Paying Sales Pros (Part 3 of 3)

The seasoned veteran sales professional is a person who has been selling residential and light commercial HVAC systems for several years. He or she has a good grasp of sales skills as evidenced by a closing rate of 65% or higher.  (Some I know hit 90%, and not on price!)

They are masters of the subtle question and know how to elicit strong emotional drivers from their clients and harness their solution to those drivers so sales are (to a casual observer) very easy. (But they fully understand how complex and difficult selling at such a high level is!)

Such professionals often have the ability Read more…

Paying Young Sales Professionals (Part 2 of 3)

Sales people who have survived their first year (and I use the term “survived” with purpose) will probably go on to become decent sales people. Some of them will even become great (but not that many—maybe 6%).

So how do we pay sales people who are no longer rookies but not yet at that level of experience and skill that the truly great sales people attain?

Clearly, a level of pay that is above that of a first-year rookie is appropriate, provided the sales person is producing at a rate that is better than a rookie. (For convenience, let’s call this sales person an apprentice. They have graduated from pure rookie-dom, but are not yet at the level of a journeyman.)

Read more…

Paying Rookie Comfort Consultants

The other day, I received an email from a territory manager in the Midwest who I have known for almost 20 years. He is one of the sharpest men I know in this business, and he wrote to warmly discuss how my blog posts have been helpful to him and his dealers. I am grateful for that! But he also suggested a topic that has lead to this series of posts—how do you pay sales people, especially beginners?

In the LIBRARY section of this web page, you can download an article titled “Pricing For Commissions.” I explain in that article (click here to download a copy) how to set your pricing to recover commissions so your company nets out the profit you want. But I do not explain in that article how to pay sales professionals in the first place.

Let this first article of a series of 3 lay some groundwork. Read more…

Got Biz Plan?

I am not a big advocate of written business plans— at least, not those 10-chapter MBA thesis projects that a Harvard B-school graduate student would write.  Those tomes are fine for getting a loan or impressing an imbecile to buy shares in your venture, but they are not much use to a small business person for the day to day running of a struggling business.

But I am a proponent of a written business plan for any small business.  It’s just that it needs to be short (no more than 10 pages) and as wordless as possible.  Which is why I have become a fan of Michael D. Ames, a professor of business at California State University (Fullerton). He wrote a paper titled “Rethinking The Business Plan Paradigm” (you can download a PDF copy here. Read more…

The Labor Bugaboo!

The biggest killer of otherwise healthy HVAC businesses is labor that is not under control.  And I don’t mean installers and service techs acting like drug-crazed maniacs.  I mean labor that is not properly and efficiently used by management.

I use a rule of thumb to bring home its horrible cost.  I call it the UT RULE (which stands for the unbillable time rule) and it goes like this:

If you have typical unbillable time in your company, it could be costing you 2,000 times the net hourly pay (with benefits) of your field people!

Read more…

A Contractor’s Birthright

What should an HVAC contractor be able to expect from the sales rep who calls on him or her from his major brand supplier?  In this blog, I will paint a picture of what a superb sales rep should be able to do for a contractor.

First, a superb sales rep (I’ll use the acronym SSR from here on out to save my fingers some wear and tear on my keyboard) knows that you create the pool of profits from which everyone in this business drinks. You, of course, derive your livelihood from what you do, but so does that sales rep and the company he works for.  The factory that supplies that distributor with equipment depends on the profits YOU generate.  The suppliers to the factory (metals, refrigerants, motors, etc.) depend on those profits too. Read more…

Family Members In a Family-Owned Business

Nothing can bring more pride and joy to a parent than a child (mature offspring, not a little kid) who wants to enter the family business and does an outstanding job of making it work.  At the same time, few things bring more chagrin and anguish than a child who enters the family business and bungles it all away.

The first thing you need to determine before bringing a son or daughter into the business is, Does the child really want to be in the family business?  Ask this question of the child some time when you have thicker skin than normal.  I think that many parents foist their family businesses off on their children the same way they force their kids to be involved in soccer, Tae Kwan Do, scouting, equestrian arts, debate clubs, and the like. (A lot of kids in those “mom’s taxi” situations really don’t want to be doing all that stuff.)  If they don’t, have the courage to open your hand and let that little bird fly to some other tree.

Read more…

Is Retail Financing Going Through a Change?

As a consultant, I subscribe to the Harvard Business Review. The HBR is powerful academic tool devoted to exploring business theory. Often, things that become common business practice five years from now appear in the pages of the HBR today. It is, in my opinion, lacking in practical experience, but rich in theory and early analysis of trends.

The latest issue (September 2009) ran a short article on pages 15 and 16 titled “Selling to the Debt-Averse Consumer.” Here is how the article started:

The successful consumer-oriented companies in the coming years will be those that can figure out how to make do without the former life of the economic party: the monthly payer. In his heyday, this kind of consumer asked himself not whether he could come up with the whole cost of a vacation or landscaping or a car but whether he could afford the resulting increase in his monthly bills. Read more…

Why Ain’t There Any Profit?

Each year, I review the statistics on the HVAC trade in America and each year I see the same basic data.  To be sure, from year to year, the numbers change—but only a little.  (The data from the current recession won’t be out for a good while yet, but I shudder to think what it will look like!)

For decades, the net profit after taxes in this trade has run under 3%.  For all the hard work contractors put in, to only keep 3% of what they bill out doesn’t seem fair, does it? (By the way, that is about the average net profit of health insurance companies (3.3%), too; click here for details; not that I am opposed to reform in the health insurance business– I am– but I am not convinced they are making a bundle off their clients. Probably makes more sense to do tort reform, but that’ s another blog!).

The math is simple—and ruthless.  Profit is what is left after overhead and costs are subtracted from sales.  In my consulting practice, I find that most dealers have pared about as much overhead as they can.  (To be sure, there is some waste here and there, but it is often not enough to make a big difference to the bottom line.)  They have also gotten their costs down about as low as they can (to the grief of many manufacturers). Read more…

The Midas Touch: Turning Your Business Into Gold

In a previous blog post, I wrote about not neglecting that 401-K that is your business. I showed how your retirement income needs may well outstrip even an aggressive savings plan and suggested that you not overlook that growth of the most important investment in your life—your business. In this post, I will touch on some ways to build a business that will be worth its weight in gold (well, almost) when you decide to retire.

First, if you are not yet married, consider making your business divorce-resistant (not divorce-proof—there is no such thing).  Consider a pre-nuptial agreement with the spouse-to-be.  And if you are already married, think about putting your business into a trust. Read more…