HVACR Business August 2019 by HVACR Business

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Build Your Team, Know Your Limitations Pete Grasso 5

The Art of Failure Megan Jackson 16

Proven Marketing Campaigns Joy Gendusa 20

Review Financial Statements Each Month Ruth King 18

HVACRBUSINESS.COM AUGUST 2019 / VOL.14 / NO.8

HELP YOUR TECHNICIANS SELL ADVANCED TECHNOLOGY Page 6

ALSO INSIDE Â» Executive Roundtable: Residential Heating ............................................................. 9 20 Questions with Larry Gemma Owner of GEM Plumbing and Heating Services ....... 22

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CONTENTS

AUGUST 2019 / VOL.14 / NO.8

F E AT U R E S

Help Your Technicians Sell Advanced Technology

D E PA R T M E N T S

The focus for the technician should always be to ascertain what the customer really wants and then determine what best fits the customer’s needs. By Jamie Kitchen

Editor’s Notebook

20 Questions with Larry Gemma

Executive Roundtable: Residential Heating

Driven by efficiency and comfort, residential heating systems now offer your customers a multitude of options. By Pete Grasso

The Art of Failure Life is full of lessons learned through trial and error. By Megan Jackson

As a business owner, everything falls on your shoulders. It’s important to make sure you build a competent, trustworthy team around you. By Pete Grasso

Owner of GEM Plumbing & Heating Services in Lincoln, R.I.

C O LU M N S

Review Timely, Accurate Financial Statements Each Month

Marketing Campaigns that Generated $20,000 In Revenue

Once owners are in the habit of receiving financial statements and asking good questions about them, they get more accurate. By Ruth King

To generate enough calls and sales from your marketing, you need to market consistently. By Joy Gendusa

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EDITOR’S NOTEBOOK

THE HVACR MANAGEMENT MAGAZINE

TERRY Tanker Publisher ttanker@hvacrbusiness.com PETE Grasso Editor pgrasso@hvacrbusiness.com MEGAN LaSalla Art Director mlasalla@hvacrbusiness.com BRUCE Sprague Circulation Manager bs200264@sbcglobal.net BARBARA Kerr Executive Assistant bkerr@hvacrbusiness.com

ADVERTISING STAFF EAST COAST/SOUTHEAST JIM Clifford Regional Sales Manager Tel 201-362-5561 Fax 201-334-9186 jclifford@hvacrbusiness.com MIDWEST ERIC Hagerman Regional Sales Manager Tel 216-409-3246 Fax 440-731-8750 ehagerman@hvacrbusiness.com WEST COAST TERRY Tanker Publisher Tel 440-731-8600 Fax 440-731-8750 ttanker@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©2019 by JFT Properties LLC. No part of this publication may be reproduced in any form or by any means, electronic or mechanical, or by recording, or by any information storage or retrieval system, without written permission from the publisher. 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 © 2019 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 Fax: (440) 731-8750 Web site: www.hvacrbusiness.com (ISSN: 2153-2877)

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Build Your Team, Know Your Limitations

ast month marked the 30th anniversary of the first episode of “Seinfeld,” which aired on July 5, 1989. Anyone who knows me (or has read my columns regularly) knows that I’m a huge fan of the “show about nothing.” On a recent trip to New York City, I made my wife go with me on an out-of-the-way side trip to the Upper West Side of Manhattan just so I could take a picture in front of Tom’s Restaurant, which doubled as the exterior shot of “Monk’s Café” on the show. Although there hasn’t been a new episode of “Seinfeld” in 21 years, the show lives on in syndication and not a day goes by when I cannot relate some aspect of life to something that happened during it’s nine seasons.

fact, as the ambulance was finally able to turn the corner, they slammed into George, who happened to be driving Jerry’s rental car at the time. When Sid returns from vacation, he has more than a few stern words for George. “Now you didn’t tell me you didn’t know how to drive. You should have mentioned that,” he says. When George tries to explain that he does in fact know how to drive, Sid is quick to reply, “Then how’d all those cars get damaged? Why are people calling me up screaming on the phone? Most of them cancelled out on me.” Now, for the lesson. Actually, there’s two we can glean from this comical scenario.

Case in point: I recently watched the classic episode “The Alternate Side,” and immediately thought of a valuable life lesson.

The first is this: As a business owner, everything falls on your shoulders. It’s important, however, to make sure you build a competent, trustworthy team around you.

The main plot of that episode involves George Costanza parking cars. As the show opens, we find out Jerry’s car has been stolen. Turns out Sid, who makes a living moving cars in the neighborhood from one side of the street to the other throughout the day so residents don’t get tickets, accidentally left Jerry’s keys in the car.

When the time comes that you have to leave town, whether for a vacation or business trip to one of the many shows and conferences in this industry, you want to be sure you have people in place so that your business doesn’t suffer in your absence.

As Sid is apologizing, he informs Jerry that he’s going to visit his sister for a week and won’t be able to park cars. Upon hearing this, George asks if he can fill in while he’s away.

Had Sid properly prepared George before he left, he might not have lost so many customers while he was away. Here’s the second lesson: Know your limitations.

“I’m in a transition phase right now,” George replies.

It’s easy to always say yes and take on more and more work in the interest of growing your business, but sometimes you have to say “no.” If you don’t have a proper growth plan in place, you may quickly become overwhelmed with the extra work and your business will actually suffer instead of grow.

A couple of scenes later, we see a frantic George, with multiple sets of keys latched onto his belt, rush into Jerry’s apartment. He’s clearly overwhelmed by the seemingly simple task of parking cars.

George, obviously, didn’t know his limitations and was quickly in over his head when he agreed to take on Sid’s job. He didn’t have a plan, instead jumping in head first to what he thought was easy money.

“What’s a young man like you want to move cars for? You don’t work?” Sid asks.

