An Industry Veteran Returns Tom Perić 5
Social Media Strategy in Steps Nick Rau 6
Are Your People Really Selling? Frank Hurtte 12
Empowering HVAC in Cloud Technology JG van Graan 14
What Story Is Your Marketing Plan Telling? Will Merritt 16
HVACRBUSINESS.COM FEBRUARY 2024 / VOL.19 / NO2
CYBERSECURITY IN 2024 STAYING SECURE & SATISFYING INSURANCE REQUIREMENTS Page 10
Latching onto the Smart and Connected Revolution Page 15
ALSO INSIDE » Management Resource Shelf .................................... 4 Four Ways to Ease the Tax Bite When Selling Keven Prather................................................................................ 19 Financially Fit Business – Part 4 Ruth King......................................................................................... 20 Product Focus ........................................................................... 21 20 Questions with Lauren Roberts cfm Distributors..................................................................................... 22
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CONTENTS F E ATU R E S
6 Social Media Strategy in Steps
The best way to implement a strategy is to have a workable to-do list that helps you plot your progress. By Nick Rau
10 Cybersecurity in 2024 - Staying Secure and Satisfying Insurance Requirements Every HVACR company is a target as cybercriminals ramp up. Implement these precautions. By Anthony Mongeluzo
12 Are Your People Really Selling?
The sale is easy when the weather is troublesome. Here’s an action idea for mild weather. By Frank Hurtte
14 Empowering Young HVACR Professionals Through Cloud Technology Here comes cloud technology. Prepare now or face a difficult time recruiting young people. By JG van Graan
15 Latching onto the Smart and Connected Revolution
Revenue Opportunity for HVAC and Plumbing Contractors with a Growing and Familiar Set of Products. By Ryan Kiscaden
16 What Story Is Your Marketing Plan Telling?
You’re just starting to judge the effectiveness of the company’s annual marketing plan. By Will Merritt
CO L U M N S
19 Four Ways to Ease the Tax Bite When Selling Your Business
There’s always some pain when selling your business, but Prather helps make the transition easier. By Keven Prather
20 Achieve Your Freedom with Your Financially Fit Business – Part 4 King provides counsel on what to do when your overhead is too high. By Ruth King
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FEBRUARY 2024 / VOL.19 / NO.2
D E PA RT M E N T S
5 Editor’s Page | An Industry Veteran Returns A veteran HVACR editor returns to the industry and these pages. Tom Peric
4 MRS | A Potpourri of Ideas
We’re offering a potpourri of choices, including books, blogs and podcasts.
21 Product Focus 22 20 Questions with Lauren Roberts cfm Distributors
Management Resource Shelf
A POTPOURRI OF IDEAS Now that you’re firmly committed to your New Year’s resolution, we thought a potpourri of different books and podcasts – thematically different – might be just the break you need from a management resource shelf with a singular focus. It’s rather like browsing through the bookstore with no specific theme in mind and settling on a book that seems intriguing or captures your fancy. We hope you like our suggestions and find them helpful.
Impact Players Liz Wiseman Your business has a star, or stars, that go above and beyond. They are all in on the mission and step up for the demanding job before anyone else. Liz Wiseman has interviewed hundreds of leaders, managers and employees to determine what makes these “Impact Players” so effective. As a result, she has constructed a framework for developing the impact players’ skills and mindset for yourself and the rest of your business. https://www.amazon.com/Impact-Players-Take-Bigger-Multiply/ dp/0063063328/
Extreme Ownership: How U.S. Navy SEALs Lead and Win Jocko Willink and Leif Babin Jocko Willink and Leif Babin are retired U.S. Navy SEAL officers who have distilled the lessons they learned on the battlefield into 312 pages. It covers leadership, strategy, and tactics that have—literally—been battle-tested and placed in your hands to help you run a successful business from the top down. While these lessons were tested in combat, they can be universally applied in order to lead a team, execute a plan, and reorganize after a plan falls apart. A good leader is the cornerstone of a successful business. If your purpose is to “lead and win,” this book is for you.
Social Media Marketing
The Social Media Marketing podcast, hosted weekly by Michael Stelzner, dissects the best practices to successfully employ social media marketing for small businesses. Stelzner keeps you ahead of the curve in a constantly evolving landscape by bringing in marketing experts from various industries who provide strategies for entrepreneurs to leverage social media to create revenue. https://www.socialmediaexaminer.com/ social-media-marketing-podcast/
HBR IdeaCast
From the minds of the Harvard Business Review comes the HBR IdeaCast, a podcast that features successful business leaders on topics ranging from highpressure decision making and team building to artificial intelligence and how it affects your business. This podcast is a perfect fit if you subscribe to the Harvard Business Review. If you are an entrepreneur seeking advice on finetuning performance management (an episode from September 2022), this podcast demonstrates why. https://hbr.org/2018/01/podcast-ideacast
https://us.macmillan.com/books/9781250183866/extremeownership
The Long Game: How to Be a Long-Term Thinker in a Short-Term World Dorie Clark Small, positive changes today will significantly and positively impact the future. This is true both in business and in life. It is easy to become short-sighted as the relentless requirements of dayto-day life bear down on us. Clark helps the reader take a step back, take inventory of what they want to accomplish and set forth the framework to accomplish it. Every overnight success is a long, slow grind, but it rewards those who stick to it.
First Round Review
The First Round Review is an entrepreneur’s guide on how to generate customers, recruit and retain talent, develop management skills, and so much more. For more than 10 years, The First Round Review has provided advice from industry experts, teaching its readers how to succeed with well-written and engaging articles. Whether you are an established CEO looking for guidance on conducting performance reviews or are a brand-new business owner looking for start-up advice, the First Round Review has you covered. https://review.firstround.com/
https://www.amazon.com/LongGame-Long-Term-Thinker-Short-Term/ dp/164782057X
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HVACR BUSINESS
FEBRUARY 2024
www.hvacrbusiness.com
THE HVACR MANAGEMENT MAGAZINE
TERRY Tanker Publisher ttanker@hvacrbusiness.com TOM Perić Editor in Chief tperic@hvacrbusiness.com
ADVERTISING STAFF TERRY Tanker Publisher Tel 440-731-8600 ttanker@hvacrbusiness.com
MEGAN LaSalla Art Director mlasalla@hvacrbusiness.com BRUCE Sprague Circulation Manager bs200264@sbcglobal.net BARBARA Kerr VP Operations bkerr@hvacrbusiness.com
HVACR Business, founded January 1981, is a monthly national trade magazine serving contractors, mechanical engineers, manufacturers, manufacturer representatives, wholesalers, distributors, trade associations, and others in the heating, ventilating, air conditioning and refrigeration (HVACR) industry primarily in the U.S. The editorial focus and mission of HVACR Business is to provide business owners and managers with the very best business management concepts available. Critical topics covered include leadership, management, strategy, finance, sales, marketing, training, education, staffing, operations, human resources, legal issues, customer service and more. We are dedicated to helping contractors master these key management skills and provide them with the resources necessary to build strong, profitable companies. Every effort is made to provide accurate information, however, the publisher assumes no responsibility for accuracy of submitted advertising and editorial information. Copyright©2024 by JFT Properties LLC. No part of this publication may be reproduced or retransmitted in any form or by any means, including, but not limited to, electronic, mechanical, photocopying, recording or any information storage retrieval system, without the prior written permission of the publisher. Unauthorized copying may subject violators to criminal penalties as well as liabilities for substantial monetary damages up to $100,000 per infringement, costs and attorneys’ fees. This publication should not be utilized as a substitute for professional advice in specific situations. If legal, medical, accounting, financial, consulting, coaching or other professional advice is required, the services of the appropriate professional should be sought. Neither the authors nor the publisher may be held liable in any way for any interpretation or use of the information in this publication. The authors will make recommendations for solutions for you to explore. Any recommendation is always based on the authors’ research and experience. The information contained herein is accurate to the best of the publisher’s and authors’ knowledge; however, the publisher and authors can accept no responsibility for the accuracy or completeness of such information or for loss or damage caused by any use thereof. Subscription Rates: Free and controlled circulation to qualified subscribers. Non-qualified persons may subscribe at the following rates: U.S. and possessions: 1 year $48; 2 years $75; 3 years $96; Canadian and foreign, 1-year $108 U.S. funds only. Single copies $8. Subscriptions are prepaid, and check or money orders only. Subscriber Services: To order a subscription or change your address, write to HVACR Business, 31674 Center Ridge Road, Suite 104, North Ridgeville, OH 44039 or call (440) 731-8600; or visit our Web site at www. hvacrbusiness.com. For questions regarding your subscription, please contact bkerr@hvacrbusiness.com. HVACR Business (ISSN 2153-2877) Copyright ©2024 is published monthly by JFT Properties LLC,31674 Center Ridge Road, Suite 104, North Ridgeville, OH 44039, Phone: 440-731-8600. Periodicals postage is paid at North Ridgeville, OH and additional mailing offices. (USPS 025-431) POSTMASTER: Send address changes to HVACR Business, 31674 Center Ridge Road, Suite 104, North Ridgeville, OH 44039.
