The Irresistible Lure of the Large Customer

The Irresistible Lure of the Large Customer

Chart courtesy of the Commercial Collection Agency Association

As a business owner, it is very important to understand the power of money at work in your company. Over the life of the business, understanding the cost of not taking a vendor’s discount or of not following up on receivables until they become uncollectible can literally make the difference between success and failure. Some companies understand that all too well, (usually the large ones) and they are very good at putting your money to work in their business.

 

It all started when the RB (Really Big) Company called on Friday at 4:45 PM. While you have been a small but regular customer of theirs, you have also been trying to get their business for years. While the caller wasn’t particularly friendly, you chalked that up to the fact that he was under the gun and it was late in the week. You saw this as perhaps your chance to get a foot in the door and win some business for your firm. The request was a bit complicated, and you weren’t sure the final dollar amount of the invoice was representative of everything that was involved on your part to fulfill it. On the other hand however, you were sure the effort put forth to obtain the item you tracked down for RB Company would likely be rewarded with future business. As a customer, RB’s accounts receivable group was very efficient at collecting money owed them. Their terms were 1% 10/Net 15, and after 30 days you would begin hearing from their credit group. By 45 days they were firm in their discussions and by 60 days they were downright importunate. Based on that, you are certain their payables department would handle invoices the same way. You sent off your invoice following fulfillment of the order… And it was never heard from again.

 

Your contact at 30 days was not returned, but a busy schedule prevented you from realizing they still hadn’t paid at 60 days. You were more persistent this time when contacting them, especially since you had gone out of their way to meet their need when they were in a bind. The best you are able to get from them however was a gruff statement about they would “look into it.” By 90 days you are getting seriously aggravated and that showed in your voice when you spoke with their accounts payable department. Finally, you received payment 110 days after your initial invoice was sent – and they had taken the early payment discount!

 

Has that ever been your business? If so, you would not be alone. It’s unfortunate that there are companies who abuse their vendors by not paying them in a timely manner, but don’t be the one that lets them ensnare your funds into their deliberate web of cash flow manipulation.


Are You Prepared for What’s Coming?

Are You Prepared for What's Coming?The June 8, 2015 ACH & R News featured an opinion article by Kyle Gargaro which asked the question, is your organization changing? If not the opine stated, it should be. The article quoted former NFL coach John Gruden who said, “When talking about teams and players: you never stay the same. You either get better or you get worse.” What about your organization? Are you prepared for the changes coming in this industry? Consider the following.

Another article in the same publication talked about the changes coming to condensing units. In an article by Ron Rajecki, he stated that if you are like most consumers, the condensing unit represents the “face” of your system – but big changes are coming to that face. While multistage condensing units have been around for some time now, variable speed compressors offer the ability to better match equipment performance with the needs of a changing load, according to Tom Archer, product manager for Carrier Corporation. Variable speed condensing units have enabled manufacturers to make drastic reductions in the overall size and weight of condensing units, sometimes by as much as 50% with the same efficiency rating is a traditional single speed unit. Archer also noted that communicating HVAC systems are becoming increasingly prevalent.

According to Farook Mohamad, director of product management for Rheem Manufacturing, US manufacturers have traditionally used the air side of the system to gain higher efficiencies. Therefore the size of heat exchanger surfaces have increased and more efficient fans and motors are being used. “We’ve kind of come to a crossroads in that the size of the equipment continues to increase, and the cost of materials goes up,” said Mohamad. “So, we are increasingly turning our focus to the refrigerant side of the system and going with variable speed compressors and drives to increase efficiency. On the air side, we are beginning to run into the law of diminishing returns.”

What does that mean for contractors? According to Mohamad, “Contractors are going to need to understand the technology and diagnostics the equipment is providing them. Training is going to be very important. ” Looking down the road, Mohamad said he expects consumer demand to drive more high-end products. Traditionally, the bulk of the industry has been built on minimum feature, minimum efficiency products but Mohamad thinks that’s going to change in the next five years because society is becoming more informed and tech savvy. “Everything is moving at breakneck speed,” he said. “Products are becoming more sophisticated and there is a general expectation that people want to be able to control and communicate with their appliances, and our industry is just catching up with it.”

For more information, see Giving HVAC’s Face a Tech Lift in the June 8, 2015 ACH & R News.


