ACHRNEWS

Premium Profits Fuel Financial Freedom

May 15, 2006
Buckle up, hold on, and get ready for the reality ride of a lifetime. HVAC contractors are facing many new challenges in the current market. Three of them, however, stand to impede contractor progress unless sound business tactics are employed to overcome the roadblocks.

Unfortunately most buyers have less money. The minimum monthly payment for Americans who carry credit card debt has doubled. This has created a pothole in buyers' budgets and contractors' sales. Less money and rising interest rates keep millions of homeowners from tapping their homes' equity to fund projects like better comfort.

Another roadblock is the rising cost of basic equipment. The price of HVAC equipment materials and components has skyrocketed. The copper in a penny is worth nearly twice its face value. Steel, aluminum, and transportation costs aren't at a peak, they're at an all-new average. This fact has inspired orange barrel slow downs in business and strained contractors' budgets.

To this witches' brew of challenges stir in the fact that everyone sells high efficiency. Once a high-margin component, 13 SEER is now an entry-level commodity. The business fast lane has just been closed due to construction.

These are the ingredients necessary for one of the most mind-numbing changes in the history of the HVAC industry. Change, however, always creates a crossroad of risks and opportunities. One new road is the path of least resistance and it is often the major reason small business failure rates are so outrageously high. Another path requires good planning and the right process, but with enough passion and persistence, anyone can follow it to the prize at the end - financial freedom.

THE KEY TO FINANCIAL FREEDOM

The first step in this profitable journey is for contractors to ask themselves if they want to reach financial freedom while they are still young enough to enjoy it. It is impossible to arrive at financial freedom selling on price and trying to make it up in volume. It has been tried for centuries and it doesn't work. The most direct path to financial freedom is selling premium products and services. About 80 percent of all HVAC contractors sell in the range of price only buyers to mid-tier buyers. Less than 20 percent focus their efforts directly on selling premium comfort to people who can afford it. Companies who focus on premium comfort have less competition and make more money.

When done correctly, premium comfort sales produce premium profits and maximum customer satisfaction. Without premium profits, contractors can't afford to hire the best people, purchase the best tools, employ the best techniques, or offer the best training. They also can't provide the type of service that consistently exceeds client expectations. Exceeding expectations is the key to repeat business, referrals, and the profits to grow a business and fund its net worth.

Premium products also contain the unique benefits needed to produce premium comfort. As the level of comfort rises, so does value. Value is what determines price and allows profits. About 80 percent of buyers are willing to pay more money to be more comfortable, however at the premium end of the comfort scale, only about 50 percent can afford it. The groups most likely to buy premium comfort are wealthy buyers, high-income buyers, and lifestyle buyers.

WEALTHY BUYERS

Many wealthy buyers don't appear rich. A large number of them drive older cars, buy clothes off the rack, and live in middle-class neighborhoods. Small business owners, including many in this industry, comprise over one half the new money millionaires.

Most wealthy buyers made their money by investing, not spending. Contractors must be ready to show how premium comfort is a wise investment. Reviewing how energy savings keeps putting money in their pocket, and detailing how precise indoor air quality and humidity will protect their investment in antiques, art work, and fabrics can be most beneficial.

HIGH-INCOME BUYERS

This group has amazing buying power and uses it freely. They want their next comfort system to be profoundly better than the old one. When necessary, contractors shouldn't be afraid to replace all the ductwork, add zoning, and offer the best they've got. Contractors also shouldn't be surprised if things like appearance, style, and snazzy features that buyers can show their friends are what make the sale.

High-income buyers do pre-purchase Internet research. Most contractors are unknowingly disqualified because their Website is clunky, boring, or doesn't answer some of their basic questions. Contractors without a Website most likely don't stand a chance with this group.

LIFESTYLE BUYERS

This group's buying power has been a best-kept secret. If a lifestyle buyer wants something strongly enough they'll find the money, even if it means spending less in other areas. For the majority, their kids are gone, they've reached peak earning years, and they have a strong desire to be comfortable. These are the baby boomers.

Boomers grew up with great expectations and any business that can exceed these is on its way to making a premium sale. They need a lot of questions answered before spending their hard earned money. Why should I buy it? Why is it worth that kind of money? Why should I buy from you? They also demand customization. Without designing around their requirements it's impossible for them to get exactly what they want.

A contractor would be hard pressed to find a lifestyle buyer who enjoys being manipulated. If asked to choose one of three package deals, savvy buyers know they're being maneuvered toward the one in the middle. With this approach they know they probably won't get everything they want and will most likely pay for things they don't want. It is impossible to consistently sell premium comfort using a logical-based good, better, best approach. Premium buyers use emotion, not logic, to make their most important buying decisions.

FOLLOW THE ROAD

Contractors must choose which new crossroad of change they are going to take - financial freedom or financial failure. Choose wisely.

Sidebar: The Scoop

  • The average home in America is 32 years old.

  • According to Harvard University, "As income rises, so does spending on home improvement projects."

  • Eleven percent of households with incomes of more than $100,000 account for 25 percent of all remodeling expenditures.

  • One-half of all lifestyle buyers will complete some type of home improvement project this year.

  • When selling to premium buyers, manipulation is the leading cause of sales death.

    Publication date: 05/15/2006