Are You Going to Get Your Fair Share?


We have heard the term “fair share” a lot in recent years, most of it has to do with if you are paying it.  Unless you have been living under a rock however, you know these are good times for the economy.  How good?  Consider these statistics.

 

According To the Joint Center for Housing Studies at Harvard University, homeowner expenditures on improvements and repairs will rise 7.5% in 2018 to approach $340 billion.  According to Freddie Mac, 3 trends will drive the mortgage market in 2018.  They expect increases in new home mortgages, they expect a cooling of refinancing to lower interest rates, and they expect an increase in homeowners tapping home-equity for home improvements.  Existing home sales are unlikely to increase due to limited inventory, so there is an expectation in longer-term treads toward aging in place – all of which point to an increase in expenditures for home improvements.  Of course, those home improvements include many things other than HVAC, but according to Appliance Design magazine, shipments of central air conditioners in the United States increased 6% in 2017 and are expected to increase another 5.4% in 2018.  The shipment of forced air furnaces are expected to increase 4.7%.  You get the point, things are booming.

Are You Going to Get Your Fair Share?

How is your company positioned to take advantage of these trends?  Do you have a business plan that you are working in order to achieve purposeful, sustained growth, or are you one of those firms that will experience “accidental growth”?  What is accidental growth?  That is the type of growth you experience because of the swell of market demand – and the type that disappears when the inevitable pendulum of the business cycle swings the other way.  If you are a medium to large sized firm, you are operating by plan, and not by accident.  But according to SICcode.com, there are 141,922 total companies in SIC code 1711, and these companies employ a total of 1,435,932 people.  What is SIC code 1711?  A Standard Industrial Classification (SIC) is a four digit numerical code assigned by the US government to business establishments to identify the primary business of the establishment.  SIC 1711 is the code assigned to special trade contractors primarily engaged in plumbing, heating, air-conditioning and similar work like sheet metal.  According to these numbers then, the average size of a company in SIC 1711 is 10 people.  While there is a significant deviation to this average, this effectively means there are a lot of small contractors in the heating and air-conditioning industry, and amongst this group are a lot of firms poised for “accidental growth”.  If you are one of those companies and accidental growth is okay with you, read no further.  If you are one of those companies however that desire purposeful, sustained growth, how do you go about achieving it?  In essence, the answer is to develop a sound business plan.

 

The term business plan is an anathema to many small firms, but such a plan need not be long or complex.  It needs to be what is effective and usable for your firm.  While this topic merits a discussion by itself, the key elements of a business plan include:

  • Strategic Discussion ~in other words, what kind of business do you want to develop into and what are your strengths and weaknesses relative to that strategy?
  • Market Analysis ~in other words, what are the opportunities in your locale and where do they exist?
  • Sales & Marketing Goals ~what are your top line revenue, gross margin and net profit goals, by major department? (I.e. new construction, replacement, service etc.) How many leads are you going to need to reach these goals, what are your closing ratios on these leads and what kinds of marketing/advertising will be required to generate these leads?
  • Production/Organization ~what is your current staffing by department, and what will be required in order to achieve your sales goals? What is the productivity of your service department (billable versus paid hours) and what are your strategies to meet commensurate goals?
  • Financial Requirements ~what is your current cash flow position and how will you fund future growth?

 

The above isn’t intended to be a template for a business plan, rather it provides a discussion framework for the major elements that need to be included in such a plan.  There are many places you can go to get help building a business plan.  There are online forums and tools for this purpose, you can tap into the expertise of other company owners you know or meet through associations such as the Air Conditioning Contractors of America, you can talk with the manufacturer whose products you represent and/or their distributors – there is literally a wealth of information out there for you to take advantage of.  If you want to grow your business however and you have not put together some type of business plan, now is the time – because time is a wastin!