HVACR BUSINESS DECEMBER 2020 by HVACR Business

Give Thanks Pete Grasso 4

The Freedom of Franchise Ownership Steve Truett 9

Have a Sound Collection Policy Ruth King 17

Your Company is Your Brand Ron Smith 18

Recruiting is 20-Mile March Steffan Busch 19

Asset Protection Planning Mistakes Keven Prather 20

HVACRBUSINESS.COM DECEMBER 2020 / VOL.15 / NO.12

LEADERSHIP ADVICE FROM TOP CONTRACTORS

ALSO INSIDE » Industry News .................................................................5 Special Report: Low GWP Refrigerants .....15 Product Focus .................................................................22 20 Questions with Stuart Aust Principal/Founder of The Aust Group ….......................23

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CONTENTS

DECEMBER 2020 / VOL.15 / NO.12

F E AT U R E S

6 9 15

Leadership Advice from Top Contractors

D E PA R T M E N T S

Learn from your peers and those who have been in your shoes, and you will evolve as a leader. By Pete Grasso

The Freedom of Franchise Ownership Franchise owners have the benefit of belonging to a community, and the support of a vast network of resources. By Steve Truett

Special Report: Low GWP Refrigerants As manufacturers move to low global warming potential refrigerants, here’s where we stand as an industry. By Pete Grasso

C O LU M N

Sales count. Profits count. But they’re worthless if you don’t collect the money those sales and profits generated. By Ruth King

Your Company is Your Brand

Recruiting is a 20-Mile March

Asset Protection Planning Mistakes

Despite the crazy year it’s been, with all the ups and downs (mostly downs), it’s still important to give thanks for the good things. By Pete Grasso

Industry News

Product Focus

17 Wealth Rule No. 7: Have a Sound Collection Policy

Editor’s Notebook

20 Questions with Stuart Aust Principal/Founder of The Aust Group

The services you provide and the expertise you possess are what the customer is buying — not a product name. By Ron Smith Ignoring recruiting as a business process to be worked on consistently could certainly kill your business. By Steffan Busch Asset protection strategies can build a wall around your wealth to stop others from unjustly taking what’s yours. By Keven Prather

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EDITOR’S NOTEBOOK

BY PETE GRASSO

PETE Grasso Editor pgrasso@hvacrbusiness.com

Give Thanks

s we come to the close of another year — and boy, what a year it’s been! — it’s a good exercise to take stock of all the reasons you have to be grateful.

On the surface, one might think there isn’t a whole lot to be thankful for in 2020. The coronavirus pandemic has certainly made for a difficult, if not interesting, year for many. Event cancellations, shut-downs, new safety protocols and the continued surge of COVID-19 cases has, unfortunately, become the norm lately. I don’t think any of us thought we’d still be dealing with this in December, but here we are for better or worse. Back in the early days of the pandemic hitting the U.S. in March, confusion abound. What did it all mean for the way you conducted business? Would you survive?

they interact on the job. It can be a lot to deal with and it’s important to ensure they feel appreciated. Talented employees stay because they are listened to and appreciated. Take some time to thank your team for their hard work this year and let them know how much you value them. You couldn’t be successful without customers. Without customers, you have no business. Today’s homeowners and building managers also have many choices — and they choose you! Make sure they know how grateful you are for their business.

Despite the crazy year it’s been, with all the ups and downs, it’s still important to give thanks.

YOUR PEERS Your peers are an invaluable resource and one which is often overlooked.

The initial stay-at-home orders and shuttering of nonessential businesses are something from which many have still not yet recovered. Thankfully, and rightfully so, HVACR was deemed an essential business and a great majority of contractors with whom I’ve spoken the past several months have reported record years in terms of business and growth. The need for this industry and the service you provide didn’t go away and, in fact, many residential contractors saw a large uptick in business as customers spent more time at home. Smart contractors have adapted to doing business in a safe way during a pandemic — and thrived!

I’m willing to bet you have at least one aspect of your business that you implemented based off a conversation you had with a peer. They found success and shared it with you. Now you’ve found success thanks to them.

Despite the crazy year it’s been, with all the ups and downs, it’s important to give thanks for the good things. You can certainly be thankful if your business is doing well, but I encourage you to take a closer look at the reasons behind it.

You wouldn’t be where you are today without your family. Perhaps the most thankless role in the life of a business owner is that of his or her family.

I’m talking, of course, about the four groups of people all successful business owners cannot do without.

YOUR EMPLOYEES Your employees are the lifeblood of your company. Maybe you started as a one-man shop (as many of you did). You worked hard to grow and began adding employees. Whether you currently have just a handful of employees or hundreds, you owe them your gratitude for where you are today. During this past year, I imagine your employees have even been asked to do more than in years past — from following additional safety protocols to changing the way

HVACR BUSINESS DECEMBER 2020

MEGAN LaSalla Art Director mlasalla@hvacrbusiness.com BRUCE Sprague Circulation Manager bs200264@sbcglobal.net

ADVERTISING STAFF ERIC Hagerman National Sales Manager Tel 216-409-3246 Fax 440-731-8750 ehagerman@hvacrbusiness.com TERRY Tanker Publisher Tel 440-731-8600 Fax 440-731-8750 ttanker@hvacrbusiness.com

BARBARA Kerr Executive Assistant bkerr@hvacrbusiness.com

YOUR CUSTOMERS

How many times have you turned to a contractor you met at an industry show or through an association meeting and asked for advice? Maybe you belong to a MIX group, where you bounce ideas off other successful entrepreneurs, or perhaps you’re friends with other business owners in your area.

TERRY Tanker Publisher ttanker@hvacrbusiness.com

YOUR FAMILY

Your business is your life, and sacrifices need to be made for your business — often times at the expense of your family. Whether they’re officially a part of the business or not, your family plays a huge role in your business success. They stick by you, no matter what. They’re understanding. And they need to be appreciated. If there’s one thing to be learned from all that 2020 has thrown at us, it’s the importance of family. As an essential business, you may not be stuck working from home, but I’m sure you’ve spent more time at home than usual with your family. They already know how much you love and appreciate them, but it doesn’t hurt to let them know anyway. u

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©2020 by JFT Properties LLC. No part of this publication may be reproduced or retransmitted in any form or by any means, including, but not limited to, electronic, mechanical, photocopying, recording or any information storage retrieval system, without the prior written permission of the publisher. Unauthorized copying may subject violators to criminal penalties as well as liabilities for substantial monetary damages up to $100,000 per infringement, costs and attorneys’ fees. This publication should not be utilized as a substitute for professional advice in specific situations. If legal, medical, accounting, financial, consulting, coaching or other professional advice is required, the services of the appropriate professional should be sought. Neither the authors nor the publisher may be held liable in any way for any interpretation or use of the information in this publication. The authors will make recommendations for solutions for you to explore. Any recommendation is always based on the authors’ research and experience. The information contained herein is accurate to the best of the publisher’s and authors’ knowledge; however, the publisher and authors can accept no responsibility for the accuracy or completeness of such information or for loss or damage caused by any use thereof. Subscription Rates: Free and controlled circulation to qualified subscribers. Non-qualified persons may subscribe at the following rates: U.S. and possessions: 1 year $48; 2 years $75; 3 years $96; Canadian and foreign, 1-year $108 U.S. funds only. Single copies $8. Subscriptions are prepaid, and check or money orders only. Subscriber Services: To order a subscription or change your address, write to HVACR Business, 31674 Center Ridge Road, Suite 104, North Ridgeville, OH 44039 or call (440) 731-8600; or visit our Web site at www.hvacrbusiness.com. For questions regarding your subscription, please contact bkerr@hvacrbusiness.com. HVACR Business (ISSN 2153-2877) Copyright ©2020 is published monthly by JFT Properties LLC,31674 Center Ridge Road, Suite 104, North Ridgeville, OH 44039, Phone: 440731-8600. 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.

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INDUSTRY NEWS » Industry Honors Jim McDermott

Honeywell’s Low GWP Solutions Approved by EPA

CLEVELAND — On December 15, the HVACR industry comes together to celebrate the life and career of Jim McDermott and the impact he made in the HVACR industry.

MORRIS PLAINS, N.J. — Honeywell announced the U.S. Environmental Protection Agency (EPA) has recognized its environmentally preferable Solstice Refrigerant technology for use in centrifugal and positive displacement chillers and industrial process air conditioning systems.

Eight different contractor, manufacturing, distribution and media organizations joined together for this effort, including the Air Conditioning Contractors of America (ACCA), The National Comfort Institute (NCI), Service Roundtable, Air-Conditioning, Heating and Refrigeration Institute (AHRI), Heating Air-Conditioning & Refrigeration Distributors International (HARDI); and the three leading HVACR publications — Air-Conditioning, Heating, Refrigeration (ACHR) News, HVACR Business and Contracting Business.

