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.

Typical USGS Benchmark

I am technically not a pure geo-cacher. I don’t locate the caches hidden by other geo-cacher’s. But I do enjoy locating the benchmarks placed all across America by the US Geodetic Survey. I go to my geo-caching webpage (http://www.geocaching.com/mark/) and select benchmarks in an area to locate. I then use my portable GPS unit to find and photograph the benchmarks. It is a lot of fun and great exercise as well. And occasionally I get to report back to the USGS that a benchmark is destroyed or damaged.

But what does this have to do with running an HVAC business? On the surface, nothing. But if we dig a little deeper, some wonderful parallels to business emerge. Benchmarks were established by the US Geodetic Survey to help determine the exact size and shape of the United States. They are also used by surveyors to establish boundaries for new roads, shopping centers, schools, residential developments, and any other activity which involves the land.

In business, benchmarks help us determine whether or not a particular business is where it should be in terms of its performance. There are five benchmarks in particular that are helpful to an HVAC business owner. These are the Productivity Ratio, the Installation Volume per Installer, the Service Revenue per Truck, Service Sales as a Percentage of AOR, and the Staffing Balance.

The Productivity Ratio. Found by taking the annual sales and dividing it by the total number of employees, this ratio is a good overall indicator of how efficient a business is. The higher the number, the better. Currently, the average in the United States is $159,244, but this can vary quite a lot from county to county.

The Installation Volume Per Installer. This benchmark is similar to the Productivity Ratio, except you divide the total installation sales by the number of installers that installed the work. This benchmark can vary quite a lot based on your county as well, but the current US average is $283,000.

The Service Revenues Per Truck. Divide the total service sales by the number of trucks used that year. The current US average is under $110,000, but you should strive for $175,000 or more.

Service Sales as a Percentage of AOR. “AOR” stands for ad-on and replacement. If you are not in this market, you should ignore this benchmark. But if you are in the AOR market, divide your total service sales by your total AOR sales. To be healthy, your benchmark should be between 25% and 50%. If you are under 25%, you’re not running enough service to get enough replacement leads to drive your replacement operation. (You’ll have to advertise a lot to make up for it.) If you’re over 50%, your field people are doing small ticket work when they could be doing large ticket work.

The Staffing Balance. Divide all of your direct employees (installers, service technicians, and helpers) by the number of office employees (managers, comfort consultants, receptionist, bookkeeper, and others). This benchmark indicates how many pairs of hands bring in revenue compared to how many pairs of hands consume revenue. Generally speaking, the higher this number the better. But there are qualifiers. If you do repetitive work (like residential new construction), your benchmark should be between 5.0 and 7.0. If you are more into the AOR market, a value of 2.5 to 4.5 is more reasonable. And if you are focused on service, a value of 2.0 to 3.0 is healthy.

For more details on these benchmarks (and others), click here for the article titled “Strategic Performance Measures (in Word or PDF).” You might also find the form “Benchmarking for Success” (in Word or PDF) helpful as well.

Enjoy finding your benchmarks! And if you have questions or comments, please post them in this post or send your question to me using the Contact-Us Form.