HVACR Business January 2018 by HVACR Business

Start Fresh and Resolve to be Profitable By Pete Grasso 5

Vanity Metrics vs. Clarity Metrics By Ruth King 8

Hire for Happiness By Patrick Valtin 13

Do the Right Thing By Jim Baston 17

Business Resolutions for a Profitable Year By Tim Ross 19

JANUARY 2018 / VOL.13 / NO.1

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ALSO INSIDE Â» Featured Entrepreneur: Chris Hunter, owner of Hunter Heat and Air ...............6 Product Focus: AHR Expo Innovation Awards........................................20 20 Questions with Troy Meachum President of ACR Supply Co. in North Carolina........22

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FEATURES

CONTENTS 10 Your Most Profitable Year Ever

Identify the lost revenue you’re already generating and you can grow your business without spending any more money. By Scott Brinkley

JANUARY 2018/ VOL.13 / NO.1

13 Hire for Happiness

Ensure expansion and stability — and protect your business from disgruntled employees.

17 Do the Right Thing

A simple approach leads to an exceptional service experience for your customers. By Jim Baston

By Patrick Valtin

C O LU M N S

D E PA R T M E N T S

8 Vanity Metrics vs. Clarity Metrics

5 Editor’s Notebook

There are many metrics to track, however, none are as important to profitability than current ratio, acid test, productivity ratio and net profit per hour. By Ruth King

19 Business Resolutions for a Profitable Year

Business resolutions force you to address issues that may keep your business from reaching its full potential. By Tim Ross

Educating your staff and increasing efficiency are just two keys to making this your most profitable year ever.

6 Featured Entrepreneur Chris Hunter, owner of Hunter Heat and Air

20 Product Focus AHR Expo Product Innovation Award Winners

22 20 Questions with Troy Meachum,

President of ACR Supply Co. in North Carolina

M A R K E T WAT C H Stock Index: The HVACR Business Stock Index posted a solid 58.33-point gain, up 3.81 percent, and closing at 1590.61, an index record. Advancing issues dominated declining issues by a 29-to-2 count.Visit hvacrbusiness.com/stock-index to read this month’s analysis.

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THE HVACR MANAGEMENT MAGAZINE TERRY Tanker Publisher ttanker@hvacrbusiness.com PETE Grasso Editor pgrasso@hvacrbusiness.com JIM McDermott Editorial Advisor jmcdermott@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 440-471-7810 Fax 440-471-7943 ehagerman@hvacrbusiness.com WEST COAST TERRY Tanker Publisher Tel 440-471-7810 Fax 440-471-7943 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 refrigerating (HVACR) industry primarily in the USA. 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©2018 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, 24651 Center Ridge Road, Suite 425, Westlake, Ohio, 44145 or call (440) 471-7810; or visit our Web site at www.hvacrbusiness.com. For questions regarding your subscription, please contact bkerr@hvacrbusiness.com. HVACR Business (ISSN 2153-2877) Published monthly by JFT Properties LLC., 24651 Center Ridge Road, Suite 425, Westlake, Ohio, 44145. POSTMASTER: Send address changes to HVACR Business, 24651 Center Ridge Road, Suite 425, Westlake, Ohio, 44145. Postage paid at Cleveland, OH and additional mailing offices. (USPS 025-431)

24651 Center Ridge Road, Suite 425 Westlake, OH 44145 Tel: (440) 471-7810 Fax: (440) 471-7943 Website: www.hvacrbusiness.com (ISSN: 2153-2877)

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BY PETE GRASSO

EDITOR’S NOTEBOOK

Make this Your Most Profitable Year Ever

here’s something about flipping the What do you plan to do differently this year? calendar to a brand new year that suddenly Mericle: One of our biggest changes will be fills me with optimism. I know it’s an switching to flat rate for our plumbing service. arbitrary thing, but the New Year is the perfect time to say, “Starting now, I’m going to be This will allow us to charge what we should be, lower back office labor and improve the customer better than I was last year.” experience. If you had a bad or mediocre year last year, then Staso: We’ve established key performance indifigure out how to turn it around starting now. If cators (KPIs) for every employee in the company. you had a good year last year, then build off it and make this an exceptional year. Call it a resolution Stom: By looking at our processes and seeing if you must, as long as you plan to be successful. where we can improve on service and installation To help you make this your best year ever, I delivery, we can exceed customer satisfaction. solicited advice from a handful of successful con- What is your main goal for 2018? tractors — Greg Mericle of Hurlburt Heating, Mericle: To standardize and improve our proCooling & Plumbing in Durand, Wisc., Mike Nicholson of Nicholson Plumbing, Heating cesses. This will hopefully give better guidance to our staff and improve cus& Air Conditioning in tomer experience. Holliston, Mass., Wendy Staso of Huckestein What better time than now to Nicholson: To recruit Mechanical in Pittsburgh, more talent to join our Jason Stom of Clear the hit the reset button, start fresh growing team. It’s importAir Cooling & Heating and resolve to be profitable? ant for everyone to know in Alvin, Texas and Ryan we’re hiring, as well as the Williams of 128 Plumbing, incentives and benefits attached to working at Heating, Cooling & Electric in Wakefield, Mass. Nicholson. How do you plan to accelerate growth?

Mericle: We’re nearly quadrupling our advertising budget for 2018. Some of that is targeted marketing, however, since we’re looking to establish our presence in a new market, the majority of our spend will be general branding. Nicholson: We already have strong momentum, so we intend to continue to expand into additional trades and hire additional technicians for existing trades. Staso: We’re moving into geographic areas beyond our local union’s jurisdiction. Stom: We’re taking a look at the root efficiencies of our operation, to find better ways to do more with less. We also plan to reduce advertising costs by focusing on customer referral building and providing as much value as possible. How do you plan to be more profitable?