Solstice N15 (R-515B), a non-flammable, low-global-warming-potential (LGWP) refrigerant, was listed by the EPA’s Significant New Alternative Policy program (SNAP) as acceptable for use in centrifugal and positive displacement chillers and new industrial process air conditioning systems. In addition, the EPA also listed Solstice zd (R-1233zd) as acceptable for use in new and retrofit industrial process refrigeration systems primarily used in chemical, pharmaceutical, petrochemical and manufacturing industries.

“If you look back over the past 50 years, you’ll find no one made more of an impact on the HVACR industry than Jim McDermott,” said Terrence Tanker, publisher of HVACR Business. McDermott began his career in editorial at The Air Conditioning and Refrigeration Business magazine in 1965. As the industry began to evolve, McDermott understood the newly placed importance on service, becoming publisher and changing the magazine name to Contracting Business. This was a critical moment that paved the way for industry growth and expansion. “Jim McDermott is a towering figure in the HVAC industry,” said Matt Michel, CEO of Service Roundtable. “From his editorial platform, he oversaw one of the greatest periods of service innovation the industry has seen.” McDermott worked tirelessly to foster positive working relationships among airconditioning and heating contractors, manufacturers and distributors, coordinating multiple, key industry and coalition events. “The greatest contribution he made to our industry was when he, recognizing the adversarial relationship between manufacturers, distributors and contractors, took the initiative to do something about it,” said HVACR-legend Ron Smith. “He started arranging a number of dialogue meetings of great contractors with major manufacturers.” With the advent of new technologies, and as the HVACR industry continued to develop, McDermott advocated for and educated about the importance of ongoing training and development, which led to new roles, expanded career paths and, ultimately, more successful contracting businesses. Over his career, McDermott held leadership roles at Contracting Business magazine, Contractor magazine and HVACR Business, where he retired in 2011. McDermott also held executive positions at Penton Media’s Quality and Training group, Penton Custom Media and SocialTract, the HVACR industry’s first blogging service.

ACCA Postpones 2021 Conference & Expo ALEXANDRIA, Va. — After careful consultation regarding the health and safety of everyone in the industry, the Air Conditioning Contractors of America (ACCA) has made the difficult decision to postpone its 2021 Conference and Expo, scheduled for February 21-24 in New Orleans. “Following increased and overwhelming concerns about the COVID-19 virus, the ACCA Events Committee felt this was the best way to proceed during such an unprecedented global situation,” said Barton James, ACCA president and CEO. “While there is disappointment regarding the postponement of this event for our members, event attendees, partners, and exhibitors, we know this is the right decision based on the information we have today.”

Numerous global environmental regulations have prompted companies to seek alternative solutions that are reliable, practical and help reduce carbon footprint to meet hydrofluorocarbon (HFC) phasedown requirements in support of the Kigali Amendment. >> honeywell.com

TIME Names Carrier’s OptiClean a Best Invention of 2020 PALM BEACH GARDENS, Fla. — Carrier Global Corporation’s OptiClean Dual-Mode Air Scrubber & Negative Air Machine has been named as one of TIME’s 100 Best Inventions of 2020. The OptiClean was developed through rapid innovation in early 2020 to help support infectious isolation rooms in hospitals. TIME featured OptiClean in the Medical Care category of its prestigious annual list that recognizes 100 ground-breaking inventions that are making the world better and smarter. At the onset of the pandemic, Carrier invented the OptiClean as a negative air machine for hospitals treating COVID-19 patients to help hospitals protect caregivers, workers, and patients. >> time.com/best-inventions-2020

AHRI is Leading the Transition to Low-GWP Refrigerants ARLINGTON, Va. — The Air-Conditioning, Heating, and Refrigeration Institute (AHRI) continues to demonstrate its commitment to ensuring a safe transition to low-global warming potential (GWP) refrigerants through educational events such as a recently concluded five-part webinar series on the latest refrigerant research, which attracted more than 1600 participants. Topics included air conditioning applications, commercial refrigeration applications, understanding refrigerant sensors, predictive tools for refrigerant behaviors, and refrigerant ignition in open flames/hot surfaces. “The Refrigerant Webinar Series was quite effective in engaging various stakeholders about the research taking place to determine application limits and safety requirements for low-GWP flammable refrigerants,” said AHRI Vice President of Regulatory Affairs Helen Walter-Terrinoni, who also heads the AHRI Safe Refrigerant Transition Task Force (SRTTF). “The impressive attendance these webinars attracted is a testament to the importance of our mission. I encourage anyone with an interest in learning more about AHRI’s efforts regarding the safe refrigerant transition to visit our website to find out how they can become involved.” AHRI’s SRTTF was established in 2019 to address every step of the supply chain in the transition to safe low-GWP refrigerants. Walter-Terrinoni works with a group of dedicated volunteers to educate stakeholders about the transition. >> ahrinet.org

>> acca.org www.hvacrbusiness.com

HVACR BUSINESS DECEMBER 2020

LEADERSHIP ADVICE FROM TOP CONTRACTORS

Learn from your peers and those who have been in your shoes, and you will evolve as a leader.

BY PETE GRASSO

eing a leader means many things to different people. What may be an effective leadership style for some may not work for others. The one thing that seems most certain about leadership is that truly great leaders are always evolving. This industry is full of some truly great

leaders. These contractors know the best way to lead their companies — their teams — is to learn from others, implement good leadership advice and evolve their leadership style.

1) What’s the best leadership advice you’ve ever received?

We surveyed a handful of successful contractors and asked them three simple questions:

Instead of soliciting leadership advice, we asked these contractors to describe their leadership journey. In their responses

Jaime DiDomenico PRESIDENT Cool Today Sarasota, Fla. cooltoday.com

Find someone who could teach you this business — and follow their instructions! Actually, to be a great leader, you have to become a really good follower of success. Those people who’ve blazed a trail of life experience may not have all the RIGHT answers for your business, but they definitely know the WRONG way and how to avoid the land mines of failure that exist. Listen to them, follow others who have knowledge, and you will save so much time, effort and money. I not only have people I could call for advice and visit their operations, I also have a network of peers through Nexstar Network who are finding a way to grow and prosper. Leaders are always growing in knowledge and leadership skills. This takes constant learning, which helps their company grow with them. I’m learning as much as I can and staying humble in my leadership track. I have learned to listen better, more effectively. I have learned to let situations play out before jumping in, and to plan a year out to be successful in a larger company. I have also evolved in respect to investments in training and educating the team. It’s a necessary investment in them and your company.

HVACR BUSINESS DECEMBER 2020

2) How did you implement that advice into your own leadership? 3) How have you evolved as a leader?

— their stories — is some of the best leadership advice you can get … because it’s real. It’s what they’ve learned from others, about themselves and their leadership. Use these stories to help you along on your own leadership journey — and feel free to reach out to me at pgrasso@ hvacrbusiness.com to share your story. u

Theo Etzel CHAIRMAN OF THE BOARD Conditioned Air Naples, Fla. conditionedair.com theoetzel.com If you’re not willing to put others first, above yourself and money, then you don’t deserve to be called a leader. Serving others is the ultimate call for leaders. This drive also allows you to surround yourself with smarter people than you and feel confident you can help equip them to be even better at their career. Just saying that others matter more and not showing it, doesn’t cut it. I had to demonstrate it every day, even when that meant tough decisions and had costs associated with them. To gain trust from the team I had to say what I meant and then act on it. Leadership hypocrisy is a destroyer of organizations. I’ve learned to balance my compassion and confidence in the conviction of what our correct path is and why it is important to stay the course. I’m more selective in who is allowed onto the team and quicker to release someone who is pulling against the mission. I’ve also grown in the realization that the company culture can and should be by design and not by default. Culture is the backbone of success or failure. I wrote my thoughts on leadership down in a book titled “Invest Your Heartbeats Wisely.”

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Winston Hancock

Greg Mericle

PRESIDENT Gilman Heating and Cooling Ashland, Va. gilmanheatingandcooling.com

PRESIDENT Hurlburt Heating & Plumbing Durand, Wisc. hurlburthp.com

The key to success is to double your failure rate. You must be willing to do what others won’t to achieve what others don’t. Examples of both of these is to keep fishing.

Be honest. Set honest expectations of what your team can expect from you and what you expect from them. From there, you can hold each other accountable and see that those expectation are met.

For me, it’s the little things … not the big silver bullet that people think. If you can find what does not work, then you have found a starting point of what will work. I was willing to change every day and I’m still changing today.

Having been an employee in the past, the respect I had (or didn’t have) for my leaders was generally derived from their follow through. If you say you’re going to do something, you had better do it. Your team will not go into battle for a leader they don’t trust and respect.

I’ve learned I was only as good as my team. For example, a dog will bark when they are happy or mad. If you recognize and approach both you usually make a friend, and it takes a lot of friends to have a quality of life and success.