31674 Center Ridge Road, Suite 104 North Ridgeville, OH 44039 Tel: (440) 731-8600 Web site: www.hvacrbusiness.com (ISSN: 2153-2877)
www.hvacrbusiness.com www.HVACRBUSINESS.com www.hvacrbusiness.com
BY TOM PERIĆ
EDITOR’S NOTEBOOK
An Industry Veteran Returns
I
’m unsure if it’s deja vu all over again, as Yogi Berra once said, but whatever the emotion is, it feels great.
I have an open door for ideas and would-be writers.
I’m referring to my position as the new editor of HVACR Business magazine. Taking on the responsibility has brought me back to a similar role in an industry that I’ve enjoyed being part of for nearly 25 years and in which I have thrived. I was the editor of two different national HVACR magazines from 1998 to 2017, specializing in the wholesale side. (I was the original editor of HARDI’s official magazine.) I loved working in the industry and covering those who made up the wholesaler sector. Now, I’ve joined their cousins, the contractors. Those previous magazines and HVACR Business have a common thread that is inescapable. They were business publications that swam in HVACR waters. One reason I decided to return is HVACR Business’ publisher Terry Tanker. I’ve known him for more than a decade, and we would meet occasionally at HARDI conferences. We were mild competitors, but our conversations were easygoing and friendly, maybe because I actually read what Terry wrote. He seemed a bit surprised when I once told him that he wrote pretty well for a publisher. (I’m not suggesting publishers can’t write, but his style had flair and a practical insight that I enjoyed.) Anyone with an ounce of brains looks at an organization’s top before joining. I didn’t have to think long or hard with Terry at the helm. When the opportunity arose, I grabbed it. Unsurprisingly, I reviewed the editorial mission of HVACR Business before I took on this new role. Its founders intended to “Become the best management resource in the HVACR industry for the thing every business leader holds most dear … their business.” This idea should be reasonably straightforward to our readers because it’s a truism owners and managers
demonstrate daily. I can’t think of a single business owner or manager who isn’t constantly searching for a way to improve the business, whether it’s finding a new marketing concept, a painless way to reduce cost, new talent to hire or simply initiating an uncomplicated management policy that improves the work environment. I believe that HVACR Business has succeeded in this quest by providing insights from an array of time-tested experts to fulfill that mission. My job is to ensure, in part, that our editorial content remains timely, topical and relevant.
I have an additional message for readers. Someone I know well and who has written extensively about public relations says no editor of any publication is more open to ideas, creating new contacts, and finding topic experts or potential writers than one who takes on the reins of a magazine for the first time. It is an accurate observation. Let us know if you are interested in a current trend or unfolding policy that we should write about. Even better, feel free to write about it. Even if writing isn’t your strong suit, we have staff with skills that can assist you and make your idea sparkle in print. Here is the simplest way to let me and our staff understand an article you might want to consider penning. Just email me a few sentences explaining your idea and why it matters to our readers. Think of yourself not just as readers but as partners. I know many overuse that term these days, but I mean it sincerely. I have an open door for ideas and would-be writers. We have a good sense of our editorial mission. But no one has all of the good ideas. I’d like to hear yours. We will collectively be better for it, as will our HVACR industry. It’s good to be back. u
HVACR BUSINESS
FEBRUARY 2024
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YOUR SOCIAL MEDIA STRATEGY IN 10 STEPS BY BY NICK RAU, DIGITAL MARKETING COACH FOR NEXSTAR NETWORK
S
ocial media has grown to be an important part of marketing for contractors because of its versatility in advertising, interacting with customers and amplifying your brand story.
What does success look like? SMART goals (specific, measurable, action-oriented, realistic, timebound) ensure that you don’t waste your effort and money.
Whether you’re just starting to grow your social media presence or already skilled in social media marketing, here are 10 best practices to keep in mind when creating a strong social media plan.
if it’s not also leading to the success of your business overall.
4. Choose the right platforms.
3. Determine your social media goals.
1. Have a brand identity.
What are you trying to accomplish? What does success look like? SMART goals (specific, measurable, actionoriented, realistic, timebound) ensure that you don’t waste your effort and money. Start with a few goals each quarter to keep up the momentum.
In the home service industry, Facebook is the default platform to be on. It’s still one of the largest social media platforms with a multi-generational audience. Other platforms, such as Instagram and TikTok, can also be valuable if you dedicate adequate time to managing the platform correctly and the potential results align with your marketing goals. For example, TikTok could be a useful platform to increase your marketing awareness since brand visibility is the primary outcome.
You need to know who you are, what you stand for to ensure that people will have a reason to follow you, and what value you will provide to them both online and offline.
2. Understand your annual marketing goals. Without an overall marketing plan, you aren’t able to create a meaningful social strategy that will align with your goals. Social media success means nothing
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• Realistic goal example: Increase our Instagram followers by 10% (from 100 to 110) by the end of quarter. • Unrealistic goal example: Create a viral post within a week. It takes time to ramp up a social presence.
FEBRUARY 2024
5. Identify content. A quick way to plan for content is to
identify “content themes” or categories which can help in your curation and development stage. Content theme ideas could be: DIY, Community Spotlight, Offers, Employee Highlights Customer Highlights and Contests. Rotating your content and themes will keep posts from getting stale or overused. Remember to use the rule of 80/20 – this means that 80% of your posts should provide value or entertainment to followers, while 20% of the posts can ask for something from the follower (such as offers). Look back at what was posted in previous years to see which types of posts have worked; build off previous successes instead of starting from scratch. Figure out which types of content your current audience connects with so you can build on your existing foundation.
6. Find a “social media champion”. Once you have your social media marketing plan, you need someone
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to implement it. Having a third party manage social media can help you get a “heartbeat” – a pulse that simply shows customers that you’re active. But having that internal social media champion will help turn your “heartbeat” into an actual “heart,” where followers can authentically experience your company and its culture, avoiding generic content.
9. Invite and engage. It’s a good idea to include a way to get people to follow and begin to engage with your content. A strong call to action that’s repeated throughout outgoing communications is essential. Build your audience by ensuring that you link active social media platforms to your company’s website, including inviting people to follow you in emails and invoices and encouraging employees to follow the profiles.
7. Know the budget. A social media budget covers a variety of tactics, including ads, boosted posts, giveaways, content editing software, and creative assets. You will need to account for anything that creates original content, ad spend to gain brand awareness, generate leads or promote posts.
Remember, once you’ve invited people to engage with your company, it’s equally important to keep providing consistently engaging, relevant, and meaningful content.
Make a monthly calendar that includes all posts layered with the messages from the marketing plan to ensure consistency in messaging.
Once you have your social media marketing plan, you need someone to implement it. Having a third party manage social media can help you get a “heartbeat” – a pulse that simply shows customers that you’re active. But having that internal social media champion will help turn your “heartbeat” into an actual “heart,” where followers can authentically experience your company and its culture, avoiding generic content.
Curate and write posts for the upcoming month and then plan the themes and rotations for the next two months. And don’t simply copy and paste
posts across each platform. Highlight the same topic, adjusting the content to match which platform you’re using. Also,
Note: This budget should not cover all expenditures for social media. For example, you should include any community efforts highlighted on social media in the larger marketing budget.
8. Plan and create ahead.
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avoid writing posts too far in advance since things can change, and adjustments may be needed.
10. Track. As momentum builds, watch your analytics and adjust based on significant data. Remember to track each goal and determine whether you’ve made progress. Marketing is worthless if people aren’t seeing it. u
Nick Rau serves Nexstar Network members as a Digital Marketing Coach. He ensures they spend their time and money effectively to build a strong digital brand and presence. Contact him at nickr@nexstarnetwork. com or follow him on LinkedIn.
HVACR BUSINESS FEBRUARY 2024
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BUSINESS INSIGHTS »
ADVANCED SOFTWARE TECHNOLOGY
Software Inside Tips from JG van Graan, Director for ThermoGrid
A
s you know, businesses that manage teams of heating, air conditioning and refrigeration mechanics and installers rely on smart dispatching. Whether it’s assigning the team member with the most suitable skill set to each job or simply working out who can get there the quickest, it’s essential to have real-time information on hand. According to one study looking at 2022 field service trends, 55% of fleet managers and executives reported that the pandemic had negatively impacted their business, while 44% of fleet managers saw increasing costs as their top challenge. To drive efficiency savings, many field service SMBs have implemented specialist software for contractors designed to improve accuracy and take the guesswork out of the scheduling and dispatching process. We chatted with JG van Graan, Director for ThermoGrid on the importance of smart dispatching and how it can help your business stay on track—and even scale!
