'Know Your Numbers' Urges Industry Expert
He also had a lot of other thoughts to share with members on the state of the HVACR industry, as well as some advice about how to survive and prosper.
Abrams said there are two important rules about “knowing your numbers.”
“Rule No. 1 is, if you are in the retail business, count the number of people in your business,” he stated. “Every person should generate $10,000 in revenue per month. If you don’t own that number, take the number of employees down or raise your prices.
“Rule No. 2: Your total labor costs should never be too excessive. I’d prefer 30 percent [of sales] or less.”
The Changing Face Of CompetitionAbrams predicted that the “big box” retailers will have a profound effect on the HVACR contracting trade.
“The day is not too distant when the major retailers will control the replacement trade,” he stated. “Replacement opportunities will be gone in the next ten years, just like when the water heater replacement opportunities went away from the plumbers. Someone else will be doing replacements, and you will be doing service only.”
Abrams, who co-founded consolidator Service Experts with business partner John Young, said the consolidation model has not necessarily failed, citing the example of American Residential Services (ARS) — a major consolidator purchased by ServiceMaster — which does $55 million in revenues in the Houston market. “They’ve made a name for themselves there,” he said.
He cited the example of a United Kingdom utility company that sells energy, HVACR services, insurance, and other offers, noting that the company plans to get into the North American market with a mandate of signing up 10 million customers.
“Your competition is ripe for acquisition because they don’t know what is happening out there,” Abrams said. “The ability to stand alone is becoming much more difficult. Alliances are important. There are strengths in numbers.”
Future PlansAbrams said that Contractor Services is focusing on acquisitions in the Northeastern United States in 2003 in order to establish a number of One Hour™ franchises. While the motto of AirTime 500 contractors is “fixed right or it’s free,” the One Hour franchises will guarantee service within an hour of the scheduled appointment, said Abrams.
“Customers want you now — or at least at the time you said you would be there,” he said. “They want you to do it right, and they don’t want to see you again.”
Abrams said the new One Hour franchises will not be positioned to compete with existing AirTime 500 locations. He projects sales of $50 million to $100 million in One Hour locations in 2003 and expects to take the company public in 2004.
“The industry has seen nothing like this before and probably will not see something like this again,” Abrams added.
He believes that customers will pay for timely service and will remain loyal if they receive good service.
“Get your customers close to you,” he said. “Make it hard for someone else to come in and take them away from you. The future will be in assurances for customers. They will want service and replacement.
“The future is going to fall into customer loyalty. Estimates are that it costs $2,000 to get a customer. Solidify your walls. Become the master of your business.”
Publication date: 04/07/2003