Before I make a promise or a statement to our team I try to always consider its feasibility … the last person I want to be is the guy who always aims high and misses low. When I do miss, I’m the first one to call it out. This level of personal accountability and honesty from a leader trickles down to your team, who will respect you for it and hopefully take on these attributes as well.

I don’t consider myself as a leader, but I do consider all who I associate with to be leaders. One leader can’t inspire all, but all can inspire one. When you reach that point, leadership works and there is not much the team can’t achieve. Everybody I work with is a leader in their own special way.

Darryl Robinson

The younger me was a fire and brimstone guy, patience and understanding were not part of my being. As I look back, the most embarrassing and costly moments in my life have been instances where I went off on someone or acted before I had taken the time to gather all details of the situation and consider potential outcomes. Time and personal growth have taught me to slow down situations and view them from the widest perspective possible to consider the points and possibilities of all involved. Life, and being a good leader, are much like playing chess: the better you see the board, the more successful you will be.

OWNER Robinson Air Lawton, Okla. robinsonairhvac.com

Marty Rosica Don’t be afraid to ask for help. This might seem like a no brainer, but our pride sometimes gets the best of us and we feel we should always have the answers. I struggled with this early in my career, but eventually realized there are a lot of people who are eager to help. This really became evident once I joined ACCA and Service Nation Alliance, where I met other leaders who faced the same issues I had been struggling with and were happy to share how they overcame them. I am fortunate to be in an industry where we make our living by serving others. This includes customers and colleagues. I’ve tried to create a culture where no one is afraid to ask a dumb question or have a bad idea. I’ve also tried to be sensitive to those who may be struggling and ask if there is anything I can do to help, and not wait for them to ask for it. One of the most important lessons I’ve learned has been to not be so hard on myself. This allows me to be more understanding of others as well. The sin is not to make a mistake, the sin is to repeat it. I am much more accepting of mistakes than I have ever been, both of myself and of my coworkers. Failure is never easy, but it is necessary for success.

OWNER Hawks & Company Deptford, N.J. hawksandco.com I have been a part of many leadership sessions with our peer group over the years. Understanding and implementing servant leadership was a turning point for me. Servant leadership is a bottom-up mindset, with me being on the bottom and serving it up to all of our employees. Humility and vulnerability are key words in our organization that we talk about and hire to. I have become a better delegator. This has enabled our team to get better by making more decisions, driving ideas and blazing their own trail in the organization.

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HVACR BUSINESS DECEMBER 2020

Steve Saunders

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Jeff Madison GENERAL MANAGER Krinkie’s Heating, Air Conditioning and Plumbing St. Paul, Minn. krinkies.com

When I started working for Bruce Krinkie, he told me “Don’t ever ask someone to do that you won’t do yourself.” Within my first week of working for Bruce, I witnessed this as I watched Bruce army crawl around in a hot attic for four hours. We had younger guys on the job that could have been up there doing it, however he WANTED to be the guy in there doing the hard/dirty work. I get out of the office and work with the team. I really like to be on the difficult jobs. I started in this industry as a duct cleaner, went to installation, service and eventually management. I know the conversations that can happen when, as an installer or technician, you arrive to a difficult/dirty/ uncomfortable job. I want my team to know that I will be there in the trenches with them. I want to continually evolve as a leader. If you stop evolving, you become comfortable, stagnant and outdated. If you want your team to evolve and get better at what they do, you need to be evolving and getting better with them or they will probably move on to someone that will. This year has pushed anyone in a leadership position to places we never would have thought we’d have to go. This spring, at the onset of the COVID-19 shut-downs, we had a choice to make. We could sit around and wait it out or we could adapt to it. We decided to adapt to it and my leadership position had to evolve. We found ways to do outside-only work for our clients to keep our employees and clients safe. We would stand in lines for hours trying to get hand sanitizer from distilleries. We had to ask our CCRs to start doing health screenings before we sent someone out and other countless things to adapt to the current situation everybody has been facing. As a leader, if you haven’t taken the time to thank the people who have stuck with you and helped get through this, make a point to do it. Without Bruce and the amazing team, I have in this with me, this year could have been a disaster. For a long time, it had been my thinking to put clients first. Bruce has taught me the employees come first. If you put your employees first, they will put the clients first.

HVACR BUSINESS DECEMBER 2020

CEO Tempo Partners Inc. Irving, Texas tempoair.com

My first boss was the founder of TDIndustries, Jack Lowe, Sr. He had many great leadership ideas and one that has stuck with me for 45 years is the concept of being dependable. In essence, this meant doing what you say, when you say you will do it. No one is ever 100 percent, but Jack used to say that with dependability there was not much difference between 50 percent dependable and 95 percent dependable. All the difference came from the area of being 95 to 100 percent dependable. I have a tendency to over commit. That can potentially lead to failures in dependability. My two biggest tools were to learn more discipline — meaning listen more, promise less — and to write down and keep a list of what I committed to deliver and when I promised it. Both of those have served me well. At this stage of my career, leadership is primarily about preparing for the future. Some of that is planning and executing strategic investments to develop or maintain competitive leadership. But mostly, the future is about preparing people for enhanced leadership roles. Listening more. Encouraging often. Probing. Reminding. Supporting. Giving the freedom to try and fail and to learn from failure. The future is almost all about people.

Konrad Rybak OWNER Air Blue Heating and Cooling Wheeling, Ill. airblueinc.com

Be fair and decisive like a dad, acknowledge good work like a mom and give work based on experience. We segregated our installation and service based on personalities and knowledge. We ask for photos of before and after, then post it in an area that everyone can see. We are disciplining when it’s needed and rewarding when it’s due. Throughout the years, I’ve learned about the different personalities and realized not everyone is driven the same way. One person can be motivated on making money, but another person values family time … the goal is to balance it all.

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THE FREEDOM OF FRANCHISE OWNERSHIP

Franchise owners have the benefit of belonging to a community, and the support of a vast network of resources. BY STEVE TRUETT

reedom and autonomy are two reasons why individuals start companies as independent business owners. While there are many great benefits to being a contractor, running a business on your own can be difficult and overwhelming, particularly when it comes to operations, marketing and technology implementation. By contrast, franchise owners who take advantage of available systems, technology and support can enjoy more freedom and autonomy while still having the ability to shape and promote their businesses. Whether the business needs help with systems, greater buying power or networking and support, there are several distinct advantages franchise owners can have over independent owners.

With a complete supply chain solution, franchise owners can be more competitive in the marketplace. and technology. The franchise puts specific systems in place that can evolve to meet the needs of both employees and customers.

provide professional business tools, such as branded emails, websites, marketing materials and templates for estimates and invoices.

To that end, there are office systems, technology systems, marketing systems, front line systems and sales systems. These systems work together to provide a reliable, brand-compliant foundation for conducting business. They also offer a level of accountability by ensuring that every franchise operates with the same brand standards.

Not only do professionally produced documents present a positive brand experience, they also provide critical information that ensures the customer knows exactly what he or she can expect. Oftentimes, independent owners don’t have the ability to purchase new technology — or even the time to implement updates and upgrades to existing systems.

CONSISTENT, COMPREHENSIVE SYSTEMS

This consistency is necessary for ensuring a reliable and unchanging customer experience across franchises, regardless of geographic location.

When a business professional becomes a franchise owner, he or she is part of an expansive network of people, processes

Unlike many independent owners, franchise owners often have access to technology and software systems that

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Lee Downing was an independent business pro for nine years before becoming the owner of four Aire Serv franchises in Tenn. He described the systems available to him as a franchise owner as “phenomenal.”

“When you print out a four-page estimate in detail, there’s no comparison,” Downing says. “Many shops are still handwriting work orders. The systems we have are the best. We definitely have the best tools in the bucket.” Technology tools such as proprietary software programs enable more streamlined sales systems, which then empower the franchise owners to conduct business more efficiently within their niche. Franchisees use proprietary software that empowers their sales team to present customers with detailed information that helps them identify the right heating and cooling systems for their homes. For independent contractors, using proprietary software may not be possible simply because of the scale and cost.

BUYING POWER Franchises typically have access to a vendor network that franchise owners continued on page 10

HVACR BUSINESS DECEMBER 2020

continued from page 9

can leverage to realize greater efficiencies, lower costs and more product selection. As a group, Franchisors use the power of the vendor network to help franchisees save on equipment, including vans and trucks as well as services like credit card processing and payroll. Because of economies of scale, the vendor network not only helps franchisees identify the best vendors in terms of product and service quality, but also the best vendors in terms of discounts and rebates. Most contractors don’t have access to these money-saving opportunities. Scott Jay was an independent business owner for eight years before becoming the franchise owner of Aire Serv of Branson, Mo., in 2008 and Aire Serv of Springfield, Mo. in 2018. Having the independent business experience has made him appreciative of what a vendor network can offer. “We get thousands back every year just in rebates,” Jay explains, “and we get price reductions because of the buying power.”

