Originally Published in Snips Magazine- April 2016 edition
Being an HVAC construction business owner is hard work and one of the biggest challenges every owner faces is trying to keep the order books full.
Of all the areas that require your attention, HVAC sales are the sole source of revenue and are usually a priority. When you think about it, all the other activities in your business are costs — necessary costs — but still costs. Sales are the lifeblood of your business and simply put, no sales equals no business.
“…there’s always someone willing to undercut your quote.”
And if things weren’t tough enough, there always seems to be someone willing to undercut your quote. However, most can’t do it cheaper and don’t realize it until they go out of business. But there always seem to be another startup willing to take their place and do unprofitable work and continue to make your life difficult.
Now the fact that you’ve survived is a testament to your HVAC market abilities, but constantly worrying about getting those new customers can take a toll: Visiting prospects at nights or on weekends when you’d rather be at home. Preparing those quotes and then having to wait while they check your competitors pricing. Most days it feels like you‘re on a perpetual treadmill trying to keep the orders coming in, just to make sure you’re crews are busy and hopefully pay some bills.
Get out there
Alternatively, sitting back and waiting for phone calls is really not a viable option. Praying for customer orders to magically appear rarely ever happens. No, generating sales is a participation sport and your company needs to be fully engaged in that process otherwise you’ll have to deal with some other unpleasant activities, like having to lay off that highly trained staff when the order book goes empty. Of course you can always keep everyone on the payroll sweeping the floors, organizing the inventory and washing the vehicles until you get busy again, but if you’re like most of us, you only want to do that for a few days. So what are the alternatives?
There are patterns that emerge that cut across many industries, including the HVAC construction business. One of the most common is that owners tend to focus most efforts looking for new customers and not a whole lot of time deepening the relationships with existing ones. Getting new customers may be more exciting but creating an ongoing relationship with existing customers is one of the major secrets to building a consistently profitable and successful business.
“It’s not uncommon for an HVAC company to have over 2000 customers”
Where most HVAC market business owners fail is that they’ve invested many hours building the customer base one order at a time but then never leverage it. You have convinced these customers to do business with you. You’ve earned their trust and yet have failed to reap the ongoing dividends and true profits from that relationship. If you consider that it’s not uncommon for an HVAC sales company to have over 2,000 customers and yet when you ask when was the last time a representative talked with any of them, the most common answer is “I can’t remember” or “Not since we put in the new furnace.”
This is such a waste.
Consider the following and you may begin to understand the true value of existing customers and how expensive it is to get new customers (think time, travel, quoting). It is estimated that it can costs between five and 10 times more to gain a new customer than it does to keep an existing one. Compound that with the fact that if you can increase their loyalty or purchasing frequency by just 5 percent, their profitability to you will increase in the range of 25 percent to 85 percent. Why? Because you’ve done all the hard work getting them as customers and you’ve potentially positioned yourself as their go-to company for their HVAC construction needs, but this only happens if you nurture and leverage those relationships.
So how do you leverage those relationships? It’s easier than you think. Let’s assume for a moment that you specialize in residential HVAC sales. This can apply equally to commercially focused HVAC market businesses. The fact that you have any customers means that every one of them gave you the nod for either a repair, replacement or new install of their furnace or air conditioning. If you’re like most, you did the job, got paid, put your sticker on the equipment and left figuring they’ll call you again if they need anything. Unfortunately, that future phone call rarely ever comes and why should it?
“it’s not customers’ job to remember you,”
Customers lead busy lives and are usually in a hurry. Many don’t remember what HVAC market company they called the last time so they just ask a friend what HVAC sales firm they use.
Suddenly, you’ve been replaced. Too many of us forget that it’s not customers’ job to remember you, but it’s your job to stay top-of-mind with them.
So try this after your next HVAC construction service call: Instead of rushing to the next HVAC sales appointment, have your HVAC construction technicians take a moment to walk around with the customers and inventory all their mechanical systems. By recording the brand of HVAC market equipment, estimated age, serial number and any sheet metal products or accessories, you would now leave knowing everything contained within the homes. In addition, while this is happening your technician can use the opportunity to have a conversation about the comfort level of the house. Is it too hot or cold during the summer? In the North, where heating is required during the winter months, does the house heat evenly or is there a lot of static electricity? With this information you begin to create a simple profile of the customer’s home. Armed with this information you can now turn a onetime customer into an ongoing predictable and profitable revenue generator.
Given that they don’t have a regular HVAC sales company — otherwise they wouldn’t have called you — the easiest first step in this evolution is to begin by scheduling annual equipment inspections. Air conditioners and furnaces should be checked and cleaned annually and most homeowners never remember until someone calls and lots of homeowners never get calls. A furnace inspection and cleaning typically costs the homeowner $125 on which you’re making a 50 percent to 70 percent margin. An air-conditioning cleaning is about $100 with about the same margin. When you consider how many homes have both, they can easily be bundled for about $200 and not jeopardize your margin because you’re on site. Add in the occasional pool heater and you’re now looking at a $300 invoice for just a couple of hours work.
If you managed to get 33 percent of your 2,000 existing customers to sign up for annual inspections, you could be looking at additional annual revenues of $100,000 and that is if only half of that 33 percent had both heating and air-conditioning systems. The net profit on that $100,000 can easily exceed $60,000 every year as your costs are mostly labor related.
In those homes where people are suffering with dry skin during the heating season, you’ve just been presented with another opportunity: recommend a humidifier. The average sale for a decent unit runs $400 to $500 installed with profit in the $200 to $300 range, all for an hour’s work. How many of those can be sold to your existing customers? What about air cleaners, as allergies are very common? Uneven heating or cooling may mean the system needs to be balanced. What’s that worth?
“Over time this ongoing relationship creates a predictable and profitable revenue stream”
None of these examples are sexy nor are they big-ticket purchases, but by taking the time to understand the needs of your existing customers, it gives you the opportunity to stay in front of them. Over time this ongoing relationship creates a predictable and profitable revenue stream that can help you to even out the ups and down of the business because you control the scheduling. By building on these long-term relationships, the odds are in your favor that they’ll be calling you for any major mechanical HVAC construction replacements they may need. Now wouldn’t that be nice for a change.