Blogs for HVACR Contractors

Welcome to my blog page. I hope you find the information useful!

What Do HVAC Contractors Want to Read About?

I recently put a survey question out on Linkedin to test the inquisitive minds of HVAC contractors. My question was simple: What topics are of the biggest concern to you?

There were four multiple-choice answers and an “other” choice where respondents could fill in their own answers.

The choices were:

Slow economic recovery
Cutthroat lowball competition
Selling customers on energy efficiency
Retaining/attracting customers
Other

Despite the low number of respondents (44), it was clear to see that there was no clear-cut choice and in fact, the top three choices were only separated by two percentage points.

The results were slow economic recovery (27%), cutthroat lowball competition (25%), retaining/attracting customers (25%), other (13%), and selling customers on energy efficiency (9%).

Here are what some of the “other” respondents said:

Dealing with the potential long-term side effects of an economic and environmental disaster/Gulf oil spill – Robert Wilkos, Peaden Air Conditioning, Heating & Plumbing
Most likely positive changes will not come until after November elections. MAYBE then. – Aaron York, Aaron York's Quality AC
Employee pricing ruined the market. I am sure you have heard this before: “What is done in the dark will be brought to the light.” In other words, if you try to hide something, sooner or later it will come to the light where all can see. It’s happening all around us. Most of us were aware that employees of the major automotive manufacturers were given discounts if they purchased a car from the company. I have no problem with that; as a matter of fact, I think it’s a great perk. I didn’t know what the discount was, but I was happy for the employees. However, when the auto market went south, the major manufacturing companies began offering “employee pricing” to the general public. In my mind, two things happened. First, I didn’t have to guess anymore what the employee discount was because now I knew what it was. The discounted pricing “came to the light.” Second, I thought if they can discount this much and still make money, the general public, including myself, has been ripped off for a very long time! My initial thought was that it was a great deal, if it were true. The economy has been down for the past 12-24 months. What have most contractors done? They have lowered their prices. What are we now telling customer, without saying it? “We have been ripping you off at the higher prices we used to charge.” And guess what? When one contractor lowered his price, so did the guy down the street. Does this sound familiar? Pizza Hut ruined the market, and we are doing the same thing. The reality is that most contractors have lowered their pricing without making corresponding reductions in their overhead costs. The net result is predictable: we are now under priced. Now what? The more we sell, the quicker we go out of business. Ouch! – Matthew Stewart, 72 Degrees/ACC Systems, LLC
The longer we are in this recession, the lower some companies are pricing replacement systems to homeowners. Some of these companies won't be in business a year from now. – Dave Hutchins, Bay Area A/C
What slow economy? We are busy and are battling the cut-throat lowballers. But quality will win out, otherwise they were not our kind of customer anyway! We are WOMAN, hear us ROAR!! – Carolyn Christensen, DUCTZ Indoor Air Professionals of Greater Atlanta
The internet is a very nice toll although potential customers are actually looking on line for pricing of equipment and for those add-on features which we work on selling. This makes charging a fair market price, as I have seen these people may obtain the items on line (which also may be our price as well) and we charge a small amount for the install. – Ted Paul , Minuteman Cooling & Heating
New topic: How to dominate your area and take no prisoners (lowballers!)! – Greg McAfee, McAfee Heating & A/C, Inc.
Dynamic management is a great article topic as well as Green Energy related services etc and IAQ. – Russ Donnici, Mechanical Air Service, Inc.

Do you have a topic you’d like to know more about or would like me to check out? Drop me a line at jrhidea@gmail.com.

Made in America – One HVAC Manufacturer is Fighting the Odds

According to the U.S. Department of State, in 1975, U.S. exports had exceeded foreign imports by $12,400 million. That would be the last trade surplus the United States would see in the 20th century. Through the first quarter of 2010, the U.S. current budget deficit is $109 billion. Remember that number.

Millions of jobs are being lost and thousands of business shuttered because U.S. consumers are spending more money on foreign-made products and manufacturers are using foreign countries to assemble their products before shipping them to the U.S. It is a vicious cycle that continues to erode the U.S. economy.

Fortunately, there are some manufacturers who are bucking the trend and keeping their products – and workers – on U.S. soil. One of those companies manufactures products for the HVAC trade and is located in the Midwest – Indianapolis, Indiana to be exact. That company is Jackson Systems LLC, which manufactures zoning control products for the residential and commercial markets.

The company has solid roots in the Midwest, thanks to founder Ron Jackson. Ron’s son Tom Jackson, CEO of Jackson Systems LLC, talked about the man and the company. “Ron Jackson shares the same spirit of Alexander Graham Bell, Henry Ford, and Thomas Edison,” Tom said. “After graduating from high school and serving in the United States Air Force, Ron followed his passion of electronics and HVAC. This in turn led Ron to become not only one of the premium HVAC control designers, but really a true American success story.”

Tom said his company is an integral part of the Indianapolis community, a trademark of many traditional U.S. businesses. “Our technical and sales support (all located in Indianapolis) take their roles extremely serious and want to ensure they deliver only a great experience to the client,” he said. “All the employees are committed to hard work and take pride in their country.”

For Tom, doing business as a U.S. manufacturer is a way of life for him and his staff. “I believe that “Made in America” is more than just the fact we try to source and build as much as we possibility can right here in the U.S.A.,” Tom added. “We take tremendous pride in our ability to innovate and develop new products, and then manufacture them right here.”

Here is how Tom describes one product his company manufactures and sells – and how it exemplifies the “Made in America” theme. “One of our most popular lines of products is the Z-200 and Z-300 zone control panels,” he said. “They were completely designed right here in Indianapolis (including the original patents owned by Ron Jackson). The printed circuit boards are made in Chicago, the components are ordered from a local supplier, and the boards are “stuffed” (the process of adding the components to the board) locally.

“Final assembly and 100% testing are done at our facility in Indianapolis. All documentation is created and printed in-house and the box is made in Indianapolis.”

Everything, even down to the box, is made and assembled in the U.S., keeping more jobs in the local economy and taking a chunk – albeit a small one – out of the U.S. trade deficit. If more companies practiced what Jackson Systems LLC does, the trade deficit may reverse itself and buck a trend that has been growing for 35 years. Made in America can gain momentum in every industry, with the HVAC trade playing an integral role.

Now, about that $190 billion. One Web blogger recently made this calculation. “Let's say 300,000,000 Americans simply reallocated one dollar per day; spending one dollar less on foreign-made goods and one dollar more on American-made goods. (That's $30 per month, per person, and it is not an extra $30 per month, but just where you spend it.)

“After a year, this would add up to $109,500,000,000. What could the real, productive American economy do with an extra $109.5 billion? How about 2,737,500 new jobs paying $40,000 per year?”

At least Jackson Systems LLC is thinking along those same lines. For more information about their HVAC zoning control products visit www.jacksonsystems.com.

The Phone Keeps Ringing Now, But…

It’s the summer time and a heat wave has descended upon your region. People are calling your business at all hours of the day and night, complaining that their air conditioning is: (A) not working properly; (B) not working at all; or (C) they don’t have air conditioning and want a system installed.

We all dream about (C) and wish that every call would be a new installation or at least a replacement. But then again, the service calls are the cash cows and keep the money spigot flowing. In all scenarios, the summer heat is your biggest friend and the reason you are able to keep busy and keep your employees working – while making some serious jack ($$$) too. Although it may get hectic at times – these are times you never want to end.

If you are in the southern U.S. the good times last a lot longer than if you were in the northern U.S. But in any case, the good times will eventually come to an end. September and October will be here before you know it and the phones will stop ringing. I hate to be the bearer of bad news but it’s a reality that all of you are familiar with, so don’t shoot the messenger. The HVAC business rides the waves of seasonality and the fact is, the business owners who plan for low tide are the successful ones. They know how to maintain an even work flow throughout the year.