“I need like a bucket of water! I got a car overheating, I got an alarm that won’t go off, I’m pressing ‘one’, I’m pressing ‘two’, nothing! What do I do?! Help me! Help me!” he exclaims. A little while later, an ambulance is delayed because the entire intersection is gridlocked, thanks in large part to George’s parking fiasco. In

Growth for the sake of growth isn’t always a good thing, especially if profits suffer because you’ve gotten too big. One interesting side note: This episode coined the catchphrase, “These pretzels are making me thirsty.” u

HVACR BUSINESS AUGUST 2019

HELP YOUR TECHNICIANS SELL ADVANCED TECHNOLOGY

The focus for the technician should always be to ascertain what the customer really wants and then determine what best fits the customer’s needs. BY JAMIE KITCHEN

here is an old saying that “a customer does not buy drill bits, they buy holes.” The meaning of this as it relates to our industry is that, even though we sell technology in the form of equipment and services, we are really selling improved comfort, control and energy savings. The customer might desire better temperature and humidity control, reduced allergy symptoms or to fix the areas in a space that seem to be too hot, cold or damp. Perhaps they want to be able to access the system remotely on their phone and precool the house before they get home and are interested in what options

The reality is many customers may not have given a lot of thought about what they really want and/or need and what is required to fulfill. are best available to them. Regardless of the specifics, the focus for the technician should always be to ascertain what the customer really wants and then determine what best fits the customer’s needs. The alternative approach is to quickly suggest a range of products hoping one of them will pique the customer’s interest.

HVACR BUSINESS AUGUST 2019

The risk is that the customer may perceive the effort as an ‘upsell’ of unneeded parts or services and push back, however, regardless of whether one of the suggestions may actually be just what they need. The reality is many customers may not have given a lot of thought about what they really want and/or need and what is required to fulfill. The smart approach is

to work with the customer to help them first envision the ideal solution and then offer the technology that will allow them to achieve it. It may sound simplistic, but there are several steps and conditions that should be met before the customer is likely to agree to anything. The first is to avoid selling the customer something they do not need. While there may be compromises, selling the customer something that will not show value in their eyes can be a costly mistake for future business and send a negative message that can spread continued on page 8

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Do not get too focused and eager on pointing out all the bells and whistles of what you offer and forget to take the time to work with the customer and listen to what they have to say.

quickly through customer reviews and social media.

UNCOVER CUSTOMER IDEALS Once you have identified a customer looking to possibly update or replace their current system, ask why they want to do so. What are they looking to achieve? It is important for the customer to identify, as close as possible, what they are looking for with indoor air treatment and how they will control it.

Make sure you keep your promise. Also, this would be a good time to suggest a preventative maintenance plan, especially if the customer is not able to perform basic upkeep functions like replacing air filters.

CONCLUSION POINTS

Keep in mind not all customers may be aware of what can be done through today’s technology. In this case, the technician’s job is to guide the customer so they are comfortable to dream bigger than they normally might, given their limited knowledge of available options. Highlight the solution in a way that helps them understand the capabilities — and limitations — in a language they understand. If possible, suggest several available alternative methods that will let them achieve as much of their ideal solution as possible, and be honest about where they may need to compromise. Today’s systems offer capabilities that many people find valuable. It is not wise to assume a customer would not be interested in them, even if the feature or capability isn’t something the customer mentioned previously. Highlight the points that relate to and allow the customer to achieve what they have identified as being most important. For example, if discussing the proper distribution of treated air to eliminate hot or cold areas, focus on how your solution will solve this challenge.

REALISTIC, FLEXIBLE & PATIENT Take care to not over-promise what your solution is capable of and understand the challenges involved in incorporating your solution, such as space design or their budget — and, if applicable, what is needed outside of your offer before you can start your part of it. An example could be the requirement for new windows, additional insulation or the complete reworking of ductwork buried in walls. If your solution costs $XX, and they go for it all the way, having to then tell them they will need to spend an additional 1.5x before you can start will not do your cause any favors.

and commissioned, the customer is set up with and comfortable operating a system that works according to how they want it to. Let them know you will return after installation to check up on them and make any modifications needed so they feel protected and assured they will not be abandoned once they sign the check.

• Selling advanced technology should not be done just because it generates greater profits, but rather as a real solution to actual challenges the customer may have.

Again, do not automatically expect your customer to be aware of this. There is no point in recommending the customer spend thousands of dollars on variable speed, zone control and total energy treatment if the space has leaky windows, non-existent insulation and 60-amp service. There are many types of challenges that should not be solved by simply throwing technology at it. Thus, it is important to take a longer, holistic view of the challenge and situation and be realistic with the customer. If they really need to invest in upgrading their ductwork, offer it as a solution to start and explain the benefits. Then, have them build on this investment with a solution you can offer when they are ready for the next step that will provide additional benefits. They will see the benefit of this approach (and won’t think you are just upselling) if you let them decide when to take the next step and emphasize you are taking a long-term outlook, understand their current situation and will be waiting to assist with the next step — even if it will be another year or three before they are ready to move forward. You are building a relationship that can pay back over the years with preventative maintenance contracts, equipment upgrades and a loyal customer that will take that relationship with them when they move — and, possibly provide positive

HVACR BUSINESS AUGUST 2019

recommendations for you to their neighbors and social networks. Do not underestimate the value of this last part.

FINER POINTS Do not get too focused and eager on pointing out all the bells and whistles of what you offer and forget to take the time to work with the customer and listen to what they have to say. Once both you and the customer are confident and comfortable with the solutions you have come up with, however, take time to reiterate how the solution will meet the air treatment needs originally discussed. For example, if they have asthma, spend some time detailing how your solution will help. Just make sure you have enough knowledge to back up what you are claiming. It is not constructive to have your customer point out important facts that negate what you just claimed would be a great solution. In these instances, it is critical you are aware of the finer points that need to be understood before you go there. Also, don’t forget to educate your customer about what is required on their end to maintain the equipment in proper running order. If the customer is currently not capable of programing a thermostat or does not know what a humidistat is for, make sure you have a plan to ensure they can do these things.