Nicholson: Educating our entire staff on how to excel in their specialty is the key to our success. When you pursue excellence, the by-product is a profitable bottom line. Williams: We want to increase efficiency. We’re optimizing our stocked warehouse by getting materials to technicians as soon as they need it. Staso: This year, we’re going to tightly managing manpower and overhead costs.

Williams: To master scalability for our current offerings and keep procedure aligned as we grow. We’re going to achieve positive scalability by creating a plan, following and sticking to it week by week, and changing it and accepting when it needs to be tweaked. Staso: To create a lean operation using the KPIs mentioned earlier, and engage with every employee in designing a workflow for their role. What’s your biggest challenge this year?

Mericle: It’s definitely the field labor shortage. We’ve been hiring young people with aptitude and then pairing them with experts. We also take advantage of manufacturer and supply house training. Nicholson: Massachusetts requires a five-year apprenticeship to obtain a plumbing or sheet metal license, which has scared a lot of people from the trades. Our long-term plan is to recruit right out of vocational school and train them up. Williams: Battling the labor shortage is a challenge, but we’re not going to stop looking for great candidates. There is no pause when it comes to recruiting. Stom: Every year it seems to be finding the best help. We’ll continue to hire the best personalities and train on skills and processes. u

HVACR BUSINESS JANUARY 2018

Featured

ENTREPRENEUR

Learning to Succeed BY PETE GRASSO

C CHRIS HUNTER TITLE: Owner COMPANY: Hunter Heat & Air WEBSITE: hunterheatandair.com YEAR FOUNDED: 2006 HEADQUARTERS: Ardmore, Okla. WORK PERFORMED: Residential & Light Commercial HVAC, Plumbing and Electrical NO. OF EMPLOYEES: 45 ANNUAL REVENUE: $7 million VENDOR-PARTNERS: Amana, Lennox, Air Scrubber, Guardian Air, Jackson Systems, Rotobrush AFFILIATIONS: Service Roundtable, Service Nation Alliance CERTIFICATIONS: North American Technician Excellence (NATE), National Comfort Institute (NCI)

HVACR BUSINESS JANUARY 2018

hris Hunter’s roots in this industry started, like most contractors, when he was in high school. Although he took an HVACR class at the local trade school, he says he honestly had no real intentions of doing heating and air conditioning work at the time. “I hate to say it, but I was a baseball player and was looking for an easy half-day. After graduation, I started my own tile setting business,” he says. But then he had an opportunity to go to a yearlong electrical mechanical school and was hired by AT&T as a communications technician. Just after 9/11, the company had to lay off 10,000 people — and Hunter was going to be one of them. They did need an HVACR technician, however, and offered the job to Hunter if he could pass the test. Hunter’s new job was to service AT&T’s central offices, and this is where he developed his philosophy on customer service. “The communications equipment put off a lot of heat and, if a system went down, it had to be repaired immediately,” he remembers. “When they called, no matter what I was doing, I had to drop everything and run to that equipment.” During that time, Hunter immersed himself in training, earning seven North American Technician Excellence (NATE) certifications. Anytime he could, he was taking classes and, in 2006, he got his contractor’s license. After three years of doing work for friends and family after hours, he realized he was essentially working two full-time jobs and it was time to make a decision. That’s when he decided to go off on his own and opened Hunter Heat & Air in 2009. For the first four years, he was a full-time technician, running his own company. But then, as his business continued to grow, he knew it was time to take the tools out of his truck and concentrate on building and investing in a team. With no business background to speak of, Hunter knew it was important for him once again to learn as much as he could. “I looked at who was good at this business, and what could I learn from them,” he says. “I found Ron Smith’s book, ‘HVAC Spells Wealth,’ and got involved with The Service Roundtable.”

Hunter transitioned from a technician standpoint of solving one problem at a time to a business standpoint where he was solving problems from all different angles. Today, Hunter Heat & Air — home of the Hunter Super Techs — uses training as a cornerstone of its success, just like it’s owner has throughout his career. And they don’t solely focus on customer service, technical skills and sales. Hunter offers employees training on life skills as well. “I grew tired of seeing guys come to work who were battling their finances or going through a divorce without the skills to cope,” Hunter says. “If there’s trouble at home or something that’s dividing their attention, it affects their performance at work. “So, if you can help improve somebody’s life and give them life tools to succeed, it comes back ten-fold on the work force side,” he says. Hunter has created a family atmosphere and culture that is rare in most companies today, and it’s why he never worries about a labor shortage. He firmly believes if you know who you are, what you stand for and what your mission is — and you have fun doing it — you’re going to attract people who want to be part of the team. “They may not have an HVAC background, but that’s fine,” he says. “I want people with the same values as us.” As Hunter Heat & Air continued to grow, the business side also continued to challenge Hunter. Thanks to his entrepreneurial spirit and willingness to always learn, however, he has managed to transform his business. For example, a couple of years ago, Hunter noticed they were stuck at about 700 service contracts for about two years. They simply couldn’t get over that hurdle. So, Hunter sat down with his management team and redesigned the company’s maintenance agreement plan. “I realized it was my fault, due to not having a process in place to succeed,” he says. After changing the way their process, they were able to get up to 2,600. u

Pete Grasso is the editor of HVACR Business magazine. Email him at pgrasso@hvacrbusiness.com.

www.hvacrbusiness.com

Coming January 2018 Get ready for HVACScan®, the innovative new technology that will revolutionize HVACR service delivery. Generate more recurring monthly revenue. Increase service efficiency. Close more new business and build customers for life. BuildingReports, the most trusted name in fire and life safety inspection technology and compliance reporting, will unveil a new mobile service app and paperless documentation solution for the HVACR industry this January. The latest edition to the ScanSeries® line-up, HVACScan® provides: • Electronic documentation of verifiable service records, manufacturer manuals, warranty, etc. accessible online 24/7 • Complete inventory of HVAC systems and subcomponents with label and device images • The location of devices on a facility floorplan with drag-anddrop icons, and the ability to drill down to device details with one click or tap • Tracking of device recalls, warranty expirations and regularly scheduled maintenance

