Tribue to Kermit: It’s Not Easy Being Green

I am going to do something in this Blog post that may brand me as a heretic, but here goes:

I AM GROWING WEARY OF THE “GO GREEN” MOVEMENT!

There. I said it. And I feel better for having said it.

But why did I say it? Because I have seen this sort of marketing fad before. I was a freshman in college when the first Earth Day took place (April 22, 1970) and I recall the silly hype about how we were killing the planet back then. Nothing has changed. We are still talking silly hype about how our chemicals, our buildings, our cars, are killing Mother Earth. (You want a shock? Google Isaac Asimov’s essay, “The Nightmare Life Without Fuel” and read it. Then note when it was written.)

I am an amateur astronomer. I run around with people who are astronomers and geologists. And contrary to what people with a doting press that fawns over every word they say would have us believe, the scientific community as a whole is NOT buying into global warming as a result of human activity. (The term is “anthropogenic.”) Read more…

Four Nights in the Sonoran Desert

In late March of this year, a very good friend from Kansas City, Fiske Miles (http://www.fiskemiles.com/sitemap/sitemap.php) came out to Arizona to put the 22-inch Dobsonian telescope he recently built to a dark sky test. (The skies here in Arizona are much darker than those in the Midwest, although the air is usually much more turbulent.

In astronomical parlance, we would say that the “seeing” in Arizona is moderate to poor most of the time, but the “transparency” is excellent. In the Midwest, the opposite is true-usually pretty good seeing and moderate transparency.) Fiske’s web site has a wonderful history of building his telescope. (To put things in perspective, if Fiske had built this scope 150 years ago, it would have been the largest telescope in the world.)

Fiske is a true “renaissance man”, a man of many talents, ranging from cabinet making to birding to astronomy to gourmet cooking. He has a voracious appetite for books and is one of the most intelligent and well-spoken people I know. Read more…

Service Agreement Pricing

As you can tell from my blog history, I don’t blog a whole lot. I am usually too busy every day running my business, being a grandfather to two great grand kids, being active in my church, and being president of the Saguaro Astronomy Club (and observing the heavens every chance I get) to blog much. So when I do post a blog, it is usually because either I (a) have some extra time on my hands and don’t want to hike through the Grand Canyon, or (b) I have something that may be of interest to you.

This is a Type B blog.

Many HVAC contractors want to sell their businesses some day, but most have no idea how to go about doing that. One thing is for sure, though– a well-developed customer database is worth more than your building, fleet, and inventory (in most cases, anyway).

So what constitutes a “well-developed customer database?” One thing it is NOT made of is a shoe box full of job cards. You may have installed 20,000 jobs over the life of your business, but the big question is, How many of those folks have you seen in the last 24 months?  THAT’s the measure of your realistic customer database. I doubt if it would be 20,000. (If a typical service tech can see five customers a day and works 240 days a year– wishful thinking, maybe!– he could touch 1,200 customers a year. Multiply that by the number of techs you have, then multiply that result by 1.5 and you probably have your 2-year “customer touch” count. The 0.5 deduction allows for customers you see very year for tune-ups and the like.)

If those customers are not regularly seen, they are vulnerable– vulnerable to another contractor with an aggressive marketing campaign. So how can you keep your customers tied to you? (And make them of value to a prospective buyer?)

With service agreements. Research I did in the 1990′s, and published in the magazine Contracting Business (Dec 1993, May 1994) and The HVACR News (Nov 24, 1997 and Dec 1, 1997) showed that an undeveloped customer database is worth maybe ten cents a name, while a service agreement base is worth at least $75 a name. Adjusting for inflation, today I would say an undeveloped list is worth $0.15 a name while a developed database is worth at least $110 a name. If you had 8,000 customers in your database, the difference in value between an undeveloped list and a developed one would be $880,000! Holy snowballs, Batman!