• Do not become so enamored with a technology that it becomes the default solution for everything and you end up pushing it when it should not be. • Work with the customer to find the key points important to them and go from there. If remedial work is required to prepare the space before you can realize a sale of advanced technology solutions, make sure this is done beforehand and do not push the customer until they are ready. • Make sure you have the knowledge before you attempt to provide a solution to specific needs such as medical conditions or other special cases, such as precise humidity control. • Promise you will follow up with the customer after the system is up and running to ensure any modifications needed are taken care of — and then make sure you do. u

Jamie Kitchen is an account manager for Danfoss. He previously was the training manager for Danfoss in North America. Jamie has worked in several positions around the world to develop an expertise on the various considerations each region requires to achieve its air treatment needs — whether through refrigeration, air conditioning, heating or humidification. For additional information, visit danfoss.us.

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EXECUTIVE ROUNDTABLE: RESIDENTIAL HEATING Driven by efficiency and comfort, residential heating systems now offer your customers a multitude of options.

BY PETE GRASSO

t’s August. Temperatures continue to rise and calls for air conditioning service pour in … it’s the Dog Days of Summer, and that can only mean one thing to an HVACR contractor: heating season is right around the corner. It might be difficult to imagine now, but soon you’ll start getting calls for “no heat.” It’s never too early to start thinking about heating, especially with so many new efficiency standards and regulations looming in the industry. I recently spoke with a handful of top executives at many of the top manufacturers to get their thoughts on residential heating efficiency standards, how contractors should market these solutions to customers and what challenges lie ahead. This Executive Roundtable panel included: Todd Nolte, director of product development at Carrier Liz Haggerty, vice president & general manager, ducted system for Johnson Controls Quan Nguyen, vice president and general manager for Lennox Residential Steve O’Brien, senior vice president at Mitsubishi Electric Trane HVAC US Andrew Tran, marketing manager at Noritz Allan Dziwoki, vice president and general manager at Panasonic Chris Day, vice president of product strategy and engineering for Rheem

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As consumers continue to look for cleaner, more efficient, more comfortable and more environmentally friendly options, manufacturers are applying advanced technologies to capitalize on those trends and those desires. How has residential heating category evolved in the past few years? Day: Residential heating has consistently gotten more efficient, not only due to the specific furnace regulations, but also as the cooling side of the system has gotten more efficient. That’s always important to remember, that the furnace is a key part of that system … it’s the main air mover. As cooling efficiency increases, so does heating. Dziwoki: With an ever-increasing emphasis on the cost of heating and “decarbonization,” partnerships such as the Northeast Energy Efficiency Partnerships (NEEP) and the Northwest Energy Efficiency Alliance (NEEA) and others are strongly influencing local market incentives for higher efficiency and cleaner solutions. In addition, heat pumps, particularly ductless and variable refrigerant flow (VRF) solutions, have continued to gain greater acceptance for heating capability among the HVACR community. Haggerty: We’ve had a lot of changes around efficiency and a focus on sustainability that have been driven by the Department of Energy (DOE) and through energy advocates, as well as

companies really wanting to align with overall sustainability efforts within their businesses. HVACR systems are the largest energy user in the home, and so we’re trying, as an industry, to really understand how to reduce our carbon footprint, how to improve our overall efficiency and, at the same time, improve comfort within the home. Nguyen: Products continue to get more and more advanced, and there is continued shift to a higher end product with more features and more benefits. Once upon a time, most of the market was onestage, non-connecting furnaces. You see a lot more two-stage, a lot more variable speed, and that’s been driven by both regulation as well as customer preferences. It continues to grow into a very healthy category with a continued movement towards higher efficiency and higher comfort. O’Brien: As consumers continue to look for cleaner, more efficient, more comfortable and more environmentally friendly options, manufacturers are applying advanced technologies to capitalize on those trends and those desires. Tran: Every year there’s sort of an increase and a shift of going toward high

efficiency, especially as customers become more aware of environmental impacts. Governments are pushing us to go that way too. That includes condensing products on the gas side as well as heat pumps on the electrical side.

Are there any new regulations contractors should be aware of? Day: We’ve seen some compression across the residential heating category. Certainly the market’s shifting more toward 90 percent furnaces and that’s increasing as well, in terms of what the market’s demanding. So instead of having a great stratification across 90 plus, we’re seeing the market move fairly rapidly towards the highest efficiency in those tiers. Dziwoki: We are seeing more residential rebate incentives for higher efficiency systems than actual regulations. However, that trend will likely lead to more regulation (stick versus carrot) over time, especially by local governments. Haggerty: As you go into heating season, I’d say from a regulatory perspective, is just that new found efficiency rating and being able to understand the changes that are going on around fan efficiency within the furnaces, and which has pretty much obsoleted the PSC motors, and is now moving everybody to more of a ECM motor. I think it’s just a knowledge base of what’s available out there from an overall product offering. continued on page 10

HVACR BUSINESS AUGUST 2019

EXECUTIVE ROUNDTABLE PANEL

Todd Nolte, director of product development at Carrier

Liz Haggerty, vice president & general manager, ducted system for Johnson Controls

Andrew Tran, marketing manager at Noritz

Quan Nguyen, vice president and general manager for Lennox Residential

Allan Dziwoki, vice president and general manager at Panasonic

Chris Day, vice president of product strategy and engineering for Rheem

continued from page 9

Nguyen: This is a big year in regulation, and there are two elements. Number one, fan energy regulation (FER), the other one is around Ultra Low NOx, which is specific to California. Both of these are driving us to create and bring new products to the market. We have a full line of furnaces that meet that requirement in order to provide that quality air that they made in California, which will likely spread across North America. Nolte: When you look at the Ultra Low NOx, there’s a change in cost there, in development and technology, with which contractors really need to be comfortable. From that standpoint, I think we have all the things they need to make them feel comfortable during that transition, and provided them with all the tools and materials they need to do so. Simply being aware of how that affects the customer and how they then communicate to them and explain to them what the changes are, and give them the education, is the biggest piece.