Oftentimes, independent owners don’t have the ability to purchase new technology — or even the time to implement updates and upgrades to existing systems. With a complete supply chain solution, franchise owners can be more competitive in the marketplace.

SUPPORT

provides. “My franchise fees come in way less than what it would cost for me to hire talent to do the same thing,” he says.

Sharing knowledge and information is an important driver for business success. For contractors, hiring professionals to help with finances, operations and marketing can be expensive, particularly in ultra-competitive markets.

While professional business services are key to reaching customers and mitigating missteps, franchise owners often find there’s an even greater benefit at play: namely, the relationships with other franchise owners.

Franchise owners have a network of experts to consult at any time, such as marketing professionals who help them devise and map out marketing plans for their local markets.

Franchise owners enjoy a special camaraderie and freedom to support one another — without worrying about losing revenue to a competitor.

Jay said that when his franchise contract renewal came up, he put pen to paper to see how much it would cost to hire people with the same expertise that Aire Serv

“You’ve got a group of people you can rely on and bounce ideas off of when needed,” he says.

from the other owners is my biggest benefit.”

WINDOW OF OPPORTUNITY While every franchise brand operates differently, moving from an independent business to franchise ownership can create greater opportunities for revenue and growth. Whether that means more access to technology, better prices on services equipment, or professional and personal support, franchise owners will tell you they appreciate the ability to be a part of something bigger than themselves — while still controlling their own business path to success. u

Steve Truett is brand president of Aire Serv, a Neighborly Company. For additional information, visit neighborlyfranchises.com.

Downing agrees, adding: “I have lifelong friends. The family feeling I get

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HVACR BUSINESS DECEMBER 2020

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There is a growing movement to replace R-410A refrigerant.

Itâ&#x20AC;&#x2122;s different this time. You have a choice to make. The easy choice is R-32 refrigerant.

32QUESTIONS

ABOUT R-32 with PHIL JOHNSTON OF DAIKIN APPLIED

We sat down with Phil Johnston, Daikin general manager and low GWP refrigerant leader, to learn more about the potential for R-32 refrigerant as a low GWP replacement for R410-A. While low GWP is important, it’s not the only measure of a refrigerant’s total impact. R-32’s excellent thermodynamic properties, low cost and availability make it the right choice to replace R-410A. 1. Is R-32 a more efficient refrigerant? Yes. Test data in Daikin’s labs of inverter-driven compressors for rooftop units and water-cooled chillers found that full-load and partial-load efficiency rating metrics can be improved by up to 12% using R-32 instead of R-410A.

2. How does R-32 affect unit weight?

R-32’s excellent thermodynamic properties allow the HVAC system to use less refrigerant to accomplish the same heat transfer compared to blends for any efficiency level. Moving less refrigerant through the HVAC systems allows for design with smaller motors, smaller diameter piping and smaller heat exchangers to provide the same capacity and efficiency as blended refrigerants, resulting in lighter weight and more compact units.

3. What’s the lifecycle impact of R-32?

Total life cycle refrigerant impact measures the direct emissions from refrigerant, as well as the indirect emissions from electricity consumption. Because R-32 has a GWP of 675 and requires less charge in certain systems, direct emissions from those systems can be up to 80% lower than similar R-410A systems. And because R-32 can obtain higher efficiencies than many blends, units can be designed to consume less electricity over the lifetime of the equipment. The result? Fewer carbon emissions that contribute to climate change.

4. Is R-32 easy to work with?

As a pure, single-component refrigerant, R-32 can be topped off and recharged in the field, in both liquid and gas phases, without changes in composition. It is easy to clean and reuse on-site, and is easy to reclaim and recycle off-site with a simple cleaning process, particularly as compared to blends with HFOs that are typically reclaimed by being distilled to their pure compounds and then remixed.

5. Where has R-32 been accepted? Over 100 million R-32 units have been safely deployed worldwide.

6. Is R-32 patented?

No. R-32 is widely available, manufactured by numerous refrigerant producers, and distributed globally. There are no active patents on the basic molecule. Some alternative low-GWP blends can be proprietary to the companies that own the patents, potentially limiting access and supply.

7. How does the cost of R-32 compare? R-32 refrigerant historically has a lower price per pound than R-410A, and a much lower price per pound than most available proprietary low GWP blends.

8. Is R-32 a blended refrigerant?

No. As a pure, single-component refrigerant, R-32 can be topped up and recharged in the field, in both liquid and gas phases, without changes in composition. It is easy to clean and reuse on-site, and easy to reclaim and recycle off-site with a simple cleaning process, particularly as compared to blends with HFOs that are typically reclaimed by being distilled to their base components and then remixed.

9. Will R-32 become exclusive to any HVAC manufacturers?

No. R-32 is widely available, manufactured by numerous refrigerant producers, and distributed globally. There are no patents on the basic molecule. Certain alternative low-GWP blends can be proprietary to the companies that own the patents, potentially limiting access and supply.

10. How much additional effort is required to install and service R-32 units?

None. R-32’s excellent thermodynamic properties provide OEM engineers the opportunity to design systems that use less refrigerant to accomplish heat transfer compared to other blends, over a range of efficiency levels. Moving less refrigerant through the HVAC systems allows for designs with smaller motors, smaller diameter piping and smaller heat exchangers to provide the same capacity and efficiency as blended refrigerants.

11. Explain the carbon footprint of R-32. R-32 systems can have a positive impact on climate change. Total life cycle refrigerant impact measures the direct emissions from refrigerant, as well as the indirect emissions from electricity consumption. Because R-32 has a GWP of 675 and requires less charge in certain systems, direct emissions from those systems can be up to 80% lower than similar R-410A systems. And because R-32 can obtain higher efficiencies than many blends, systems that consume less electricity over those systems’ lifetimes can be introduced. The result? Fewer carbon emissions that contribute to climate change.

12. Is R-32 being used today? Philip Johnston, PEng, joined McQuay International (now Daikin Applied Americas) in June 2001. Since then, he has held a series of purchasing, development, new product introduction, and product management roles. In 2012, Johnston became the Product General Manager for the Applied Terminal Business before becoming the GM in charge of transitioning to low GWP refrigerants in 2019.

HVACR BUSINESS DECEMBER 2020

Because of R-32’s availability, low cost, and excellent performance, it is used today in large quantities in R-410A and most alternative low GWP blends.

13. How does R-32’s GWP compare to R-410A?

R-32 refrigerant’s GWP is 68% lower than R-410A’s. 675 is lower than any currently enacted legislative and regulatory standards in North American jurisdictions.

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ADV ER TORI AL 14. How does R-32 perform in extreme environments?

R-32 systems can be more efficient in a broader range of operating conditions in certain applications. Testing in Daikin’s labs of inverter-driven compressors for rooftop units and water-cooled chillers found that full-load and partial-load efficiency rating metrics can be improved by up to 12% by using R-32 instead of R-410A. Daikin estimates over 100 million R-32 units are in operation around the globe in more than 90 countries and climates, including Japan, India, Australia, the Middle-East, Russia, Greenland, the European Union and the United States.

15. What is the thermal capacity of R-32? R-32 has greater latent heat capacity than R-410A, which means that R-32 can achieve the same capacity at a lower refrigerant flow rate. And at a lower flow rate, less energy is required to produce refrigerant flow, resulting in higher efficiencies for R-32.

16. Does R-32 have glide?

R-32 is a single component refrigerant and has no glide. When blends separate, you can negatively impact heat exchanger and system performance. Because R-32 is a single component refrigerant, its composition doesn’t change, so there are no negative blend-related performance impacts in any type of heat exchanger.

17. Can R-32 reduce the total cost of ownership?

When you combine the low cost for R-32 per pound and the low charge quantity with low electricity consumption, R-32 can yield low total cost of ownership. Add in easier handling from recharging in the field as compared to non-azeotopic blends, R-32 can add up impressive savings.

18. How much extra effort is required to recharge an R-32 unit?

Because R-32 is a pure, single component refrigerant, service technicians can be assured that the composition has not changed over time, so it is easy to top off during a service call. With non-azeotropic blends, it is generally not recommended to top off; the system may need to be evacuated and then recharged with new refrigerant, which can be costly in terms of materials and labor.

19. Where is R-32 currently being used?

R-32 has been safely deployed in over 100 million units in the US and around the world. In more than 90 countries, mechanical contractors and service technicians are already knowledgeable and skilled in its safe and effective handling in many HVAC applications including residential splits, VRF, scroll chillers, rooftops, and window units. R-32 has become the de facto global standard to replace R-410A in many HVAC applications.

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20. How can a manufacturer speed the time to market for R-32 products? Daikin Group offers worldwide free access to certain of its equipment patents to help other innovators accelerate their product development using this top performing refrigerant.