Call Smart – Your Smart Service Call

In the last blog, we talked about what Call Smart is and how easy it is to customize.  In this blog, we will walk through the preauthorization and marketing portion of a typical service call using Call Smart.

Call Smart - Your Smart Service CallThe first screen the service technician will utilize is a preauthorization screen.  Using this screen, the service tech will ask for the customer’s permission to conduct a diagnostic check on the equipment, while letting them know they will be charged a diagnostic fee for this service.  Both the verbiage and the screen are customizable, and can be turned off if so desired.  Following the preauthorization comes a marketing questions screen.  Companies often ask their technicians to gather this information, but the information garnered is typically nonexistent or insufficient.  The reason companies want this information is so that they can better target solutions for their customers.  These questions can be customized and this screen encourages your technician to gather the information that you want.  For example, you can ask questions about areas that are too hot or cold, whether the customer feels their energy bills are too high etc.  This information allows for subsequent messages which are highly targeted to your consumers.  If a home has multiple or unique components, the next screen allows you to set up a service history by each system or component.  Once the tech clicks on the icon for the type of unit, (furnace, condensing unit etc.) a screen comes up that allows them to input specific information pertinent to that unit.  For example, they can input information such as unit location, make, model/serial number, capacity, age, physical condition, type of refrigerant used and so on.  If that information already exists, the tech can simply bypass that screen.

What comes next is the fastest and easiest flat rate lookup in the industry!  In the next blog, we will talk specifically about the flat rate lookup screen and show you exactly why we say this.  In the meantime, look through your service tickets over the past six months and see how many of them reveal marketing information that allow you to target specific products and services to individual customers.  I’ll bet you will find you are missing opportunities to more precisely assist your customers, thereby helping to distance yourself from those companies who market themselves strictly on price.

Get more info on Call Smart


Call Smart Flexibility– Your Smart Service Solution

Call Smart Flexibility– Your Smart Service Solution

Image courtesy of talentintelligence.com

In the last blog, we discussed the problem with service tickets.  All too often they can be sloppy, and the information they convey is often insufficient both for office and customer use.  Worst of all, they can potentially be booby-traps which cause your customer to become very upset.  We finished that blog with a discussion about a solution called Call Smart, a revolutionary point of sale, mobile system from Callahan Roach Business Solutions.  We also finished that blog by asking you to look through your service tickets.  Did you identify any of the problems that we talked about?  I’ll bet a number of you did, so let’s begin to look at the flexibility of the Call Smart program.
Call Smart is an electronic program that runs on both Droid and iPad.  It features a unique and secure logon for each tech, and can be customized with your graphics and information.  Once a tech logs on to the system, they are positioned to capture the customer’s complete information – and it only has to be entered once.  In the event you have integrated with a service dispatch software or QuickBooks, you can look up the customers information from there.  Once this information is in front of the technician, they select the correct call type, the diagnostic fee and any discounts or taxes which may apply.  From there they press the start call button.
It is important to note that Call Smart is extremely customizable.  From any web portal you can change parameters ranging from call types to diagnostic fees and discounts.  You can also input your own customized service agreement program, as well as marketing brochures and videos.

Get more info on Call Smart

In the next blog we will walk through a typical service call using Call Smart.  Following this blog, you will likely begin to wonder how you ever made it using paper forms!


We’re from the Government – And We’re Here to Help You… Part II

The first 100 years of central heating in America featured 0 lawsuits relative to furnace efficiency.  That changed however when the Department of Energy began regulating the energy efficiency level residential furnaces and boilers in 1987.  Not that the implementation of efficiency levels is a bad thing in its own right, but consider the latest turn of events.

Did DOE take the 2014 settlement seriouslyIn 2011 the Department of Energy (DOE) issued a ruling that effectively established regional standards – calling for 90% AFUE in the North and 80% AFUE in warmer southern climates.  So far, so good.  The ruling however did not account for certain issues when upgrading to more efficient furnaces, at least according to an association of natural gas utilities and equipment distributors who challenged the rule in court.  In 2014 a settlement was announced that vacated DOE’s minimum efficiency standards and remanded the procedure back for further rulemaking.  It certainly didn’t take them long to conclude their further rulemaking!

On February 10 the DOE issued a pre-publication notice of a proposed rule which would raise the national minimum energy efficiency standard for residential non-weatherized gas furnaces from 78% AFUE to 92%, while also setting new efficiency standards for electrical consumption in the standby mode!

