Finance

Stupid Mistakes Contractors Make In The Fall - Part 3

Five Mistakes To Avoid This Fall

Originally published: 8/18/2022

Continuing with the next and final installment of the Stupid Mistakes Series, this one deals with the start of a new season. Many of the following mistakes can be avoided if you know better. So, as I always say, don’t make these stupid mistakes!

Here are five mistakes to avoid this fall.

1. Blindly Paying for an HVACR Marketing or Advertising Program

Before investing company funds in advertising, calculate the revenues needed to break even on that expenditure. Whether you advertise in  print, on television, through your website, via direct mail, Facebook, or other advertising mediums, you should only make that investment with an estimate of the results required for that advertisement to pay for itself.

Assume that you plan to send 1000 fall maintenance postcards to a select group of homeowners or businesses.  Take the total cost of the mailing (design, printing, and postage) and divide that number by your gross margin.

Your cost is \$0.50 per postcard and the gross margin of the service department is 55%.  Mailing 1000 postcards costs \$500. Therefore, the break-even revenues that must be generated are \$500/55% or \$909.09.

If the postcard offers carbon monoxide and heating maintenance at \$89 per system, then you must generate 10.21 fall maintenance checks from the postcard expense. Then, if we follow that formula, on the 11th, you earn a profit.

Can you generate 11 fall maintenance checks from 1,000 names?  That is a 1.1% return. The answer is, maybe. It depends on to whom you are sending the postcards.  If you are sending the postcards to people in your database who have not done business with you in the past 2 to 3 years, then the answer is probably yes.  If you are sending the 1000 postcards to a zip code where you haven't done much business in the past, then the answer is probably no.  You're likely to get a 0.5% return or less on this type of mailing.

Hopefully, at the end of winter last year, when your customers said, “I’ll replace my system next fall” or “I’ll limp along until next fall before fixing…” you recorded that comment in a tickler file.  Call those customers to get the repair done or the system replaced.

Alternatively, your salesperson gave a quote for a new heating system last year and never heard back from the customer, even after several attempts to contact that person.  Contact those customers again.  They may not have bought a new system and your telephone call might prompt them to do so.  Of course, you’ll have to check their original proposals because costs have increased.

3. Not Having a Fall Service Agreement Contest

Maintaining a strong agreement base is critical in inflationary and potentially recessionary times. Those companies with a thriving maintenance program do better during economic downturns. A contest can help you increase your maintenance customer base.

Hold a fall contest.  For residential companies, dispatchers should start the process with customers. Technicians get the first chance to educate them about the upcoming event. The technician can leave the agreement with the client. Even if the customer says, “I have to talk with my spouse.” Someone from the office should then follow up.

From a commercial perspective, your technicians are your eyes and ears at a business location. They see the condition of the customer’s equipment.  If it hasn’t been maintained, the technician asks, “Who maintains your equipment now?”  Incidentally, don’t assume that just because it is dirty, it hasn’t been maintained… some companies don’t do maintenance properly.  The technician then sets up the survey appointment with the customer and your company’s salesperson.  The technician gets a SPIFF for setting up the appointment.

Set a goal that makes the company stretch out of its comfort zone. If you’ve never generated 100 new residential maintenance customers in the fall, set this as a goal.  In three months, it’s only about 33 per month. To do this, you need 99 opportunities. Do you have that?  If so, then go for that goal.

If the technicians have never talked with your commercial customers about maintenance, set a goal of one new appointment per technician per week. This expectation will help build your commercial service contract base.

4. Not reviewing signs of carbon monoxide poisoning and fall repair/maintenance procedures

Every year the media reports on someone, somewhere who has died of carbon monoxide poisoning. Your technicians need to be aware of the signs of elevated carbon monoxide in homes. These events usually serve as a reminder, but your technicians should be reviewing this consistently. Since they have been working on cooling equipment for the past months, the switch to heating usually is easier with a few technical review sessions.

5. Not Putting Aside Enough Savings

I remind HVACR owners of this often. Yet I see some make this mistake repeatedly. Have at least 6 months’ operating expenses in a savings account.  This can be accomplished by saving 1% of all cash coming in the door and all maintenance money received.

These savings create your company’s line of credit and serve as a buffer during slower periods.  If you do this, you won’t have to rely on a bank for a line of credit.

Now that you know what not to do, you will never make these stupid mistakes. Sincerely, I hope you found the Stupid Mistakes Series helpful. Feel free to comment or send suggestions on what you’d like to read.

Next up – Trailing Profit & Loss.

Ruth King has over 25 years of experience in the hvacr industry and has worked with contractors distributors and manufacturers to help grow their companies and become more profitable. She is president of HVAC Channel TV and holds a Class II (unrestricted) contractors license in Georgia. Ruth has written two books: The Ugly Truth About Small Business and The Ugly Truth About Managing People. Contact Ruth at ruthking@hvacchannel.tv or 770.729.0258

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