21. How many HVAC manufacturers use R-32?

R-32 has been selected as the alternative to R-410A by more than 40 manufacturers around the world, including Asia, Europe, India and North America.

22. Is R-32 flammable?

R-32 is a proven, lower toxicity mildly flammable refrigerant. R-32 is classified as an A2L. National and international safety standards have been modified to help protect building users, such that the HVAC equipment and systems are engineered with proven safety mitigations. More than 100 million R-32 units are operating safely around the world in chillers, packaged rooftops, VRF, residential splits and window air conditioning units.

23. Is more refrigerant required to charge an R-32 unit?

Because R-32 is a pure, single component refrigerant with excellent thermodynamic performance characteristics, an R-32 system could have up to 40% less charge than a similar R-410A system, meaning you could reduce the amount of refrigerant in the system and potentially also reduce the amount of refrigerant leaking to the environment.

24. What are the international GWP standards?

While there is no single international standard for GWP limits, many countries have set a benchmark of less than 750. For example, by 2025, the European Union’s F-gas Regulation will ban certain new split AC systems containing less than 3kg of HFCs that have a GWP greater than 750; Canada will limit GWP for refrigerants used in certain new comfort chillers to 750 by 2025; and Japan has targeted a GWP of 750 for various room air conditioning and commercial air conditioning.

25. Can R-32 units draw less electricity?

Because R-32 can obtain higher efficiencies than many blends, HVAC engineers can develop systems that consume less electricity over those systems’ lifetimes. The result? Lower electricity costs over the life cycle of the equipment.

26. R-32 units will require more raw material consumption, correct?

Actually, no. R-32’s excellent thermodynamic properties can allow the HVAC system to use less refrigerant to accomplish heat transfer compared to other blends for any efficiency level. Moving less refrigerant through the HVAC systems allows for design with smaller motors, smaller diameter piping

and smaller heat exchangers to provide the same capacity and efficiency as blended refrigerants. Smaller parts can benefit the environment because less energy is needed to mine and process raw materials and ship finished goods.

27. Does R-32 degrade over time?

No. Because R-32 is a single component refrigerant, its composition doesn’t change over time as it does with most blended refrigerants. This means there are no negative performance impacts due to composition change. And R-32 can be easily topped off or recharged in the field in either a liquid or gas phase.

28. What special requirements are necessary to recycle R-32?

Pure, single component R-32 makes “Reduce, Reuse, Recycle” a new reality in the industry. Reduce: Certain R-32 systems could have up to 40% less charge than similar R410A systems. Reuse: R-32 can be topped up and recharged in the field, in both liquid and gas phases, without changes in composition. It is easy to clean and reuse on-site. Section 608 of the Clean Air Act allows appliance owners to reuse recovered refrigerant in other equipment under same ownership. A single component refrigerant can’t lose its composition like many blended refrigerants and will retain its quality over time. Recycle: R-32 can be reclaimed and recycled off-site with a simple cleaning process, as compared to blends with HFOs that are typically reclaimed by being distilled to their base components and then remixed.

29. How are R-32 units charged in the field?

Being a pure, single-component refrigerant, R-32 can be topped off and recharged in the field in both liquid and gas phases without changes in composition.

30. R-32 is a new refrigerant, right?

With today’s installed base exceeding 100 million units from over 40 OEMs, R-32 components have a proven history. Products and components using many alternative, low-GWP refrigerants are under testing or have only recently been introduced to the HVAC market.

31. Will R-32 units be difficult to handle when installed and serviced?

In more than 90 countries, mechanical contractors and service technicians are already knowledgeable and skilled in its safe and effective handling in many HVAC applications where R-32 has become the de facto global standard to replace R-410A.

32. Globally, are R-32 units limited to specific installations?

Since 2012, R-32 systems have become the global standard to replace R-410A in many HVAC applications including residential splits, VRF, scroll chillers, rooftops, and window units.

HVACR BUSINESS DECEMBER 2020

Thereâ&#x20AC;&#x2122;s more than one good reason to choose R-32. In fact, there are 32 of them.

WITH MORE THAN 100 MILLION UNITS INSTALLED WORLDWIDE, R-32 IS ENDORSED BY:

SPECIAL REPORT: LOW GWP REFRIGERANTS As manufacturers move to low global warming potential refrigerants, such as R-32, here’s where we stand as an industry. BY PETE GRASSO

fter the 1987 Montreal Protocol, moves began to phase out refrigerants most harmful to the ozone. Harmful chlorofluorocarbon gases such as R-22 were replaced with blends like R-410A and R-407C because of their zero-level ozone depletion potential. Unfortunately, however, the HFCs were found to have even greater global warming potential (GWP). It’s clear the writing is on the wall, as stated in Part 1 of this series on low GWP refrigerants (Refrigeration Regulations are Changing, Oct. 2020 pg. 6). In 2016, the parties to the Montreal Protocol agreed to phase down the use of HFCs citing, among other concerns, the continued increase in refrigerant usage and emissions that are expected to rise as access to refrigeration and air conditioning continues to increase in developed and developing nations. The Kigali Amendment to the Montreal Protocol is now in force, having been ratified by more than 90 countries and is designed to reduce the production and consumption of these heat-trapping gases more than 80 percent over the

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Although mildly flammable, R-32 has a number of environmental and end-user advantages. next 30 years. A certain percentage of these refrigerants needs to remain to service existing equipment and for use in refrigerant blends.

members and stakeholders employed with contractors, government agencies, the fire service, unions, training organizations, environmental groups, and other entities.

As a result, some manufacturers are now phasing out HFC refrigerants. The challenge in deploying lower GWP refrigerants come with trade-offs. Many alternatives exhibit more flammable properties than refrigerants they would replace (designated as ASHRAE A1).

To date, the Task Force has led inperson and online educational sessions on regulation compliance and safety standards and codes, all of which are of critical importance to contractors, technicians, code officials, and members of the fire service.

The HVACR industry has been actively working to address this issue for 30 years and by developing a new classification of refrigerants, known as A2L, aimed at meeting the most recent lower GWP challenge. The Air-Conditioning, Heating, and Refrigeration Institute (AHRI) Safe Refrigerant Transition Task Force (Task Force) was established in 2019 to address every step of the supply chain in the transition to safe low-GWP refrigerants. The Task Force comprises AHRI

R-32 All refrigerants have pros and cons to their use. But in determining what gas to use in their next-generation equipment, manufacturers consider more than the environmental impact. Obviously, contributions to ozone depletion and global warming are of vital importance, particularly when it comes to meeting government regulations. Still, when choosing to adopt a new type of refrigerant, manufacturers also consider

safety, compatibility with materials, cost of production and energy efficiency. Although “mildly flammable,” R-32 has a number of environmental and end-user advantages. R-32 has a much lower GWP than R-410A (675 compared to 2088) and could reduce refrigerant charge in certain equipment by up to 40 percent. In 2019, Daikin companies in North America announced it was developing ducted and ductless residential, lightcommercial and applied products utilizing R-32 refrigerant. Based on comprehensive evaluation and testing, Daikin concluded R-32 is the ideal low-GWP alternative to R-410A. The company also took a holistic approach to include safety, energy efficiency, and cost-effectiveness. R-32 has been the dominant refrigerant for residential HVAC equipment in Japan for several years, where it accounted for 25 percent of all residential units in 2018 — more than 25 million. Likewise, the refrigerant has become a popular choice in China and many European nations. continued on page 16

HVACR BUSINESS DECEMBER 2020

continued from page 15

According to Daikin, R-32 is used in more than 84 million residential units in 70 different countries. Daikin itself has sold more than 21 million R-32

residential units globally. Daikin is not alone in choosing R-32 â&#x20AC;Ś it is quickly becoming the refrigerant of choice for many manufacturers.

less refrigerant than R410A, making them

OTHER OPTIONS

more efficient and cost less to operate; has

In addition to having a lower GWP than R410A, R32 systems use up to 20 percent

is easier to recycle than R410A, as it is a

There are many lower-GWP refrigerants available. While R32 is a popular choice, due to its availability, performance and efficiency, according to Danfoss, R-454B and R-452B also offer convenience and, potentially, low system qualification costs. Further alternatives are also entering the market.

an Ozone Depletion Potential of 0 and single component refrigerant.