Do you?

There is something you and your staff can do right now – in the heat of the busiest times – to protect against a big slowdown when the weather stops spiking. Maybe some of you are doing it already but chances are, when the service calls are backing up and you need to see as many customers as you can each day, thinking about the future sometimes gets lost in the shuffle.

So here is what you do – and see if any of these scenarios are right for your business model:

On each service call, suggest to the customer that they can get routine maintenance of their HVAC equipment with a service contract. And make that contract retroactive to include the current service call. Also remind the customer that with a service contract, they get priority ranking when they call for emergency or routine maintenance.
If your customer is a former service contract holder, offer to renew the service contract at a discount, again including the current service call. And leave a referral card with them in case a friend or neighbor needs service. A referral can also save your customer money via a discount on future service.
If your customer is a current service contract holder, ensure they have signed up for a renewal and offer a discount if you need to sign them up on the spot.
Make sure your customer service reps follow up each service call, not only to ensure the customer’s satisfaction, but to sell the service contract lead if it hasn’t been sold already. Don’t let time pass, follow-up the next day.
If a customer does not buy a service contract, ask them if they would like to be contacted for routine maintenance in the cooling season – at which time you have the opportunity to sell the service contract again. You may even suggest a discount on their next maintenance call.

Keep in mind that you can use an emergency service call as a way to gain a customer for life. That way, you have built up a customer base that ensures year-round work for you and your employees – and extra cash flow for your business.

The phone will stop ringing eventually. Will you be prepared?

A Service Tech’s ‘Close Encounter’

Humor

(This first-person story is reprinted from The Successful Contractor magazine.)

It was warm and sunny. The homeowner had gone to work and left the door open for me. The blower on their furnace was making a loud thud when it tried to blow air, a rotating thud ... thud ... thud.

The blower unit was located under the house. I gained access through the crawl hole in the garage and went to find the problem at a crawl’s pace. It was dry and clean underneath the house as I crawled on my hands and knees toward the unit. I had perfected the “workman’s crawl” technique some years back. It was just plain experience that enabled me to put my entire toolbox into my pants pockets and my flashlight in my mouth. So what if my pants were lumpy? I was prepared.

I crawled at a rhythmic pace, my flashlight and I invading the dark. I was keeping an eye out for spiders, rodents and other critters who might take unkindly to me disturbing their home underneath the house.

After crawling about seventy-five feet, I found the blower unit. I took the panel door off and tried to look inside the unit. It was difficult to see. Seeing nothing, I put the panel back on and crawled back out. Then, I went to the thermostat and turned on the blower again. It started up and began making the same noise. Thud. Thud. Thud. I shut the unit off and proceeded with my crawl technique back to the blower.

After removing the panel, I tried again to peer inside the cabinet, but it was a little too high. So, I lay on my side, enduring the pain caused by the awl in my front pocket, and thinking I needed to update my tool list for underneath-thehouse work. I started feeling around the shaft. Felt good! Then, the set screw. Good and tight.

Finally, I reached into the blower wheel and I felt something … probably just a piece of insulation, I thought. I had been able to contort my body so that my face was about eye level and about eight inches from the blower, and I reached in to grab the “insulation.” Simultaneously, my hand and my brain told me there was a problem.

About the time that my hand told me I had grabbed onto something cold and round, my mind started calling me names … Insulation is not cold and round, you IDIOT!” Ai-e-e-e-e-e-e-e-e-e! I’d grabbed a snake – and not a small one. I dropped the snake immediately, and beat my most hasty retreat ever, perfecting a new “underneath-the-house run.” I escaped through the access hole in record time.

Safely out from under the house, I faced a new dilemma. My speedy retreat had caused several of my tools to come to life and propel themselves from my body. They were strewn along my departure route underneath the house. I got a larger light, a mirror to use with the light to see into hidden spaces, and I crawled back inside, setting no speed record. If I didn’t spot the snake, I wasn’t going to search for it.

Couldn’t we let bygones be bygones? Carefully, I peered into the blower cabinet and there it was. I flinched and took a second look. Its head had been severed when the unit started. I put my gloves on and gingerly pulled the snake out, half expecting it to come to life. I carried it outside and laid it on the lawn … four feet long in all its glory.

I wanted the homeowner to see it later and know what had caused the thud, thud, thud. And know what I went through. I had gone above and beyond the “call of duty.” I knew it would be some time before I would reach inside a blower cabinet without taking a complete look first.

Memo to myself: just in case, always know what insulation feels like.

Got an interesting tale? E-mail it to me at ideaperson@ideaperson.net.

77 People Respond to 'Profit Drain' Survey -- Lowballers Targeted

What’s draining your business profits? Do you feel the economic crunch has been nickel-and-diming your profits away from you every month? That’s what I wanted to know when I put my survey up on Linkedin.com in early 2010. My question was: “What is the biggest drain on your profits?”

I didn’t ask respondents to specify if the economy had anything to do with their answer, but judging from the answers I conclude that the economy – in 2010 – has a lot to do with profit drain.

Respondents were asked to choose from five answers:

Callbacks
Material costs
Labor costs
Competing with lowballers
Other (add comments)

The most popular answer (see chart) was “competing with lowballers,” which got 36 percent of the vote – over 1/3 of the respondents. “Labor costs” and “other’ were almost dead even at 23 percent and 22 percent. “Callbacks” totaled 14 percent and material costs were way back at 3 percent of all answers.

Some of the people who responded to “Other” left comments. In fact, the comments section was open to everyone and there were some pretty interesting answers. Below is a sampling of the comments by respondents.

“Competing with lowballers includes the cost of matching or lowering our price, and the cost of estimating, load calculating, following up, etc, on lost jobs.” – Dave Hutchins of Bay Area A/C
“All of the non-productive work required from customers and government agencies, including vendor qualification and pre-qualification forms, job site work plans, job site safety plans, and State and Federal audits. Very little of this work can be delegated to lower level employees and this work takes directly away from productive work.” – Carl Grolle, Golden Refrigerant
“Insuring that we have 100 percent full call count each and every day no matter what the weather. Callbacks? Poor training. Material costs? Pound on suppliers to get a better deal, training techs to sometimes "give away" items, performance pay. Labor costs? Training, performance pay. Lowballers? Definitely training. If you have to match a lowballers price, your company has clearly not shown your client the difference between your company and “Cheap Charlie”.” – Wesley Holm, Thompson Plumbing, Heating, and Cooling
“The inconsistency of work. Make profit one week; lose profit the next paying for overhead.” – Andy Sievers, ARCO Heating & Air, Inc.
“I find one of the biggest drains on profit is companies that are my competitors that do a good job and do not lowball, but are afraid to raise prices to increase profits. These companies are the hardest to compete against. Lowballers do not offer the service, reputation, or longevity so they are not truly my competitor and usually can be sold around. Second obstacle to better profit is training around weaknesses in techs and motivating them to increase productivity by working smarter not necessarily harder. The third drain is all the state and federal government taxes and compliance issues.” – G Andrew Smith, Aire Serv of Southeast Texas
“Unapplied labor costs, travel, securing parts, etc.” – Jimmy Gibson, Green Heating and Cooling, Inc.
“We have a very low percentage of callbacks, but I despise them! However that being over-taxed can drain us faster than all these combined!” – Greg McAfee, McAfee Heating & A/C Co., Inc.
“Balancing the right amount of support staff. Employees not following policies & processes cause double work as well as negatively affecting cash flow.” – Fred Hutchinson, Hutchinson Plumbing Heating Cooling
“The rising costs of medical and other insurances as well as fuel costs.” – Russ Donnici, Mechanical Air Service, Inc.
“Overhead and waste are cancers to business.” – Jeff Scherr, Comfort Heating & Air Conditioning, LLC
“Wasted materials and poor use of time/wasted trips.” – Mary Locke, Locke Aire Serv
“Too much unlicensed activity and no enforcement by local authorities.” – Brian Furman, Brass Monkey A/C & Heating Inc.
“It is not the sleazy lowballer but rather those nice, clean cut and competent service techs who believe that they have to be their own boss. Many of these guys do good work but are bad businesspeople. Our company has no problem competing with the low-lifes, but a highly qualified and grossly underpaid individual? I have several competitors whom I would gladly hire and pay them much more than they are making on their own. They have just been taught that “being in business” is the ultimate road to respect.” – Tim Funke, Aire Solutions
“We have always done our best not to drive down prices to compete with the "bottom feeders." However, thanks to the economy we have no choice.” – Saundra Jones, Alpine Air, Inc.