So, if raising minimum efficiency standards under certain installation conditions doesn’t make sense in northern climates, how on earth can raising minimum efficiency standards to 92% everywhere possibly make sense?  Perhaps only in Washington.  Needless to say, industry officials are watching this closely.  Stephen Yurek, president and CEO AHRI was quoted in a recent Refrigeration News article saying… “Even though natural gas and oil prices are lower than they were three years ago, DOE now feels a 92% nationwide standard is appropriate.  How can that be?  What’s changed?”  In the same publication, John Metchi, vice president of government affairs and business development for HARDI said, “Anecdotally, I can tell you I’ve heard concerns from members regarding the potential cost to homeowners who would require a significant retrofit and the cost benefit to those residing in warm weather climates.”  Charlie McCrudden, senior vice president of government relations for ACCA said he was surprised by DOE’s proposed 92% AFUE standard.  “It’s very aggressive,” he said in the publication.  “It effectively eliminates noncondensing furnaces starting in 2021.”

Did DOE take the 2014 settlement seriously?  You be the judge.

Part 1 : We’re from the Government – And We’re Here to Help You


We’re from the Government – And We’re Here to Help You

Ronald Reagan once said that the nine most terrifying words in the English language are: I’m from the government and I’m here to help. That language might be used to describe the department of energy today as it regards furnace efficiency standards. For about 100 years American homes were heated by central heating systems, and not one lawsuit was filed relative to their efficiency. Market advances improved both the comfort and efficiency of these central appliances, and the consumer decided what would go into their home.

We're from the Government - And We're Here to Help You

No Efficiency Standards on This Baby

That changed in 1987 when the Department of Energy (DOE) began regulating the energy efficiency level of residential furnaces and boilers. Residential furnaces are defined as those having a heat input rate of less than 225,000 BTU per hour. These furnaces are rated in terms of annual fuel utilization efficiency, (AFU E) a measure of dynamic operating conditions as performed in a laboratory using a DOE test procedure. In 1992, the DOE standard specified that residential gas furnaces would feature a minimum of 78% efficiency. At that time, DOE estimated the standards would result in energy savings of $46.2 billion for product shipped between 1992 and 2021. While technology was certainly capable of producing furnaces with higher efficiency levels, market forces were allowed to drive the consumer toward the furnace of their choice.

In 2007, DOE proposed raising the minimum efficiency to 80 AFUE effective in 2015. This change however would have little impact, because almost all gas furnaces on the market already met or exceeded that level. Before that proposal could be acted on, a group of states and efficiency advocates challenged it in court, encouraging the DOE to arrive at a more stringent standard. In 2009, a group of efficiency advocates and equipment manufacturers prepared a consensus agreement to advocate for new efficiency standard levels for residential furnaces, heat pumps and central air-conditioners. The basis of this agreement was to establish separate regional standards, which represented a whole new concept in the implementation of energy efficiency levels. The concept seemed to make sense, because what is cost-effective for a furnace in Illinois may not be cost-effective in Texas. The DOE preceded to issue a ruling in 2011 that was scheduled to go into effect in 2013, which established a regional standard of 90% AFUE in colder climates and 80% AFUE in warmer climates.

Before the effective date however, an association of natural gas utilities and equipment distributors challenged the rule in court, arguing that the DOE had not accounted for certain issues when upgrading to more efficient furnaces. They argued that switching from a noncondensing to condensing gas furnace often requires modifying the furnace’s ventilation at additional expense. In March of 2014, the plaintiff group announced a settlement with the Department of Energy. The US Court of Appeals issued an order that among other things, vacated DOE’s minimum efficiency standards for residential gas furnaces and remanded the procedure back to DOE for further rulemaking. The settlement agreement included a provision that in the rulemaking, DOE would make available to the public the data gathered and analyzed by the agency prior to publication of a proposed rule in a timely manner.

Whew, glad that’s over. Well, tune into next week’s blog to see what the DOE did next!


The Problem with Service Departments

Does your service department suffer from the following symptoms:

  • Incomplete or sloppy service tickets
  • Low service ticket revenue
  • Customers who feel the need to shop the Internet after the diagnostic



Yes, but what do you do about it?
Call SmartYou train your technicians but you are still not achieving uniform results.  You talk with other owners and they have the same issues, so you resign yourself to live with it.  After all, you don’t receive that many customer complaints about it.  Not so fast.  Let’s examine this issue in a little more detail.