In 2018, Carrier announced that R-454B as its primary lower GWP solution to replace R-410A in all of its ducted residential and light commercial packaged solutions sold in North America. The new refrigerant, to be offered in these Carrier products beginning in 2023, is expected to surpass the requirements of anticipated future regulations. Carrier has been working with The Chemours Company, who will produce and distribute the new refrigerant in North America. With a GWP of 466 â&#x20AC;&#x201D; one-fifth that of R-410A â&#x20AC;&#x201D; R454B refrigerant was selected to minimize environmental impact and energy use, while improving performance, safety and longevity. According to Danfoss, as a straight R-410A system replacement, R-32 has around 10 percent more capacity. As a result, a new system built for R-32 will deliver higher cooling capacity or require smaller displacement compressors to achieve the same capacity. Efficiency gains over R-410A are expected, provided the system and component designs have been optimized for R-32. However, R-32 has a high discharge temperature which can limit its operating envelope unless the issue is handled by design or some type of injection, Danfoss says. R-452B is the closest drop-in equivalent to R410A in terms of capacity and efficiency. R-454B delivers slightly less capacity but has the benefit of an even lower GWP. Both refrigerants allow the fastest conversion from R410A and give multi-refrigerant flexibility, allowing lateline customization. u

Pete Grasso is the editor of HVACR Business magazine. You can reach him by email at pgrasso@hvacrbusiness.com.

HVACR BUSINESS DECEMBER 2020

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FINANCE

BY RUTH KING

Wealth Rule No. 7: Have a Sound Collection Policy

f you don’t have the cash to make payroll it doesn’t matter what your sales are.

Many contractors are more concerned with making the sale rather than collecting the money for that sale. But if you don’t collect on those sales, you can’t pay your bills.

Sales count. Profits count. But they are worthless if you don’t collect the money those sales and profits generated.

Here’s how you can be profitable and go bankrupt because you didn’t collect your receivables: A contractor was very profitable and had been for many years. He paid his bills on time and was current with all of his suppliers. One week, this company’s three biggest customers declared bankruptcy. These customers represented more than $1,000,000 in receivables owed to his company. He didn’t have the cash to recover from these receivable losses so he went out of business too. Before you ask whether those customers were bonded, it didn’t matter. Getting paid from a bonding company takes months — if you ever get all of the money owed to you. This company didn’t have the cash to wait. In addition, if you have been paid by those businesses who declared bankruptcy in the past 90 days, the bankruptcy court can require you to give the court the monies that you got if other creditors were not paid (this happened to a client). Bankruptcy of your customers, if they represent more than 20 percent of your revenues, can put your company out of business. Even though you have a profitable company, when your customers’ businesses close without paying you — if you have not built cash reserves — you might be faced with the inability to pay your bills. You cannot pay bills and payroll with profits. You must have cash. So, what can you do to prevent this from happening? The critical thing is to

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watch your sales, collections and payables each week. If you’re like most contractors, you don’t have a lot of time to deal with these issues. You don’t have to deal directly with them — delegate the tasks and oversee the actions. Restaurants, supermarkets and retail stores are all COD. Can you imagine walking out of the grocery store without paying? For residential work, all service is COD. For replacements, unless financing has been approved, get the maximum deposit allowed by the laws of your state and require payment when the job is completed. This should be part of the sales process and stated in the accepted proposal. Then you have the get the signed paperwork and submit it the day after the work is completed so you get your money. Over the years, I’ve seen too much financing paperwork sitting on desks weeks after the work has been done. It’s the cash you need to pay payroll and your bills.

For commercial, accounts receivable are a way of life. Until a customer establishes credit, the work is COD. In addition, for larger projects, at the beginning of the project with a new customer, your bookkeeper or other accounts receivable team member should call the accounting department of your new customer. Get to know that person and ask what requirements that company has to get paid on time. You are establishing a relationship so if there is a problem getting paid at some point, you know who to call and can have an initial friendly conversation. In addition, make sure your company takes credit cards for payment and have clear payment terms. And, when that 30 days is up and you haven’t received a check, then someone needs to make a phone call to the accounting person you have established a relationship with. Ask whether you can put the amount due on a credit card. Many times, your customer

will say, “yes.” Then you have your money quickly. Watch your cash each week. Your bookkeeper should print a weekly cash flow report for you to review each Friday (Wealth Rule No. 5, Oct. 2020, pg. 18). The key to the cash flow report is the weekly projection. It tells you how much money you can expect to come in the door the next week and what you expect to pay. If you don’t have enough to cover all of your bills, then someone needs to start making telephone calls to people who owe you money. That person does not have to be you … it might be your bookkeeper. Just remember, unless you direct someone to make those telephone calls and follow up with you, these telephone calls won’t get made. It is important to do an accounts receivable and accounts payable aging each week to estimate the money coming in and the money going out. This way, on at least a weekly basis you are keeping track of where you are financially. And it doesn’t need to take up much of your time or your bookkeeper’s time. Once the flow of information needed to complete these sheets is set up and running smoothly it should only take ten to fifteen minutes each week to create this critical business management document. Sales count. Profits count. But they are worthless if you don’t collect the money those sales and profits generated. u

Ruth King has more than 25 years of experience in the HVACR industry and has worked with contractors, distributors and manufacturers to help grow their companies and become more profitable. Contact Ruth at ruthking@hvacchannel.tv or call 770-729-0258.

HVACR BUSINESS DECEMBER 2020

MARKETING

BY RON SMITH

Your Company is Your Brand

n the early 1980s I came to a realization: The HVACR contracting company I owned at that time was establishing its own brand in our market area. I started to accept the idea that our brand was not the manufacturer’s equipment we represented — rather, it was the name of our company.

The services you provide and the expertise you possess are what the customer is buying — not a product name.

In fact, when we discontinued our relationship with the equipment manufacturer we had long been associated with and had well represented, our customers continued to do business with us, and we continued to add new customers. Shortly after that is when I began to write articles for trade journals and travel around the country speaking at various contractor group meetings, symposiums and conventions. Whenever I made the statement, “Your brand is your company, and it is not the equipment manufacturer you represent,” it resulted in a lot of blank stares. People looked at me as if I were from Mars. At that time, manufacturers were very dominant in our industry, and we relied heavily on them for their services including training, marketing, trouble shooting and inventory financing. Gradually, our industry matured. Many contractors, particularly those focused on the residential retail business segment, are astute marketers. They recognize the value of their local brand (the company) and are continually building it. The better contractors do not totally rely on manufacturers and/or distributors services as they once did. As an example, they have wellstructured inhouse training programs, just-in-time inventory-management procedures, consumer-financing options and operate with a set of proven processes. Manufacturers are, of course, an important and valuable element of our industry. It’s simply a fact that manufacturers have a

less-dominant role. And it’s a fact that many contractors are less loyal to a single manufacturer. As a contractor, your system is your total installation. It is important to understand that the equipment you choose to use is only a component of your system. This results in your installed system being quite unique. A customer cannot invest in your system with any company other than yours. Yes, a customer can purchase the same equipment from any number of contractors, but they cannot get the same system. This principle applies to all of your company’s products and services including accessories, IAQ products, tune-ups and service agreements. The same elements that make your installed system unique only to your company are some of the elements that contribute to establishing and maintaining your company’s brand. To establish a strong local brand, you must start with determining your market area. I’ve learned to define, geographically, three areas:

HVACR BUSINESS DECEMBER 2020

1. The dominant area. 2. The response area. 3. The no-service area. Many contractors attempt to serve too large of an area, resulting in a strong and dominant position in no area. Plus, this causes them to be less efficient. The idea is to be very proactive in your selected dominant area and to be reactive in your response area. When your brand is well established in the dominant area, you expand in a proactive fashion to the response area. You do not perform business in the noservice area. Building a strong presence in your dominant market area establishes your brand. This is achieved with a combination of tested and proven processes beginning with the manner the phones are answered, the appearance of your vehicles, the appearance and behavior of your coworker representatives, the quality of your work and, of course, your marketing. It’s

important

spend

time

determining what I term your company’s portfolio of products and services. Remember, you’re capable of improving a customer’s total indoor environment. There are many products and services that assist in doing so, and you should make them available to your customers. In your marketing efforts always market first to your active customers — those that you’ve done business with in the past two years. It is always easier to sell something to someone you’ve recently sold something else to. Then, market to your inactive customers. Focus on getting as many service-agreement customers as you can. All service-agreement customers are active customers. By focusing your efforts on your dominant market area, you can achieve significant presence and build a strong “share of mind” position. Use targeted direct mail. Take full advantage of electronic marketing by having a good interactive Web site, keeping it updated with meaningful content and by using e-mail. Support your marketing efforts with the highest possible quality of work. Welltrained installers and technicians using dependable equipment and material, the correct tools and testing instruments, and guided by a good set of company processes will assist, significantly, in establishing and maintaining your brand. You’ll know that you’ve established a strong local brand when people thinking of air conditioning and heating quickly associate it with your company. u

Ron Smith is a well-known authority in the HVACR business with more than 50 years of experience as a contractor, franchisor, consolidator and consultant. He is the author of HVAC Spells Wealth, “More and New” HVAC Spells Wealth and HVAC Light Commercial Service Agreements. For additional information, visit ronsmithhvac.com.

