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.

Perhaps the most touching scene in the movie comes near the end when the 54^th is going to be given the lead in storming an impregnable Confederate fortress, Battery Wagner in South Carolina.  As they march forward to form up for the charge, a white regiment they had earlier clashed with behind the lines gave them a mighty salute and cheer as they realized that these “niggahs” had become their equal in fighting quality and spirit.  Sadly, over half the regiment was killed and wounded in the unsuccessful attack.

And that got me to thinking about our recent election and what it means-that a black man could become president of the United States 143 years after the Civil War was over.  I don’t know whether President-elect Obama is descended from slaves (on his mother’s side) or not, nor does it matter. What matters is that America has finally come to grips with what the Civil War was about.  (Oh, some die-hards in the deep south argue that the War was about “State’s Rights”-but when you peel that onion, you realize that the heart of the argument was about the rights of states-to have slavery as a legal institution!)  I did not vote for Mr.Obama, but he is now my President (or soon will be) and so I will pray for him daily to have wisdom and courage.  May he lead us well in the difficult days ahead.

The exact number of dead and wounded on both sides of the Civil War is unknown, mainly because recording keeping in those days was not exact and most of the Confederate war papers were burned when the Confederate archives building was torched by Confederate sympathizers as Ulysses Grant’s Union army bagged Richmond in April, 1865.  But estimates range from 600,000 to 640,000, with perhaps 3 times that many wounded.  The war lasted just a few days over 4 years-about 1,470 days or so.  That means that the number of Americans (both sides) KILLED in the war averaged at least 408 PER DAY (and it may have been as high as 435 per day).  More Americans were killed in only 10 days of the Civil War than have been killed in Iraq and Afghanistan since March 2002!  Yet no one, including me, would say the Civil War was not worth it.  435 men a day to free 7 million slaves.  Compare that to 4,000 over 6 years to free about 60 million Iraqis and Afghans.

Anyway, as I thought of all this, and the awesome sacrifice those brave men of the 54^th Massachusetts made at Battery Wagner (and all the other regiments, black and white, who fought for the Union), my heart is stirred by their courage and willingness to give the last full measure of devotion.

Because of them, and millions more like them in our other wars-the Revolution, the War of 1812, the War with Mexico, the Spanish-American War, World War I, World War II, the Korean Conflict, Viet Nam, the 1992 Gulf War, and today’s conflicts, just to name the major ones-I can live a free man today in the best nation on the face of God’s wonderful earth.

Veterans, I salute you and thank you immensely!

This week, if you get a chance, buy lunch for a Veteran.  (When I travel, if I find soldiers in the airport, I always buy their lunch or dinner.  They protest that I don’t have to do that, but I do anyway, and they really seem to enjoy it.  The high point so far was when I bought dinner for a World War II vet and his wife at a Cracker Barrel in New Jersey 2 years ago.  He wept, and I wept as I thanked him for his sacrifice.)

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!

The key to thriving in a recession is to understand your customers better than ALL of your competitors.  With this understanding, you will be able to deliver incredible levels of value.  It is these higher levels of value that are the key to your survival-no, your success-in a recession.  Higher levels of value allow you to charge what you need to charge to continue as a strong business.  They also slam the door on your value-less competitors.

I have attended many classes on HVAC sales techniques over the years-heck, I have even taught many of them myself.  As I have matured (a graceful way of saying “aged”), I have seen a steady evolution in my thought processes and practices in the area of sales techniques.  I have also noted that in most cases, sales training has not kept pace.  Too many sales courses teach good stuff, but not the most important stuff.  They teach good stuff like how to ask good questions, how to do a thorough home survey, how to present a solution (or solutions) to the prospect and so on.  Most of the courses I have attended or know of do these things, and most (but not all) do them very well.

Yet most of them leave the student with the same worn bag of tricks-the “magic questions”, the “irrefutable closes”, the “sure-fire scripts” and so on.  As a result, graduates of most sales training go back into the field well-armed with tools, but are so inwardly focused on using those tools correctly that they lose sight of the most important part of the sales process-the customer’s way of seeing things, of valuing things, of making decisions.

You cannot pick up all the signals the customers is sending you if you are focused inwardly on what YOU are going to do next and how you are going to do it.  And by the way, “Did I do it the way I was taught in class?”  You can only pick up the signals (visible and invisible) by focusing on the CUSTOMER.

Are you aware that customers in their routine conversations with sales people spill out a whole pile of cues on the values they hold, how  they sort their needs and wants, and how they reach decisions to satisfy those needs and wants?  It can be something as simple as the darting motion of the eyes in conversation, or the use of certain types of words.  It can be as complex as asking the customer specific questions to help you unpack their decision strategies.