I’ll ask again – what drains your profits? E-mail me with your response at ideaperson@ideaperson.net.

Keeping Costs Down and Profits Up

Just because business may be down in this shaky economy, some businesses have not hit the panic button. In fact, they have found ways to increase profitability in spite of flat or less-than-usual revenues. I recently sponsored a survey at Linkedin.com where I asked how business owners were keeping their profit margins up. Here is the text of the survey question:

Profit can still increase despite flatline revenues. What cost-cutting measures have you taken?

The answers from 108 respondents showed that there was no clear cut popular solution to cutting costs. The multiple choice answers included (a) Increased worker productivity; (b) Increased hands-on management; (c) Streamlined normal operations; (d) Cut staff/cut wages; (e) Other. By the slimmest margin, the most popular answer was “streamlined normal operations,” slightly edging out “increase hands-on management.”

The complete results are in the figure below.

Respondents who left comments to the final answer – “other” – are highlighted below.

I pay my techs out of the flat rate pricing book; therefore, I have ZERO unbillable time. They are paid off of what they do. The "bad economy" was an excellent time to do it... they realize it’s better than no job at all. My lead people have seen an increase in their own revenues... it’s a win-win. Those that complain are usually the ones that were riding the clock before.... wasting MY money. – Michael Covert, Covert Aire
Take hard look at cash flow and make decisions based on this important aspect. Yes, you can increase profits with flat revenues, but there is no one-size-fits-all item. – Robert Wilkos, Peaden Air Conditioning, Heating & Plumbing
As usual it isn’t that simple (only one way to deal with the recession). We have cut some office and field staff. We have improved margins by choosing not to work with unprofitable customers. We eliminated our 401(k) match. We eliminated holiday party and holiday bonuses. We have managed more tightly - questioning all expenditures more aggressively. – Scott Robinson, Apple Heating & Cooling
We examine costs. – Jason Putman, Pro-Air Services, Inc.
We are small but have increased gross revenues and net profits; we have fired "C" and "D" customers; and increased marketing. It also helps that we never have done new construction, so we didn't have to adjust for that lost revenue stream. – Michael Pickard, Ocean Air, Air Conditioning & Heating Co., Inc.
We chose not to participate in the "recession." We are up 17% from 08 (a record breaking year). We increased our advertising by 25%, hired 8 new people, created 4 new positions, and bought 2 new trucks. – Greg McAfee, McAfee Heating & A/C Co., Inc.
We really watched our expenses and made sure we were following our marketing budget. We also added a staff member that does nothing but proactive calls. – Thomas Jackson, Jackson Systems LLC
For well over a year we have been cutting our expenses on every item that we possibly can and looking for less expensive services providers or negotiating the prices. Our employees are glad to have a job so they are pitching in to help watch the expenses such as not wasting time and gas. We have actually added employees this past year as our business has grown. We have had to change our methods of securing business as residential has slowed and commercial has increased. – Carolyn Christensen, DUCTZ of Greater Atlanta
We hired more experienced personnel and are installing higher end equipment with higher profit margin. – Barry Sherer, Complete Heat
We were recently able to switch our phone service and Internet access to the local cable company and saved approximately 50% annually. We also are looking at switching to a different cellular provider and will save approximately 30%. We had several employees in the office leave for one reason or another and have all picked up a little extra work so no one has to do a lot more. We are not planning on any other staff reductions and have not had to implement a pay reduction. I guess being in a resort area we've been in this recession for over four years now so it's sort of like business as usual. – Brian McDonald, Outer Banks Heating & Cooling
We have had to drop company health benefits, drop membership in organizations that benefited us the least, cut management pay, and really reel in all expenditures. We are slowly starting to come out of the hole. – Andy Sievers, ARCO Heating & Air, Inc.
We have done all of the suggested items and more. We renegotiated every overhead expense we had. We froze pay, and reduced management’s compensation. I personally cut my own pay 20% to lead the charge! I am planning a series of restorations if this trend continues. We are up on marketing expense and will restore compensation and remove the pay freeze first. We have taken advantage of the opportunity to find good people and culled the week from the ranks and upgraded positions with a few rock stars! We recently have posted the two most profitable months and are tracking for the highest showing in profitability for this month that I can remember, in several years. – Andy Rodenheiser, Rodenhiser Plumbing, Heating, & A/C
We have done all of the items in the poll except cutting wages. We did put a freeze on raises till things turn around better. We have been fortunate to have a large backlog of work and have hired four new field people. – Russ Donnici, Mechanical Air Service, Inc.
We dramatically reduced discretionary spending. – Rex Boynton, NATE
My focus is to help streamline normal operations through Internet efficiency. There is so much time that goes into the effort of communicating with the customer for estimate reviews, schedule updates and invoicing plus managing the jobs with employees and subcontractors. – Brian Javeline, ServusXchange LLC
My company has done everything mentioned except cut staff or wages. In fact, even with staying flat for gross dollars we have expanded into larger territories by minimizing waste in all other areas of the company. The expansion into new territories is offsetting the losses in our previous territories and will guarantee a jump in overall business as the economy rebounds. If at all possible, now is the time to grow your business area and expand your product and services. – Robin Boyd, HVAC Distributors, Inc.
You must watch your day to day costs, and eliminate unnecessary overtime. Be productive you have to stay involved. – Scott Getzschman, Getzschman Heating LLC
I think that the easiest answer to lowering overhead by percentage increasing sales effectiveness. You can save your way out of a recession. – Joe Crisara, ContractorSelling.com.

What have you been doing to hold the line or increase profitability this year? Please drop me a line and let me know. Contact me at either of the two e-mail addresses: ideaperson@ideaperson.net or jhall@4buymax.com.

Contractors Speak Out on Expanding Customer Base

As customers go, so goes a business. Without an active customer base, contractors are left to resorting to costly advertising and price cutting. Maintaining and expanding a customer base should be a priority for any business owner – at any time. It is one of several strategies that contractors should explore in 2010, along with maintaining good customer service, referral programs, marketing, etc.

I recently posted a survey at SurveyMonkey.com, specifically targeted for answers on how contractors plan to expand their customer base in the coming months or years. A total of 61 people responded to the survey, which is still open. I welcome your feedback and you can click on this link or cut and paste it into your browser: http://www.surveymonkey.com/s/MQVFH6F.

Below is a summary of the results as of January 1, 2010.

How Would You Expand?

The first question was: “If you had one choice to expand your customer base, what would it be?” The most popular answer – selected by 42.6 percent of the respondents – was reviewing former customer lists and reconnecting. This is one method that is often overlooked because some customers may have left because of a poor experience but can often be “won over” by showing a new concern and attitude towards them. Former customers can be a gold mine because contractors usually have detailed information about them and their installed systems.

The next closest response with 26.2 percent of responses was direct mail campaign.

The second question was: “If you could expand your customer base by adding one product, what would it be?” There was a runaway popular answer with 52.5 percent of the votes – anything energy efficient. While the popular notion may be to carry a line of ‘green products,’ consumers are still looking for products that are energy efficient and can reduce their utility bills. It is all about the money – and how to hold on to it.