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RECRUITMENT

BY STEFFAN BUSCH

Recruiting is a 20-Mile March

ometimes I think we use recruiting as an excuse for poor business performance. It’s kind of like using the weather as an excuse for a bad year in HVACR. Is it really the weather? Or is the weather just a convenient way to cover a lack of planning? In the same vein, do we blame our company’s less-than-stellar results on the fact that “there just aren’t enough good people out there?” I consistently hear that recruiting is everyone’s biggest constraint to growth, but I also don’t see a lot of people actively doing anything about it. Are we serious about recruiting and ensuring we have the right staff levels to grow our business? Or do we prefer to use recruiting issues as an excuse for our lack of growth? You tell me. At Nexstar’s 2019 Super Meeting in San Antonio, keynote speaker and bestselling business author Jim Collins told the story of Roald Amundsen and Robert Falcon Scott, two explorers who competed in 1911 to be the first to reach the South Pole. Both explorers began the journey at roughly the same time, but Amundsen and his group arrived at the South Pole nearly a month before Scott’s group. How did they do it? Amundsen’s group stayed disciplined — they marched an average of 15 to 20 miles per day. Scott’s group, on the other hand, would march many more miles on good weather days, while not marching on bad weather days. Amundsen’s consistency, focus and discipline helped him beat Scott to the South Pole. Because Scott’s team took so long to get to the South Pole, they ran into the colder months and died on the journey back. Recruiting isn’t life or death but ignoring it as a business process to be worked on consistently and with discipline

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Sales count. Profits count. But they are worthless if you don’t collect the money those sales and profits generated. could certainly kill your business. Earlier in my career, I worked as a recruiter for the company that owns Avis and Budget Car Rental. I learned that staffing demands, coupled with employee turnover, meant I would always be recruiting.

recruiting, ensure there is time during the week dedicated to recruitment efforts. If you’re the owner and it falls on you, take an hour or two each day and focus your efforts on posting jobs, sourcing and screening resumes, and making contacts.

Be consistent. Be focused. Be disciplined. Make recruiting a 20-mile march and you’ll find your recruiting efforts will pay off as you gain momentum and get to the staffing levels you planned for the year. u

Steffan Busch is a Recruiting & Retention Coach at Nexstar Network. To learn more, visit nexstarnetwork.com, call 888-240-7827, or email membership@nexstarnetwork.com.

It was a struggle at first, and oftentimes frustrating. I would fill positions, take my foot off the pedal and then find that I had to start over to fill positions. I learned that when I took my foot off the pedal for a moment and slowed down my recruiting efforts, I would lose momentum and basically have to start from scratch when I needed more people. But I found that if I kept the momentum going — stayed persistent in my process and spent time on it, even when not officially hiring — I was able to fill positions faster because I had a pipeline of candidates. Staying active in my recruiting efforts was the key. Much like Roald Amundsen, I stayed consistent with 20-mile recruiting marches, as opposed to doing long marches and then taking time off. The effort paid off later when I was recognized with a company award for my work. A colleague called and asked what my secret to success had been. My response was simple: “Persistence.” Recruiting is not easy. It takes persistence. It requires you to create a process and follow it up with consistency, focus and discipline. Recruiting is a 20mile march. Regardless of the size of your company, or who in the company is the owner of

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HVACR BUSINESS DECEMBER 2020

ESTATE TAXES

PROVIDED BY KEVEN PRATHER, CFBS

Five Big Asset Protection Planning Mistakes – and How to Avoid Them

f you’ve got substantial assets, you may be more likely to be targeted by lawsuits because of your accomplishments. That can be especially true if you’re a successful business owner or highly compensated professional.

• Get asset protection strategies in place before you need them.

Of course, anyone can be sued. And even when a lawsuit is unfounded, as is often the case, it can result in financial loss along with considerable aggravation and stress.

• Evaluate and stress-test your various types of liability coverage.

That’s why it’s so important to create barriers to protect your wealth. Enter asset protection planning— which employs legally accepted concepts and strategies, as well as specific financial products, to ensure a person’s wealth is not unjustly taken from him or her. The goal is to motivate litigants and creditors to settle amicably. Well-done asset protection planning is often an effective way to avoid litigation entirely. Important: Asset protection planning is not about hiding assets, avoiding paying taxes or defrauding creditors. It is a legitimate subspecialty of wealth planning. But asset protection can be a tricky business. Make the wrong move— knowingly or accidentally—and you can easily blow up the wall you’re trying to build around your wealth. With that in mind, here are five major mistakes that we see commonly made when the affluent engage in asset protection efforts—and how to avoid them so your wealth is safeguarded to the greatest extent possible.

MISTAKE #1: Starting asset protection planning after you are aware you can be sued While there are quite a few ways to protect your wealth, they tend to be ineffectual if they’re done too late. Move assets around after you are aware a claim can be made against you—into a trust,

• Make asset protection efforts part of an overall wealth planning strategy.

for example—and you’ll learn a new vocabulary term: fraudulent conveyance. That strategy will likely be reversed by the courts.

• Current or likely litigation

There are two types of fraudulent conveyance:

• Transfers conducted secretly

• Actual fraud involves intent and occurs when someone transfers assets to a person they can strongly influence, resulting in not having any resources to pay creditors. Still, the person “informally” maintains control of the assets. • Constructive fraud is about the economics of the transfer of assets, not the intent behind the transfer. If the asset transfer was done relatively quickly when the person was in a financially distressed situation, it might be considered constructive fraud. Note: When it comes to intent, it is often impossible to know what someone was thinking. But courts do look at so-called badges of fraud, which are circumstantial evidence of actual fraud. Some examples of badges of fraud include:

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• Assets transferred to family members, enabling the person to still “control” the assets The way to avoid this mistake is to engage in asset protection planning as early as possible. Without question, you want to do asset protection planning before you need the protection.

MISTAKE #2: Not having enough (or the proper) liability insurance Part of effective asset protection planning is ensuring you have the right kinds and amounts of liability insurance. Most people could, for instance, benefit from larger umbrella liability policies. They don’t think of this, however, nor do their property and casualty brokers. A further complication: Many property and casualty brokers are limited as to the amount of coverage they can provide because of the insurance companies they work with.

Additionally, we see that many accomplished business owners have substandard general liability coverage. A good number of these business owners might also benefit from higher-quality (and more customized) directors and officers liability coverage. The good news: Liability insurance is relatively inexpensive. After avoiding lawsuits (generally beyond your control), it can be considered the first line of defense in an asset protection plan. Therefore, periodically stress testing your liability coverage is usually a smart move (see page 5). Doing so will enable you to uncover and correct any gaps in coverage.

MISTAKE #3: Failing to approach asset protection planning synergistically with your other wealth planning efforts Comprehensive wealth planning encompasses a variety of specializations, including estate planning, income tax planning and—yes—asset protection planning. While it’s possible to engage in these types of planning independently of each other, there are often considerable benefits of thinking about your planning holistically—so that all the components of your financial life work together in concert, seamlessly. Very often, a holistic approach to wealth planning enables you to understand the trade-offs you are making—as well as any risks that you might otherwise overlook. Example: Gifting to heirs can be a good estate planning solution, but it might be considered a fraudulent conveyance when it comes to asset protection. Reviewing the structure of potential inheritances from your parents is also important. If Mom and Dad have significant assets or still own part of the family business, receiving that inheritance

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in a properly structured trust will protect the assets in the trust from creditors, including divorcing spouses. Your estate plan, done properly, can protect your children from creditor claims as well.

If you are unsure of how well your wealth is safeguarded from frivolous or unfounded lawsuits, consider stress-testing your current plan. Basically, the process of stress testing your asset protection plan is composed of four steps.

By approaching your planning as comprehensive wealth planning instead of piecemeal planning focused on one area, you will often end up with solutions that work best for you and your loved ones— and that are most cost-effective.

The first step involves determining your high-probability significant risks. What is likely to happen? And, if a risk is likely to happen, how detrimental will it be to you? This can be an actuarial calculation, or—as many people do—you can make an experiential estimate.

MISTAKE #4: Not understanding what you did and why you did it If you cannot explain the intended results of your asset protection planning and why you did what you did—at a big picture level, at least—there is a pretty good chance your planning will not deliver the protection you seek. In legal depositions, for example, there is a strong possibility a court will become suspicious and set aside asset transfers if you cannot explain the what and why. Important: Asset protection planning can become quite complicated because of the complexity of a person’s financial and personal situation. You don’t need to be an expert on the strategies and financial products, but you should be able to explain in broad terms the reasoning behind the actions taken.

MISTAKE #5: Failing to work with a skilled professional There are a lot of professionals who profess expertise when it comes to asset protection planning. Trouble is, many of them are not very adept. Some are so-called Pretenders: They know just enough about asset protection strategies to get themselves—and you—in trouble. Others are Predators, who prey on your fear of litigation and deliver ineffectual

Keven Prather specializes in serving the complex needs of business owners through Financial Planning and Business Transition/ Exit Planning. Using a Total Wealth Planning approach, Keven’s objective is to turn complex problems into actionable, understandable and manageable steps, by collaborating with business owners, their family, and strategic partners.” Keven can be reached at (216) 592-7314 or kprather@financialguide.com. www.TransitioNextAdvisors.com.