Decision strategies are like the combination to a combination lock.  If you know the combination, you can dial it in and presto!  The lock opens. If you don’t have the combination, you can sit there all day spinning the knob until your fingers grow numb-and you won’t open the lock.

So the thing that I now teach in my sales courses is how to do just that-how to unpack a customer’s decision strategy.  Once you know how to do that, you are in a position to take the other skills you learned (like how to ask questions, how to design a good solution, how to present, and so on) and customize them to that particular customers decision strategy.

Here’s the neat thing about this: when you know a customer’s decision strategy and then present your solution the way he or she is “wired”, they don’t hear YOU talking-they hear THEMSELVES thinking!  I don’t know about you, but when I do my “self-talk”, I never argue with myself.  I consider all the options and make a decision because it is MY decision and I always accept what I tell myself.  (Dangerous sometimes, but true of all of us!)

Customers raise objections in sales calls because the sales agent has not unpacked the customer’s decision strategy.  The customer hears the SALES AGENT’S arguments, not their own.  If the sales agent could couch the solution in the customer’s decision strategy, the customer would have nothing to argue with.  Is it possible to have objection-less sales calls?

You bet!  Go to my “Services” page and click on the “Contractor Training” link, then scroll down to the last two courses listed:  “Communication Styles: A Beginner’s Guide to Neuro-Linguistics”, and “Selling More by ‘Selling’ Less.”  The course on Communication Styles is a general course to help managers get better results out of their people (or spouses to have a better marriage, or friends to get along even better, and so on), while the Selling More course is tailored specifically to sales situations.  These courses are only offered through local distributors, so if you are interested in attending one, have your distributor contact me.

Or, check back on this web page in the next few months as I will be publishing all my course material in the form of “learning kits” you can purchase and study at home, learning the skills you would learn in one of my “live” seminars.

Stay tuned, Sales Fans!

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?  Only 14%.  That means he would have to sell a $5,000 job for $5,700.

That may seem like a tall order until you consider one of the factoids about the market:  on average, 24% of the people shop on price and on price alone (low bidder wins, period).  Another 17% shop on value (they’ll pay more to get what they is valuable to them).  The other 59% can go either way.  And research shows that they end up buying in the segment the sales person comes from.  If the sales rep is a price-driven person, they’ll buy on price; if the sales person promotes value, they’ll buy on value.

The long and short of it is that to some people the market is price-driven.  But to me, 17% plus 59% (or some 76% of it) is NOT!  Those are the people I want to sell to. And to do that, I need to know how to sell a strong value-proposition, one my customers want.  If Kamikaze Ken can figure that out, he can probably raise his prices 14% (or more), stop trying to sell to that 24% who wants low-ball prices all the time, and make as much as he did last year on 30% less work this year.

Kamikaze Ken could either offer the same old wagon full of bargain-basement junk he has been offering all these years (and try to get 14% more for it), or he could learn how to put together a power value-rich package and sell it for a higher price than he does now-perhaps 25% or 30% more, not just 14% more.  Most contractors know that 18 SEER equipment can fetch 25% to 40% more than 13 SEER equipment, yet most are afraid to  offer it lest they lose a job to a lowball competitor.

But let’s get really drastic for a moment.  What if this recession gets so deep that Kamikaze’s sales drop by 50%? Could he survive such a disaster?

By using the spreadsheet I reference above, when I set up the Volume input for -50%, with no other changes, Kamikaze ends up losing $106,500-this would surely bankrupt him.

But I can also simulate the effects of selling the top of the line and controlling costs and overhead.  If I enter +15%  in the Pricing input cell, -5% in the Costs cell (simulating better job design and less waste, since the spreadsheet already reduced direct costs when I reduced the volume), and reduce overhead by 21%, I can get Kamikaze back to where he was before the recession hit.  But cutting overhead by 21% is a huge job!  What if Kamikaze can only cut overhead 10%?

Then he ends up losing $13,500 instead of making $15,000. But who says that 15% is all the price increase Kamikaze could get away with?  Suppose he offers the best product he has to offer and can realize not only a gain in sales due to a gain in the costs of equipment, but also a gain in sales because he can sell a value-rich proposition for more margin dollars than a low-value package.  Suppose Kamikaze could get 22.5% more in sales due to a product shift and a sales practices shift?  Is such a jump possible?

Many dealers who have learned how to do just this tell me that it is not only possible, it is EASILY doable.

Ah, but can Kamikaze Ken learn how to sell like that?  THAT will be the topic of the next blog.