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FINANCE

BY RUTH KING

Vanity Metrics vs. Clarity Metrics

here are two types of tracking: nice to know and need to know, otherwise known as vanity metrics and clarity metrics. Our industry also calls them key performance indicators (KPIs). I’ll take it one step further and say it’s the trend that counts, not the “raw number.” I often get asked, “if I were going to track only one or two things, what should they be?” My clarity metrics are: current ratio, acid test, productivity ratio and net profit per hour. The other indicators that many of us track (including me) are nice to know but aren’t critical to the profitability of your business. Here’s why: managing labor and materials are critical for profitability. A poorly managed labor force leads to inefficiencies,

Decide what you want, build your pricing around it and then track it to make sure your company is earning it. usually a stressed owner and lower profitability. Inventory is a bet. If you don’t manage it well, you’ll spend your hard earned cash on things you may never sell.

PRODUCTIVITY RATIO The productivity ratio answers the question: for every dollar of revenue, how much are you spending on payroll and payroll taxes? Divide total payroll — including field, office and owner’s salaries — by sales. This number should be less than 40 percent. For most months,

it should be stable or decreasing. In a slow revenue month, it probably will increase. As revenues increase, this ratio should decrease.

CURRENT RATIO AND ACID TEST These two ratios answer the question: can you pay your bills and are you building too much inventory? The trends should be upward. Increasing current ratio and acid test usually means increasing profitability, unless you sold an asset for cash.

Decreasing current ratio generally means decreasing profitability, unless you bought an asset for cash or had a huge cash expense, such as your tax bill. Current ratio is defined as current assets (things that are cash or turned into cash within a year) divided by current liabilities (bills you have to pay within a year). Acid test is defined as current assets minus inventory divided by current liabilities. If the spread between current ratio and acid test is increasing, you are building inventory. Here’s why just the ratio — and not its trend — is dangerous: The industry average for current ratio is about 2. Let’s say your company’s current ratio in January is 3.

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You don’t worry about it because it is above the industry average. In February, however, it is 2.8 and March is 2.6. You’re still not worried because you’re still above the industry average. But you should be worried. The trend is downward and it’s telling you that you’re becoming less and less profitable. You need to find out why and stop the bleeding! If your current ratio is 2, your acid test should be 1 or higher. This means you probably have the correct amount of inventory. Every HVACR company has some inventory, even if it’s a few parts and refrigerant. Account for it properly and track it.

If you see your current ratio is increasing and your acid test is staying constant, this indicates that you’re building inventory. Find out why this is happening. If you just got a spring or fall stocking order, that explains the build up. You should see the spread between current ratio and acid test decrease as you use the inventory.

profit are you generating? It’s not a percentage. It is a dollar amount.

track it to make sure your company is earning it. There are other metrics that you can track, however, none are as important to your company’s profitability than current ratio, acid test, productivity ratio and net profit per hour. u

NET PROFIT PER HOUR

Calculate it every month. Divide net profit by the number of billable hours. If your net profit per hour is less than $10, you could get a job at a fast food restaurant and earn more than you are earning in your business. If it’s negative, you’re paying your customers to maintain, service and replace their equipment. There are some slower revenue months that it may be negative. The overall net profit per hour each year, however, should be positive.

The last clarity metric for me is net profit per hour. This metric answers the question: for every billable hour, how many dollars of

Only you can determine what net profit per hour you want to earn. Decide what you want, build your pricing around it and then

If a stocking order is not the reason, find out why you are buying more.

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Ruth King is president of HVAC Channel TV and holds a Class II (unrestricted) contractors license in Georgia. She has more than 25 years of experience in the HVACR industry, helping contractors, distributors and manufacturers grow their companies. Contact her at ruthking@hvacchannel.tv.

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HVACR BUSINESS JANUARY 2018

Grow your business without spending any more money BY SCOTT BRINKLEY

he first step to growing your company is not spending more money to make more money. Instead, you should identify the lost revenue you’re already generating. Here are four ways to uncover this revenue and make this your most profitable year ever.

STAFF PROPERLY One of the reasons companies fail is because they’re not staffed accordingly — meaning they’re understaffed. When you’re understaffed, this causes many problems. You could be burning the call — too many calls and not enough technicians. You end up sending technicians on too many calls a day, which will not only burn out the technicians, but will also make your customers feel rushed on their visit. And that visit will have less value. Having too many calls also makes you send underperforming

MASTER THE CALL CENTER

Being understaffed makes the business run you, instead of you running the business. technicians to more calls when, in reality, they should have been sent home for the day. Being understaffed makes the business run you, instead of you running the business. When you have too much work, you’re not going to look for that low-hanging fruit. That’s easy revenue you could uncover. Think about it like this: You’re a family with two children. When you go to sit down for dinner, and you’ve got enough food, your kids are 100 percent full, and you’ve got leftover food to throw out. Are you going to look for more food? No. But imagine you sit down to dinner and the plates are only half full. Everyone finishes eating and they’re still hungry. If this were the case, would you look for more food? Of course you would.

HVACR BUSINESS JANUARY 2018

One of the first things you need to do to grow your business is to be staffed correctly. Without staff, you’re not going to look for the low hanging fruit that’s ready to be picked. When you’re staffed accordingly, you can hit capacity. Most companies, when not managed correctly, will hit about 60 percent capacity (each install crew doing three jobs a week on average). To hit capacity, you should do five jobs per week per crew. This may sound like you’re going to have to spend more money, but if you learn how to price your jobs so your overhead is covered in the first three days, then the margin percentage of the next two day’s installs will go straight to the bottom line.