One of the biggest challenges the industry faces is having a workforce that’s deep enough and experienced enough. Whether it’s heating or cooling season, the answer is the same. What new solutions in this space can contractors now offer to customers? Day: We launched last year our modulating 98 percent efficient furnace. And the cool thing about that furnace is it’s a 98, it’s the highest efficiency out there in the market, and the other nice thing is it hits 98 percent in all inputs, so even from our 50,000 up to 125,000 BTU furnace, you’re getting 98 percent efficiency on the heating side, with connected, variable speed blower. Dziwoki: Contractors can now offer ductless and VRF solutions as a single source of low ambient heat or integrated with existing heating systems. Panasonic

HVACR BUSINESS AUGUST 2019

Steve O’Brien, senior vice president at Mitsubishi Electric Trane HVAC US

is expanding its high efficiency, lower temperature heating capabilities in more models this coming year, with the added benefit of significantly enhanced indoor air quality (IAQ).This is particularly important during the heating season in airtight residential buildings when air quality tends to suffer. Haggerty: We’re continuing to understand what’s coming next in this space, and understanding how we can continue to differentiate ourselves but continue to provide better options to the consumer around solving solutions, rather than it just being about cold or warm air. With the legacy of our controls side of the business, it’s important that we continue to

leverage that capability as we start looking at not only where we are today, but also our future road map. Nolte: One of the trends that we’re seeing now is electrification. In California, you have a lot of utility and state demand for moving to all electric homes and that’s starting to spread throughout the U.S. and Canada. We’re seeing a big shift into what I’d call more advanced heat pumps, or cold climate heat pumps, which can work in colder climates and still provide the comfort and efficiency that they need. You see it with our Greenspeed heat pump, where we have really great heating performance, even in the colder climates. Tran: Product efficiency is only one part because controlled delivery and home design also play huge factors in reducing energy costs. Contractors should expect development of smaller and more efficient ways to use the heat being generated and a big step for reducing energy bills. continued on page 12

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continued from page 10

How has the evolution of connected homes impacted residential heating products? Day: Contractors are seeing a tremendous amount of value in connected and communicating systems because they’re able to effectively diagnose the product much, much quicker. So they can maintain uptime in a house, and or repair, do diagnostics before they’ve even seen the equipment in a lot of cases. Customers become much more satisfied with a service call and so the contractors are actually pulling on us regularly to give them more and more access to data and information that they had not had access to before. Haggerty: Customers now have the ability to actually have better insights into what’s going on in their home, including the ability to monitor IAQ. Our GLAS thermostat, which is predominantly focused at the residential space, allows customers to actually understand the quality of the air they have in their home. That’s very important as homes become tighter

At the end of the day, all the products that we build are important, but the most important thing contractors need to be able to do is a quality installation. in terms of how they’re built, and so the need for outdoor air refresh and the ability to understand the air quality level you have in your home has become very important to customers. Nguyen: What that’s doing is it’s creating a customer that is more and more demanding. They want to be able to manage their furnace remotely, so before they get home if the house is cold and they’re coming from vacation — they don’t want to keep their home warm while they’re away but they do want to make sure it’s warm when they step in. The other part of the spectrum is that their equipment is smarter and more reliable. What you see now is smart equipment that has the ability to self-identify, self-diagnose errors that come along so that the contractor can get ahead of it so the customer doesn’t have a no heat situation.

Or if they have a no heat situation, the contractor’s making one visit to the home, coming with the right part, with the right skill set to fix it the first time. Nolte: You’ve got Amazon Alexa, Apple Home Kit, Google Home, and so forth … all these ecosystems, which consumers are bringing into their home and they want to interact with their HVACR. We need to integrate well with those platforms but still maintain the proprietary nature of how our equipment operates. That’s the biggest shift. For HVACR to win in that space is very difficult. We just need to play very well with other ecosystems and make sure we integrate flawlessly. O’Brien: In general it’s changed controls and thermostats the most. That’s where the innovation resides most significantly. But we believe the best systems are the ones that are connected from the

thermostat or control all the way through to the equipment. Our kumo cloud app is an app-only thermostat replacement which allows you to program and control your METUS equipment from your handheld device from anywhere in the country. That allows you to program and control that individual indoor unit directly like you would have with a thermostat but from your handheld. It also allows you to control basically all the functions that are available on an indoor unit, including fan speed, and vane direction, and all those kind of things.

How do you see the residential heating market changing over the next few years? Dziwoki: We expect to see these trends to continue: higher heating performance in cold climates, higher efficiency and lower environmental impact. Manufacturers will continue to innovate around these trends, including the ability to integrate more seamlessly among each other’s different heating solutions. continued on page 14

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Haggerty: The change that’s coming for contractors in the residential space is really the change that’s going to happen in the refrigerant space with low global warming potential (GWP) refrigerants. There’s a lot of work going on within the industry to educate contractors about what that’s going to mean and get them ready before the timing that this happens, which is a little bit up in the air right now based on where California has put a stake in the ground versus other states. Nolte: The biggest thing over the next couple years is the new cooling standards and heating/cooling standards for heat pumps and air conditioners in 2023. That’s right around the corner. You also have the Kigali Agreement and so forth, and how states are changing or limiting the GWP limits for refrigerants. When you look at that and the technologies that need to be incorporated to address those regulations, it’s going to drive a lot of change in the industry.

What are contractors saying are their greatest challenges? Day: One of the biggest challenges the industry faces is having a workforce that’s deep enough and experienced enough. Whether it’s heating or cooling season, the answer is the same. Dziwoki: Contractors want more education and tools to help them sell — especially for newer, higher efficiency solutions like ductless and VRF. Haggerty: It continues to be a challenge to get people to come into the industry at the technician level. I don’t think the issue is as much in the installing level as it is having educated technicians. And that’s going to become even more important for us as OEMs, to continue to provide the right level of training to contractor technicians as you get into more complex, higher efficiency, more controls built into the systems, to be able to ensure that we give contractors the right training to teach their folks on how to do proper installation, but also your proper setup and servicing of the equipment. Nguyen: The biggest challenge is getting a talent to do installing services, and this isn’t a new challenge. There are simply not a lot of folks out there who want to get into the trades. As a manufacturer, we have a responsibility to support our

Don’t settle for replacing like for like, because that can allow your products and your service as a contractor to be commoditized. contractors. What we want to do is make our products reliable, easy to install and easy to service. Nolte: The technician shortage is a real big challenge. And how do we address that collectively? So there’s a big need to really address that shortage. And so what can you do, from our standpoint, around awareness and generating awareness around the trade itself, and the career path that it offers? Training. O’Brien: Contracting firms are having a difficult time recruiting, training, developing and retaining high quality help. Contractors cannot let their product line or their labor become commoditized. We often tell them try not to spend your precious labor installing equipment you can’t make a good profit on. Use it to install equipment people want and people will pay more for so you can make a higher profit.