How can finding the right software improve routing, scheduling, and dispatching? A complaint I always hear is how emergency calls and last-minute jobs mess up a technician’s schedule. Most heating and cooling business owners aren’t aware how contract scheduling software can fully automate tech scheduling. This reduces downtime and even helps plan out the best schedules and fastest routes for their team.
What’s the importance of keeping your whole team on the same page with one software? Your team in the field needs to stay connected, not only with each other, but with the folks in the office as well. When everyone is using and updating a single system together, then they’re all on the same page. This means your techs won’t need to make as many phone calls to chase down parts availability, or equipment records. Everything is available on their phone or tablet.
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FEBRUARY 2024
JG van Graan
Director for ThermoGrid ECI Software Solutions, Inc. 800-959-3367 ecisolutions.com
FOLLOW UP: Find out how to dispatch the right tech and grow your business with ThermoGrid. Visit us at www.thermogrid.com.
BUSINESS INSIGHTS: ADVANCED SOFTWARE TECHNOLOGY BROUGHT TO YOU BY ECI | THERMOGRID
To drive efficiency savings, many field service SMBs have implemented specialist software for contractors And if you need to dispatch someone quickly, you’ll be able to easily locate the tech who has the skill and availability to jump on that job.
One of the biggest issues field service businesses face is identifying the right technician for every job. How can software help with accuracy? Nothing is worse than a wasted trip. It costs you money and frustrates your valuable customers. If you have a service call for a boiler, you want to make sure you’re sending someone who is qualified to repair a boiler. Dispatch software will actually store your tech’s skills, qualifications, and training so that you can easily match the job to the best tech. You’ll improve call times and first-time fix rates, all while keeping your customers happy.
What about emergency work orders? Imagine one of your customers calls you on the hottest day of the year, complaining that their A/C isn’t running. You will keep that customer for life if you can respond quickly and make sure they are sleeping in a cool house that night. Dispatch software can automatically assign the nearest or next available tech. You don’t have to scramble to arrange routes or schedules. And since the team is all synced into the process, communication and productivity are not interrupted.
About ThermoGrid by ECI Software Solutions: For over 20 years, businesses worldwide have relied on ECI Software Solutions to help strengthen their operations and plan for the future. Our ThermoGrid contractor management solution is built specifically for field service businesses, connecting the field with the office instantly for real-time business insight. Since implementing our software, many HVACR customers have experienced growth of more than 100% without adding IT staff or expensive equipment and you can too.
www.hvacrbusiness.com
Maximize Revenue & Minimize Wasted Time with ThermoGrid® HVACR businesses owners like you are increasing revenue and gaining more business by using ThermoGrid to manage teams more efficiently. Whether you’re working from your laptop in the office, or in the field without internet access, our ThermoGrid contractor management software keeps everyone connected. Book service agreements, provide invoices, view customer records, and access job information all from your digital device.
SE E HOW MUCH REVE NUE YO U C O U L D S AV E W I T H S M A R T D I S PAT C H I N G ! S C A N T H E Q R C O D E
CYBERSECURITY IN 2024 STAYING SECURE & SATISFYING INSURANCE REQUIREMENTS
BY ANTHONY MONGELUZO
T
he world of cybersecurity is constantly evolving, and as we enter 2024, the need for robust security measures has never been more critical. If you think of people in the cybersecurity field as individuals prone to using scare tactics to get their message across, think again. Just ask anyone on the receiving end of a phishing attack, a virus that ruined their contact database or a ransomware assault holding their entire company hostage. Surprisingly, by taking a few steps and focusing on the issue of cybersecurity, you can significantly decrease the chances of becoming a victim. The steps you should take include:
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One of the weakest links in cybersecurity is human error. Cybercriminals frequently use social engineering techniques like phishing to exploit unsuspecting employees. Multi-Factor Authentication and Advanced Endpoint Detection and Response (EDR) Let’s be blunt: Cybersecurity breaches can devastate the finances and reputation of your business. To counter these risks, one crucial step is implementing Multi-Factor Authentication (MFA). This might
FEBRUARY 2024
seem straightforward today, but some companies still ignore what has become a commonplace security measure. MFA is still a sturdy defense with some inherent limitations on texting, which is why Google, Apple and Amazon are heading toward passkeys. (Microsoft is starting to roll out passkeys this year, according to the Wall Street Journal.) Passkeys are unique, can’t work
on fake sites and can require access by a face or fingerprint scan. Endpoint Detection and Response (EDR) solutions are another critical defense tool. EDR tools continuously monitor endpoints for suspicious activities and respond swiftly to potential threats. It’s important to note that cyber insurance companies often require that businesses (and consumers) implement these tools. Fortunately, these tools are readily available and affordable, costing around $10 monthly.
Employee Training The human element offers hackers the most opportunities. One of the weakest links in cybersecurity is human error.
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Cybercriminals frequently use social engineering techniques like phishing to exploit unsuspecting employees. Online scammers use phishing by sending enticing emails to businesses and organizations to collect sensitive information. When you click on the email link, it allows the scammer access to sensitive company information, including financial data. Organizations should invest in training programs and regular reviews to counter this threat by teaching employees how to identify suspicious emails. You need to remind employees to report any phishing incidents.
Don’t forget: NO company, regardless of size, is immune to cyber threats. You protect your company from future threats by taking steps now.
business in his parents’ spare bedroom 23 years ago. Today, he is the president of PCS, a 250-person IT company that serves businesses of every size across the United States. PCS provides managed services, 24/7 IT helpdesk support, and cloud and cybersecurity solutions. Contact Anthony at anthony@helpmepcs.com or
Network Security
Software Patching Software patching is one of the easiest and most fundamental rules for cybersecurity. Hackers often use outdated software entry points to breach the system because the target – your business – failed to update your software regularly. Sometimes, it’s no more than agreeing to the update. Also, some insurance companies mandate that you keep your software programs updated because software designers often recognize “holes” in their systems only after they release a new version. And in the hacker world, they quickly learn and share the security shortcomings of popular software programs. In short, the software program you use isn’t forever. It’s only current until the next update.
Immutable Backups What happens if you have a cybersecurity event? Having reliable backups is crucial for data recovery. However, hackers have been known to compromise backups to prevent recovery. To counter this, businesses should create an immutable
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Don’t forget: NO company, regardless of size, is immune to cyber threats. You protect your company from future threats by taking steps now. u
Anthony Mongeluzo started his IT
Additionally, organizations should implement policies to secure their physical locations. Unauthorized access to an office can lead to data breaches, and controlling network access points is vital for overall security.
It is surprising how often companies overlook aspects of their physical network security. It’s important to deactivate the network ports that you don’t use. Failing to do so allows unauthorized individuals to gain access to your network. This should become a basic policy whenever you temporarily deactivate these ports.
software patching procedures and immutable backups, and consider outsourcing their cybersecurity needs.
877-596-4446.
backup that no one can alter or tamper with. You protect the business by creating a point-in-time backup that remains untouched until you need it. While you might lose some data (depending on the date of the immutable backup), it becomes the proverbial lifesaver to recover from a cybersecurity attack.
Outsourcing Cybersecurity When discussing the potential gloom and doom of cybersecurity, the most basic question arises: Who is going to do all this regularly? For most small to mediumsize businesses (SMBs), outsourcing cybersecurity is both practical and the most cost-effective. Cybersecurity experts can provide access to advanced tools and technologies that SMBs might be unable to afford independently. The bottom line is that an internal security expert or team, along with the tools they need, can become quite expensive. Keep in mind that while you might already have your “IT person,” it doesn’t necessarily mean they are well-versed beyond the basics in cybersecurity. This is where you should
shop around for an experienced and affordable specialist.