Three answers ran a distant second, including complimentary products like water heaters, unique niche products like pellet stoves, or anything trendy like green products.

The third question was: “If you could add one service to expand your customer base, what would it be?” There were two runaway popular answers, probably because both are closely tied to the HVAC service trade. The most popular answer – with 37.9 percent of responses – was electrical. It was followed very closely by plumbing/sewer. These responses showed that contractors are willing to add a service that their technicians and installers are already performing and have probably been trained in, too. Understanding electronics and plumbing are extremely important to being a well-rounded service technician or installer.

With all of this said, the fourth question was all about timing: “Do you plan to add products or services in the next year?” Most respondents either said yes (54.1 percent) or maybe (31.1 percent). At least this group of contractors sees an urgency to expanding their business in the next year in order to expand their customer base.

Supporting or Dispelling the Facts

The next three questions in the survey all asked for true or false replies. This was the “opinion” section of the survey.

Question five: True or false. Adding extra products or services will keep customers coming back to you. A total of 78.7 percent of respondents said true. They believed that giving people more reasons and options are a great way to maintain an active customer base.

Question six: True or false. Adding products or services will have little effect because people are price shoppers. A total of 85 percent of respondents said false. These contractors have faith that their customers will not use lower prices as an excuse to shop the competition.

Question seven: True or false. Adding products or services is the best way to expand your customer base. A total of 71.7 percent said true, confident that a bigger variety will attract more customers.

Not Everyone Wants to Expand

All of the people who responded with “false” to the last question were asked to explain why they believed that having more products or services did not necessarily equate to getting more customers. Here are some of their comments.

“Adding products and services must be balanced with adding/maintaining quality of existing products and services. If you aren't where you need to be with the quality of existing products/services, the best way to expand customer base is to beef up those services before adding more.”
“Adding product or service will neither keep nor expand your customer base unless you are providing a reliable, dependable reproducible first class experience every time they call and/or have service. Relationships are the key.”
“Getting good marketing of existing offerings will do better than adding additional offerings.”
“Generate more referrals from your current customers. It keeps you more focused without having to train or add employees; and inventory stays the same.”
“Sticking with core competency keeps you on message and makes you more efficient. Referrals are still the best acquisition method.”
“Provide higher quality service. Impress customers so much that they will want to tell their friends.”
“Try home energy scans.”
“We have expanded 52% thru 11/03/09 by increased marketing, expanded training, and implementation of operational excellence.”
“Acquire customers through purchasing other companies.”
“If service companies would focus on the word "service" they would have more work than they could manage. It's not about what I sell or provide although it should be top of the line equipment. How I respond to the customer is going to have the most powerful and positive results. You ask any customer what they want from a service provider and that's to be treated like you really care and you want to do what ever it takes to make them happy.”
“Ask for referrals. Just because you add products and services doesn't mean you will expand your base. Your customers will expand your base.”
“Try an online rating strategy or top of mind awareness.”
“Get more from our existing customer base. This could be adding new products, but I think there would be better return on selling more of our existing products. Some of our customers only buy a specific line rather than all that we have to offer.”
“The best bang for your buck is to grow via acquisition. Every market and demographics has comparable smaller companies that can be purchased and tucked into an existing operation. If any company is positioned for growth, it will be positioned to acquire customer bases.”

These are all good answers. So the next question is – what is your strategy?

Topics For Your 2010 Meetings?

It is a challenge to keep things “fresh” at industry meetings and trade shows. There will always be the new or improved products and services that are available to meeting attendees – that’s a given. Technology seldom gets stale and uninteresting.

But how often will people want to see “recycled” information from speakers who simply put a new spin on an old topic? Let’s face it, HVAC contractors and their employees spend a lot of money to attend industry trade shows each year, often taking valuable time away from their businesses. The last thing they want is to come away from meetings with the same old information – information that will soon be forgotten and that provides little or no value for their investment.

So what is the answer? It couldn’t be any simpler than asking people what their business challenges are and what they would like to learn about. It’s that easy.

It’s almost as simple as the recent survey I conducted on this very topic. I asked four basic questions and got feedback from 100 HVAC contractors. The survey was created at SurveyMonkey.com and ran for six months in mid-2009. The results are posted below.

In their replies to the first question, respondents overwhelmingly said their biggest problem was cutthroat competition. There is no doubt that a down economy will spark price cutting and see the emergence of more garage businesses as well as workers doing a lot more side jobs. While this has always been an industry problem, it is more evident during economic slumps, such as the one we have been languishing in.

In answers to the second question and by a closer margin, respondents said they planned to go out and find new customers to improve their business. This response finished a few percentage points ahead of “streamlining business practices” as a way to improve the bottom line.

It’s no surprise that the runaway winner to the next survey question – what topics would they like to see at a seminar – was ways to expand a customer base. Are you listening business meeting planners?

Lastly – and by the largest margin – respondents said they would prefer to attend an industry meeting where they could interact with peer members of their own group, such as a meeting of AT500 or One Hour contractors.

So the next question is: When do we get started on topic ideas? Let’s put our thinking caps on.

Survey Results

What is the biggest problem facing your business?

Lack of new business – 24.5%
Retaining existing customers – 9.2%
Employee problems – 15.3%
Poor cash flow – 10.2%
Cutthroat competition – 40.8%

What will you work on to improve your business this year?

Retaining customers – 22.4%
Finding new customers – 30.6%
Streamlining business practices – 26.5%
Reducing debt – 14.3%
Making personnel changes – 6.1%

Which topic would you like to see at a business seminar?

Advertising/marketing tips – 28.3%
Employee hiring/retention tips – 11.1%
Technology breakthroughs – 8.1%
Information technology – 7.1%
Expanding customer base – 45.5%

Which would you prefer to attend?

Networking meeting with non-competitors – 32.6%
Social meeting with industry partners – 4.5%
Business meeting with industry peers (group members) – 62.9%

Contractors Talk Back About "Free" Advertising

There is a tired old cliché about “looking a gift horse in the mouth” – and it certainly applies to the notion that business owners routinely ignore ways to get free advertising for their businesses. That’s right – FREE. But many suspect that there are strings attached to anything that is free. Human nature dictates pessimism.

That’s understandable. But even if there are strings attached, should business owners ignore free advertising for their businesses, especially in an atmosphere of tough economic times and even tougher competition?

I asked HVAC contractors to tell me how much they know about free advertising and how to get it – in a recent survey which garnered 172 responses. I knew right away that there is a lot of ignorance when it comes to knowing how to get free advertising. The first question of the survey was: “Do you know how to get free advertising from your local media, i.e. newspapers or television?” A total of 29.6% of respondents answered yes, leaving the other 70.3% wondering how. Seven out of ten HVAC contractors who took part in this survey admitted that they did not know how to get free advertising.

As expected, the majority of respondents believe there are strings attached to free advertising. The second question was: “Do you believe free advertising comes with strings attached, i.e. you must be an advertiser?” A total of 59.8% of respondents answered yes while 40.1% believed there are no strings attached.

Negativity Sells Newspapers and TV Spots

So much of the media stories which generate free advertising often reports negative stories, shedding a poor light on businesses that sometimes get caught up in the sensationalism of new stories. The third survey question was: “Do you believe the local media in your community is more interested in reporting negative stories rather than positive ones?” The yes answers outscored the no answers by a 65.6% margin to 34.3%.

One respondent noted, “I believe it is easier for the media to find and dramatize the unfortunate events rather than spending time to find the positive stories which are always out there if they look for them.”

Another said, “Happy stories don’t sell the news.”

One contractor who believed that the media reported more positive stories said, “People like to see the good things happening in their local community. They also like to support good people and people that give back to their community.”

What “Price” for Free Advertising?