One of fastest ways to grow your revenue without spending more money is to master the call center. What a lot of contractors don’t understand is that the call center is not just for booking calls. It’s for booking the correct amount of certain types of calls. Imagine you have a day with 30 calls on the schedule and all of them are for brand new HVACR equipment on which you’re running tune-ups. You have another day with 30 calls on the schedule, and half of them have equipment that is broken down. Which day do you think your company will do more revenue? Obviously, the second one. It’s not only about the correct amount of calls, but also about booking the right mix of calls. You need to book a certain amount of tune-ups, demand calls and aged system calls. Companies that master their call

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center can do as much revenue in the spring as in the summer by making sure they have the correct mix of calls. Doing this will give you a weather-enhanced business, rather than a weather-dependent business. Your call center needs to be armed with the right questions to ask customers and scripts to follow up with existing customers to help them book not only the right amount, but again, the right mix of calls. It’s a good idea to never have more than 33 percent of the calls on your schedule be HVACR equipment less than five years old. The same holds true for aged equipment. If you can, make sure at least 33 percent of your calls have HVACR equipment that is older than 10 years. By simply doing this, you’ll streamline your revenue and help take out the ups and downs due to weather.

USE PROFU Your call center should be involved in the professional follow-up (PROFU) process, but so should your technicians. PROFU will help you grow your internal revenue by at least 5-8 percent. This includes training your staff on what should happen if a customer decides not to buy. For example, if a technician goes to a call and the customer decides not to do business, the technician

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Companies that master their call center can do as much revenue in the spring as in the summer by making sure they have the correct mix of calls. should then call, as part of the PROFU process, to help the customer get engaged in doing business with your company. The point here is that in these cases, you’ve already run the call and spent the money on marketing, fuel, labor, etc., but you didn’t get their business. By teaching the PROFU process, your staff will engage with the customer and pick up lost revenue. PROFU can vary business to business, but the point is having a process in place.

GO CHERRY PICKING Once you have the staff in place and call center prepped, it’s time to implement cross-trade lead generation, or cherry picking. This is a type of cross-marketing for multiple trades, and it can grow businesses 25 percent without spending an additional penny. In one instance, a company that decreased their marketing and implemented this process actually increased revenue for their HVACR departments from $20,000 a month to $36,000 a week. That is a truly amazing result, gained by implementing a process. The basic premise behind crosstrade lead generation is that you’ll

capture all the low hanging fruit of the other trades, and you’ll be able to do this on a consistent basis because it’s just a process. Other types of cross-marketing can work, but in those scenarios you’re relying on the technician’s ability to do the heavy lifting instead of a process. Cross-trade lead generation works differently. Here’s an example: Say you’re an HVACR company that also does plumbing. You have six plumbers and six HVACR technicians. When you tried to get plumbers to book calls for HVACR, it wasn’t all that successful. That’s because you were relying on the success of one technician in the field. If each of those plumbers are running three calls a day, that’s 18 calls that you’re likely not to do HVACR business with, unless they have a service agreement with you. With cross-trade lead generation, you do this instead: When your plumber closes out on a call with dispatch, they will make a note about the age of the customer’s HVACR unit. If there’s opportunity there, the customer’s name is recorded as a cross-trade lead, and goes into a “cherry pick book.” Now you have a book of

customers who have a potential need of new HVACR systems. At a company that runs 18 plumbing calls a day, the HVACR cherry pick book will grow with about six insertions a day. In the middle of summer — when your HVACR technicians have all they need to “eat” — this book from your plumbers will grow. At the end of summer, you’ll have a book of hundreds of names and your call center will follow up to book the calls. When the weather isn’t cooperating, pick up the cherry pick book and you’ll be able to consistently control your business. By doing this correctly, the call center will now control the types of calls. If you don’t have multiple trades to work off with for this process, cherry picking is the easiest way to start another trade service line. If you implement all of the above things, you’ll be a weatherenhanced company, instead of a weather driven company. u Scott Brinkley is a business coach with Nexstar Network. His more than 23 years of experience in the plumbing, HVACR and electrical industries helps him take Nexstar member companies to the next level. For additional information, visit nexstarnetwork. com, call 888-240-7827 or email membership@nexstarnetwork.com.

HVACR BUSINESS JANUARY 2018

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Hire for HAPPINESS Ensure expansion and stability — and protect your business from disgruntled employees

BY PATRICK VALTIN

here are two phenomena related to the uptrend of Equal Employment Opportunity Commission (EEOC) claims: 1) Employers are not well educated on HOW to avoid retaliation cases and 2) More disgruntled employees might be tempted to take advantage of the increasing willingness of EEOC authorities to systematically trust the plaintiffs. Here are the main reasons why EEOC claims are on a steady uptrend: • Employees becoming better educated about their rights under federal, state and local civil rights laws. • The U.S. Supreme Court has clarified the requirements for individuals attempting to prove on-the-job discrimination. • Jurors are more willing to accept the fact that an employee was treated differently due to his or her complaint of sexual harassment and discrimination. • Small business employers tend to ignore the specifics of the law — they are too busy handling the day-to-day emergencies and priorities. Many are not aware

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Creating a connection in the first steps of the recruitment process may make a huge difference. of the importance to respect the law simply because they are badly, if at all, educated on the anti-discrimination regulations. • Some employees (a minority of them) might be tempted to abuse the fact that the law is naturally meant to protect their rights and to ensure they are not discriminated. Unfortunately, when monetary compensations are involved, it may be tempting to take full advantage of the juror’s tendency to be more on their side.