Understanding the Target In my decades of experience, I always marvel at how many small and mediumsize businesses assume they’re “too small” or unimportant to be an attractive target for cybercriminals. This reasoning is dead wrong. Hackers will often attack smaller targets to gain access to a much larger target, in other words, your customer or client. In one notable case, a local HVAC vendor’s compromise led to a massive data breach at a major U.S. retailer. Think of it this way. Your cybersecurity efforts not only protect you but also your customers or clients. The repercussions of someone gaining entry to them via your network can have enormous negative business and even legal ramifications. To stay secure and meet insurance requirements in 2024, companies should implement multi-factor authentication, advanced endpoint detection and response solutions, employee training programs, network security measures,
HVACR BUSINESS FEBRUARY 2024
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WHEN IS THE RIGHT TIME TO SELL MAINTENANCE AGREEMENTS
BY FRANK HURTTE
A
funny thing happened at the Iowa presidential caucuses on Jan. 15. The weather was terrible, with a high of negative 7 degrees, dangerous wind chills and knee-deep snow. I was running late and was one of the last people to get into the official location. Seconds later, I was joined by a haggard-looking gentleman who, like me, was one of the last in the door. We exchanged excuses for being late while we waited.
Another great time to sell is when the customer remembers the pain your services alleviated. answer shocked me. He told me that 70% of the failures he worked on over the past couple of days were preventable via regular maintenance. When I raised my eyebrows, he went on to say a well-known national association pegs that number at closer to 80 to 85%.
It turns out my new friend, Bill, was an HVAC service technician who had spent his day juggling furnace emergencies. In his words, "In this kind of weather, the biggest issue is how many hours a day I can work." He worked all day without a break and came straight from the last service call to the caucus. The lines on his face indicated this wasn't the first day of this service crush.
Sadly, I 'didn't get a chance to continue the conversation, and being one of the worst skeptics on the planet, I checked into his facts as soon as I got home.
As we walked to the meeting room, I asked him if a person could do something to eliminate these subzero callouts. His
• What issues could you have avoided if the customer had regularly scheduled maintenance?
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What I found out was Bill obviously knew his stuff, and now I have a bunch of unanswered questions for him: • Did you share this maintenance information with your customers during this cold spell?
FEBRUARY 2024
• How much could the customer have saved by following a maintenance program? • Did you attempt to schedule these customers for routine maintenance sometime this spring or summer? • Do you plan to reach out to these customers later to create a maintenance service plan? • Have you or your fellow service people ever had any sales training?
When is the Best Time to Sell a Maintenance Agreement? After more than four decades of direct selling experience and pulling from thousands of years of clients' experience in customer-facing roles, we have learned that selling takes place when customer
need is at its maximum. When the temperatures drop below zero and the furnace isn't running it is one of those times. Based on Bill’s comments, his company has zero issues selling during this emergency. The question is, how do you sell during times when the weather is mild? Another great time to sell is when the customer remembers the pain your services alleviated. For years, I have advised industrial salespeople to schedule meetings with the top decision maker the morning after they have saved the day by getting the customer's facility up and running. The same applies to my personal life. For instance, the car dealership where I purchased my last three vehicles earned my loyalty because of their efforts on my behalf when I was negotiating with an insurance company on the value of a wrecked car. The day after providing
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me with extensive information on my car's value on the used market, the sales manager called to remind me of their efforts politely and suggested that I drop by to check out some of the vehicles they had in stock. I did, and they made a sale. I have since purchased several cars from them and have referred friends and family.
Sales lessons from unexpected places. Many years ago, a barber friend reached out to me because they wanted to grow their business. Brainstorming over beers, we concluded that most people get their hair cut when they are far shaggier than they want to be. When asked, most folks tell their barber they are a few weeks overdue but forget to make an appointment. Barbers and stylists agree for most people the best time for a new haircut is five to six weeks following their last cut.
Frank Hurtte is the Founding Partner at River Heights Consulting. Common sense, straight talk, small town values, and a lifelong drive to help others grow define Frank Hurtte’s work at River Heights Consulting. Frank has authored six books and countless articles on distributor success. His latest book, The New Sales Guy Project, is available on Amazon. He hosts a popular blog www.thedistributorchannel.com and can be reached at Frank@riverheightsconsulting.com.
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Spend a little time today to set up a system for reaching out to your customers during those predictable slow periods. By setting an appointment for fiveweek intervals and sending out reminders, my friend's business grew by over 25 percent without finding a single new customer. Further, fewer people switched to a new shop during the first two years of tracking. What would have happened if Bill had set spring maintenance appointment times with each of the people he visited during the freezing days of snowmageddon? A serious bump in business would follow, meaning happy customers and more company revenue. Isn't that the goal? The moral of this story is relatively simple. Spend a little time today to set up a system for reaching out to your customers during those predictable slow periods. u
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HVACR BUSINESS FEBRUARY 2024
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EMPOWERING YOUNG HVACR PROFESSIONALS T H R O U G H C LO U D T E C H N O LO G Y BY JG VAN GRAAN
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n the dynamic world of Heating, Ventilation, Air Conditioning and Refrigeration (HVACR), a transformative wave is reshaping the industry: the advent of cloud technology. This technological revolution is not just about enhancing efficiency or optimizing performance; it’s also about ushering in a new generation of professionals. The young minds who are the future of HVACR find themselves at the cusp of an exciting era where innovation, sustainability and digital prowess converge. With its vast potential for innovation and modernization, cloud technology is rapidly altering how we design, monitor and maintain HVACR systems . This digital transformation extends beyond mere technical upgrades, fostering a deeper, more profound change in the industry’s appeal and approach. For the younger generation – digital natives who grew up in an era of smartphones and instant/always internet connection – integrating cloud technology into HVACR is not just a professional opportunity; it’s a call to action. It beckons them to be part of an industry that rapidly aligns with the core values of sustainability, efficiency and technological advancement. In this article, we explore how cloud technology is redefining the HVACR landscape, focusing on its impact on the industry’s processes, its appeal to the younger generation and the doors it opens for a sustainable future.
Innovation and Modernization Integrating cloud technology into the HVACR industry creates a dynamic and evolving workspace that appeals to young professionals drawn to cuttingedge technologies. Implementing cloud technology enables the development of intelligent climate control systems,
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For the younger generation – digital natives who grew up in an era of smartphones and instant/always internet connection – integrating cloud technology into HVACR is not just a professional opportunity; it’s a call to action. which provide superior user experience and efficiency. The design of these systems allows for learning and adapting to a user’s preference, resulting in a more comfortable and personalized environment. Furthermore, incorporating IoT (Internet of Things) sensors into HVACR systems heralds a new era of predictive maintenance. These sensors collect data in real-time, allowing for the early detection of potential issues before they escalate into major problems. This proactive approach to maintenance enhances the equipment’s longevity and significantly reduces downtime and maintenance costs. Advanced data analytics, another facet of cloud technology, is pivotal in optimizing energy efficiency in HVACR systems. These systems can identify patterns and inefficiencies by analyzing large data sets, leading to more effective energy use and lower operational costs. This is particularly relevant today, where energy conservation and sustainability are paramount.
ensures that the content remains relevant and in line with current technological advancements. Moreover, the flexibility offered by cloud technology in accessing these resources is a significant advantage. Learners can engage with the material at their own pace and convenience, whether at home, in the workplace, or even on the move. This flexibility is particularly beneficial for professionals who must balance ongoing education with work and other commitments.
Career Opportunities in Sustainability and Green Technologies
Enhanced Learning and Training Opportunities
The younger generation, known for their environmental consciousness and dedication to sustainable practices, finds a promising and dynamic field in green technologies. One of the pivotal areas where you can channel this enthusiasm is by integrating cloud technology into HVACR systems. This technological advancement plays a critical role in enhancing energy efficiency and significantly reducing the carbon footprint of buildings.
Cloud technology significantly enhances learning and training opportunities for young professionals. It can be a gateway to various educational resources and interactive training tools accessible through cloud-based platforms. These platforms offer an extensive collection of online courses, tutorials and simulations that continuously update to the latest industry standards and practices. This dynamic nature of cloud-based learning
Utilizing cloud technology in HVACR systems marks a revolutionary shift in how we approach environmental conservation in urban settings. It facilitates more accurate control and real time monitoring of HVACR systems, ensuring that these systems function optimally and contribute to a considerable reduction in environmental impact. This technology empowers systems to adapt to varying conditions
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in a more energy-efficient manner, thus aligning with the principles of sustainable living. The green technology field offers many fulfilling career opportunities for young professionals driven by a passion to make a tangible positive difference in the world. These roles are not just limited to the technological aspect but also encompass areas such as research, development, implementation and advocacy of sustainable practices. Engaging in this field provides an opportunity to be at the forefront of combating climate change and contributing to a healthier planet. In conclusion, working in a field that continuously embraces new technologies and methodologies is highly attractive to the tech-savvy younger generation. It offers them an opportunity to be at the forefront of technological innovation, working with systems that are not only advanced but also contribute positively to environmental sustainability. The HVACR industry, with its integration of cloud technology, represents a blend of technical challenge, innovation and responsibility toward a greener future, making it an ideal career path for those passionate about technology and the environment. u
JG van Graan, Director for ThermoGrid, ECI Software Solutions. JG’s deep HVAC industry roots began as an installation helper and then grew through roles as a technician, service management, and residential sales. Today, JG helps HVAC companies implement business management software to simplify the management of their businesses by streamlining functions such as dispatching, invoicing, and inventory management.
