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The Customer Comes Second | Clip of the Week

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The Customer Comes Second | Clip of the Week

How can you hire the right people? By remembeing one simple rule: The customer comes second.

Yes, you read that correctly.

Weldon Long explains, in a clip from this week’s episode of Cracking the Code.

Watch the clip from this week’s episode of Cracking the Code below, and visit EGIA.org/Show to watch the full show, before it goes in the members-only archive on September 3.

Ask the Experts | Charging for Parts Under Warranty

Question: How should we charge our clients for parts that are under warranty?

Gary Elekes; Founder, EPC Training:

If it’s under warranty there’s really two different places that could happen, right? Either it was our install and it’s under your warranty, so that would depend somewhat on how you manage your overall customer experience.

And then there’s the second area which is, somebody else installed it, and your service guy is out there and he or she sees it and it’s a part that’s actually under warranty.

So the easy one is, obviously, if it’s under our warranty we’ve already reserved and organized around that. So what we do – this applies to the second part of the question as well – most companies today are flat rate. So the warranty part, what happens is that when you charge for the time when it’s not your part, when you didn’t install it, you expose your labor rate. So in some cases that’s not a big deal.

If you’re $75 an hour, you’re probably going to be a poor contractor and not make much money if that’s the price, but it’s not likely that somebody will be upset with you – that $75 an hour doesn’t sound unreasonable. If you’re $350 an hour, like we are – $354 – there’s going to be some people who are pretty unhappy about that number staring at them for a condenser fan motor that didn’t warranty, but they’ll have to pay you for the labor portion of that.

So what we do is we create an in-warranty labor rate that’s a specific repair. So any time that we deal with a call that’s an install or a service call that wasn’t something we dealt with on a warranty, but it’s clearly in-warranty based on the manufacturer, we charge a reduced rate basically so that we don’t expose the client to the overall full labor rate.

Now one of the things that I would caution is that we’re pretty effective at this. And I think the important part of the reduced labor rate is you have to get the customer on a club agreement. One of the things that we do with our own installs is either we’re going to embed that in our customer experience — if you bought the system from us, you’re going to get the club agreement for a period of time – and any extended warranties that are passed, you’re going to have to stay in the club.

So in this situation, an external warranty where you didn’t install it, this would be a great opportunity for you to talk to the customer about maintenance. Probably that repair wouldn’t have happened – there’s a good likelihood that if we did regular maintenance on it, this particular crisis wouldn’t have happened – so join the club.

You’re not going to make a living doing reduced warranty labor rates: it’s no fun. So you want to also keep that as a part of your tracking system and your financial system.

So Drew, I’ll toss that over to you, but that’s how we handle it.

This is the weekly Ask the Experts free excerpt. To listen to all of this week’s calls, or to see the schedule and register for future calls, click here.

Proactively Closing the Price Door | Clip of the Week

So your customer just objected to the price. Is the first thing you do try to shut that price door? It might be too late.

In a clip from Cracking the Code, Weldon Long explains how to proactively — and preemptively — close the price door before your customer can sneak out of it.

Watch the clip from this week’s episode of Cracking the Code below, and visit EGIA.org/Show to watch the full show, before it goes in the members-only archive on September 3.

Ask the Experts | Managing Tech Hours on Slow Days

Question: How should we handle our technicians’ hours on a slow day?

Drew Cameron; President, HVAC Sellutions & Energy Design Systems, Inc.:

Well, very carefully. We don’t want to go ahead and waste people’s time, as far as the people on our staff, number one, and second we don’t want to waste consumers’ time. We’ve got to make sure — we’ve got limited resources — and we have to use those to the best of our ability when we have them. I guess what I’ve done, and I think it obviously varies based on the company and how you’re set up and what you’ve got in place, so I’ll throw out a few ideas.

If you’ve got service agreements and you’ve got some precision tune-ups you haven’t done yet, try to get those scheduled and done if you can.

Follow up on technician recommendations that were previously given to customers that maybe they didn’t buy. Maybe you can offer some kind of package discount or something like that, to stimulate some work.