PROTECT YOUR BUSINESS First, business owners and their executives must be more involved in the hiring process with HR managers. People work for people, not for companies. Creating a connection in the first steps of the recruitment process may make a huge difference. Many business owners tend to “dump” the hat of talent acquisition — either to their human resources manager,

if the company is big enough, or to any willing administrative, trusted person. Second, to prevent such situations, employers should implement clear procedures or policies for addressing workplace complaints, ensure these are known and followed with regard to all employees and take affirmative steps to avoid the possibility of adverse actions against individuals who complain about EEOC (or other) issues or otherwise participate in investigations into such issues. Third, every business should put more attention on creating a work environment that is conducive to job satisfaction and general happiness at work. You should also take measures against bullying at work or rough management principles. When employees feel that they’re important and that management genuinely cares, they’re less tempted to abuse the advantageous legislative position. Cases in point: • Companies with happy

employees outperform the competition by 20 percent. • Happiness in the workplace raises sales by 37 percent and productivity by 31 percent. • Happy employees take 10 times fewer sick days, and they stay twice as long on their jobs. Fourth, there are unfortunately a minority of applicants and employees who will always take advantage of any opportunity to make money out of some defective procedure or lack of respect of applicable laws. Often pushed by shark-types of lawyers to maximize the accusations, they won’t hesitate to exaggerate the facts about seemingly faltering or illegal hiring and/or management procedures committed by their employers. You must be able to detect such personalities and act accordingly. HR managers can play a vital role in minimizing legal trouble throughout the hiring process. Here are a few tips that can be easily implemented in your business: Education. Most business owners and their executives have not been educated to recruit — it’s continued on page 14

HVACR BUSINESS JANUARY 2018

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not in any high school or college curriculum. There is a science to successful, or no-fail hiring. Stop focusing on hard skills. As stated above, almost 50 percent of discrimination claims are retaliation cases. That means, in many cases, retaliation from the employer occurs after personality clashes and/or emotional reactions in the relationship between a senior and his/her junior. Selecting applicants only on the basis of hard skills is not effective. It is proven that hard skills do not guarantee success on the job. As a matter of fact, per Leadership IQ, almost 50 percent of newly hired employees fail within 18 months. Of those, only 11 percent of failures are due to lack of hard skills, whereas lack of soft skills account for 89 percent. Technically qualified applicants know their value and, in the current applicant-driven market, often inflate their salary expectations. You may tend to blindly compromise

Hard skills do not guarantee success on the job — almost 50 percent of newly hired employees fail within 18 months. with your original plans and succumb to hard-skilled candidates’ negotiation tactics. The problem is, higher salary does not always lead to better performance, as the above numbers demonstrate. Another interesting report published by workforce.com suggests, if you neglect the soft side of candidates and rely primarily on their hard skills, you double or triple the odds of experiencing a hire failure. Standardization. When it comes to talent acquisition, subjectivity is the big killer. From an EEOC viewpoint, lack of objectivity and formalization in the hiring procedure will definitely lead to legal trouble. It’s often difficult for management to be aware of the importance of formalization.

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HVACR BUSINESS JANUARY 2018

IMPORTANT SOFT SKILLS TO LOOK FOR In a Job Outlook survey conducted by the National Association of Colleges & Employers (NACE), the top characteristics looked for in new hires by 276 employer respondents (mostly from the service sector) were all soft skills: communication ability, a strong work ethic, initiative, interpersonal skills and teamwork. Per a research undertaken by LinkedIn in 2016, the most searched-for soft skills were: • Communication (specifically, active listening) • Organization (planning and implementing projects) • Teamwork • Punctuality • Critical thinking • Sociability • Creativity • Adaptability • Interpersonal skills (in one’s relationship to others) • Friendly personality By focusing more on hiring great soft-skilled employees, employers reduce the risk of legal trouble. Assuming you’re respecting the law — or are not consciously violating it — you’re still prey to

hiring (a minority of ) people who might not abide by the same ethical standards and could look at taking full advantage of the regulations to obtain monetary (or other) gains. In addition to avoiding legal trouble, it’s proven that hiring the right people leads to higher profitability and viability for organizations: Per the Association of Certified Fraud Examiners, the economic consequences of employing people with lack of vital soft skills can be fatal. Point in case, honesty is an extremely important and yet most difficult soft skill to evaluate: • About 30 percent of bankruptcies in the USA are due to employee theft. • Occupational fraud and abuse costs organizations about $600 billion annually or 6 percent of gross revenue. Reducing personnel turnover by 20 percent could increase your company’s profitability by 75 to 100 percent (knowing that 79 percent of failed hires are due to soft skill issues).

Patrick Valtin is an international public speaker and the author of No-Fail Hiring. His No-Fail Hiring System has been used by thousands of small businesses of all kinds of industries. For additional information, visit patrickvaltin.com or call 877-831-2299.

HIRE FOR HAPPINESS In my recent whitepaper “Hire for Happiness,” I focus on the six drives, or soft skill-based factors, which provide a “Happiness Contribution Index” — it reflects an individual’s ability and willingness to contribute to others’ success and happiness. A strong combination of these drives has proven to be needed on any type of position, in order to guarantee success at work.

THESE DRIVES ARE: • Purpose drive • Talent drive • Performance drive • Exchange drive • Service Drive • Team drive To download a copy of this whitepaper and learn the best branding strategy for ensuring expansion and stability, visit the Resource Center on hvacrbusiness.com. — Patrick Valtin

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DO THE RIGHT THING

continued on page 12

A simple approach leads to an exceptional service experience for your customers BY JIM BASTON

hat is the difference between these two approaches: “doing things right” and “doing the right things?” Which of these approaches do you feel best serves the customer’s needs? Which of these will lead to higher levels of customer satisfaction? Doing the right things is the approach that best serves customer needs and will lead to higher levels of customer satisfaction. Doing things right is obviously important, but it is a subset to doing the right things. Doing the wrong things right brings little value. As service providers, you have a keen interest in meeting the needs of your customers. Most of you are continually searching for ways to improve your service levels, exceed your customers’ expectations and provide an exceptional service experience. Doing the right things will help you achieve these goals.