What type of education & training do you offer contractors? Day: We’ve opened five innovation learning centers starting in the last few years where we’ve got hands-on demonstration labs with equipment, where we do training for contractors and distributors. We’re encouraging, promoting and helping fund training centers in every one of our wholesale locations, or at least in some of the key locations across the country. Dziwoki: Panasonic offers classroom training at multiple training facilities in the U.S. as well as on-site field training, and online live and pre-recorded video training. Our curriculum is customized to the contractor’s needs, covering product sales, application, project design, installation, operation, maintenance and troubleshooting. Haggerty: We do both technical training and education, which is around understanding how to properly install multi-stage, variable speed equipment, connected thermostats, and really how to manage the technical side of that in terms of the understanding of how to set the system up when it gets installed, and ensuring that it’s operating properly. And

HVACR BUSINESS AUGUST 2019

then we also do a lot of business training, providing tools to the sales people within contractors on how to go and position the product so that they have the tools to be able to communicate the better value proposition. Nguyen: Our training arm is Lennox Learning Solutions and we think about training in different ways. One way is classroom training, one is virtual training and one is online. We have classes that go from sales, installation, and service across those three spectrums. They’re all available to any dealer to sign up for those classes. Nolte: We’ve spent a lot of time in our training program over the last couple years with providing online training and virtual reality (VR) training. If we can engage a new generation of technicians with a more immersive experience, ones that sticks with them, they can either use a laptop or a computer, and more importantly, a VR, which really puts them in a real field-like experience. Instead of sending technicians to a training center somewhere for the day, they can have a VR setup within their office, or a computer or laptop, and still get that same experience. O’Brien: Currently we offer product training, applications training, and service and controls training to contractors, engineers and distributors, or basically any stakeholder in our channel. To do all that, we have 11 company-owned training centers, ones that METUS owns directly, and 51 more that are owned by our distributor partners, including Trane as a distributor partner and half owner of our joint venture. Just this last 12 months, we’ve trained more than 21,000 people in a variety of programs we offer that I just mentioned.

What’s the most important thing contractors need to be aware of as they head into heating season? Day: Be aware of the changing space when it comes to regulations. We talked about FER and we talked about Ultra Low NOx. Contractors who aren’t in California need to be paying attention to the trends that are going on in other states. Canada’s another good place to look at the trends that could be out there, and paying

attention to those, and being aware. More and more local governments, as well as states, are evaluating potential regulation changes that could impact the heating business as a whole. Dziwoki: More and more people are demanding higher efficiency systems with a lower impact on the environment. Fossil fuels are becoming taboo, while heat pump technologies, such as ductless and VRF, are closing the gap on being a single source of heat in almost any climate. Contractors should also reach out to past customers to offer a pre-heating season check up to make sure the heat pump system is fully charged and filters are clean. Nguyen: At the end of the day, all the products that we build are important, but the most important thing contractors need to be able to do is a quality installation. Sizing the home, sizing the heating load, recommending the right product to meet their needs. From a feature and benefit standpoint, what do they value? Hot and cold spots, quietness, dialed in comfort are all things that come with that qualifying installation. Getting that quality installation to meet that customer’s needs is what’s going to best allow that contractor to be successful. O’Brien: Don’t settle for replacing like for like because that can allow your product and your service as a contractor to be commoditized. Ask the customer if they’re comfortable in every room. Are they happy with their utility bill? Are they happy with the sound level of their system and satisfied with the environmental impact that their system is having? If they’re unhappy, then consider an alternative. Tran: It’s important to be aware of the availability of products they might not know of. We fairly recently released a product that does both domestic hot water and radiant heating. It’s kind of a two-in-one product, but it does it simultaneous. Usually there were products like that before combination boilers that only did one or the other and just recently our competitors have done the same. They’ve been able to release products that kind of fit in that space and I think that’s a fairly new product to some contractors. u

Pete Grasso is the editor of HVACR Business magazine. To reach him, please email pgrasso@hvacrbusiness.com.

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THE ART OF FAILURE Life is full of lessons learned through trial and error.

BY MEGAN JACKSON

ou don’t know how far you can go until you’ve gone too far. This was something my father said often when I was younger, most likely linked to some action I committed that was based on a poor decision. As children growing up, you learn to test boundaries; you learn quickly failure can teach the most memorable and tactile lessons. We learn to walk by trying and falling; we learn to ride a bike by trying and typically falling. Learning to listen may result in a burnt hand or bump on the head because you didn’t stop jumping on the bed or you didn’t listen when your mother told you the stove was hot. Life is full of lessons learned through trial and error. And yet as we get older, parents, teachers, professors and business owners less and less encourage the actual art of failure. As an adult, the stakes of failure are higher. Suddenly, failure goes from a bump on the head to life and death consequences whether physically, mentally or financially. And yet history is filled with those who dared to fail, especially within this Industry.