Let’s take the example of a service tech who went out on a no cooling call and found a bad capacitor.  After replacing it, he wrote the words “25 MFD Cap Bad” in the area of the ticket detailing the work performed.  Then he showed the price of the capacitor at $118 and labor at $69 for a total ticket invoice $187.  What might your customer do?  They might just get on the Internet and surf for 25 MFD Cap and correctly determine that a capacitor was replaced – only to discover that a 25 MFD capacitor can be purchased online for about five dollars.  Now they’re hot!  Obviously, they don’t understand your cost of doing business so what do they do?  Call you and complain?  Probably not.  In all likelihood, they simply stop using your services and tell everyone they know that your company is a ripoff.  Studies show that a satisfied customer will tell 2-3 people about their experience with your company, but a dissatisfied customer will tell 8-10 people about their experience.  The odds are not in your favor.  And the worst part about it?  You have no idea it’s going on!

So what is the solution?  Consider Call Smart

What is that, you ask?  Call Smart is a revolutionary point of sale, mobile system from Callahan Roach Business Solutions that runs on both Droid and iPad.  It features a unique and secure logon for each tech, and is customizable, utilizing your graphics and information.
Stay tuned for more blog posts on this subject.  In the meantime, take some time to go through recent invoices generated by your service technicians to see if you are fully satisfied – or if you think there is a better way to go.


Is Your Company Apathetic Towards Zoning?

If so, you’re not alone.  Dick Foster, president of Zone First recently talked with The News about the topic of zoning.  “Apathy is the biggest challenge facing my company right now.  Even with more players in the zoning market, zoning is still a very small percentage of the market.  Contractors are still focused on the box and do not take a system approach.  Most contractors are order takers and wait for the phone to ring to fix what is broken versus proactively selling systems.”  But it doesn’t have to be that way, and zoning manufacturers are taking the initiative to make zoning an attractive option for contractors.

“Education is a key component in making zoning more attractive to contractors.  One of the big things manufacturers need to do is show contractors zoning is not as hard as they think, “Foster said.  His words were echoed by Ken Barton of Arzel Zoning Technology.  “By making contractors more comfortable in the knowledge of zoning, airflow, static pressure and when to use bypass, we can make them more confident that what they are selling is something that will work, not harm the equipment and deliver what they have promised customers,” Barton said.

Is Your Company Apathetic Towards Zoning

Picture courtesy of orangetiger.com

Equipment manufacturers are responding as well.  Kyle Golden of Lennox Industries said it’s iHarmony Zoning System was developed with the installer in mind.  Golden said, “It can be so difficult to get the system set up right the first time.  This causes many dealers to build in multiple callbacks for zoning installations.  With iHarmony, we simplified the entire set up and configuration process.  Technicians can configure the heating, cooling, and blower CFM; see how much CFM is available for the system; see how much is assigned for each zone; and start or stop testing all on one screen.”  Kevin Graebel of Honeywell said his company continues to develop innovative solutions that improve the installation process to make it faster and reduce callbacks.  “Last year, we released the True ZONE Bypass Damper, which dramatically simplifies the setup and provides much more consistent performance compared to the old, weighted arm style bypass damper.

Thomas Jackson of Jackson systems LLC said offering zoning can be a highly profitable option for contractors, which can provide a competitive edge over nearby contractors who don’t offer it.  According to Kyle Golden, “homeowners wouldn’t be happy if they were unable to turn the lights off in an unoccupied room or if the lights failed to adequately illuminate certain spaces.  HVAC systems account for a much greater portion of residential electricity used in lighting, and as the average home size continues to increase, problems like wasted energy from heating or cooling unused rooms and discomfort from hot or cold spots is becoming more common.  With zoning, contractors can offer the perfect solution to these and other problems.  And up selling zoning on a system replacement call is a great way to add to the bottom line,” he said.

For more information, see The News May 19 article by Matt Bishop, Knowledge Is Power in HVAC Zoning.


Do You Believe in Indoor Air Quality?

If you are an HVAC contractor, the answer is probably not. According to Eric Andrews, cofounder of Success-4Others, “it’s estimated that HVAC contractors only sell about 10% of the total market.” The other 90% of the market is going through retail channels. My customers don’t want IAQ products, and if they do, they can get them cheaper at Home Depot you say. Besides, the market can’t be that big. Well, consider this. A recent report From Navigant Research states that worldwide revenue from IAQ systems will grow from $3.3 billion in 2014 to nearly $5.6 billion in 2020.