Maybe you can send the technicians to ride along with another technician – if you have a senior technician, have a junior technician ride along so he can assist and learn and be coached a little bit there. Maybe if you have big jobs on the installation side you could send some technicians – I’m assuming we meant service technicians here, maintenance techs – send them to assist the installers, maybe knock out the job a little quicker.

Truck inventory! If they’ve gotta do their truck inventory, if you don’t keep that up electronically, do a truck inventory, a truck cleanup, washing. Warehouse cleanup. Cleanup your scrap around your office and the back of the warehouse and the shop and whatnot.

Work in the sheet metal shop making sheet metal if you have sheet metal shop going.

Building projects around the office to kind of spruce up the office and beautify the property if necessary.

And then, like right now: We’re in August, and so things are getting a little bit slow, it’s the end of the summer, seasons have been mild out here on the East Coast a little bit, we didn’t get the hot weather like everyone else did, we got a lot of rain. So plan for activities and book in time and flexibility for vacation, education, coaching, practicing and training of certain skills.

What systems can you work on internally to streamline? What company projects – for the company and the community – can you get involved in? Is there some type of community outreach you could get involved in? Could they go around and do some knocking on doors and door-hanging for lead-generation?

And don’t forget to have some fun and celebrate. Sometimes when things slow down a little bit it’s a good time to take a little time and say, What went well? What didn’t go so well? What can we do better? Can we have a little bit of fun and celebrate the success that we did have over the summer when we were super busy?

The one thing I would caution people about: Sometimes you do need to slow down; you need to slow down in order to speed back up. So this is a great opportunity slow down.

I was on a client consulting call this morning and we had, I think, about 12 salespeople on the staff and three of them were off this week. And you might think, “Geez, three salespeople were off?” But, yeah, it’s August and it’s vacation month and a lot of people aren’t calling in for leads at this point. The weather just dropped off and people are going back to school, and on vacation themselves, so why shouldn’t our guys take off and recharge their batteries too.

The one thing you have to realize is that the plane cannot fly at full capacity at maximum altitude and maximum speed forever. You do have to land, you have to refuel, you have to give the crew some rest, restock the plane, train the crew a little bit, perform maintenance on the plane, and get ready and plan for your next journey. And take on new passengers of course!

All of that needs to be worked on at some point, and so this is an opportune time to reflect on the business and see how things went and what can we do to kind of get going again. Business is the same way: It’s not downtime or slow time, it’s time to adapt, adjust and execute for what’s coming next.

Yes, I understand that you may lose a little revenue at this time if you don’t have the work hours. But if you’ve planned that into your schedule, and I’m going to pass that buck to Gary here in a minute, if you’ve planned that into your schedule, then you know this is kind of a (what we call) shoulder season. So you may dip in revenue, and we don’t want to lose revenue, but we also don’t want to lose people and we don’t want our people to lose pay.

So find a way to make the best use of this time, and with that I’ll throw it to Gary.

This is the weekly Ask the Experts free excerpt. To listen to all of this week’s calls, or to see the schedule and register for future calls, click here.

Measure Your Training ROI | Clip of the Week

Is it worth it to commit to ongoing training? Or more specifically, how can you tell how many resources you should commit to the process? Is it possible to actually quantify a training ROI?

Yes, and it’s vitally important to do so. Weldon Long explains, in a clip from this week’s Cracking the Code.

Watch the clip from this week’s episode of Cracking the Code below, and visit EGIA.org/Show to watch the full show, before it goes in the members-only archive on July 16th.

Snapshot Survey Results | On Inventory Management

In the July 2018 Snapshot Survey, we asked contractors all about inventory management. Here’s one survey question and its results from the summary report, which is now available in its entirety to EGIA members.

Question: Does your company have a formal, data-driven forecasting process to attempt to ensure the correct inventory is on hand?

While every contracting company carries some inventory, only 17% of surveyed companies use a formal, data-driven process to forecast how much they should have on hand, while 83% simply estimate. Of course, not having equipment when you need it can cost you sales, but holding excess inventory is likewise going to impact your bottom line by occupying capital you could be allocating elsewhere while increasing the myriad fixed and variable costs associated with warehousing. In a perfect world you’d have zero inventory on-hand while the supplier never misses an order. Short of that however, you should at least proactively incorporate data in order to forecast as accurately as possible. Some considerations include:

• Previous sales history — What products have sold in the past? What quantities? What time of year?