LEARN FROM HISTORY Civilizations and societies since ancient time have played one way or another in the arena of heating and cooling spaces, either

Our entire industry is built on the successful failure of our products, as the engineers had to learn to embrace the art of failure. due to necessity or due to the pursuit of comfort. Doctor John Gorrie, a Florida physician in the 1840s, was one of the first reported to experiment with the concept of cooling spaces. His goal was to temper the severe Florida heat for his patients by using ice created by a compressor powered by a Horse, water and wind-driven sails. While Dr. Gorrie’s invention was a success, it wasn’t completely practical. It was not until 1902 that engineer Willis Carrier took up the mantel in the evolution of the HVACR industry, not for the purpose of conditioning a house or business, but in the pursuit of solving the humidity problem that was causing magazine pages to wrinkle at Sackett-Wilhelms Lithograghing and Publishing Company in Brooklyn, New York. Through a series of experimentations and failures, Mr. Carrier was able to develop the first system to control humidity in a space using cooling coils. It wasn’t long after that Mr. Carrier discovered the correlation between humidity removal and cooling the air (air conditioning) and

HVACR BUSINESS AUGUST 2019

surmised that this process could benefit more industries. With a new passion in sight, Mr. Carrier along with six other engineers formed the Carrier Engineering Corporation. At the St. Louis’ World Fair in 1904, the general public got their first taste of comfort cooling at the Missouri State Building, where the AC system used 35,000 cubic feet of air per minute to cool the 1,000-seat auditorium. By the 1920s Americans were flocking to the movie theaters to escape the heat in the first comfort-cooled theaters while watching their favorite stars on the big screen. Thus the creation of the “Summer Blockbusters” was born.

LEARN FROM ROADBLOCKS But as you may have guessed the story doesn’t stop there. Over the next 90-plus years, the science behind HVACR experienced many ups and downs. Size restrictions, refrigerant and environmental changes and hazards, and the sheer expense of the products made it difficult to

bring the technology of heating and cooling to your average home. So where would we be as an industry if we allowed the failures and pitfalls of the past to keep us from trying and succeeding? Our entire industry is built on the successful failure of our products, as the engineers had to learn to embrace the art of failure. Testing, researching, developing and experimenting are the backbones for progress, and with each new test engineers and designers learned what a unit was capable of; they literally pushed the unit to its limits until it failed.

EMBRACE FAILURE So how does one truly accept and embrace the art of failure? First, we must accept that failing at a task does not make us a failure. As we grow, the act of failing becomes less an act and more a personality description. Generations of children who have matured into adulthood grew up under the mandate that failure was not an option. When you failed, because we all know failure is inevitable in life, our failure could and would easily become part of our personality definition, causing less and less people being willing to take chances in fear

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of being labeled a failure just for trying. Be prepared to fail again and again and again. In the process of growth, exploration and research it is important to realize that failure is bound to happen again and again. Yet with each failure it is our responsibility to determine why we failed or what caused the failure. Once the cause is determined, we need to take the time to learn from the failure and devise another plan of attack or another way of doing the task. As frustrating as it can be, this is all part of the process. Each time you fail, you are essentially learning how NOT to do the task your trying to do. Thomas Edison said it best when commenting about his early failures at making a light bulb: “I didn’t fail. I just found 2,000 ways not to make a light bulb; I only needed to find one way to make it work.” Never be afraid to ask for advice or help. When it comes to success, I believe that most of the greatest victories are not achieved alone. Mentors, counselors, teachers, and even Religious advisors have served as sounding boards for ideas and concepts.

Each time you fail, you are essentially learning how NOT to do the task your trying to do. But asking for help or seeking advice doesn’t stop there, the simple act of admitting that you failed and allowing those around you to help you move through the grieving process back to the light is paramount for success as well; because in the end no one wants to suffer defeat alone, but neither do we want to celebrate our accomplishments alone. Whatever you do, never stop trying. In the end, it is always important to celebrate each small victory and milestone. Without these celebrations we are bound to get discouraged and stop trying. It’s important in embracing the art of failure, to never give up and to always keep striving to better yourself, your products, your ideas, or your business. For in the end, the only TRUE failure comes from either quitting or not trying at all. As human beings, whether its mentally, physically, personally or professionally, we need to strive, to move forward and be prepared for failure because it is only

through failure, do we discover what we are made of and what we can accomplish. No great invention or work of art was created without a string of mistakes and failures in its wake. Even the most world-renowned writers, poets, musicians, scientists and engineers spent their time being told no, or being told they weren’t good enough, or watched as their work went up in smoke. Success is not always about what we can accomplish, sometimes it’s from that fact that we tried and we didn’t give up. Our industry is constantly evolving which requires us as business owners, managers, technicians, and engineers to follow suit.

also remove the possibility for true greatness and success. Always remember that failure doesn’t have to be the end for those who are brave enough to crawl out of the ashes and try again. The failure they experienced the first time gives them strength, knowledge and motivation to succeed that much more the next time around. And that is the beauty of the art of failure. u

Megan Jackson is the office manager for Redlaw Mechanical Inc., a community-minded air conditioning and heating maintenance and installation in Lancaster, Va. For additional information, visit redlawmechanical.com.

We cannot allow the fear of failure to limit us from the possibilities of the future. Yes, taking risks and failure in a business can mean the loss of jobs and financial ruin, but without those risks, without the possibility of failure you

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HVACR BUSINESS AUGUST 2019

FINANCE

BY RUTH KING

Review Timely, Accurate Financial Statements Each Month

inancial statements are your scorecard. You must have them to properly price, make sure you are earning a profit, spot minor issues and resolve them before they become major crises and make good business decisions.

Once owners are in the habit of receiving financial statements and asking good questions about them, they get more accurate.

Surprise! I will settle for, in the beginning, inaccurate financial statements over no financial statements each month. This shows that the company owners are getting in the habit of receiving monthly financial statements. And, once owners are in the habit of receiving them and asking good questions about them, they get more accurate. A financial statement prepared by the company’s accountant quarterly is unacceptable. Shoeboxes delivered to the company accountant at the end of the year are unacceptable. Timely, accurate financial statements prepared by the 20th of the following month (preferably by the 15th), gives owners the ability to spot and fix minor problems before they become major crises. The long-term survival of a business depends on them. The first thing to do when receiving financial statements is to do a quick review (see “How to Tell if Your Financial Statements are Wrong,” HVACR Business, July 2019, pg. 17). If something looks wrong, question it and get it right before going any further. Once the statements are as accurate as possible, calculate the 10 ratios, which answer these operations questions: 1. Can the company pay its bills? 2. Is inventory too high? Is it increasing or decreasing? 3. Is there a collections problem coming up? 4. Is there a personnel productivity problem?

is becoming less profitable. Even if the profit and loss statement shows a profit, the company is less profitable overall. Find out why. 2. If the inventory days line is increasing the company is building up too much inventory. Even a five-day increase in inventory days is significant. That’s an extra week’s worth of inventory. Discover what is happening. 3. If the receivable days line is increasing the company is headed towards a collection problem or has one. Like inventory days, a five day increase is significant. It is taking a week longer to get paid. Why? 4. If the overhead line on the P&L trailing graph is trending upwards, then the company is spending more each month, as a rule, on overhead. Discover what is being spent and whether it is a reasonable expense.