Indoor Air Quality

Images Courtesy SpringtimeHomes.com

“Oftentimes, we let our own personal objections get in the way of offering our products and services to clients. If you don’t have the money to be able to afford these products, don’t automatically assume that your customers don’t either. Or, if you don’t suffer from bad allergies, asthma, or other respiratory issues, don’t assume that your customers don’t either,” said Andrews. In Andrew’s opinion, the majority of customers are not even aware their contractors can offer them IAQ options. “Instead, homeowners buy them online and in the big-box stores because that’s where they see them,” he said.

Matthew Kuntz, vice president of a Jupiter Florida contracting business said the key to closing sales lies in solving customer’s problems. “We install whatever product solves the client’s issues,” he said. “Closing the sale comes from giving the client a solution to the problem, educating the client on the correct product to fix or eliminate the issue, and giving him or her options for investing in the product.” According to Andrews, it’s really very simple. “Offer them to every customer on every call and you’ll be surprised at what you will sell,” he said.

Huntington Heating and Cooling in Huntington, Indiana is one contractor who uses this approach. “We developed an accessory sheet with 24 items, ranging in price from $35-$1964 that technicians give to the homeowner during the service or maintenance agreement call,” explained Bob Zahm, president. Zahm said the accessory sheet includes four air cleaner options, UV lights, odor killers, humidifiers, ventilation items, dehumidifiers, carbon monoxide/gas detectors and more. He added that his techs are trained every week on “offering solutions, not selling.”

Andrews added one last tip for how contractors can learn about IAQ products and improve sales. “The best way to sell any product is to be a customer yourself. That’s right, put these products in your home.” he said. “Sales is nothing more than the successful transfer of belief, and experiencing what these products do for you is the best way to become a believer yourself.”

Article courtesy of Kimberly Swartz, “Capitalizing on a Surging IAQ Market, The News, July 14, 2014


Warming to the Idea Of Adding Insulation Services

Warming to the Idea Of Adding Insulation Services
Picture courtesy of Downs Energy Limited

Contractors have found a number of tried and true ways to grow their businesses, including bringing in-house allied divisions of work like plumbing.  As the focus on home performance contracting grows however, more companies are adding insulation work to that list according to a News article written by Kimberly Schwartz.

“Insulation is one of the biggest drivers to make a home perform,” said Rob Minnick, CEO of Minnick’s Heating and Cooling in Laurel, Maryland.  Rich Morgan, President of Magic Touch Mechanical found that bringing the insulation work in-house allowed him to be in complete control of both the customer experience and job quality.  “Our HVAC installation crews learn and do the insulation installation as they are at the home doing other tasks,” he said.  However, insulation is a brave new world for many HVAC contractors, and they must be willing to make the commitment through education, training, and tools.

According to Michael Goater, an authorized training partner for Comfort Institute Inc., the most basic principle that contractors must understand is that insulation is ineffective without air sealing.  One problem frequently encountered is that many companies are simply blowing insulation into attics without properly sealing the homes.  Michael Rodgers, president of Omstout Consulting urges contractors to learn how to do it right.  Doing it right involves an investment in training and equipment.  Magic Touch Mechanical estimates they have done about 150 hours of training about insulation best practices, estimating classes and hands-on demonstrations.  He estimates this investment in equipment and training is in the $30,000 range, and in addition, he requires his installers be BPI (Building Performance Institute) certified.  Morgan believes the most important tool is an infrared camera, which helps estimators and consumers see where insulation is insufficient or nonexistent.

That’s not to say all this comes without its challenges.  Minnick noted that some of the biggest challenges include finding the right insulation product and training the sales staff on how to sell.  Morgan added that scheduling and staging the work at a customer’s home can also present hurdles.  Rogers advises contractors to use specialized crews along with cross training your installation crew to assist with HVAC.  According to both Morgan and Minnick, the opportunities for growth and profits are there and contractors who learn about insulation and offer superior installation to customers can bypass their competition.  According to Goater, “Testing the home prior to performing any work and educating the customer allows contractors to differentiate themselves from those who do the low margin blow and go work, ultimately leading to higher margin work.”

Source: Contractors Boast the Benefits of Adding Insulation Services by Kimberly Schwartz in The News, May 19, 2014