But one of the biggest barriers to contractors getting into service agreements is pricing them. That is why I am please to announced I now have available on my site an Excel spreadsheet that takes the guesswork out of pricing them. It runs on Excel 2003 and all later versions and lets you calculate prices for residential and light commercial jobs. Both types of jobs let you price inspection-only agreements, maintenance agreements, and full coverage agreements. The commercial sheet is for DX cooling systems only (no chilled water units, please), but can handle almost any size DX job.

To visit the page or order a copy,click here.

Salute to Our Veterans

On Veteran’s Day (Nov. 11), I was sitting on the sofa after dinner relaxing and decided to see what was on the TV.  I came across my favorite Civil War movies, Glory, with Morgan Freeman, Denzel Washington and Matthew Broderick.  One of the most accurate Civil War movies of all time, it is the stirring account of the 54^th Massachusetts Regiment, one of the first all-black regiments in the Union Army.  Broderick (as the young idealistic Colonel Robert Shaw) takes on the task of molding a bunch of misfit, uneducated and undisciplined freed slaves (and free blacks) into a respectable regiment.  The movie has many wonderful plot twists, and how Morgan Freeman and Denzel Washington failed to win Oscars for their performances is beyond me.

Read more…

The Kamikaze Contractor, Part 3

In the first two posts in this thread, I introduced you to a fictional contractor I called Kamikaze Ken.  If you have read those posts, you know how he got this name.   And if you have not read them yet, now would be a good time to browse them before going on.

I promised in the second episode to show how Kamikaze Ken could not only survive in a recession, but do very well.  I will keep my word in this episode! Read more…

The Kamikaze Contractor, Part 2

I want to continue the blog I started last month when we looked at a hypothetical contractor who I named Kamikaze Ken.   (Click here to retrieve that blog post.)  In Part 1, I simulated a typical reaction to a recession market by having Kamikaze Ken cut his prices 10%, to discover that under those conditions, he would not survive the recession.

Now let’s run another scenario, using the simulation software I introduced in Part 1 (click here to download a free copy).  I’ll reset Kamikaze Ken’s pricing on row 20 to 0% and this time, simulate a drop in business- let’s say, a 30% drop in business.  (To do this, I type a minus 30 in the Volume column on line 20.)  At first glance, Kamikaze Ken loses $57,900.  So the question becomes, all things being equal, if his volume drops 30%, how much would his prices have to rise to net out $15,000 on the work he does get?  (That is, what offsets his drop in volume so he makes the same profit he did last year?)  The answer?  Read more…

The Kamikaze Contractor (Part 1)

Yesterday was September 29, 2008.  It was a bad day for Wall Street (the largest single point drop in its history and the 17^th worst percentage drop).  This all unfolded as the House of Misrepresentatives failed to pass legislation designed to “save” the American economy from doom and gloom.  I watched in sadness, then disgust, as members from both political hack groups-excuse me, Parties-paraded to the microphones to blame the other, like 3^rd grade school boys in a chest thumping contest on the playground.  I imagine Nero is laughing his head off right now!

As I was listening to the events unfolding on a local radio program, an air conditioning contractor called in to say that his suppliers were freezing all open account activity for the time being and that this was going to really hurt-maybe even destroy-his business. He said he had six homes waiting to be finished, each with roughly $15,000 worth of equipment and ductwork in them, and that he did not know now if he would ever be paid by the builders since their construction loans were also frozen.  My heart went out to this guy, and his call got me to thinking.

How does a contractor survive in times like these?

Read more…

Shifting Sands?

The desert of the American Southwest is a beautiful place to visit (and a tough one in which to live, given the heat).  But to me, it is home, and an inspiring home at that. It has a stark beauty, a testament to the harsh reality of the titanic struggle for survival that is played out every day (and night) in this stunning ecosystem.  On many a weekend camp out to the desert for astronomy time, I have marveled at how plants, insects, tarantulas, scorpions, and various snakes can survive in such harsh conditions.  (And I am glad that sleeping in the back of my SUV keeps them and me safely separated!)