Although the question may sound confusing, some HVAC contractors actually put a value on free advertising, by what it would be worth to their business. But they were in the minority. The fourth question was: “If you had to ‘pay’ for free advertising, what would it be worth to you?” A total of 59.8% of respondents said they would not pay anything for free advertising. The remaining 40.1% responded with answers in the following price ranges:

Under $100 – 17.4%
$100-$300 – 12.7%
$300-$500 – 2.3%
Over $500 – 7.5%

Speaking of costs, HVAC contractors were asked how much money they budget for paid advertising – a business expense that is a necessity in any market in spite of the availability of free advertising. The fifth survey question was: “Choose which percentage of sales you earmark for advertising.”

Here are the responses:

Less than 1% -- 16.2%
1%-3% -- 30.3%
3%-5% -- 27.3%
5%-7% -- 14.5%
Above 7% -- 11%

Who to Contact/Who to Speak

One of the problems facing business owners is speaking in public. Some people just don’t have the confidence or savvy to deal with media, especially under negative circumstances. Still, most respondents preferred to be the face of the company they own or manage. The sixth question was: “If free advertising is available, would you prefer to be the spokesperson for your company?”

A total of 76.7% of respondents said yes while 23.2% preferred to defer the responsibility.

When it comes time to push for free advertising, a large majority of respondents did not know who to contact in their local media. The seventh question was: “Do you know who to contact in your local media in order to get free advertising? If so, who?”

An overwhelming number of HVAC contractors – 81.3% -- did not know who to contact while 17.9% responded that they did know who.

That included one contractor, who noted that the local newspaper business editor was a good contact; while another said he uses his advertising representative.

One of the jobs of public relations professionals is to know who to contact in the local media, and thus business owners turn to these professionals because of who they know and how they can help them get their advertising messages out to the public. The eighth question in the survey was: “Do you use a professional public relations person/writer to create copy for your free advertising?”

The replies heavily leaned toward the business owners who had no public relations person/writer and who preferred to do their own marketing in-house. That number was 74.3% of the responses. Only 25.5% hired an outside professional.

One of the HVAC contractors who replied no stated, “I feel I can do a better job.”

Another added, “There is too much time and cost involved.”

Personal Brushes With the Media

While most respondents to this survey said they would prefer to be the spokesperson for their company, a large majority of them do not have a plan in place for dealing with negative stories, should the situation arise. The ninth question was: “Free advertising also has a negative side. Do you have a plan in place to deal with negative publicity from stories like ‘stings’ or customer complaints?”

A total of 76.7% of respondents answered that they did not have a plan in place. The remaining 23.1% said they did have a plan and some described what it was. “I tell the truth, apologize immediately if appropriate, tell people what you're going to do to fix things, and do it,” one respondent said.

Another added, “Be direct, positive, and honest. Only the owner speaks for the company – no exceptions. Be very clear and concise with the message.”

“We resolve the customer complaint that day or at their earliest convenience,” said one contractor.

The last question in the survey asked respondents what type of free advertising they had been involved with. Most, but not the majority of HVAC contractors said they were involved with positive publicity (48.2%). Fortunately, no respondents answered that they were only involved with any negative publicity but some (20.3%) admitted to being involved in both positive and negative publicity. The remaining 31.3% said they hadn’t been involved in either.

The point of the survey was to find out how much HVAC contractors actually knew about free advertising. As one respondent said, “I stay on top of the media and always respond.”

I couldn’t have said it better.

What Biz Topics Do You Want to Read/Hear About?

A lot of you are waaaay too busy trying to run a business and navigate the choppy economic waters. I get that. I am in the same boat, if you will forgive the metaphor.

Many of us don’t have time for extracurricular activities and often sacrifice family time for business time, which may seem like a necessity but is a real no-no anyway. There are times when you really need to get away from the biz and do what really matters – spending time with loved ones.

There are also times you need to get away from to learn about ways to improve the biz. Sometimes that takes a simple block of time to read books, articles, blogs, etc. containing business tips and advice. Other times it means attending a local meeting of business owners or peers. And still other times you have to hop on a plane to attend a larger, more national or regional meeting.

Whatever the case, I am interested in what you want to know and where you want to learn it. That’s why I developed a very compact four-question survey at a great survey website called SurveyMonkey.com.

The survey asks what topics you want to know about and what audience you want to share your time with. Please take a minute (seriously, it will only take a minute) and take my survey by clicking the link below. I’ll be happy to share the results soon, and follow up with more specifics about upcoming articles and meetings, too.

Thanks!

http://www.surveymonkey.com/s.aspx?sm=9vz7RHebbf8TE7lpgpBWIA_3d_3d"

Imprinted Ad Specialty Ideas for Service Businesses

(The following is a brief Q&A with Ken Kelsey of XtremePromotions on timely and useful imprinted advertising specialty products.)

IdeaPerson: “Ken, what are your suggestions for imprinted products for service businesses (like HVAC contractors). Include some low-end giveaways (prospects) and thank you leave-behinds to customers.”

Ken Kelsey: “The best thing that they can give right now is hand sanitizer in a gel or spray. If people can't wash their hands they should be using hand sanitizer often during the day. Make sure that the one you buy has at least 62% alcohol content. Here is what the FDA said, “For alcohol-based hand sanitizers, the Food and Drug Administration (FDA) recommends a concentration of 62% to 95% ethanol or isopropanol... Some products marketed to the public as antimicrobial hand sanitizers are not effective in reducing bacterial counts on hands.”
“One product that has worked very well for contractors is an dry erase board with a pen and magnets on the back. It is great for the refrigerator or for a steel door between the house and garage. The dry board serves as a constant reminder of the contractor. Letter openers are still great low cost leave behinds. Decals on the equipment are a must. If the customers don’t remember you, they need something to remind them of you.
“Looking professional is always important. A comfortable shirt with a embroidered logo is a must. It could be a shirt with Teflon so that it stays clean and looks good all day long. Spills at lunch just roll off.

“And here is a new idea: How about an energy saving journal to keep all the information about repairs in their home in one place? The energy journal has 16 pages of timely energy information included with 32 pages of ruled note paper. It is spiral bound with your logo and info on the front cover.”

IdeaPerson: “What are the most popular imprinted products?”

Ken Kelsey: “Calendars are always one of the best values and ROI for the money spent. It’s like giving the homeowner a billboard to hang on their wall and is seen many times during each day. The choices are a nice wall appointment calendar for the home or a year in view large calendar for businesses. If you doubt the value of calendars go to a bookstore and see how many are sold at retail and at a much higher price than what you will pay. We also have a small strip calendar (12 months) 14” x 1.1875”. It is put on a computer or monitor or inside a cupboard or on a slide out drawer. Your message on a calendar is seen 6 to 10 times a day on average. Multiply that by 365 days and you get 2190 to 3650 impressions.Talk about a low cost per impression (a great deal lower than newspapers or TV or magazines).
“Playing cards are a good item to give to senior citizen centers or churches for their card clubs. Looking at the card daily will ingrain you name and logo so when they need your service they'll remember you. It might also cause some good word of mouth, talking about your service while playing cards.
“Always leave a pen behind. When they go to sign the order and try to hand back your pen, say no, it's yours. This little gesture goes a long way and people remember it.
“Clips to reseal your chips and other bags after opening have always be a welcome gift. We also have the world's best pizza cutter which also works on sandwiches, pancakes, waffles and many other food items. It's safe so that children can cut their own food with it. Jumbo clips that are magnetic hold bills and notes and pictures.
“A nice thank you gift for a homeowner is our home hardware kit with screws, anchors, hooks, push pins, thumb tacks picture hangers and nails. Magnetic car signs make the personal vehicle a rolling ad.”

IdeaPerson: “Are there any new trends in imprinted products?”

