White Paper: Reaching the HVAC Business Promised Land! By Ruth King

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Continued > 1 Procedures and Personnel Management This is the time to begin putting procedures in place. Discipline becomes an issue if people don't or won't follow the procedures. For owners, it can be very difficult to fire people who are not performing because their attitude is: "I need him/her". They only see the person's contribution to sales rather than examining whether that person is earning the company a profit. 2 Inventory Excess inventory can kill the business. At this stage most companies have the space for inventory and employees love to fill that space (in the building and on their trucks). Without close inventory control, the company's hard-earned cash can be wasted rather than used wisely for growth and survival. 3 Cash Management Cash management is critical. There is a lot of overhead related to sales, so, just like inventory, billing and collections must be closely monitored, and productivity on jobs and service calls must be maximized. Residential service and replacement should be COD. Cash flow issues can crop up when the company begins billing for commercial work and payments are not made for 45 days or longer. 4 Training and Customer Service Training is mandatory. Good employees want to be trained. In addition, the owner needs to be trained on important business issues. Pricing properly and learning how to sell value rather than price are critical. In addition, a good service agreement program must be implemented to provide the cash needed to survive and grow (as well as creating a loyal customer base). The company must become customer focused. 5 A Critical Stage This is a vulnerable stage of business growth. Many owners don't make it out of this stage because they cannot make the transition from doing to managing. They may become frustrated and return to being a hands-on owner/operator. Or, they may grow and succeed, becoming a business manager. Roll with the Revenue Between $1,200,000 and $2,500,000 in revenue. This is generally a good stage for the contractor. He will complain about having to find technicians, staying busy, and increasing profitability. In most cases, however, unless a catastrophe hits, the overhead that was added at the $800,000 level is generally enough to last through most of this stage of growth. If the owner is trained, and implements his training, then he is pricing his jobs right and taking care of his employees. He will usually be making more profits than he did as a sole operator. However, if he is not pricing his jobs right and running his business right, he may begin to lose employees and find himself back in No Man's Land. Staying Sharp As mentioned, the primary vulnerability at this stage is a catastrophic event, such as illnesses, work related injuries, or the loss of key customers or employees. The company is now large enough to make reasonable profits, but may not be large enough to absorb catastrophes. This As of 2016, there were 332,900 HVACR jobs in the United States.² Middle market HVAC businesses have an average of 4.5 full time employees. 3

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