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LATCHING ONTO THE SMART & CONNECTED REVOLUTION REVENUE OPPORTUNITY FOR HVAC AND PLUMBING CONTRACTORS WITH A GROWING AND FAMILIAR SET OF PRODUCTS. BY RYAN KISCADEN
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Alexa, turn on the lights. “OK, lights on.” Alexa, open Garage Door. “OK.” Alexa, play the band Rush. “Playing now.” It was only a few years ago that our family didn’t have a single smart and connected device. Our household, likely just like yours, became a quick adopter of these new gadgets. Our path to becoming “smart” started with Amazon’s Alexa. We started purchasing garage door openers, smart plugs, cameras, smart TVs, a front doorbell, and a brand-new thermostat. We also purchased an Amazon Alexa Show to act as the hub for these products that could be voice commanded. Playing music and turning off lights was tedious before. Now, it has never been more invigorating not at least since The Clapper.1
Current Smart and Connected Landscape Since the beginning of time, innovations have made life easier. Think of the wheel, the Industrial Revolution, or the new smart and connected gadgets in buildings today. Products with smart and connected features are not just growing, they are exploding. Product shipments with smart and connected features eclipsed 22 million in 2016 and were predicted to hit 96 million by 2026 - with many journalists in the tech space predicting a 20% CAGR being possible for the entire category. Today, artificial intelligence and deep learning, the next wave of “smart” have the capability to revolutionize by anticipating a building’s service needs and its occupants’ behaviors – and it all starts with turning on these smart and connected features embedded within the products. www.hvacrbusiness.com
… contracting companies might have to think of their employees more like cable internet technicians and grow their smart and connected setup skills. There’s Money in Them ‘Thar Products As consumer recognition and adoption of smart and connected features evolve, it has begun to erode a troublesome perception problem. Are these products with smart and connected features safe? Certainly, there are instances of bad actors breaching home security cameras, in-vehicle computer systems, and Wi-Fi routers. Now, manufacturers of these products, including those in the HVAC and plumbing industry, build protective barriers against malicious commands. The government has begun writing and implementing rules to protect privacy and security, too. Security concerns shouldn’t deter your adoption of smart and connected product setup and support for your customers. This is because the consumer is more willing to share data by turning on these smart and connected features to monitor and detect, or report their behaviors, such as energy usage patterns. Consumers want the convenience these products offer and need support from the inbuilding services professional. Smart and connected features illuminate the health of mechanical equipment that is normally hidden while bringing insights straight into the hands of the end-user. As contractors, a top job priority on the job site is to professionally install equipment that solves customer comfort. That doesn’t change in this new paradigm. Your reputation and the potential for
repeat customer opportunities will remain. But with the growth of smart and connected features, you have a chance to increase the value of your professional installation – specifically by learning how the product can be set up for monitoring and maintenance reporting. We all admit that working in a crawlspace isn’t the same set of skills as networking computer hardware. And this means contracting companies might have to think of their employees more like cable internet technicians and grow their smart and connected setup skills. Investing into your employees can open a new revenue source – such as a monitoring and maintenance subscription agreement. In theory, this could eliminate the need to go onsite while still helping your customer from afar.
usually available inside the package, and manufacturers investing in easier ways for customers to understand how to handle in-field connection challenges. If you are ready to meet your consumer’s requests for smart and connected features, start with manufacturers’ websites. These have incredible training opportunities for technical setup – or use the manufacturer’s customer support line. Products with smart and connected features are here. We shouldn’t be surprised that before the end of the 2020s, we will be kowtowing to Alexa, Siri, or an app on our smart phones, or interacting with generative AI tools such as ChatGPT more. These technologies eliminate pain points for end-consumers that they didn’t know they had, and they are fun. My question for HVAC and plumbing contractors; “Are you ready to learn and implement something new for your customer’s growth?” Or should I ask Alexa about this? u
End-Consumers Are Smarter, It’s Time to Deliver As we know, the success of contracting businesses depends on how to extend or grow lines of revenue and maintain the business you already have. There are new revenue models that have emerged from meeting end-consumer demands for smart and connected features. Learning how to use, set up, and teach these features on the familiar products you install provides an incremental revenue source and higher level of customer satisfaction. Manufacturers realizing this as an opportunity have continued to make setup easier. It starts with the supplemental documentation,
Ryan Kiscaden is an author and an HVACR and plumbing marketer. His career includes working for an HVACR and plumbing wholesaler, running a nonprofit focused on recycling thermostats and working for major plumbing equipment and plumbing category manufacturers. More information on his professional background is available on https:// www.linkedin.com/in/ryankiscaden/ Anyone remember The Clapper? It is undisputable that The Clapper was the first home automation device. As you clapped, the device switched power from on to off. Voice commands have now replaced the clap. 1
HVACR BUSINESS FEBRUARY 2024
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WHAT STORY IS YOUR MARKETING PLAN TELLING YOU? 2023 WAS A CHALLENGING YEAR FOR HVACR BUSINESSES
BY WILL MERRITT
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any HVACR businesses flourished during COVID, but in 2023, many of us experienced a flat down year. During the pandemic years of 2020 through 2022, we had a somewhat captive audience. Consumers were working from home in record numbers. Much of the population was receiving government stimulus money. This led to homeowners realizing their homes were not very comfortable. Indoor air quality products became sought-after items to protect and clean the air in our homes. This drove consumers to replace systems prematurely in some cases and to add additional home comfort products, such as smart thermostats or IAQ items. This fueled the fire that led us to where we are at the beginning of 2024.
The consumer is under many stress factors in 2024. Inflation is “real” for all consumers today. “The cost of everything has risen dramatically, from luxury items to everyday consumables. HVACR equipment costs have doubled with inflation, SEER2, and new refrigerant changes coming,” says Jeff Buresh, VP – Value Added Distributors.
How Have the Consumer and the Market Changed?
Interest rates have skyrocketed, and many consumers cannot get approved for financing these days. So, we now
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Marketing back to your customer base is key. Your HVACR company must remain top of mind with your current customers. No matter the size or age of your business, you must market it to your existing customers.
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have homeowners choosing to repair versus replace. Just a couple of years ago, homeowners upgraded to a higher efficiency system instead of repairing them. Now, contractors are seeing consumers getting multiple estimates for equipment replacements and even repairs. I’ve had several owners tell me that existing maintenance customers are checking prices when a replacement system is needed. They are also asking their current service provider to match other companies’ prices. It seems loyalty has diminished in our current economy.
Do You Need to Revamp Your Marketing in 2024? So, do we need to revamp our HVACR marketing in 2024? That is a multilayered question that requires some thought and analysis.
Where is Your Business? Let’s first look at your business. Look at these factors when determining your marketing budget and mix: 1. What are your goals, short-and long-term? 2. How long have you been in business? 3. What is your target demographic (age, income, rural or metro)? 4. What type of growth are you looking for?
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The answers to these questions will determine your marketing or advertising mix. What is your mix between digital online advertising (organic and paid), traditional (radio, TV, billboards), social (organic and paid), and grassroots (sponsorships, community involvement)? Let’s look at some examples:
A newer business under five years in operation will need a stronger presence with online paid ads on Google or other search engines. You should direct at least 60% of your budget toward paid ads.
Creative advertising really makes the offer work. You can have a great offer, but your results will be diminished if you poorly execute creative advertising. Your company must convey a professional image to your target audience and give them what they want. What do they want from your service business, you may ask? They want to have trust in your company. They need value in their purchase. The most important one of all is fixed now or same-day service.
3. A more established business with a larger customer maintenance base can look at more traditional or organic marketing for paid advertising. We see a more even split or leaning toward branding through TV, radio, billboards, and community involvement.
2. Outbound calls (During the shoulder seasons). 3. Happy Calls after service, maintenance, or a new installation. Often, a marketing campaign’s success depends on creative advertising and the offer.
So, how do we address what is not working and how to enhance what is? Whether you handle your marketing internally or through an outside agency, you need to review your metrics. What is working and what is not? Monthly reporting is a must for marketing campaigns. Once you know the best platforms that work for your HVACR
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2. $99 Heating or A/C Tune-up.
Creative Advertising or the Look and Feel
2. A newer business under five years in operation will need a stronger presence with online paid ads on Google or other search engines. You should direct at least 60% of your budget toward paid ads.