Stay tuned, fiscal fans!

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?

The Flight of Kamikaze 126

That, in turn, led me to imagine a scenario involving a hypothetical contractor, who I will simply call Kamikaze 126.  He could be any contractor in American right now, but I will pretend he is an HVAC contractor trying to survive these turbulent times.

I want to walk you through a typical panic scenario and I’ll be using an Excel workbook I wrote that I call “The Projector” to do the math. (If you’d like to download a free copy and follow along this post, click here.  It is part of my Fiscal Fitness workshop software.)

I begin by setting up my workbook for Kamikaze 126’s financial data-sales of $750,000, against cost of sales of $450,000, with overhead of $285,000 (leaving only $15,000 net profit-about 2%, a very typical, if not sad, figure for today).

Kamikaze 126 thinks, “Man, this economy is tanking!  I’m running into bids from my normally sleazy competitors that are getting ridiculously low, even worse than normal.  I’m losing my butt on bids lately.  I’ve got to stay competitive. I must lower my prices.  Gee, but how much?”

At this point, Kamikaze 126 rubs his chin and ponders this life-changing question.  After an agonizing few seconds, he settles on 10%. He’ll cut his prices 10%.

I simulate this by entering a negative 10 (-10) in cell F20 of the “What If” sheet in the workbook.  I then scroll down to see the results.  As it turns out, Kamikaze would go from a weak $15,000 net profit to a loss of $60,000!!!  At this rate of blood-letting, Kamikaze 126 must sell almost 45% more work (or a little over $1 million) just to get back to making the $15,000 he made for sure last year!

Do you honestly think that would happen?  Do you really think that a 10% cut in prices would bring in 45% more work in an economy where over half the HVAC contractors are flying their planes into the ground?

But this is what will happen to Kamikaze 126 because he let his heart rule his business and not his brains.

In the next post in this blog series, I’ll dig a little deeper into these “what if” scenarios to see if we can build a survival strategy for these times.

Please be sure your seat backs are in their full upright position and that your seat tray is up and in its locked position.  Hang on: wild turbulence ahead!

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). I am referring to the traditional buying patterns of the American consumer.  Many surveys and studies over the last three decades paint a fairly consistent picture about how the buying population is distributed.  About 24% (plus or minus, it depends on whose report you read; a good source is here:  www.winninger.com) are cost-focused buyers.  They buy only on price.  If you are not the cheapest vendor of what they want, you won’t get their business.  Another 17% (again, plus or minus, depending on the source) are value-focused buyers.  They buy based on value, on what the product can do for them, not on its price.  (Of course, price is ALWAYS an issue, but with this group, it is not THE issue.)  The balance of the population-some 59%– can go either way.  Here is how that looks in a pie chart.

The research further shows that those in the “Either” slice will END UP IN THE SLICE THE SALES AGENT CAME FROM.  Did you catch the significance of that?  If the sales agent comes from a price-driven business (and in the HVAC trade, we know that a LOT of these business are price-driven, aren’t they?), he or she will make a presentation to the prospect  based on (what else?) PRICE.  “We won’t be undersold!”  “We have the best prices in town.”  “Bring us your best quote in writing from someone else and we’ll beat it.”  Yada, yada, yada, ad vomitorium.  If the prospect buys, what are they buying on?  Price.

The sales agent who comes from a value-driven business (and there are quite a few of them in the HVAC trade too) will present to the prospect a value-driven story.  If the prospect buys, it is because of the value they perceived the sales agent could deliver.

(For a script I developed when I was in retail sales to help me weed out the price shoppers up front, click here.)

Look for a moment at the two “committed” slices- PRICE and VALUE.  Which of these two slices is larger?  PRICE is, by a 24 to 17 ratio, or roughly 60:40.  In other words, contractors tend to shake out into these slices like the market at general does, so we would expect a significant majority to be price-driven.  (If you talk to some contractors, they swear that EVERY dealer in their market is in the PRICE slice!)  So to the average HVAC contractor, the market sure looks like it is PRICE driven, doesn’t it?

Yet to me, the market favors value by a ratio of 76% to 24%- the EITHER slice can go into the PRICE or VALUE slices depending on where I, as a sales agent, come from.  So to me (the eternal optimist), the glass is ¾ full- ¾ full of value-buyers, not price shoppers!

