David Wells
David Wells

My accountant swears by it and says it’s a natural law, like gravity and death. If you want to increase profits (bottom line), you have to increase sales (top line) and reduce expenses. As the economy continues to slump along, contractors have done their best at reducing overhead and cutting costs. The third factor, increasing revenue, seems impossible. No one wants to spend any money.

Despite what doomsday prophets proclaim, there are HVAC contractors out there who are growing and profiting. What follows is a guide to your own 10-step program on how to make more money in this economy.

There are only two ways I know of to increase sales: sell to more people, and sell more to each person. If you plan to market to more people, you must identify your target market. Will it be geographic? You may want to identify your service area, your nonservice area, and your preferred service area. Maybe instead of geography, you want to target by demographics, economics, or psychographics (golfers, innovators, fans of green products). Then get to work. Here are five ways to increase your customer base.

1. Customer retention: It’s a fact: You will lose customers this year. People die or move away, and there is nothing you can do about it. If your customer list isn’t growing, it’s shrinking. Worse yet, your competitors are probably calling on your customers if you’re not. People who can’t remember their wedding anniversary certainly aren’t going to remember who fixed their furnace two years ago. Customer retention is at least as important as acquisition, and it costs so much less, just an occasional phone call or email in most cases. Do you have a customer database? Do you use it?

2. Newsletters: If you ask a person to name a laundry detergent, and you don’t give him a list to choose from, that person will (more often than not) say “Tide.” This is called top of mind awareness (TOMA), and it is why Tide has been the top-selling laundry detergent since the 1950s. Guess what? You too can have TOMA. Your company name is your brand name. Don’t be a stranger. Remind your clients of who you are. Put a magnet on their refrigerator. Put your name and phone number on their thermostat. Send them a newsletter two-four times a year, just to remind them you’re here for them.

Sure, put some heating and air conditioning information in, and maybe a coupon for some service. But include some interesting articles, maybe a recipe, the history of how a holiday or custom got started, how to save money on their energy bill, or what kinds of utility rebates are available, for example. Make it so interesting that they will share it with their neighbor, and she will want to be on the mailing list, too. If the cost of postage scares you, try an enewsletter.

3. Direct mail: This one’s a little pricier than newsletters, but the audience is larger. You can share an envelope with other advertisers in a weekly mailer, or buy a database by zip code or other demographics and mail postcards or fliers. The results will depend on who you target, how many you send, and what you offer. If you are mailing to households you haven’t yet done business with, narrow your target (by household income, age of home, etc.), and include a coupon with an expiration date.

4. Web presence: Welcome to the 21st century. If you don’t have a website, you don’t exist. Yes, this is where people go when they need anything from shoes to cars, including all the information and reviews about those shoes and cars. If you have a website, and you’re not on the first page of Google, Yahoo, and Bing, get an expert on web design (keywords and meta tags) and Search Engine Optimization (SEO) to help you. Or you can opt for pay-per-click, or both. The upfront cost is an investment in the survival of your company. Don’t ignore the social media sites like Facebook and Twitter, or sites where customers blog about your performance, like Service Magic, Yahoo Local, and Google Local.

5. Referrals: This is my favorite way to increase your customer base, and it’s free. Not only that, but the prospect is less likely to haggle over price because he knows you are going to do a fine job. Don’t be afraid to ask for referrals upon completion of a job. A handwritten note is the best; put that right into your presentation book. Another approach is to mail a thank-you note a few days after completion. Include a copy of the warranty, and a short survey with questions that elicit positive responses, like “Did the installers arrive on time?” “Were they courteous and polite?” “Did they do everything they promised?” “Did they clean up after themselves?” “Would you recommend our services to a friend?”

That’s half the equation. Now here are five ways to increase your revenue per customer. Don’t be surprised if you get the job just because you were the only one to ask the right questions.

1. High efficiency: Offer high efficiency at every service and every replacement call. While you walk the house with the homeowner, ask if saving money on the energy bill is important to her. If she says yes, ask if it’s important enough for you to include it in the proposal. As energy costs continue to rise, more people are exploring alternatives.

2. Extended warranties: Offer extended warranties at every replacement call. I once awarded a job to a window contractor because he offered me a lifetime warranty on my new kitchen window. His bid wasn’t the lowest, but when I looked at the basketball court outside my kitchen, I determined he had the best value. Some people say they don’t care about the warranty, but studies show that a good product warranty implies a good product. And a 10-year labor warranty will get you a loyal customer for 10 years.

3. IAQ: Offer IAQ products at every service and every replacement call. Are there pets in the house? Do any of the occupants suffer from allergies? A whole-house electronic air cleaner can be a costly upgrade, but even the right pleated filter will remove 90-95 percent of the pollen-size particles from the air. Statistics reveal that 70-80 percent of homes need IAQ products. Ask the questions while you walk the house. You might be the only one who does.

4. Financing: Offer financing at every upgrade and every replacement call. You are a retailer. Just like Sears and Best Buy, you need an alternative to cash if you are going to sell big ticket items. No one has that kind of cash lying around, and if they do it’s never enough. And they can’t get an equity loan when there’s no equity. So come to the table prepared. Many HVAC manufacturers sponsor consumer financing programs, or check with your local bank or credit union.

5. Service/maintenance agreement: Offer a service/maintenance agreement at every service and every replacement call. Service agreements benefit the customer because regular seasonal maintenance will reduce the likelihood of their equipment failing, which usually occurs at the most inopportune time. If they purchase an agreement during a repair call, they may be able to apply any discounts to the cost of that call. But the benefits to the contractor are phenomenal. First, it gets your name in front of the homeowner at least four times a year; twice to schedule the call, and twice when you perform the service. Remember TOMA? Second, it provides cash flow to your business when you need it most — spring and autumn. Third, owning a list of regular paying customers builds equity in your company. This could be crucial to your exit strategy if you eventually want to sell your business or pass it on to your children.

There you have it: 10 strategies that have been proven effective to increase revenue and profit for contractors all across the nation. Go ahead, start with one or two of them, and reap the benefits before your competitors beat you to it.

Publication date: 01/09/2012