Surviving Being Small
Small HVACR contracting firms have many challenges and options. Staying in business, of course, is always the first challenge. An expression of that challenge is: "When I wake up in the morning, I wonder if I still have my company."
Owners of small contracting businesses walk a very close edge every day of the week. Small HVACR companies need to know their options, payoffs, and pitfalls so that they can grow and move away from that edge into the world of exciting growth and new options.
Many companies start out of one truck. They place stock in the family garage and the company office is in the basement or spare bedroom. To survive and grow in a very competitive world, each of these companies must make a commitment to professionalism. Every contact with a potential customer must be professional and work toward a long-term relationship.
Direction Is CriticalThe direction that you take your company is critical. What is your level and field of expertise? History has shown that small companies will flounder trying to take every job they can get their hands on. There has to be a direction.
There is often the tantalizing "big moneymaker" out there. The thought here is that if you can just get that one big job, that money will make the difference. You spend your nights awake, trying to figure it out. You ask yourself, "Can you afford the tools to make the job easier?" What you don't ask are questions such as, "Why did the big companies pass up this golden opportunity?" and, "What is hidden that makes this job a big loser?"
Does this scenario sound familiar to you? Is it because you know the pitfalls and problems? Now you know that you certainly didn't make money. The toughest question is how much did you really lose? Knowing the full answer will stop you the next time.
Income And Expense BoxesTo figure out what went wrong, let's go back to the first question asked: What is your level and field of expertise? Answering that question correctly will give you the true answer. More importantly, it will make each business day count.
Each day you have one and only one "income box" to fill. The size and volume of the income box totally depends on the number of technicians ("moneymakers") that you have. A great day is when all of your techs and you have worked and charged the full day at your highest hourly rate. On this day, all techs were at 100-percent efficiency. And, the job was 100-percent complete without any callbacks.
You cannot fill the income box when you or your techs are running around in circles. You cannot fill the income box when you are spending days working on one "free" estimate. You cannot fill the income box when your techs are sitting at a job waiting for you or equipment to arrive.
There is also a second box you should be aware of. The bills and costs of operating your business go in this "expense box." Optimally, the income box is larger than the expense box. But, when you are small and in-between seasons, the expense box becomes a huge burden. Long-term loans, new tools, and training all add to the burden.
Face it: That big moneymaker job simply didn't fill your income box enough to offset the expense box. And, you added to the expense box the price of new tools (actual and knowledge) to get that job done. Hopefully, your techs have the knowledge to continue to service that job, too.
So, what types of ideal jobs will adequately fill your income box? In residential service and retrofit installations, too often you feel compelled to lower your price to get more money. You push the expense box out of sight. This especially happens when the weather is just not cooperating. But, then you also have to worry if your techs are cooperating.
Residential service means to know all the types of equipment used in your region. And that's not just the new equipment, but the old stuff that just keeps hanging on, too. Again, your expertise is to know when to repair and when to replace. It is hard to get referrals when the customer can only say, "After I spent a small fortune, that guy then told me I had to replace it." What also must be avoided is this sentiment: "That guy can't fix anything; he just wants to sell you a new one."
Some techs may want to increase his time and not condemn the equipment. Other techs are scared to try to repair and will quickly condemn.
Keep Track To Stay AheadChecking a tech's efficiency weekly is very important also. The formula is simple. Take the time he has charged you against the time he has billed the customer. Travel time is the remainder of the time. Look at it closely. Typical travel times should be less than a half-hour from place to place. Time sheets should show the customer's name, invoice number, address, when the tech arrived, and when the tech left. (See example in Figure 1.)
All techs should be maintaining at least 70-percent efficiency. That still allows for days when travel is impossible. What needs to be tracked are callbacks. (See example in Figure 2.)
Look carefully how one callback drastically decreases the income for that day. You need to know this on a weekly basis. Otherwise, you may think you have a great tech, but really don't. A great tech should average 80-percent efficiency every month. You cannot pick up patterns unless this becomes a weekly task.
If you are running service calls, then do the same for yourself. Once you see the time lost at supply houses or on the cell phone, you can start making better decisions. Are you spending more time talking to your techs than finishing your service call? Are the tech and you losing money at that point?
Remember, the income box has to have more money than the expense box to get you away from the edge and increase your comfort level. If the jobs you are taking are leading to poor efficiency, you must be ready to make changes.
Next installment: For small companies, it is especially important to lock in customers.
Chris Colditz is co-owner of Laco Mechanical Services, Palatine, Ill. She can be reached at 847-358-3300; 847-358-8710 (fax); email@example.com.
Sidebar: Important Phone SuggestionsBefore you get the telephone to ring, you need to make sure you have a business number. Using the home number leads to confusion and lack of company control. Answering the telephone is very often the first contact a potential customer has. You need to make sure a trained person answers on the second or third ring. Answering on the first ring means you are desperately waiting for the phone to ring. Having the phone ring 5 or 6 times means you are too busy or have too few people to adequately handle the potential customer's needs.
Screaming kids, barking dogs, or the radio blaring can be problems that must be resolved when the office is in the home. The person answering the phone should sound calm and cheerful, with good listening skills.
Answering services, with live people, are necessary, especially if you are a residential company. In the middle of the night, cold elderly people don't want to push buttons hoping to talk to someone. If you are a commercial company, business people will tolerate some automation. Do realize that tolerance will be shorter on a hot sultry day when customers are complaining about the heat. It is good business to get someone in the office during that hot spell to answer the phone. At that point, that person should be the coordinator and make sure everyone is being efficiently used.
The person who answers the phone wears many hats. One hat is salesperson. Is the job being described something you can do? Can the sale be made on the phone? There is also the dispatcher hat. You set up appointments and send the techs.
Another hat is emergency coordinator. Is there an emergency that is life threatening? Should the person be calling the fire department from a neighbor's home?
The worst thing that can happen to a customer is nothing. Make sure that first phone call answers the reason behind the call completely or that a deadline has been given when the caller will be given the answer.
- Chris Colditz
Publication date: 05/24/2004