SABOTAGE Despite your intentions of delivering an exceptional service experience, you sometimes sabotage your own efforts because of your approach to service delivery, specifically when you take the doing things right approach. The doing things right approach is job-focused. Being job-focused means that performing the work to

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MAKE CUSTOMERS FEEL SPECIAL

Being job-focused means that performing the work to specification is top of mind. specification is top of mind. If the task is to repair a broken unit, all attention is on completing the repair as effectively and efficiently as possible at the exclusion of almost everything else. You can default to a doing things right approach when you’re under stress and the stakes are high. The unit has failed; you must get it up and running as quickly and economically as possible. Calls must be made, parts must be ordered. This single-minded focus on the task can detract from your goal of delivering an exceptional service experience. You may fix the unit, but miss an opportunity for addressing the real customer need. A relentless focus on doing things right may also cause you to be perceived as rude or condescending. I am not suggesting that it is a bad thing to be focused on the task at hand. In fact, this focus is critical in order to make the repair as efficiently as possible. It’s just that, when you lead with a doing things right approach, you can sabotage your efforts of delivering an exceptional service experience.

DOING THE RIGHT THINGS Doing the right things is customer-focused. Being customer-focused is different from being job-focused because customer-focus is centered on solving the problem from the customer’s perspective and not solely on the task of correcting the issue. It is a subtle difference, but an important one. While the doing things right approach is intent on repairing the broken unit, the doing the right things approach is focused on solving the customer’s problem. By being customer-focused, you put yourselves in your customers’ shoes so that you can better understand the issues they may be facing and the underlying reasons for their request. With this, you can then proactively address those issues to ensure that you do the right things in response to your customers’ needs. Doing the right things involves asking questions to probe for the real issues and using creative problem solving approaches to address them. This approach helps you to ensure that your service closely meets the needs of your customers and thoughtfully helps them achieve their goals.

You may not be able to “see” a customer-focused approach, but you can “feel” it. When you focus on the customer, you see the problem from the perspective of how the issue impacts them. You can consider such things as how the customer might be feeling, what they might need right now, how you can ease the impact of problem and what the right solution might be. If the customer is obviously stressed, it might make sense to spend a moment reassuring him or her instead of immediately reaching for the solution. If the repair will be significant or if a replacement is the only remedy, a conversation about their future plans before making a recommendation will put you in a position to suggest a better solution for them. If the customer is adversely impacted, steps can be taken to ease the pain of the immediate problem. If there is no obvious solution, alternatives can be suggested to address the situation until the problem can be solved. All of this adds up to doing the right things and this shows the customer you care about them as individuals and contributes to an exceptional service experience.

BENEFIT TO YOU Although your customers will continued on page 18

HVACR BUSINESS JANUARY 2018

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find a resolution?

receive great benefit from your doing the right things approach, it actually creates tremendous benefits for you. A doing the right things approach does not require you to work harder, just differently and the rewards for this change in mindset can be career changing.

If they couldn’t provide you with exactly what you were looking for, were you more willing to listen to their suggestions and perhaps more accepting of their recommendation, even if it was not exactly what you initially requested?

Just think about your own personal experience of being a recipient of customer service. Did the way the person who served you impact how you treated them? If they took steps to understand your problem and earnestly tried to resolve the issue, did you show more patience as they worked to

If they were polite and courteous and treated you like a human being and not a number, were you more courteous and respectful of them? Do you think that as a result of the way you responded to their approach, that their experience in doing their own job might have be improved? A doing the right things

approach can directly and positively influence how your customers treat you. That is because, as human beings, you tend to respond in kind to how others treat them. When you become more customer-focused and take steps to fully understand the needs of your customers, you can influence how those customers will treat us. Through a doing the right things approach, you can create a world where the customer is less demanding and emotional, more respectful and reasonable and more patient and forgiving. Taking a doing the right things approach will contribute to customer satisfaction, customer

retention and profitability. It will also contribute to a more enjoyable and rewarding working environment. you can reap the benefits of doing the right things by focusing on solving the problem from the customer’s perspective rather than simply the task of fixing the customer’s equipment. u

Jim Baston is president of BBA Consulting Group Inc., a management consulting and training firm dedicated to helping technical service firms leverage the untapped potential in their businessdevelopment efforts. For additional information, visit bbaconsulting.ca.

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HVACR BUSINESS JANUARY 2018

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STRATEGY

BY TIM ROSS

Business Resolutions for a Profitable Year

he beginning of the year is typically when we take stock of our personal lives and pledge to make improvements. But have you ever considered taking the same approach to your professional life? Going through the process of making business resolutions forces you to evaluate your performance and address issues that may be keeping your business from reaching its full potential. Maybe you need to get expenses under control or increase your sales leads. Whatever the case might be, creating a “resolution” to tackle the problem will automatically increase your accountability. Now, making business resolutions may not come that easily initially. So, to help get you started, here are some New Year’s strategies that have yielded positive results for other companies, and should place your business on firmer financial footing for the next 12 months.

DEVELOP A BUDGET This might seem like a no brainer, but I often encounter business owners who think that as long as they have a rough idea of how much revenue they need to generate to cover expenses, everything should run smoothly. That approach might work for a while, but eventually it will catch up to you. You may be wasting money and not realize it until sales decline and you decide to cut costs. Writing a budget requires you to take a hard look at all of your expenditures and evaluate their importance to your overall operation. If you’re unsure about where to begin, consider using last year’s numbers to establish costs, then make adjustments based on whether you expect business to trend up or down. Don’t forget to include taxes, fees and any one-time expenses you might be facing in the upcoming year. You may also need to make changes based on inflation or equipment pricing trends.

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Everyone on your team should embrace your values and way of doing business and should represent those tenets when they are out in the field. Once you’ve got your costs down, you’ll use your revenues from the previous year to determine your gross profit margin. That’s the revenue you have left over after subtracting the cost of the goods sold. Remember to monitor and track your costs daily. Reviewing your profit and loss sheets monthly will also help you stay on track. While unexpected costs may arise, try to stick to your budget as much as possible.