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asset protection solutions. There are even Exploiters who provide asset protection strategies but at egregious prices and that are often inappropriate to the situation at hand. Each of these three types of professionals will probably end up doing you more harm than good.

protection strategies, contact your legal or financial professional to explore the topic further.

In order for you to get the optimal benefits of asset protection planning that you may seek, you need to work with a true authority in the field—someone who is recognized by financial professionals as an expert on asset protection planning.

Detail signicant high-probability risks

Pro tip: In keeping with our belief that asset protection should be just one part of a larger wealth planning initiative, we suggest working with a wealth manager who has an asset protection specialist on his or her team (either internally or externally).

ACTION STEP If you think you or a family member could potentially benefit from asset

Securities and investment advisory services offered through qualified registered representatives of MML Investors Services, LLC. Member SIPC. www.SIPC.org. TransitioNext AdvisorsTM is not a subsidiary or affiliate of MML Investors Services, LLC, or its affiliated companies. Supervisory Office: 2012 West 25th Street, Suite 900 Cleveland, OH 44113. 216.621.5680. This report is intended to be used for

STRESS TESTING AN ASSET PROTECTION PLAN

Determine level of concern over signicant high-probability risks

Evaluate current asset protection plan

Then the issue is to decide how concerned you are about the risks. This may involve balancing out different needs, wants and trepidations. For example, you might decide to take a major decisionmaking role in a medical company delivering cutting-edge experimental treatments. If you are sure of the quality and viability of the treatments, your concern about lawsuits might not be high. Next, you and an asset protection specialist evaluate your current asset protection plan. An analysis is done, incorporating high-probability significant risks, your concerns and what you have in place to protect your wealth. Based on the outcome of this analysis, you decide on the next steps. Actions can range from not making any changes at all to making dramatic changes. u

Take appropriate action

informational purposes only. Neither MML Investors Services nor any of its employees or agents are authorized to give legal or tax advice. Consult your own personal attorney legal or tax counsel for advice on specific legal and tax matters. CEG Worldwide, LLC. is not a subsidiary or affiliates of MML Investors Services, LLC or its affiliated companies. VFO Inner Circle Special Report By Russ Alan Prince and John J. Bowen Jr.

©Copyright 2018 by AES Nation, LLC. All rights reserved. This report is reprinted with permission from VFO Inner Circle. Unless otherwise noted, the source for all data cited regarding financial advisors in this report is CEG Worldwide, LLC. The source for all data cited regarding business owners and other professionals is AES Nation, LLC.

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The tool’s 360-degree swivel is an industry-first and comes paired with brightest-in-class LED lights to let users not only access tight spaces — but see them more clearly in low-light applications. >> ridgid.com

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The instrument can be used for 60 refrigerants, automatically calculating superheating/subcooling and can be connected to your smartphone/tablet via the testo refrigeration App. >> testo.com

The new YJACK Path Range Extender works seamlessly with the YJACK DEW, YJACK Temperature Clamp, YJACK Temperature Strap, all P51-870 TITAN devices, and the new YELLOW JACKET YJACK VIEW App. >> yellowjacket.com

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20QUESTIONS >>

with STUART AUST

We sat down with Stuart Aust, principal/founder of The Aust Group, a mergers and acquisitions advisory firm for service companies. Aust discussed growing and selling his own service business, the importance of succession planning and working with his sons. 1. What’s your background?

I got started in the service industry more than 30 years ago. I worked for two different pest control companies, first as a service manager, then as an account executive in sales, before starting my own company.

2. Why did you start your own company?

9. What did you learn about leading?

Leadership is not telling people what to do when you want something done. It’s a skill each one of us needs to develop. A lot of times, it’s getting people to buy in … asking your employees to be part of something or think about something and help you make decisions.

The dream was always, as a younger man, to have my own company. So, I could, God willing, control my own destiny. Having had both sides of the service and sales, I felt very confident going into my own business.

10. How do you motivate people?

3. Did that confidence last?

11. How big did your company get?

As I look back, it was really jumping out of my comfort zone. I always had a commission check coming the next month, from the previous month’s sales. So, I’d be lying if I didn’t say it made me a little nervous. But the American dream for some, is to really start your own company and grow it over the years.

4. What was it like in the beginning?

We almost took on anybody for a customer just to have customers. It wasn’t until years later that we started to look at things like a profit and loss statement, balance sheet, et cetera. In the beginning, it was just mixing and matching to have customers and revenue coming in. And it was exciting as much as it was scary.

5. How long before you started to grow?

We had a real paradigm shift at the eight-year point. Prior to that, we were servicing residential accounts and commercial accounts. But at the eight-year point we landed Yankee Stadium as a cold call, and that was our largest account for many years.

6. So, then business really started booming?

Yes, I knew I was on the right track and that the sky was the limit. After Yankee Stadium, we started landing accounts like the United Nations on the East Side of Manhattan, Madison Square Garden, the world-famous Plaza Hotel … and literally, hundreds of Walmart’s, Sam’s Clubs, Macy’s.

7. And it all came from cold-calling?

Yes, most of those were from cold calls. I always encourage business owners to really think outside the box and think big. Someone has to service these accounts; it might as well be you.

8. What’s your management style?

I’ve read a lot of books on leadership. I’ve also made a study of people that were over me in leadership when I was working for the different companies. I always said to myself and to my wife Donna, that someday when I become an owner of a company, I want to treat people the way I would want to be treated. Like the Bible says, “You reap what you sow.” www.hvacrbusiness.com

People are more motivated when they believe in something, rather than when their told to do something and they don’t understand. When we started the company in 1992, it was just myself and my wife Donna. We grew to about 40 employees with more than $7 million annual revenue by 2016.

12. That’s when you sold the business? Yes. We were approached by Anticimex from Sweden, owned by a private equity. They made us an offer we couldn’t refuse.

13. Was that always the plan?

I’d talked about it a lot over the years with my wife and the multiples for selling had taken a dramatic upswing. I’d talk to colleagues at industry events, and I was starting to get the pulse. Some of my friends and colleagues were selling their companies. And they would share with me, and I would inquire.

14. So it was good timing?

Everything in life is about timing. You should look at your business as an asset — and I understand some folks want to pass it on to the next generation. That’s their legacy, and that’s what they choose. I spoke to my wife and our sons and when they heard what the offer was, everyone was in agreement that, “Hey Dad, you’ve got to do this.”

15. What did you do after the sale?

Immediately after I sold, I started getting a lot of phone calls, emails, text messages from people in the industry. My new role at Anticimex was vice president of business development, concentrating on mergers and acquisitions. I did that for two years and then realized there was an opportunity to go into business for myself again.

16. You started another company?

Once an entrepreneur, always an entrepreneur. The phones haven’t stopped ringing since. The Aust Group is an advisory firm for service companies looking to sell their business.

17. What does that mean?

We’re helping companies find the right fit, and that begins with mentoring and helping companies with their succession plan. Some folks want to buy companies. Some have a succession plan down the road. In one year, three years, five years, that they want to sell their companies. So, I work with them on getting their KPIs and metrics in order. So, this way when they bring it to the market, they’d have a company that is going to be sold at maximum value.

18. What’s the main thing a business owner should do to prepare for a sale? The biggest thing is to have a good EBITDA (Earnings Before Interest, Taxes, Depreciation, Amortization) … fancy way of saying profitability. What contributes to a good EBITDA is having good pricing. Pricing of your services is key, as well as recurring revenue. Maintenance contracts are key, because acquirers love recurring revenue.

19. What’s the M&A market like now?

Now is a great time to be selling a company. But it’s also a great time to be buying a company. Interest rates are low. The capital gains are low right now. We don’t know what will happen with that in the future. But it’s a great way for a small company to get bigger. And typically, larger top line companies, companies that have a million dollars in revenue that are run really well, with good profitability, will command more than a similar size company that’s not run well. We see an increase in the multiples being paid for some of the better run companies with solid leadership.

20. What’s it like working with your sons?

It’s been a real blessing. They were young while we were growing the first business. The years went super fast. Now they’re older and able to work alongside me. Three of my four boys work with me full time — Dan, Nick and Chris. The youngest, Michael, is a senior in college and works for us part time in the summer.

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Articles inside

20 Questions with Stuart Aust

Product Focus

Your Company is Your Brand

The Freedom of Franchise Ownership

Recruiting is a 20-Mile March

Leadership Advice from Top Contractors

Wealth Rule No. 7: Have a Sound Collection Policy

Special Report: Low GWP Refrigerants

Industry News

Editor’s Notebook