5. Is there too much debt or is the level increasing? These 10 ratios are divided into liquidity ratios, debt ratios, compensation ratios and usage ratios. In 2014 I dissected each of the ratios in detail. Look in the archives for the detailed description of each ratio or invest in my book, “The Courage to be Profitable” (available on Amazon). I will summarize each next. The first group of ratios is the liquidity ratios. These ratios answer the question, “Is there enough cash coming in on a consistent basis to pay the bills?” The liquidity ratios are current ratio, acid test or quick ratio, and accounts receivable to accounts payable. The second group of ratios is the debt ratios. These ratios answer the question, “Is there too much debt or is the company getting deeper and deeper into debt?” The debt ratios are debt to equity and

HVACR BUSINESS AUGUST 2019

long-term debt to equity. The third group is the productivity ratio. It answers the question, “For each dollar in revenue how much is the company spending on payroll and payroll taxes? The fourth group is the usage ratios. These ratios answer the question, “Is the company building too much inventory or headed toward a collection problem?” The usage ratios are inventory turns and days and receivable turns and days. Plot the ratios on a monthly and trailing basis (looking at a year’s worth of data a month at a time). The monthly data and the trailing data are on two separate graphs. The trends are more important than monthly data. Here are five areas to watch out for:

5. If the distance between the revenue line and the gross profit line on the trailing P&L data is increasing, the company generating more revenue at lower gross margins. It might be better to have fewer sales at higher gross margins to ensure that the gross profit line is always higher than the overhead line (i.e. the company is profitable on a long term basis). 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.

1. If the company’s current ratio and acid test are decreasing (current ratio and acid test lines are trending downward), most of the time the company

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MARKETING

BY JOY GENDUSA

Marketing Campaigns that Generated $20,000 In Revenue

f growing your HVAC business has been a challenge, then have a seat and stop to read this article for a moment. I’m going to share 3 case studies from actual clients of mine who implemented ONE simple tactic that generated leads and sales. Let’s jump right in!

1. MAIL TO CURRENT CUSTOMERS MULTIPLE TIMES FOR A $20K REVENUE BOOST Most homeowners don’t think about if or when their HVAC unit is likely to need repairs, so it’s your job to remind them — and it takes more than one reminder to cut through the noise and be noticed. One of my clients, Glass City Heating & AC, generated a great response from their campaign. Here’s one of the postcards they mailed:

To generate enough calls and sales from your marketing, you need to market consistently. The results? They received 10-15 calls from these campaigns. And because they use this strategy consistently, year after year, they’ve nailed down that for every 5,000 cards they mail, they receive about $20,000 in business.

Here are the rest of their campaign’s details and their results:

When you’re consistent with your marketing — and these guys are, year in and year out — your results become more and more reliable.

• Averaged $1,395 PER booking in revenue

2. TARGET YOUR NEW PROSPECTS AND BOOK 310 APPOINTMENTS Let’s look next at an HVACR business that wanted to generate new customers, which means they had to target brand new prospects (who probably hadn’t heard of them before) rather than marketing to their own customer database. One of my clients purchased a large mailing list of 42,000 addresses. They chose to mail to: • Single family homeowners • Condominium owners

Here are a few details from their mailings: • Targeted their current customer list

• All built between 1978 and 2003 Here’s their no-frills, yet eye-catching, design:

• Seven mailings of 6,000 cards • Received 567 calls • Booked 310 appointments

If you’re doing the math, that is $432,450 is revenue generated. Amazing!!

3. GIVE AN ATTRACTIVE SPECIAL OFFER TO GENERATE 155 RESPONSES Most small business owners react the same way about special offers: “I don’t want to discount my services.” Right? Well, not so fast… A special offer that appeals to ALL consumers can be the make-or-break factor between calling you or calling your competition. The last campaign we’ll look at is definitely offer-forward to get an edge on the competition. Here’s the postcard design — with the special offer — from my client Kenrich Mechanical:

• Mailed 5,000 postcards three times (15,000 cards total) • Campaign lasted one year with mailings every four months • Each mailing was a different seasonal design • Each design offered multiple offers on tune-ups, repairs and installations • Mailing schedule: just before winter, before summer and recall campaigns in either spring or fall (they alternate and have been running this for years)

Their bright orange postcard design jumped out of mailboxes like an emergency alert that MUST be noticed and read.

HVACR BUSINESS AUGUST 2019

• Mail to the same list three times • Hit the list in consecutive months (April–June) Not only did 155 people respond to their postcard campaign, but it generated $12,000 in sales — again, from ONE campaign.

SO WHAT IS THE OVERALL TAKEAWAY FROM THESE CASE STUDIES? To generate enough calls and sales from your marketing, you need to market consistently. Whatever marketing you can budget for, map out your mailings or ads or emails on a calendar, and ensure they go out multiple times before your peak periods. You’ll reap the rewards for your dedication to marketing! u Editor’s Note: Want to check out more HVACR campaigns that have worked for my other clients? Head on over to postcardmania. com/hvacr to request FREE samples.

Joy Gendusa is an entrepreneur, business owner, author, keynote speaker and philanthropist. With only a phone, a computer and postcards (no funding of any kind), Joy grew her company, PostcardMania, from a small startup into an industry leader that generated over $50 million in 2018 and currently employs 245 people in Clearwater, Fla. You can request free postcard samples from Joy’s company, PostcardMania, or email her at Joy.Gendusa@PostcardMania.com.