1. Email marketing (newsletters, birthday cards, anniversaries).
1. $25 Off Repair. 3. 0% Financing (Financing is a great ancillary or backup offer).
1. The industry typically invests 3 to 5% of gross sales into marketing. If you’re looking to grow at an accelerated rate, 6 to 10% would be more appropriate.
Marketing back to your customer base is key. Your HVACR company must remain top of mind with your current customers. No matter the size or age of your business, you must market it to your existing customers. Acquiring new customers is quite expensive these days, so we must do everything within our power to keep them. How do you stay “top of mind” with your base?
heating or air conditioning system first. This is why promoting what the consumer wants first works the best. Here are some examples:
Good and Bad Examples of Creative Advertising business, you can pivot when needed away from ones that are not providing quality or reasonably priced leads.
TRACKING YOUR RESULTS OR METRICS Digital Campaigns You should keep a close eye on your marketing platforms. Today’s digital platforms, such as Google Search, Display, Performance Max, and Local Services Ads (Google Guaranteed), provide great metrics to measure performance. A lot of HVAC businesses and agencies look at Impressions or click-through rates, but the real identifier of success for an ad campaign is conversions. These are tracked as a phone call or website form submission from the ad. Conversions ultimately lead to new customers.
Traditional Campaigns Traditional advertising is designed for brand building in our industry. It’s all about driving your message and keeping your business top of mind in the marketplace. The media companies will be able to provide you with broad stroke measurements for your campaigns. These include reach, frequency, household penetration, viewership and listening.
Ultimately, traditional campaigns support your digital campaigns in 2024. Remember, people do not think about their heating or cooling system until it no longer works. Traditional platforms provide branding and awareness, so when it does break, they call you. Unfortunately, consumers don’t call after hearing a radio ad or seeing a TV spot. They remember it when searching online, so ultimately, the digital stuff usually takes the credit.
The Offer The offer is crucial for the success of your company’s marketing plan. Remember, consumers are not thinking about their heating and air conditioning until it breaks. We often see HVACR contractors leading with offers such as “$500 off a new system replacement” or 10% off a new installation. Consumers do not know what it costs to replace their heating and air system today. We all know it costs much more than just a few years ago. Ultimately, they are not thinking about replacing it. The decision to install a new system is typically failure-driven.
Service or Tune-up Offer Our organization has tracked the performance of HVACR offers for years. The consumer is looking to repair their
1. Billboards: You should have no more than seven words in your message. We see billboards all the time with so much wording that you have no idea what they say. 2. TV or Radio: Don’t try to cram too much into one commercial. Keep it short and sweet, promote your offer or brand your company. Consumers can easily be confused.
Search Engine Optimization from 2023 to 2024 Let’s take a look at how things are changing …
Core SEO Updates • Re-evaluate Your Keywords: The foundation of SEO is keyword research. Ensure your keywords are still relevant to your target audience and not too competitive. Tools like Google Keyword Planner and Ahrefs can help in identifying better-targeted keywords. • Improve On-Page SEO: Review and optimize on-page elements like title tags, meta descriptions, header tags, and images (with ALT text). Ensure they are keyword-rich but not overstuffed. continued on page 18
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continued from page 17
• Update and Upgrade Content: Audit your existing content. Update outdated posts, improve lowperforming content, and ensure it is valuable, informative, and answers your audience’s queries. Adding new, high-quality content regularly is also crucial. • Enhance User Experience (UX): A site with poor user experience can hurt your site’s SEO. Ensure your website is easy to navigate, has a fast loading speed, and is mobile-friendly. Google’s PageSpeed insights can provide information about page speed and user experience issues—Source: Caleb Rogers, SEO Specialist at Effective Media Solutions. These can be simple changes and updates that will have long-term positive results.
Google Updates • August 2023 Core Update: This broad update, completed in September, aims to reward highquality content across all languages
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We must be open to how the marketing platforms and customers are changing. Be open to new ideas and track your results. It will help your company prosper during the good times and persevere through the difficult times. and regions. While it doesn’t directly penalize pages, it may cause ranking fluctuations as Google reassess content value. • December Link Spam Update: This December 2023 update, still underway, targets unnatural “link spam” tactics like excessive guest posting or paid links. Sites engaging in such practices may experience ranking drops. “With the development of AI in content creation, writing quality content is just as important as ever. As search engines improve their ability to deliver accurate results after the first search, making sure you have the content your customers are looking for should be your priority,” says Jim Gregory, Digital Marketing Director at Effective Media Solutions.
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Performance Max Performance Max was introduced as a beta in November 2021 and is gaining traction in our industry. With AI and machine learning in full force, Performance Max isn’t something to ignore any longer. Pmax uses Google’s machine learning capabilities to drive more conversions across all of Google’s owned inventory (Search, Display, YouTube, Discover, Gmail, & Maps). Above all else, Google needs data to help Pmax campaigns run effectively. For lead gen, data is the one place we lean in further and heavier. For example, Pmax can only measure how many phone calls or form submissions you get, but it doesn’t know how many led to good, great, or bad conversations. Teach Google what works for your business by adding offline conversion imports. Over time, Google starts to see that the good ones
come from certain geos or share certain audience signals. Cited, Steve Kottra, Jr. – Paid Search Manager at Effective Media Solutions.
In Conclusion Tried and true tactics still reign supreme in the HVACR industry. We must do the blocking and tackling first, which is answering the phone (even after hours), providing quality customer service, and following through on our promises to our customers. And we must be open to how the marketing platforms and customers are changing. Be open to new ideas and track your results. It will help your company prosper during the good times and persevere through the difficult times. u
Will Merritt is the Managing Partner at Effective Media Solutions, a fullservice marketing agency. With 27 years of experience in the HVAC field, 10 of that in marketing for contractors, our agency has keen insight into our industry that others do not. Contact Will at will@myeffectivemedia.com or (704)507-7858. “We Speak HVAC.”
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FINANCE
PROVIDED BY KEVEN PRATHER, CFBS
Four Ways to Ease the Tax Bite When Selling Your Business
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hances are, you’ve invested enormous time and energy into your business. And if you’re like many entrepreneurs, you’ll one day be ready to sell the company and transition to the next chapter of your life. If so, it makes sense to make your exit in a way that minimizes the tax bite you’ll encounter. Despite their many differences in goals and methods, business owners often agree that they want to pay as little as legally possible in taxes when they eventually sell their companies so they walk away with more money for themselves and their families. The good news: Numerous strategies can potentially help mitigate taxes on the sale of your company.
Transfer assets regularly over time Have heirs who will one day take over the business? You can start gifting them that ownership now. Individuals can transfer up to $17,000 (while married couples can transfer up to $34,000) of stock in their company to each child every year without incurring taxes. (For 2023 limits for 2024 were not yet available as of this writing.) Giving the annual limits on such gifting, it’s unlikely that this basic approach will enable you to fully transfer ownership to one or more heirs. But it can get the ball rolling on tax mitigation.
Installment sale Selling your business may result in a profit that bumps you into a higher income tax bracket than usual. That could mean a significantly larger tax bill than you expect or want. To avoid that outcome, you could consider agreeing to be paid over time by the buyer in regular installments instead of a one-time transaction. After getting an upfront payment, you’d receive the remaining sale proceeds (with interest) over annual installments. This approach would spread your tax bill throughout the
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Here’s a look at some ways to reduce the tax bill when it’s time to hand over the reins to new owners .
Charitable remainder trusts If you want to both reduce your tax bill when selling and have a philanthropic impact by financially supporting a cause you care about, you may be well-served by using a charitable remainder trust (CRT).
installment payments. The length of the installment period is negotiable between you and the buyer. But obviously, the longer the term, the greater the risk you could incur. Because you’re getting payments over time rather than all at once at the sale, you’re relying heavily on the new owner. If they run the company into the ground, you may have far less money than you expected. The installment sale option is often closely watched due in part to frequent proposed legislative changes involving capital gains taxes. For example, one debated proposal would increase the top long-term capital gains tax rate from 20 percent to 39.6 percent for households with income of more than $1 million. Although that bogey might seem high— by one estimate, just 539,000 income tax returns were filed in 2019 with 2018 adjusted gross income of more than $1 million—it’s quite possible for business owners to hit it in the year they sell their companies. In theory, an installment sale could be designed to keep your annual income below the $1 million threshold each year—helping to avoid the higher capital gains tax rate (if it comes to pass). Warning: Only “capital gains income” is eligible for installment sales. Anything on which gains are treated as ordinary income cannot be used in installment sales. For these items — which include inventory, accounts receivable and property that’s been used for one year (or less) — you have to pay tax on any gains in the year you
sell the company. Best bet: Review IRS guidelines and discuss with a tax expert if you are considering installment sales.