Ken Kelsey: “Eco and green items. We have plastic items (mugs - pens - letter openers - rulers etc) that contain no oil. They are made from U.S. grown corn (and most items are made here in the U.S.). Corn plastic looks the same and feels the same.

“100% cotton bag recycler is a bag that hangs on a door handle or hook to store and dispense plastic grocery bags for reuse or recycling. Grocery bags are big right now so they leave the paper and plastic in the store. Food gifts to your best customers and employees go a long way and is a great year end thank you.”

IdeaPerson: “How much of their advertising budget should a small business spend on imprinted products a year?”

Ken Kelsey: “Marketing and promotional dollars give a large return on your investment. I would recommend you spend 10% of your yearly sales. Ask the most successful large businesses what they spend and I’ll guarantee you it's more than 10%. It pays to advertise because you'll get a great return if done correctly."

Contact info:

Ken Kelsey, MAS
KelseyPromo
http://www.xtremepromotions.com/
248-474-5413

LinkedIn Poll: Area That Needs the Most Improvement

It is no secret that businesses need to be cognizant of the burden that the economy is putting on their operations, both inside and outside the four walls. Some owners may choose to “hunker down” and hold on until things get better. Those are the ones who most likely fail.

Other owners will continue to seek out new ways to improve their business model and thrive despite the uncontrollable outside pressures.

My latest poll question at Linkedin was this: If you had to identify one area of your business which needs the most improvement, what would it be? The multiple choice answers were:

Operations
Management
Setting proper pricing
Employee relations
Other

A total of 74 people responded to the question. Two answers were the most popular. “Management” received 33 percent of the vote and “Operations” received 25 percent of the vote. Several people chose the ‘Other’ option and their responses are listed below.

Here are the comments that respondents left:

The area that needs the most improvement is communication, i.e. communication with external customers and communication between all departments and all levels. It’s up and down the organizational chart. – Scott Robinson
There is no single area, but from time to time, all need to be tweak -- Robert Wilkos
I chose “Other” because my weakest muscle is not just sales, but having a sales organization. I'm presently working on that. – Greg McAfee
In working with numerous companies, I find the lack of planning and setting the course for the company is the weakest area of many HVAC/plumbing companies. It is the most important part of the job of the owner/president of a company to assure success. – Dan Bergstrom
I most often bump into less-than-stellar sales and marketing teams. It's interesting, to me, that many smaller organizations feel their weakness is in operations. Those organizations fail to recognize that most of the cause for that 'perception' lies in disconnected marketing programs and/or disjointed sales departments. The majority of operations’ teams I come across are rarely the true drain on service, growth, or profitability. marketing is usually is the culprit -- Mike Robinson
I said management because I do not feel like I have mastered running my organization. I still need to learn how to focus on the most important items. – Thomas Jackson
Customer service of our technicians. – Kristi Tomao
Getting more techs that want to invest in themselves. – John Cameron
I went with employee relations for several reasons. In the broad sense it is about improved communications. More specifically, the communication between everyone involved in an order from the sales rep to the truck driver delivering the product. The attitude of each must be consistent with one another. The most problems I see are due to the right hand not knowing what the left hand is doing -- Robin Boyd
I find the need for more planning and forecasting the biggest area in our business that needs work. This is especially important in these trying economical times. – Jeff Somers
I chose the “Other” option. My experience is most all companies suffer from implementation. They invest in the systems knowledge but find it difficult to make the change or implement the new. It runs pretty deep. Owners need to go back to the ACCA Quality College concepts. -- Tom Templeton
Marketing. It can be very expensive (especially pay-per-clicks) yet is very necessary in my business. – Kim McKenna

The current poll question is, “Who is the most important person in your business?” If you are a Linkedin member you can log on to the poll at http://polls.linkedin.com/p/57039/vyjzz. If you aren’t a member, please join us. It is a great way to network and market your business.

LinkedIn Poll: Most Important Factors for Joining Peer Group

This month’s LinkedIn poll: What is the most thing to consider before joining a peer group?

Peer group membership is very important for a variety of reasons. Members can interact with each to exchange ideas and listen to ways to improve their own business models. Peer groups come in all shapes and sizes and offer different kinds of services, depending on each individual member’s needs. The cost of membership can be minimal, in some cases there is no cost. And the costs go up as do the services and expertise of the group’s hosts.

This month’s poll at my LinkedIn webpage (http://polls.linkedin.com/p/49942/fibti) asked respondents to choose the number one most important reason to join a peer group. The multiple choice answers included: (a) membership size; (b) programs offered; (c) frequency of interaction; (d) cost of membership; (e) group leadership.

There were only two “real” answers that respondents voted on. Forty-four (44) percent said that “programs offered” was the most important benefit while thirty-four (34) said group leadership was the reason they would join a peer group. The last three were really last with “frequency of interaction” getting eleven (11) percent; “membership size” getting six 96) percent; and “cost of membership” getting three (3) percent of the total votes.

Here are some of the respondent’s comments:

If you are not a great leader than you probably should not create a group. I would think that a group with strong leadership would have good programs and plenty of interaction as a matter of course. – Tony Grosso, HVAC Operations Manager
Like a lot of polls, one answer is not enough. While program topics are important, leadership plays a vital role, as well as frequency of interaction. With “Live Meeting” [Internet program] and similar products available, interaction is easy and vital to a good peer group. The biggest difficulty is getting everyone to participate every month. You always have your core group in the meeting. – G. Andrew Smith, owner, Aire Serv of Southeast Texas
Leadership is the key to everything. Without good leadership it doesn't matter what the program is, the cost or anything else. A good leader is a must for an organization to survive. – Ron Magrini, president, Aero Forze Heating & Cooling
The most important thing for me is if the group is really of my peers. I need to interact with people that have similar business interests, and can share opportunities and opinions. -- Stello Garcia, PE LEED AP
As a Business Development Officer, the synergy of the group membership is most important. What is the contact sphere of the people in my group? How will this group help me achieve my goal of growing my business? – Kathy Hoen, Membership Development Officer, Community Choice Credit Union
With strong, positive leadership, you will get the programs offered that you need, have frequent interaction, grow membership and find there is no cost because you gain so many irreplaceable benefits. – Aaron York, Owner, Aaron York's Quality AC
I believe the most important ingredient in a peer group is the mix of the membership. – Bob McAllister, VP, McAllister…The Service Company
I voted for frequency of interaction, but group leadership is equally important. As a vendor that works with several groups, I believe the strongest ones are those that have the most interaction (which of course is due to the strong leadership). – Thomas Jackson, Chief Executive Officer
Group leadership IS important, however what I can learn from the programs is very important to me. I can overlook the leadership if necessary as long as the program gives me what I need and the networking opportunities are adequate. – Carolyn Christensen, Owner, DUCTZ of Greater Atlanta
Who the leader is and who's in the group! – Greg McAfee, president, McAfee Heating & A/C Co., Inc.
Who put the group together and who heads it up are extremely important. – George Hall, Heat Treat Program Engineer, Lindberg/MPH

This month’s poll is “How would you characterize your purchasing philosophy?” Please take part and include your comments at http://polls.linkedin.com/p/48326/kszys. I will publish the story and results in October 2009.

Disgruntled Customers = Death Knell

I'm sure that many of you have heard of consumer complaint websites like "RipOffReport.com" or "Complaints.com," to mention a couple that I am familiar with. These portals are sounding boards for people who have been bent out of shape by poor service or who simply have a grudge against businesses or individuals.

In the pre-Internet days, such places to vent did not exist and caustic comments would come and go with little harm. Not now. These venonmous gems are now on record for a global audience to view -- and stay up for what seems like an eternity. Even if the poster is way off base without grounds for complaint, the damage is done once the "charges are filed."

Businesses can fight back by responding to these complaints, but by then the "perception damage" has already occured and any comments made afterward seem very defensive. Some become long threads with a lot of "cat fighting."