But that may all be changing right now.  I have seen gathering evidence (but as yet no formal studies) that suggest that in this uncertain time, more and more homeowners are playing it cautious when it comes to major expenditures, and that includes replacing, upgrading, or repairing their home comfort systems.  I work closely with three major manufacturers, all of which promote a strong value-driven line to their prospective customers.  All are reporting that they are seeing growth in their better model lines and attrition at their lower price lines (which, we assume, is going to the brands that are aggressively pursuing a price-driven strategy).  These three manufacturers find that their shares of market are staying strong, but changing in composition.  I don’t have any dealings with manufacturers who do not offer a strong value-added line, so I don’t know how they are faring in this market, but I would not be surprised to find them being hammered from both ends- losing their high-end sales to the high-end product leaders, and losing their low-end sales to the low-price leaders.

As a result of this caution among homeowners, we may be seeing growth in the “PRICE” slice of the chart-a trend that I certainly hope is a short-term phenomenon.

It may take some time (a year or longer) for the American economy to right itself in the tempestuous waves of its own making, but eventually things will settle down again.  History teaches us this.  But in the meantime, what is a value-driven contractor to do?

First, realize that more than ever, people are going to be reluctant to part with their money-cash that is in the bank today could evaporate if a job is lost, a company down-sized, a manufacturing plant moved overseas.

Second, realize that more than ever, those who esteem value are going to want more value than ever for their dollars.  Those who have the discretionary income to buy the best are still going to buy the best.  But they may be more discriminating in their selection process.

Third, realize that no matter what slice a prospect occupies when you make the sales call, they are going to want to get the best deal they can for their hard-earned money now more than ever.

So, here is my advice.

1.       Be willing to offer what the Cajuns call lagniappe. Lagniappe (pronounced lan’-yap) is like the “baker’s dozen”- giving your customer 13 donuts when they purchased 12.  It is going beyond what is expected and giving the customer something they did not ask for but would be pleased to get.  For the HVAC contractor, this may mean including extended warranties as part of the base price of a deluxe system (I would NEVER make an extended warranty part of the base price of a middle or low-tier system!)  It could mean including two inspections of a new deluxe system in its first year or two of operation (at no additional cost to the buyer).  It could mean including a setback thermostat in lieu of a standard thermostat in a deluxe system proposal (again, at no additional cost to the buyer).  Over the years, bakers have found that pitching in 8.3% worth of goodness as part of the customer’s transaction is good for repeat business and word of mouth.

2.       Learn how to better position the value you bring to the customer and how to do this in a way the customer can understand and get excited about.  This will probably mean a high-quality selling skills school (3 or 4 days minimum!).  Most of the leading manufacturers have such programs.  (One of the best was started by a friend of mine, Steve Howard.  Click here for more details:  www.nopressureselling.com.)

3.       Learn how to establish that usually the cheapest product you sell is the TOP of your line! In most cases, once you do the math on maintenance costs, operating costs and the other variables of system ownership, the best you sell (which should include extended warranties as part of the base price, not as an add-on) will be less to own over its lifetime than the cheaper lower-efficiency stuff that is available to the homeowner.  One contractor I know in Texas (Lawrence Richie of Platt Heating, http://www.grapelandchamber.com/members/default/ index.php?MID=33) takes just this philosophy, with the result that in a small farming community in east Texas, he enjoys selling the best product he has over 90% of the time!

An old proverb says, “May you live in interesting times.”  Well, we certainly do, Ollie!  How will YOU cope with the new market forces?

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?

36 years ago, I chose to be yoked to her, thus capping a relationship that began in 1951. (This ought to be in Ripley’s Believe It Or Not. We were actually born in the same hospital one day apart. In fact, the same doctor delivered both of us. While our mothers enjoyed separate rooms in the maternity wing, we became good friends in the hospital’s nursery.) We literally knew each other all of our lives, having attended the same school from fifth grade on. But it was not until we were both in college (attending schools 200 miles apart) that we began to see each other in what became a serious relationship.

This remarkable woman has borne me two children, and by them, two grandchildren. She is my helper, my counselor, my biggest cheerleader, the anchor of all my affections, and my best friend. Somehow, she manages to juggle her time between domestic engineering, helping care for the grandchildren, walking 5 miles a day, and putting up with me!

Last May, she retired from a lifetime of teaching public school. She is enjoying her retirement, and like a bottle of fine wine, she is getting better with age.

Because she is central to my life, I can look forward to my future with peace, confidence, and joy. I am grateful to God for bringing this awesome woman into my life.

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 cat 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 $137,000, but this can vary quite a lot from county to county. If you would like the adjustment factor for your particular county, use the Contact-Us Form, and I’ll e-mail it to you.

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 $243,000.

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.

So as we say in the uniquely “wild west” cowboy town of Cave Creek, Arizona, “Sit back, kick up yer heels, push yer hat back on yer head and gab a spell.”  Life is good!  Let’s explore it together.