Opportunity Zones Another tax-advantaged option is to reinvest some or all of the sale proceeds into a qualified opportunity zone fund. Opportunity Zones are federallycategorized areas of the country with historically depressed economic growth levels and historically high poverty levels. Qualified opportunity zone funds are investment vehicles that invest in properties and businesses located in these Opportunity Zones. Their purpose is to help spark economic growth and jobs in these distressed communities (of which there are currently more than 8,000). The IRS offers significant tax advantages to help motivate investors to allocate money to these funds. Example: If you sell your business (or stock or real estate) and reinvest some or all of the proceeds in a qualified opportunity zone fund within 180 days of generating a capital gain from the sale, you can defer paying taxes on that gain. In general (exceptions exist), the deferral lasts until Dec. 31, 2026 — at which time, the amount of the deferred gain that you invested in the fund becomes taxable. Also, if you maintain your qualifying investment for more than 10 years, its tax basis “steps up” to its fair market value as of the date you sell it. In short, your investment appreciates tax-free—and you won’t pay any capital gains tax on the appreciation when you sell it.
This approach calls for irrevocably gifting some or all of your business to a CRT that you create to benefit one or more charitable organizations. The CRT can then sell the business interests — without incurring any capital gains taxes. In addition, you would receive an income tax deduction in the year you transfer the business assets to the CRT. The size of that charitable deduction could potentially total tens of thousands of dollars, depending on the value of the business interests being transferred, your age, your adjusted gross income (the allowable deduction is limited to 30 percent of your adjusted gross income, with excess amounts carried forward for five years) and other factors.
Conclusion The four strategies presented here represent just a portion of the tax-mitigation solutions available to entrepreneurs looking to sell their businesses. Additionally, as noted, several methods for reducing taxes are being examined and assessed by lawmakers in the White House and on Capitol Hill, but what (if anything) will change remains to be seen. Your best bet: Reach out to your trusted advisors to review the full range of tax-mitigation resources available to you and get updated on the latest developments impacting a particular solution. u
Keven P. Prather is a registered representative of and offers securities and investment advisory services through MML Investors Services, LLC. Member SIPC. Call 216-592-7314, send an email to kprather@financialguide. com or visit transitionextadvisors.com.
HVACR BUSINESS FEBRUARY 2024
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FINANCE
BY RUTH KING
Achieve Your Freedom with Your Financially Fit Business | Part 4 WHAT TO DO IF YOUR OVERHEAD IS TOO HIGH
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ast month, I gave you the second step: Know your overhead cost per hour for each department. When you calculate your overhead cost per hour, your cost might seem high. What do you do to bring it down? First, what is a reasonable overhead cost per hour? For smaller companies, service overhead cost is $60 per hour or less. The more billable hours you have, the lower your overhead cost per hour. If you have at least 5 technicians billing at least 1,800 hours a year, your overhead cost per hour should be $40 or less. For large companies (over 20 technicians), overhead cost per hour it can be under $25. Replacement/project overhead cost per hour should be under $30, and new construction should be under $20. If your overhead cost per hour is too high, billable hours are the first place to look. On average, employees work 40 hours a week or 2,080 hours a year. Assuming you deduct vacation, holidays, meeting time, and training time, you can only sell about 1900 hours a year … about 91% of the employee’s time can be sold, i.e. billed. How many hours a year per employee do you actually sell? If your billable hour percentage is less than 75% for service or less than 85% for replacement, your overhead cost per hour will decrease as you increase billable hours. Here are five ways to increase billable hours: 1. Service technicians go to their first call from home except for meeting days. Their time starts when they arrive at their first call. If they have been coming to the shop, this gives you an extra 30 minutes to an hour of billable
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However, do not include these nonoperational expenses in overhead. 4. Make sure that commissions and SPIFFs are part of the costs of goods sold. They are expenses because you sold something. They should not be included in overhead. 5. If you give bonuses at the end of the year – don’t include these payroll expenses in the overhead calculations. These are not part of normal operations. You give them to share the wealth after a profitable year.
If your billable hour percentage is less than 75% for service or less than 85% for replacement, your overhead cost per hour will decrease as you increase billable hours. time each day. Your revenues increase, and your bottom line increases, too. 2. Dispatchers route efficiently. They decrease the amount of travel time wherever possible, and they send the right technician to the right job. 3. Replace parts from what the technicians use on the job. Most software packages have the ability to create a list of parts that you use daily. Each technician has a “locker” where they can replace parts. They pick them up when they come for meetings. 4. Lock up the warehouse. Equipment/ materials are ready for the crews when they arrive in the morning. They should be in and out of the building in 15 minutes or less. Crews do not get to pick and choose what they need for the jobs. If they do, they always take more. 5. Stagger the start times for the crews. This helps ensure that they get out within 15 minutes of arrival.
FEBRUARY 2024
If your billable hours are in line, make sure that overhead contains only overhead expenses: 1. Make sure credit card/financing fee expenses are not in overhead. These expenses are the cost of goods sold expenses. You don’t have a credit card or financing fee unless you sold something. 2. Make sure that payroll for field employees is in cost of goods sold. Your CPA often puts all payroll in overhead to make it easier for him or her to prepare your taxes. It is not correct from an operational P&L standpoint. 3. Make sure other income and expenses are after net operating profit. This means that interest you receive on bank balances, late fees or nonusual expenses such as the sale of a truck are accounted for after net operating profit. The bottom line is the same.
6. If you have building renovation expenses, they are not part of regular operating expenses and should not be included in overhead expense calculations. 7. Consider depreciation expenses as an overhead cost. If they are not included, your overhead cost per hour will be slightly lower than it should be. What if none of these seven situations occur in your business? Then, take a good look at overhead expenses and look for areas you can cut. Or can you add additional billable hours with another field employee? Remember that this field employee needs to have 1,800 billable hours a year, whenever possible, to be totally productive. u
Ruth King has more than 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. Contact Ruth at ruthking@hvacchannel.tv or at 770-729-0258.
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PRODUCT FOCUS »
ADVANCED RADIANT SYSTEMS
AIRXCHANGE, INC.
BOSCH
The APEX Range is the pinnacle in infrared heating. It boasts the highest radiant output and thermal efficiency of any radiant tube heater in the world! Its pioneering design incorporates dual firing rates to optimize control and comfort while minimizing energy consumption. It is also the first unitary heater with flue temperatures low enough for venting with polypropylene flue material. Other design features include twin 100% parabolic reflectors enclosed by a single canopy to ensure minimal convective heat loss. The APEX range also includes the Energy Recovery Exchanger (ERX) module to maximize thermal efficiency.
Airxchange is proud to introduce its new SEACON energy recovery wheel product line. Especially designed for cruise ships, offshore or coastal applications, the wheel offers outstanding corrosion protection thanks to its unique polymer media and powder coated or stainless steel construction. Gone are the days of standard segmented wheels. The new SEACON wheel takes serviceability to a whole new level with segments that can be removed and reinstalled in minutes without any special tool. The complete operation can be easily done from the face of the wheel and is made even easier by our unique, light polymer media.
www.advancedradiantsystems.com
www.airxchange.com
www.bosch-homecomfort.com/ us/en/residential/home/
MALCO
PVI, A WATTS BRAND
With the addition of 3/8” and 7/16” hex sizes to Malco’s C-RHEX lines, trade professionals now have access to more driver options that feature a heavy-duty, deep-set magnet that does not contact the screw, so the fasteners spin true, and the magnet retains its strength for years to come. Built with S2 hardened steel for long life and superior durability, the removable and reversible hex driver allows users to easily clean the socket and magnet. Trade pros can get back to work quickly by removing the driver from the impact to push the drive side of the shaft through the socket to quickly clear sealant buildup. www.malcotools.com
Centurion is PVI’s next step in the evolution of Dynamic Water Heating. Designed for maximum performance, longevity and reliability in a compact design with the integrated Edge® Controller for enhanced hot water management. The high-efficiency, direct-fired domestic hot water heater is packed with state-of-the-art technology that enables building owners and facility managers to confidently meet the highly diverse and demanding commercial and industrial hot water requirements of today and tomorrow. Its compact design fits through a standard 36" wide doorway, which makes it ideal for both retrofit or new applications where space savings and installation flexibility are key.
The Bosch IDS Ultra heat pump redefines cold-weather heating, delivering efficient warmth down to -13oF. Meeting the requirements from lab to field testing as part of the DOE's Cold Climate Challenge, the IDS Ultra arrives in up to 5-ton capacities. Powered by Bosch inverter technology, the Bosch IDS Ultra heat pump makes renewable, energy efficient heating possible in frigid temperatures. This cold climate heat pump can provide 100% heating down to an outdoor temperature of 5oF. If the temperature drops below 5, the IDS Ultra will continue to initiate heating even down to -13oF.