• External influences like utility rebate programs or distributor pull-through programs (rebates, eg)

• Planned growth

• Planned marketing initiatives and associated demand changes

• New equipment models and models that will become obsolete, according to distributor or manufacturer

Login to access the full research report on Inventory Management.

For a deep dive into inventory management, material handling, truck stock and more, and to access training materials, recommendations and education pieces, visit the Contracting Best Practices Library at the EGIA Member Dashboard.

EGIA Snapshot Survey - Does your company have a formal, data-driven forecasting process to ensure the correct inventory is on hand?

7 Laws of Sales Success | Podcast

Mark Matteson continues his series on sales in the latest episode of Contractor Coffee Club. This time, Mark offers seven things that will drive your sales mentality and success rate, along with other strategies and tactics that have helped him master HVAC sales over the last several decades.

Plus, a look at industry research data on inventory management and what it means for your company.

Ask the Experts | Is Duct Cleaning/Sealing Worth It?

Question: Is duct cleaning or duct sealing really worth our time?

Gary Elekes; Founder, EPC Training:

Well, that’s an interesting question as well. It is worth your time iff it’s a business model that you feel you’re committed to. I think that comes back to just about anything in life. If it’s something that you’re strictly looking at, “Is it strictly worth my time because is it profitable or not profitable?” that is a different framing of the question.

So all businesses need to make a profit to sustain themselves, but the reality is that’s not necessarily a problem that you would look at and say, “Should I be in that business or shouldn’t I be in that business?” Because of course it can be profitable.

The Aeroseal franchise has been around for many, many years, and there are many examples of companies that have done duct sealing and duct cleaning, and just essentially making sure of sanitization, and they’ve been very profitable. Some businesses are built solely on that. So you’d have to look at that model and say, “Of course it can be profitable.” They know some things and they’ve managed that business model in a way that’s allowed that to happen.

But the one thing that’s there, is that if that’s your only business you’re clearly committed to it. So you would be passionate about learning how to educate the customers, making sure you train and develop your team, making sure that you chose carefully the right equipment and capital that you need to function and prove that you’ve done something positive for the client.

So yeah, but I believe that that’s something that also can be a distraction in some businesses. So if your core business isn’t performing at a high level, and you’re not getting the cash flow and essentially printing money out of the existing core structure of the business, then adding a segment like that – or what we could consider to be a category – I don’t see how that would be in anybody’s best interest, because the core business needs to operate at a high level first.

So what we would like to say is get your fundamentals down. It’s a little like college football – Wally talked about college football, we’re excited about the season coming up. But you know if you don’t block for your quarterback, it doesn’t matter who your quarterback is. Tom Brady gets great blocking, and he’s about as old as I am these days, and he’s still functioning at a high level. But if he was playing for a team that didn’t block for him that might be a different story.

So when you’re looking at duct cleaning, duct sanitization and duct sealing, look at that and say, well, as a core business am I functioning at a high level? And then, does this business model fit as a bolt on? And then how do price it, and how do I train and educate and I think it’s an excellent example of even duct mods. If you look at companies that do a one-day jobs and don’t modify airflow, versus companies that price the airflow modifications as part of a second day, but understand they have to price that higher in order to get recovery, because they’re giving up that day of labor. I think you’re looking at the same kind of process in this business segment.

So surely you can make money, it comes down to convincing the customer that this is in their best interest, there has to be some value to that, it has to be real, and then the transaction model has to be effective from the standpoint of the company.

So I like that business model, I see it as one that you get into after you build the structure of your business, and then you’re ready to put that in as part of your IAQ model, but not until then. So I would look at your core KPIs and your core fundamentals of the business and make sure that those are functioning first.

This is the weekly Ask the Experts free excerpt. To listen to all of this week’s calls, or to see the schedule and register for future calls, click here.

Planting Sales Seeds | Clip of the Week

A sales lead is an active lead — an active opportunity to run the typical sales process. It’s urgent. The sales seed is not urgent, but it’s just as important.