As for the rest of the campaign, here is what we did: • Target a list of 5,000 existing customers • AC tune-up focus in advance of summer

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20QUESTIONS >>

with LARRY GEMMA

We sat down with Larry Gemma, owner of GEM Plumbing & Heating in Lincoln, R.I., a 2019 Tops in Trucks Fleet Design Contest winner. Larry discussed growing the family business, recruitment and the importance of company culture. 1. Can you tell us about your background? My father started a small, little business in 1949 and that’s basically what it was back then. It was just himself and whomever he could get to work with him on different jobs. He had nine children and, basically, we didn’t have a choice. When we got old enough to work, we went to work. And it’s been a labor of love ever since. 2. So GEM is truly a family business? Yes, all nine of us siblings, at some point or another, were working for the business. It was interesting to grow up that way. 3. When did you get involved in the business side of it? Once my brothers and myself graduated from college in the early 80s, we all got involved in the industry itself, but we worked at it from a very young age. We knew the industry before we got into it, but until we graduated college, my father was still, essentially, a one-man show. 4. What was that like? When we got involved, GEM did mostly plumbing. HVAC came in a bit later because the company wasn’t of the size to handle anything that was larger equipment, like hospitals and restaurants. In the 1980s, we got involved with other companies that we soon after purchased and brought them on board. 5. What did you go to college for? I went to college for business management and my brother Eddie was in marketing. Our oldest brother Joe is a dean at Providence College. He decided not to get in the business after school because he’d already worked with my dad doing his books at a very young age. He decided he’d rather go to college and work with the school. 6. Was it your intention to work for the family business after college? Yes, we were very entrepreneurial, so we never visualized ourselves working for anyone else. And I would have to say that was pretty much the whole family, with the exception of maybe my brother Joe, only because he loved teaching so much. But we knew we’d be doing this one way or another. We never visualized ourselves working for anyone else. 7. How did you split roles within the company? I’ve always had an affinity toward services, both residential and commercial. And two of my brothers have pretty much always had an affinity to working on big mechanical jobs. So they’ve always run the mechanical part, and I’ve always run the services. My younger brother Anthony, we actually paid for him to go to law school because we knew that at some point we needed someone to help us go out and administer buying some of the buildings and some of the equipment and the companies we were acquiring.

HVACR BUSINESS AUGUST 2019

8. How many siblings still work at GEM? Out of the nine of us, seven of us have worked for the company at some point, and six of us still do. We’re a big family, and we all get along and we have our differences, but we always work them out. We give each other a lot of room to do what we need to get done. 9. How did you really start to grow? Back in those days there were very few very large companies. Most of the major companies were in manufacturing on the East Coast and most of them had their own maintenance staff that was handling those facilities. As we were going along and we acquired a few smaller companies ... they were very knowledgeable in the equipment, but they were looking to get away from the bookwork part of it. 10. How much impact did those acquisitions have? We were doing a lot of these big factories industrially for piping and fire protection, water mains and all that. Then we decided to get involved in the larger equipment on the HVAC side. We started to advertise for technicians and we slowly grew that in the ‘80s and ‘90s to probably about 25 to 30 employees. 11. What’s your business mix today? We handle plumbing, heating and electrical for residential, commercial and industrial. We also do our own fabrication for ducts. I’d say we’re 60 percent commercial and 40 percent residential. 12. Where do you see the most significant growth in this industry? Service contracts. People don’t have the time or the energy to want to call 20 different companies. They want to find someone they can trust and they can get a contract for the life of the equipment. We’re going to be doing a lot more replacement work at a shorter time span, but it’s going to be mostly in service contracts, both residential and commercial. 13. What’s recruitment like for your company? Within the last two years, we’ve put a benefits package together that is second to none. And it’s gotten much better as far as recruitment goes. Presently, we probably have close to 450 employees.

14. What are the challenges of growing that big? I think the biggest challenge in recruiting today is the ages of the real talent for the employees. Most employees are 50 or older in the Northeast that have the licenses to do what they need to do, or that we need to get done. 15. How do you address that? With the younger generation, we want to make sure that we have our own schools, we have our own trainers, we’re partnered with all the local colleges and universities and trade schools to try and get the best talent out there. We bring them in and if they want to learn we’ll give them all the opportunity in the world. 16. What do you find most rewarding? The people. I love working with the employees. I love talking to them, helping them. We go through all the laughter and all the sorrows that everybody goes through in a career, and the most rewarding thing is the people and the customers, meeting the customers. 17. Who’s been your biggest role model? My mom and dad, God rest their souls. My dad just taught us that if you treat your customers better than you want to be treated, then you’ll never go hungry. And he would get up at 2 a.m. if somebody called him and if he had to go out, he went out. He didn’t question it; he just went out. 18. How do you manage profitability? My sister-in-law manages all the financials. And we manage our financials here on a daily basis. So, as crazy as it sounds, we watch every penny going out. And I know that sounds very difficult to do. When it comes to spending, we keep an eye on everything and we have budgets for everything. We know how many calls are coming in, we know the revenue per call … we monitor that through a dashboard and we have all the information in front of everybody. 19. How do you ensure quality? We call every customer back and we do ride-alongs. The managers, three days a week, will go out, hop in the truck and go for a ride-along just to see how they’re doing. We do probably on the services side, anywhere between 125 and 175 calls a day. And all those customers are sent both emails and call backs to see if everything went well and if there’s anything we can do better. 20. Why is that communication so important? As large as we are, that communication keeps it a bit like a family business. And right now we’re in the process of making it so customers can call us and ask us questions at no cost through our Ask GEM Program. That way, if they have a question that we could solve on the phone, we might as well help them out without having to send a truck out there to do it. www.hvacrbusiness.com

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We’re hungry for your success. That’s why we help you grow your business with tools like online training, expert support and easy, direct access to parts and equipment thanks to a streamlined distribution model with over 200 stores. With all the top HVAC brands and products, your local Lennox® Store has everything you need to create perfect air for your customers. See what’s possible when you partner with Lennox at LearnLennox.com/hvacr

Our business isn’t the only one we’re building. We’re here to make sure our dealers succeed too, with everything from equipment to education. As a Lennox® dealer, you’ll always be up to date on the latest technology with premier online and instructor-led training courses from Lennox Learning Solutions. See what’s possible when you partner with Lennox at LearnLennox.com/hvacr