I am also amazed at how much dust and sand the desert floor has accumulated over the millions of years.  The dust gets everywhere-and I mean EVERYWHERE-while the sand abrades and rubs away at rock and cars alike.  In some places in the American Desert (such as Great Sand Dunes National Park in Colorado) the sand has accumulated to several feet of depth and forms majestic and constantly-changing dunes.

With the recent assault on American’s financial system, we may be seeing some shifting in the American economic sands too, and this shift could impact air conditioning contractors (along with every other American business). Read more…

Losing the Luster

I was consulting with a distributor client the other day. In the process, I interviewed each territory manager to gauge their depth of understanding of their jobs and assess their ability to help their dealers grow and prosper.

This distributor is a growing operation with three pretty good territory managers, one of whom I have had the honor to teach in a territory manager school run by the manufacturer the distributor represents.  He is a good man, sharp as can be, and has a great future ahead of him.  His dealers are fortunate to have him in their corners.

In our one-on-one session, he made a statement that nearly knocked me out of my chair. He said, “Wow, lately, I’ve found it harder and harder to sell our company’s value-add!  Price is becoming a bigger and bigger issue each week!”

If you are a territory manager for a distributor, you may have felt the same thing lately.  If so, perhaps the thoughts I shared with this territory manager’s distributor may inspire you to reframe your challenge.

What Every Sales Professional Sales

It does not matter what you sell-air conditioning equipment, investments, sweet corn, houses-sales professionals don’t sell things.  They sell feelings.  Any person who is going to buy something wants to obtain a thing that will do what he or she hopes it will do.  But at the core of the process is the feelings of the buyer-the buyer wants those feelings to be enhanced, to be improved, by the transaction.  And this is true of air conditioning contractors too.  Most territory managers don’t understand that.  They think their dealers are gruff people, like charging bulls in an Irish crystal store.  But even the crustiest contractor has, at the core of his buying decision process, a strong mix of feelings that must be properly handled for him or her to feel good about doing business with a distributor.

(A counterexample can help illustrate this point.  How often have you bought something from a sales person you did not trust, from someone you did not feel good about? If you went ahead and bought the thing anyway, you probably regretted it later, right?)

When a territory manager asks good questions to get to the emotional roots of a dealer’s motivation, he has the information he needs to align his value-add proposition to the dealer’s emotional needs and establish a solid basis for a strong relationship.  When a territory manager fails to find the emotional roots, his value-add proposition loses much (if not all) of its power.

Here’s a simple but effective example to show the point.  Suppose you had a pet goldfish that became ill.  Concerned, you take the little fellow to a veterinarian and she says you need to put three drops of a special medicine in his water every day for 10 days.  You are relieved and ask how much the medicine is.  The vet says $800.  You do a double-take!  A new goldfish would cost less than $10.  Sure, you like Elmer, but do you care that much about the little piscine?

But if your son or daughter developed a rare form of cancer and the cure would cost a million dollars, you would not hesitate five seconds to start the cure, would you? There is a whole lot more of emotional investment in a child than a goldfish!

When a territory manager forgets this, he or she runs the risk of making his offering of products and services irrelevant to the contractor. The value-add loses its luster.  Price then becomes more of an issue, a bone of contention.

Learn how to ask powerful questions to get to the real root, the emotional root, of a dealer’s cluster of problems.  You may find the books linked to these titles to be helpful:

• SPIN Selling by Neal Rackham

• Escaping the Price-Drive Sale by Tom Snyder and Kevin Kearns

(But be warned-the techniques taught in these books are immensely powerful, but not easy to master , at least at first.)

You may also find some of my workshops (click here) to be of help to you as well.

I’d be interested in hearing from you if you are a territory manager struggling right now with promoting your value-add.  What obstacles are you finding in your way?  Where do you want to take your relationship with your accounts?

Benchmarking for Success

(Revised 11/27/09)

I have several hobbies: astronomy, the American Civil War, music, and geo-caching, to name a few. As you can tell, I have set up categories for some of these interests and will be posting thoughts and ideas to them as the Muse stirs me. Today, however, I want to use my experiences in geo-caching to express some thoughts about managing an HVAC business. Read more…