I remember an HVAC contractor friend who was being slammed at one of these sites and didn't even know it. He fought back with a lot of responses, which just made the problem worse. These site webmasters are under no obligation to inform the accused that they are under attack. In fact, there is no mechanism for alerts other than constant monitoring of the sites.

My recommendation is two-fold: settle all disputes and misunderstandings with customers IMMEDIATELY; and if the complaint becomes an Internet sensation, do your best to diffuse it by contacting the customer and getting THEM to make a retraction. I'd also advise keeping an eye on these websites, too. Your valuable reputation is at stake.

You don't want one comment to become a business death knell.

Survey: Basis of Profit Tips

I recently conducted a survey at LinkedIn and got responses from 112 people to the following question:

If you were to create one ‘profit tip,’ what would it be based on?

Better marketing/advertising
Understand how to set pricing
Controlling fixed costs
Flat rate or T&M pricing
Employee incentives

Nearly half of the respondents (46 percent) said it is most important to understand how to set pricing (b). Better marketing/advertising was a distant second with 28 percent and none of the other answers got more than 9 percent of the votes.

The results are not surprising considering the fact that setting prices pretty much includes all of the other choices. Here are some comments:

“Understanding how to price ties right into knowing your costs. The trend of manufacturers (ductless & tankless HWH) putting a MSRP on their website is impacting perceived costs. In some cases we are forced to back into our final price by building up from the MSRP. Interesting trend and one to keep an eye on.” - Bob McAllister, VP at McAllister, The Service Company
“My business coach tells me that if you don't understand how to set pricing you can spend a lot of money on marketing and advertising and still lose money or even go out of business.” - Carolyn Christensen, owner, DUCTZ of Greater Atlanta
"Understanding market pricing and positioning to participate effectively in that market is key. Once a decision is made to participate then emphasis must be placed on driving costs down and improving efficiency to maximize profit." - Joe Bliss, owner, JBC Technologies, Inc.
"Understanding how to set pricing seems like best approach because it takes into account both costs and consumer insights if done correctly. "Managing the Right Tensions" addresses profitability and growth indicating both can be achieved simultaneously by focusing on the common bond: "Consumer Benefits". What do they value and what will they pay for it. Answer this and you're well on your way to structuring your offer to yield both growth and profitability." - Chris Dunn, owner, ClearSight Marketing
"It's true that understanding how to price is critical. If you are a true flat rate pricing company, you must know all the factors that allow you to price for profit. Just agreeing with those who canvas the crowd and ask "who would like to add $25-50 to your labor and put that in your flat rate book?” is not the way. Set your pricing and then get that price with FR." - Tom Templeton,Coaching for Contractors
"In today's climate the companies that know what it cost them to run their service department (for example--and are using flat rate for example) and are running a positive, team-oriented CSRs center are better poised to continue making a profit above what they did last year (the percentage of profit may be lower; but they are still making a profit." - Jannifer Anderson, secretary, Ferris State University
"If you don't know how much to charge you are disaster waiting to happen. Setting your prices based on others in your area is an example of driving while blind. If you don't know what you are doing in this area...GET HELP." - Andy Holt, president, Toprate Services
"I think I finally got it. Last year I made 10 cents on the dollar. Today I make 50 cents per dollar. Maybe I still need to work on pricing." - Geri Hess, Helping you Feel Better In Your Space
"The problem is people who set pricing wrong, don't read or study info how to do better." - Corey Hickmann, owner, Comfort Matters Heating & Cooling, Inc.
"I see the problem as not knowing how much your labor cost you. Anyone can mark up a product, knowing labor cost is key." - Dusty Rhoades, owner, Aire Serv of Weld County
"Profit is calculated after cost is identified. Spend more time on controlling cost and becoming the low "cost" provider and profits improve. It will be amazing how quickly your marketing has improved." - Dennis Laughlin, president, Arzel Zoning

Better marketing/advertising was the choice of the following responders:

"We are up 23% from 2008 and 08 was a great year for us. We tend to be the leader in our area in Advertising and Marketing." - Greg McAfee, president at McAfee Heating & A/C Co., Inc.
"As a small manufacturer of HVAC controls, we are always trying to figure out the best way to get our name out there." - Thomas Jackson, CEO, Jackson Systems LLC
"This was a toss up for me between better marketing and understanding how to set pricing. I feel both are very important." - Kim McKenna, owner, Angel Baby Organic

Some respondents believed that the key to profitability is to have a happy and motivated staff. Here are some of their thoughts:

"Co-workers will do what you want when you share in the rewards. Set up a spiff program for replacement sales leads, and for sales of accessory products." - Ron Smith, owner. Ron Smith Consulting & Coaching
"I see that employee incentives are one of the lowest of answers. I got so much more out of my employees when I treated them well and they seemed to be happy working for me. I've worked in 2 retail environments over the last 30 years and one offered more increases, some merit, and was very vocal about it. The working environment was much better that the other one who left you in the dark about pay increases and the compensation was very low. Moral in that environment was low and getting people to produce beyond the minimum was marginal." - Annette Thompsett, owner, Computer Tech Art Services, Inc.
"Granted they are all important factors and we need to do them all, and do them well. However, the way the question was phrased it was asking “what is the single key”, i.e. the one thing without which the others don’t matter. From the comments it seems like many responders focused on one choice because they felt they already had the other things in place. (Effective) marketing will increase sales. But it won’t necessarily increase profits unless the employees move the customers’ decisions in the right direction. Having the right pricing structure is critical. But it won’t help unless the employees move the customers’ decisions in the right direction. Our employees have the greatest opportunity to influence the customers’ buying decisions – all day, every day. Our job is to take care of the employee; their job is to take care of the customer. So set up an incentive structure that rewards the behavior you want -- your profits will increase and your overall costs will go down." - Stroh Brann, owner, Seneca Consulting, LLC
"Employee incentives indicate a very small percentage of the feedback for this poll. As an employer, the right employee incentives worked well for me. Circumventing customer excessive charges is key to policing this event. I agree that the value add to accomplish my preference requires a business to first control cost and understand fair pricing for work." - Rhamy Morrison, STEP/START Program Manager, Trane, Inc.

Flat rate pricing rounded out answers from the list, but there were also some responders who felt that the most important items were not on the list. Below is the remaining list of replies:

Flat Rate pricing is long overdue in our industry as the way to do service work in our industry. Even installation work is worth using flat rate pricing. – Tom Moersch, owner, Tru-Temp Heating & Cooling
Being a major supplier of and believer in flat rate pricing systems, it goes without saying that flat rate is one of the keys to profitable business. However, if you don't set your prices right, you will not be profitable, regardless of how you present your prices! Know your true cost of doing business and then use flat rate pricing to get that price for you goods and services! - David Holt, National Sales Manager, Profit Strategies, Inc.
Because I work primarily in light commercial or commercial industrial my first "pick" was not on the list: better sales processes and sales training. So marketing stands out to me with pricing as a major contributor to profit after the negotiations and closed sales. Setting up pricing for commercial and flat rate for residential is critical. - James Graening, owner, b2bsalesexcellence.com
What a tough answer to give! There is almost no right or wrong answer. All of these things are critical aspects of a business, regardless of what sector you are coming from. I chose better marketing and advertising because it's the one thing that I have never done enough of. It's also the one thing that I believe can help you overcome many other short-comings in a business. If you have an actual marketing plan, you can create volume and capital that will help you get past other things such as setting your pricing or employee incentives. You will have the money you need to make up for not knowing EXACTLY what your fixed costs are or EXACTLY how to set your pricing. I do love flat rate pricing, but I think it can be a hard sell in a down economy like here in Michigan. In our area my business, which is electrical contracting, is hurting in part because of all the laid off workers out there taking all the smaller work. This means that I have to go compete against someone working out of a pickup truck, which is impossible for a brick and mortar operation with 10 trucks and lots of overhead. The flat rate pricing that I have seen would be nowhere close to some of our competition. Especially when that competition is charging $35 per hour which doesn't even cover my costs.- Christopher S. Mandel, Electrical Estimator/Project Manager, Superior Electric Company of Greater Detroit
I did not see an option I would have chosen. In my opinion it is to be of real value to your customer. With tough economic times, money needs to be spent on things/services that truly enhance our company or personal lives. Add value.- Annette S. Calloway, Director of Religious Education, St. Jude Catholic Church at Archdiocese of Indianapolis

Survey: 2009 business concerns

I recently conducted a survey at LinkedIn and got responses from 104 people to the following question:

What is the number one problem your business faces in 2009?