EVALUATE YOUR STAFF If it’s been awhile since you’ve reviewed your roster and determined which of your employees are contributing to your bottom line, now is the perfect time for that exercise. Your stars will likely stand out, but if you have other employees who aren’t as productive, it may be time to invest in more training or cut them loose. Many people launch job searches at the start of the year, which means you’ll have more talent to choose from if you decide to make some changes. When it comes to technicians, the key factors you’re looking for are skills and efficiency. You want technicians who can easily gauge the problem and also have the knowledge to look for other issues that may offer opportunities for upselling. Sales personnel and anyone answering the phone should be personable and coachable. You want them to be able to follow a script to set up service and sales calls, rather than trying to diagnose a problem over the phone. Having a good cultural fit is key, regardless of the position. Everyone

on your team should embrace your values and way of doing business and should represent those tenets when they are out in the field. If you don’t have a good system to evaluate performance, take the time to establish one, so you can decide which metrics are important and employees know what to expect.

MARKET CONSISTENTLY Are you guilty of only investing in marketing when sales are down? Chances are if you marketed consistently, you wouldn’t experience those sales downturns. When you opened, you probably flooded the market with promotions because you were eager to build a customer base. Over time, it’s easy to get lazy and assume that because you’re established, your pipeline will always be full. You can’t stop searching for new customers and you can’t take your existing customers for granted either. Your competitors may be marketing constantly, so there’s no guarantee that your number is the first a customer will call when a problem arises. To prevent a loss of market share, consider these tactics: Send direct mail campaigns monthly. Unlike email marketing which can easily be ignored, or TV or radio ads, which hit too wide a market, direct mail allows you to very specifically target the customers who are most likely to use your service. For existing customers, you might try offering a certain dollar amount off of a service, to help push them to address an outstanding issue. If you stay consistent and mail every month, you’ll remain on

a customer or potential customer’s radar and increase your chances of gaining their business when they need your services. Update your website. Even if your site is relatively new, refreshing it at least quarterly will help to ensure that it’s serving as a compelling sales tool. Make sure your site is easy to navigate and mobile-friendly, since more and more potential customers are now searching for services on their mobile devices. On your homepage, your phone number, address and hours should be prominently displayed. Featuring your testimonials and certifications is also important because it adds credibility. It’s also wise to include actual pictures of your technicians and staff instead of stock photos so customers can become more familiar with your business and personnel. Invest in the community. Showing consistent support for local causes and charitable organizations is a great way to build goodwill in your market. You can even solicit employees for suggestions to get them involved and invested in supporting whatever cause you choose. While selecting a cause that has a personal connection for you is always good, it’s also wise to sponsor something that will allow you to gain significant brand exposure, such as a local youth sports league or charity run. Resolving to incorporate some of these strategies or creating some of your own, will help you start the New Year in a stronger position. u

Tim Ross is a marketing veteran and president of Mudlick Mail, a leading provider of direct mail services. Over the last eight years, Tim has built Mudlick into a $40 million operation that has helped thousands of businesses develop sustainable sales growth. Visit mudlickmail.com for additional information.

HVACR BUSINESS JANUARY 2018

PRODUCT FOCUS »

AHR Expo Innovation Awards

BUILDING AUTOMATION

INDOOR AIR QUALITY

Setra Systems, Inc.

Spartan Bioscience

Setra FLEX, a complete room monitoring and control solution. Setra FLEX is used to ensure safe and energy-efficient indoor environmental and ventilation control conditions for operating rooms, isolation rooms, bio-safety laboratories, clean rooms and all pressurized critical spaces.

Spartan Legionella Detection System, the world’s first on-site Legionella DNA test to prevent outbreaks. Spartan’s Legionella Detection System fully integrates DNA collection, extraction and analysis in a compact format. Spartan’s technology enables unprecedented portability with no sample shipment to an outside laboratory and no technical expertise requirements. In addition, the system provides results in 45 minutes.

setra.com

COOLING Emerson

Copeland Scroll, a twostage compressor. The latest generation of Copeland Scroll two-stage compressors from 1 to 10 tons has been redesigned for improved performance and reliability in residential and commercial air conditioning systems. The third generation technology is optimized for mid-tier comfort and efficiency rebates with improved full-load and part-load performance up to five percent. climate.emerson.com

GREEN BUILDING Danfoss

Danfoss Turbocor TTH/TGH High Lift Compressor, a compressor optimized for air-cooled chiller and heat recovery applications. Engineered for highlift applications, including air-cooled chillers and heat recovery, Danfoss Turbocor TTH/TGH models feature oil-free, variable speed, magnetic bearing operation for outstanding full- and partload efficiency, low vibration and sound, a small footprint and reduced maintenance — while providing an expanded operating map.

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PLUMBING AquaMotion Inc.

AquaMotion AquaFlash, an under-sink hot water recirculation system. The AquaFlash by-pass valve provides: an improved bypass design that prevents the hot water from entering the cold line when the hot water faucet is opened; a bi-metal coil element that closes the internal shuttle by-pass port in the valve when hot water reaches the valve; a bi-metal element that is calibrated to deliver the hot water temperature desired; and more than double the pipe diameter to prevent calcium buildup. aquamotionhvac.com

REFRIGERATION Chemours

The ONE, a three-in-one expansion tank, air separator and dirt separator. The ONE innovates by: eliminating an important number of joints, thus limiting the leaking possibilities; using less space and taking less time to install compared to installing the three devices separately; reducing costs.

