Contractor survival in 2000

May 12, 2000
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Hvac contractors that succeed are those that outperform their competition, control costs, and manage the risks inherent in the industry.

Let’s discuss a few key areas that affect your company’s profitability.

The greatest asset

How do you determine whether a potential employee will be able to perform the work that you desire?
  •  You need a formal testing program that lets you assess the applicant’s ability.
  •  Routinely follow up with applicants’ references to make sure you are not simply “inheriting” a problem.
  •  Have a training program in place so that employees are able to perform to your standards. Offer training programs that allow your employees to improve and develop new skills.
  •  Make sure there is a system in place that allows you to evaluate the effectiveness of your employees compared to those within their peer group:
  • Tech evalutations should include quality of work (measured in callbacks), productivity, and safety.
  • Estimators should be evaluated based upon an analysis of bid spreads, and comparing actual costs to budget.
  • The evaluation of project managers includes comparing estimates to “actuals” for profitability, scheduling, billing-collection, and client satisfaction.

Like many contractors, Tom Lawson of Advanced Air Conditioning, Bossier City, LA, agreed that “It’s true that you need a system to evaluate your employees. It’s one of those things that you need to have and use.”

However, also like many contractors, “We currently don’t have a system in place, but it is something I have wanted to do,” said Lawson. “I’ve just recently added developing an employee evaluation system to my first-quarter goals for 2000.”

Over time, these evaluations will identify your top performers and those not meeting your expectations. Keep the winners and lose the losers.

Marketing, sales

Successful subcontractors find ways to identify and reach out to their potential clients. This is the essence of marketing.  
  • Managers should determine the general contractors with whom they would like to work. This evaluation should include information about types of projects that generate the highest and lowest gross profit margins.
  •  Contractors can capitalize on their specific expertise by marketing to their niche groups.
  •  Share the marketing plan with everyone in the company so that all employees realize that they share the responsibility for its implementation.
  •  Consider using formal client satisfaction surveys.

Contractor Dave Dombrowski said that his company, Metro Heating & AC, Raleigh, NC, has a series of quality and customer feedback forms that are filled out on every job. All of the data is entered into a database, and Dombrowski can keep track of his employees’ work.

“If an employee has five service calls where a problem occurs with the brazing they did, then I know it is time to pull that technician in for some brazing training.”

Dombrowski added, “We always compare ourselves to our peer groups within the hvac industry to see how we are doing. However, we should be looking at it from the viewpoint of the customer.

“If the accepted best practice is one-day service and we do that, does that make us better than our competitors who don’t make this one-day deadline? Not if the customer is expecting one-hour service.”

Technology

Some research shows that not staying current with technology can cost up to three times more than staying current.

In addition to office/administrative technology, hvac technology must be kept up with.

“If you’re not offering higher technology equipment and systems, you’re surely losing money,” stated Lawson.

Dombrowski pointed out that the changing technology, specifically in areas of diagnostics, will not compensate for the lack of technicians. “It will put a different strain on technicians; those technicians with only basic skills will eventually be phased out.

“The equipment will get smarter and we will have to get smarter.”

Capital, finances

High-quality capital and financial management resources include qualified internal accounting personnel, a solid accounting system, and experienced service providers familiar with the industry.

A good accounting system allows for the proper accumulation of costs, timely billings, and provides relevant data to allow management to analyze the company’s operations.

By analyzing these core drivers of profitability, contractors have the tools to accomplish their 2000 goals.

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