Downturn in sales
Increased competition
Shrinking customer base
Lack of qualified workers
Other

The results were predictable as shown in the chart (below). Close to half of the respondents (47%) answered ‘downturn in sales.’ There were lots of comments and I have listed some here.

“The downturn for us has more to do with credit rejection as much as the perceived economic downturn.” - Scott Getzschman,Getzschman Heating LLC
“The downturn in sales for us has been from our competition not charging enough. We are seeing pricing that we cannot compete with.” - Gary Shelley, Air Temp Services
“What I am seeing is increased competition that either has a buying agreement with the mob or a business death wish. And if hear one more customer say "but brand X has free shipping" I am going to implode. Repeat after me..."There is no such thing as FREE SHIPPING!!!!” - Jay Boyd, Home Air Direct
“We are seeing the tax credit benefit contractors who do not market, even to their customer base, more then those of us that do market well.” - Dave Hutchins, Bay Area A/C
“I have seen customers getting 4-5 estimates and also noticed that some people who are laid off and collecting unemployment are doing installs for less money then a company that must cover its overhead.” - Ted Paul, Minuteman Cooling & Heating
“Seems like customers are holding on to their money. They are repairing if a part is broken and unit is not operable. We see more customers making repairs close to $500-$800 price range instead of replacing, even with the government tax incentives. People who have had service agreements for years say they do not have the money and are not renewing at this time.” - Carla Crafton, Crafton's Heating and Cooling, Inc.
“Lack of qualified help is the biggest problem. We have lots of applicants but when we do testing even the ones with 5+ years of experience fail the test miserably.” - Zeke Acosta, Acosta Heating & Cooling
“We are slower but the caliber of workers stink!! And can not seem to find any anywhere at any price!” - Mike Beaver, Beaver Brothers, Inc.
"We see more customers making high cost repairs than normal, but the tax incentive is helping those who do buy to buy high end to qualify for the tax credit with the current $1K rebate. I feel a lot of this is due to the market uncertainty not the actual condition. People continue to hear it might get worse or a new layoff occurs. Maintenance agreements are renewing at about normal rates, but more non-plan holders are buying them when told of potential energy savings by regular maintenance.” - G. Andrew Smith, Aire Serv of Southeast Texas
“I picked other. I think our problem is overhead. We are charging to cover our overhead and as a top performing company we offer good benefits and salary to keep top techs and fly-by-nights just undercut us.” - Rob Dowd Jr.,DiFilippo's Service Co.
“I chose "other" because Hillsborough County, Florida is overrun with unlicensed activity that is being left unchecked. It's hard to compete when your "competition" has no license fees, taxes, or worry about prosecution. Turning in unlicensed activity to both the state DBPR and Hillsborough County has proven to be a waste of time for myself and other licensed contractors I know in the area.” - Brian Furman, Brass Monkey A/C & Heating Inc.
“I voted other because it’s a combination of all the things. With new construction so far down it has created a lot more competition for the add-on replacement market and is hurting gross margins. There are a lot of back door unlicensed mechanics. It’s also tough finding qualified workers with clean driving records – and with the downturn, keeping the ones you do have busy so they don't go somewhere else.” - Rusty Sosebee HVAC Sales

But the new is mixed for other contractors and in a couple of cases, business is better for them in 2009. “It is a conservative consumer mindset; holding onto the wallet with both hands and, generally-speaking, purchasing bare necessities,” said Robert Wilkos of Peaden Air Conditioning, Heating & Plumbing. “People are putting off major expenditures for later, but that was prior to the warmer temps. We'll see what happens now the weather is more favorable to us. Advantage Peaden? Time will tell and, on first wave, it appears that consumers still want to be cool and comfortable. Low pricing is also a concern. It's always an issue, but now more so than ever.”

“The downturn has been a plus for us,” said Lisa McNeil of the Nexstar Network. “Contractors are realizing that in order to make it through this trying time - they need help. This is not the time to go it alone. We have seen an increase in our members acquiring other businesses, increasing marking to acquire market share, and training their employees. You need to be at the top of your game in this economy. The good will get better, and the others will go away.”

Against all odds, Michael Covert of Covert Aire noted, “We are 0% RNC and have an increase in work, an increase in revenue, and increase cost of goods sold – all compared to this same time last year.”

“We are on track for best year ever,” said John Cameron of Oliver Heating and Cooling. “Tax credits makes everyone offer higher end stuff, especially geothermal, which is BIG TIME.”

And there is always one in the bunch. “I’m trying to find a place to spend all this money I am making,” said Terry Boone of Perfect Air of Abingdon.

Other responses:

· “The banking crisis stymied credit lines for business growth and new inventories. The result impacts our b-to-b operation.” - Carole Valade, Gemini Publications

· “One of the businesses I run sells books, videos, and software for contractors and I noticed an almost 300% increase in items that assist people in passing licensing exams. This indicates to me that there are a bunch of people out there who are planning on starting their own business. The problem I see is that many of them have limited business knowledge and will wind up dragging down the cost of service and installs until they either go out of business or wake up to reality.” - Frank Besednjak, The Training Source

· “The company I work for had many many rfq's and quotes out in 2007 and 2008 but a very small percentage converted to sales. We believe the customers need the equipment and they like the interest rate but fear their customers not buying.” - George Hall, Lindberg/MPH

· “I chose "other" – from a 10,000 ft view. What is happening "in the world" is a reflection of the internal battle individuals (including myself) are struggling with, which is that of constriction, contraction, and scarcity. The stock market, the economy: all of it is about how we are relating to ourselves, one another as individuals and as a whole. More simply, it comes to living from the space of fear. When we understand we can change "our reality" by changing our way of relating now, in the moment, beginning with ourselves. We start the chain reaction of improving relationship with other individuals and then the whole system.” - Kathy Igoe, Integral Life Designs

“We are a manufacturer and distributor of HVAC controls (mainly forced air zone control). Our sales are up slightly this year, but there is huge pressure on gross margin. I do believe the strong will survive and when the attitudes change to a positive outlook, our business will experience incredible growth.” - Thomas Jackson, Jackson Systems
“We have low class competitors. Plus, customers "SUC.” You don't know what you don't know (stupid), uneducated (won't take the time to do research and learn about the industry), and CHEAP! They are bottom-feeding, looking for cheap deals. If contractors are willing to cut their prices then they have to make it up in volume. So guess what? They have to also cut quality. I get several calls a week from customers who have chosen a cheap company and now have buyer’s remorse due to poor quality work. I just work harder to educate, inform and dazzle them with brilliance. You know the rest of that saying...” - Carolyn Christensen, DUCTZ of Greater Atlanta
“I see the number one problem for business in 2009 is a lousy attitude. I talk to people every day whose business stinks and their attitude about the business, life, the economy, etc. matches. On the other hand, I talk to a few with positive attitudes. Guess what? They are making money. Their business is growing. They are finding the good that exists and capitalizing upon it. Our business is up 12% since January. We have several clients in a variety of industries with similar results. Attitude is very powerful. Try a positive attitude for a day and see what happens.” - Steve Schneider, Retlake & Schneider CPAs