A sales seed is where we discover, through performance measurement, an opportunity to improve a person’s home — but not necessarily today. With a sales seed, we identify an opportunity to enhance someone’s home at some point in the future.

These are the opportunities that can have a resounding impact on your business during the shoulder seasons — and keep your team employed year-round.

NCI’s David Holt explains how to properly separate sales leads and sales seeds, in a clip from this week’s episode of the Cracking the Code.

Watch the clip from this week’s episode of Cracking the Code below, and visit EGIA.org/Show to watch the full show, before it goes in the members-only archive on July 16th.

Ask the Experts | Best Billing Method?

Question: What method of billing should we use for the best profits?

Gary Elekes; Founder, EPC Training:

Well, Drew, it’s another one of those “best” questions. “Collect your money,” is the answer. You can decide which market segment that applies to, but in residential change-out it’s payment upon completion of the job. All jobs ought to be finished in the same day unless bid otherwise. So we’re going to collect our money.

Services, you know, same thing. We should be up front in pricing discussions and collect our money when we’re done.

Maintenance can be either the monthly debits, or we favor the prepay. I used to be a lot more of an advocate of the monthly debit, but when I got successful at doing it I realized that it was actually more administrative costs than it was worth. So we just offer a cash discount now on the prepays, so we collect our money in advance. I like that method, that’s a very profitable method. So that money then can be invested in rolling 90-day T-bills or any type of a safe financial instrument. So you can actually make some extra money if it’s prepay.

Commercial and new construction are going to be – hang on as long as you can to collect your money. A lot of the major builders now will prepay, but they sort of control the pricing systems since the manufacturers have released their pricing to those folks. So you’re really working for labor and recovery of overhead. So that’s a tough model. Typically they’ll pay as much as 90% up front and 10% when you’re done. But unfortunately there isn’t a lot of margin or profit at the end, unless you’re a very efficient, scaled business. There are some of those companies out there, but they’re becoming fewer and fewer. So the rich get richer in that segment. But it’s a very slim margin – like the grocery business – a one-percent margin is considered to be successful for people like Kroger and Publix and Safeway and so forth. So you’re spending a lot of resources and not recovering a lot of profit dollars, although they can be scaled.

And then commercial services is 30 days, so we typically have an agreement. I think the most important thing in the commercial services market is to have a receivables report, have somebody in charge of collecting the receivables, and make sure you have clear, consistent terms up front. I think the big issues with commercial projects are how you set up the terms and conditions initially with your client, and their expectations of they’re going to pay. And how, in a lot of cases, they don’t want to pay. So I would then make sure that you file liens and have a process behind that for the opportunity to make sure you at least get in line to get your money in case something bad happens.

So for me it’s all about understanding the business mix. This question is less about collecting the money and understanding which portions of your business are flowing in and are timely collections, versus which portions of the business that you’re selling that are flowing in that are not timely. We’ve always advocated no less than a 70% positive cash flow model to support the growth of a 30% billing model. That’s just us, looking at the business in terms of profitability. That has nothing to do with what your personal philosophies, your personal interests, what your competencies are; where you want to grow the business. If you’re great at chillers, and you’re fantastic, and you can sell a $3 million chiller but you’re not going to get paid for a year, you’ll get paid in a year and you’ll get that $3 million and might make a lot of money, but you have to be willing to accept that based on that’s what you sold as a competency.

So the 70%-30% threshold — if you look at cash flow, and you look at how to be profitable in a business – being able to grow a business and increase the gross profit dollars is part of how you increase your profit overall. So if you’re cash-starved and you’re working capital-starved all the time, which many businesses in our trade are, you’re limited – you don’t have the opportunity to do business with a company that might help you grow. You can’t pay Drew Cameron and pay him his consulting fee to come in and show you some of these great financing tips and sales process, and Wally’s training, and so forth.

So the cash flow coming in by virtue of you controlling your mix is part of that question, as far as I’m concerned, and not just “what’s the best way to get paid?” Obviously up-front and getting paid on time according to your terms is the answer to that question, depending on the mix.

This is the weekly Ask the Experts free excerpt. To listen to all of this week’s calls, or to see the schedule and register for future calls, click here.