ROSENBERG’S
Rosenberg’s latest innovation in HVAC, ventilation and air filtration fans is being kept super quiet. The new company’s new backward-curved fan can generate 1,000 CFM of air movement and 1.9” of pressure with only 76 dB(A) of noise. Sound Power – Sound Pressure is only 69 dB at 3 feet. Available as a module (part number N43-28003) or as a motorized impeller (part number N4228002), the fan features Rosenberg’s new 120-V, single-phase 400-watt EC motor coupled with a very highly efficient and exceptionally quiet glass fiber reinforced polyamide impeller. Both models are IP54 rated.
DWYER INSTRUMENTS’
Dwyer Instruments’ Series MSX Magnesense® Differential Pressure Transmitter combines the stability and versatility of the original Series MS2 Magnesense® II transmitter for use in building control applications. The MSX simplifies the ordering process to deliver the desired configuration, which reduces product setup time. Pressure ranges are available in Pa, mm w.c., and in w.c. All pressure ranges can be configured in unidirectional or bidirectional modes, providing a total of 32 ranges. The MSX transmitter can provide a linear pressure output or a linear velocity output with the square root extraction from the transmitter. www.dwyer-inst.com/seriesmsx-magnesenser-differentialpressure-transmitter.html
SHEET METAL CONNECTORS
Sheet Metal Connectors now offers EZ-R phenolic lined metal ductwork, which is easier to install and simpler to handle than traditional 3” doublewall insulated sheet metal. This duct comes preinsulated, fully assembled, and ready to install with standard TDC connections in your indoor and outdoor applications. EZ-R Duct has high thermal resistance values and closed-cell insulation. EZ-R duct is available in R-8, R-12, R-16, and R-20 to meet your specification. www.smcduct.com
www.rosenbergusa.com
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HVACR BUSINESS FEBRUARY 2024
21
20QUESTIONS
>> with LAUREN ROBERTS
Tom Perić sat down with Lauren Roberts, Chairwoman of the Board, CEO and president of Kansas City, MO-based cfm Distributors. They discussed what it’s like to begin your career in the HVACR industry, the challenges of running an ESOP company and making headway to the top as a female executive.
1. What is your favorite possession?
A beautiful painting that my late grandmother painted. It’s in my home office, and it always reminds me of how amazing she was.
2. What is a secret that you don’t usually share?
While I enjoy playing a lot of games, I’m terrible at Euchre, but I insist on playing it whenever the opportunity arises.
3. It’s February and it’s cold in the Midwest. Do you have a warm refuge someplace?
My husband and I went to Cabo San Lucas, Mexico, for a week in January, so that was our warm refuge this winter.
4. If you weren’t the president of a wholesale business in HVACR, what would you be doing?
I would love to be able to do more work with charitable organizations. It would be more in the weeds work and fundraising work than leadership of those organizations, though.
5. What’s your favorite way to relax when work stresses you out?
I enjoy playing golf, which allows me to get stressed about my weak golf game instead of work.
6. What’s your background?
I grew up in Kansas City and have lived there my whole life. I went to school full-time nights and weekends while working full-time during the day at cfm while earning my Bachelors of Science in Business Administration degree from UMKC. After a brief stint in the accounting department, I worked my way up through several roles in Marketing, from marketing assistant to marketing manager to marketing director to VP of Marketing and customer experience to Executive VP, then President and CEO and recently also became Chairwoman of the Board of Directors.
7. How did you get into the HVACR industry?
My grandfather co-founded our company, cfm Distributors Inc. in 1969, and my father went to work there before I was born. [The company has seven locations.] My dad asked me if I’d like to work at cfm, and I agreed. This was in 2004, and I’m really glad I decided to join the company and the overall HVAC/R industry.
8. In business, what do you find most rewarding?
The most rewarding part of business for me is working with so many great people inside and outside of our company. I have really found it rewarding to mentor and help others grow and learn our industry. I have also enjoyed working hard to help our whole industry advance together through involvement in
22
HVACR BUSINESS
FEBRUARY 2024
HARDI, Blue Hawk, Women in HVACR, EGIA, and ACCA.
9. What’s your motivation?
I’m highly motivated to help our employee-owners at cfm be successful in their work lives and personal lives through mentorship, driving toward results that help them boost their share value and providing a great culture where we have a family feel while achieving great results and having a lot of fun. Outside of my day job, I am motivated to help everyone in our industry get better together because I truly believe in the concept of a rising tide raises all ships.
10. Who was your business mentor?
I’ve had a ton of wonderful business mentors in my life, so this is hard to narrow the list. Many of them may not have realized they were my mentors, but I learned so much from them just through observation. Some of my biggest business mentors have been both of my grandfathers, my dad, my executive coach, and too many industry leaders and peers to name here.
11. What business principles guide you running the company?
Women in HVACR to work with more people who look like me toward their important mission of helping bring women into the industry and provide education, mentoring and networking opportunities for them to learn and grow in this industry. I’m not sure I would have been able to participate in such a great group if we didn’t have the large disparity between males and females in the HVAC/R industry.
15. What advice do you have for encouraging women to join the executive ranks of an HVACR business?
Join Women in HVACR and get involved in their committees and attend their wonderful events. Find a mentor who is a female executive in our industry and find a sponsor who will give you space to show your capabilities to key decision makers and support you along the way. Determine what skills are required of the executive positions you are aiming for and take classes, read books, attend conferences and listen to podcasts to help obtain those skills and perfect them.
16. What advice do you have for our audience?
I’m strongly guided by my own core values, which align very closely with our company core values of Integrity, Teamwork, Transparency, Intentional Communication, Continuous Improvement, Innovation, Giving Back.
I think we are all well-aware of all of the vast changes the HVAC/R industry faces in the next five to ten years with the refrigerant changes, move toward higher efficiency furnaces and eventually toward full electrification, so with that being said, my best advice to this audience is to stay very connected to your respective trade associations and HVAC groups.
12. What aspects of running the business do you enjoy the most?
17. What is the center of your business philosophy?
I truly enjoy working with our employee-owners and customers. They are all like my extended family, and working with them inspires me to be better all the time.
13. What do you least enjoy?
I least enjoy it when big problems arise, which fortunately are few and far between, but after we work through them, it’s also rewarding and always provides a great learning experience.
14. How difficult or unique is it being a woman in a male-dominated industry? Early on, I found it difficult to have a voice that was listened to compared to my male colleagues, but as I grew in experience and knowledge, being a woman in this industry has largely been fun. I really have enjoyed working through
The Golden Rule really is at the center of my business philosophy along with an “others first” mentality that my dad instilled in me.
18. What’s the best business advice you’ve received?
My grandfather who co-founded our business always said, “Always remember, things are never as bad or as good as they seem.” That advice has regularly served me well, particularly when things seem bad, throughout my almost 20-year career in HVAC/R.
19. Are there any special challenges leading an ESOP company?
One of the challenges of leading an ESOP company is trying to explain how powerful the financial benefit of it can be to a person who has 30 to 40 years before they can receive the money. When they start to see their ownership grow, it changes everything for them.
20. What’s the key to good wholesaler-contractor relations?
Organizational engagement is key to those relationships. Having your wholesale executive team regularly communicating with the ownership and leadership of contractor customers, and having your department managers and salespeople engaged with similar positions at the contractor companies is the best way to support them strongly on all levels.
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“Being great means always being ready to learn and share, leading by example, and celebrating success with others. The essence of greatness lies in continuous improvement —striving to be better today than yesterday.” Brian Williams, Founder and Visionary Ashton Service Group Nexstar Member since 2011
CONNECTIONS ARE POWERFUL Never, ever underestimate them. In the home services industry, we connect with our customers to add value and offer comfort; we connect with our teams to strengthen and grow; and we connect with our peers to level up. Nexstar Network is built on connections. In 1992 Nexstar founders – like-minded contractors – forged relationships focused on success through education and sharing. They changed our industry for better. This small group has evolved into a network of more than 1,000 of the most successful home service companies in North America and beyond. Member-owned, we are committed to our valued members, those working to tirelessly to support the rising tide of the trades. Their greatness sets them apart and we celebrate their commitment to their businesses, their communities, and our industry. If you are interested in learning how Nexstar can supercharge your professional and personal growth, we’d love to talk. Call us today at 888-240-7827, or schedule an introductory call at nexstarnetwork.com/contact, and learn more about our mission to turn the world’s best tradespeople into the world’s best businesspeople.
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