Opteon XP44 Refrigerant (R-452A), a non-ozone depleting, low GWP, HFO-based refrigerant replacement for R-404A/507. It offers an approximately 50 percent reduction in global warming potential compared to R-404A/R-507, while providing the closest match to the compressor discharge temperature of any other low GWP solution on the market. With the regulations addressing high GWP refrigerants such as R-404A/R-507 in commercial refrigeration applications, Opteon™ XP44 uniquely provides equipment manufacturers and end-users an option to cost effectively cut the environmental impact of their refrigerant choice in half, without sacrificing performance or equipment reliability.

calefactio.com

chemours.com

danfoss.us

HEATING Calefactio

HVACR BUSINESS JANUARY 2018

SOFTWARE Regal

Browning Toolbox Technician Motor Efficiency Calculator, for Apple and Android platforms. This mobile app calculator module allows a user to identify efficiency differences between different generations of integral horsepower electric motors. This app not only identifies the potential efficiency gain, but it allows the user to tailor the motor usage parameters to mirror their application or overall facility usage so a projected return on investment (ROI) can be displayed. regalbeloit.com

TOOLS & INSTRUMENTS Fluke Corporation

Fluke T6 Electrical Tester, an electrical tester that takes simultaneous voltage and current measurements without test leads. The T6 testers now make it possible to take reliable true-rms measurements in crowded junction boxes or along conductors with inaccessible endpoints, saving time, minimizing potential errors and greatly reducing the possibility of arc flash. en-us.fluke.com

VENTILATION Triatek

Stable Vortex II Fume Hood, a dynamic, low flow, high performance fume hood that protects chemists from harmful dusts and vapors during experiments. It delivers a safer environment for the user than the average fume hood, while also providing substantial energy savings. The Stable Vortex II passes the ASHRAE 110 test as manufactured, as installed and as used because the superior design accounts for how people actually use fume hoods, in order to truly keep them safe. triatek.com

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12/8/17 3:31 PM

20QUESTIONS >>

with TROY Meachum

We sat down with Troy Meachum, president of ACR Supply Co. in North Carolina. Recently, Meachum became president of Heating, Air-conditioning and Refrigeration Distributors International (HARDI). Meachum discussed industry challenges, the importance of providing training and how to recruit and educate the next generation. 1. How did you get started in this industry? My father started our company in 1977 when I was 16. He had contemplated going into business for himself for a while, and the opportunity presented itself. I started with him in 1980 when I got out of school with a degree in HVAC, and opened up our first branch location in 1984. 2. How did that business evolve? In 1997, a real paradigm shift happened inside the organization. My dad and I, along with Lee, our vice president, sat down in a conference room to decide the direction of the company. Lee challenged me about where we were going to take the company. That’s when we developed our first mission statement to make sure we focused on building a healthy work environment. 3. When did you take over the business? Slowly but surely, I got into a phase of life where I could buy the company from my dad. That was almost 10 years ago now. I signed a document with a bank, and two months later the great recession hit. 4. Did you have any regrets? It was one of those moments where you just keep your head down and keep grinding away. Honestly, there was a lot of other personal stuff going on at that same time — my dad had a heart attack and right about the same time, my wife got diagnosed with cancer. It was a pretty tough time, but I call it character building moments. We persevered and made it through. 5. What’s your management philosophy? It’s servant leadership. A lot of organizations do top-down management, but we try to do bottom-up and really serve our people. We love them unconditionally, but we also hold them accountable. 6. What’s been your proudest achievement so far? Making a difference in our team members’ lives. We’ve built a culture where people want to get up every day and come to work. If your people aren’t growing, your company’s not growing. 7. What do you view as the most important aspect of your job? Developing people is the most important thing I can do as a leader. 8. How do you develop your people? We have a three-year leadership development program called Future Leaders. To get into the program you have to be nominated by your leader, and then you have to write an essay to me about why you want to grow as a leader. 9. How do you communicate effectively with so many people? We have a communication grid. We have a Wednesday morning coffee call every other week at 6:50 a.m. We have a company intranet, shared calendars and, obviously, email. We also have a group text set up where I can communicate directly with every single one of our team members. 10. What’s a big challenge in the industry now? With all the changes coming about in e-commerce and this looming threat of the Amazons of the world, contractors have to make a decision about whether they want to support local distribution, who’s going to provide them support.

HVACR BUSINESS JANUARY 2018

11. What kind of training does ACR Supply provide to contractors? We have the only LG Certified lab in North Carolina where we do commercial and residential classes. We have a marketing calendar for the whole year that lists the training available to our people and also our contractors each month. 12. How do you promote your training programs? We advertise on social media, as well as use email distribution lists. Most of it’s done through our outside sales team, though. 13. What do you see successful contractors doing that set them apart? Successful contractors focus on their people and their culture. It’s kind of simple, but those are the ones that differentiate themselves when they run a professional organization. They focus on growing their people and making it more than just a job. Those are the companies that separate themselves. 14. Do you offer any specific tools to help contractors? We have a fairly advanced e-commerce solution. It’s right at 4 percent of our business right now, overall, and we’re not in the equipment business. But it really comes back to training. All the education we provide to our customers drives their callbacks and their profitability per job. 15. Where do you see the most significant growth? We see a lot of growth coming in the commercial variable refrigerant flow (VRF), as well as building automation and controls. 16. How do you measure success? Success is about the culture and about the people. We conduct a culture survey and that’s how we know if we’re doing well or not. We focus on the five Ps: purpose, profit, people, process and progress. 17. What does the future hold for HVACR distributors in general? We must focus on attracting these rock star Millennials and help them understand this is a valid, highly technical industry. This next generation is going to solve the whole e-commerce problem. If we’re not bringing value to the supply chain then we’ll be eliminated. 18. What’s the best way to bridge that generation gap? One of the main reasons Millennials leave jobs is because their bosses allow dysfunction and incompetence to go on around them, and it’s demoralizing. So you have to create a work culture where Millennials can thrive and feel a part of something bigger than themselves. Millennials love making a difference in the world. 19. What do you hope to accomplish as HARDI president? We need to focus on creating an industry and organization that attracts these rock stars. If you’re not building a work culture that attracts and draws the right people, then you need to do something different, because apparently what you’re doing is not working. 20. Who’s been your biggest role model? Dave Ramsey is, from a leadership and financial perspective, a great role model. Through his EntreLeadership and Financial Peace University courses, I have been plugged in with his organization for more than 10 years. His materials are phenomenal.

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