HVAC industry veteran Joe Cunningham wears a lot of hats. In addition to being an HVAC contractor in Houston and running a trade school, he also finds the time to run his consulting business — Successtrack Network, where his efforts recently earned him the Consultant of the Year honor at the inaugural Service World Expo show in Las Vegas.
The NEWS was able to sit down with Cunningham recently and pick his brain about the pedigree of a successful HVAC contractor.
The NEWS: Not many people are both a consultant and contractor. How did that come about?
Cunningham: It started when I went to work with Service Experts. I was one of the original team members, and I ran some of their centers. In fact, I did the first regularly scheduled nationally broadcast training program for the air conditioning business, which continued every week. Eventually, I ended up stopping that job and doing consulting.
In my consultant work, I started dealing with a lot of individual contractors. Everyone would always say to me, ‘You keep telling us that it will work, but how do you know it will work? You don’t own an air conditioning company anymore.’ About three years ago, I got tired of hearing it, so I opened up an air conditioning company in Houston. I picked Houston because it is among the most competitive air conditioning markets in the world. There are more air conditioning contractors there per capita than any place I know of. We opened up here specifically because we knew it would be tough. We’ve hired young, inexperienced guys and turned them into technicians. The trade school was a spin off because we had so many people asking us to train their techs on the technical side.
The NEWS: What type of contractors seek your services?
Cunningham: I have guys that have just started up, and they are run three-man shops. I also work with huge companies. There is no particular size. I customize everything for each company.
The NEWS: How do you suggest contractors generate more leads?
Cunningham: They generate more leads by maximizing their opportunities in the field. The average HVAC company leaves an enormous amount of leads in the field. Technicians tend to run single-pass calls. You need to teach technicians to use dedicated checklists to check everything in the house. If you do, they will stop running single-pass calls, and their average tickets will go up. They will also know everything that needs to be done in that house. If they document everything that they put on the list, it gives them a huge marketing list to call on. That’s how we have grown this business in Houston.
We also use radius marketing, which is a really easy process. If your company is working in a neighborhood and you know you want to do more work in that neighborhood, there are some online software programs that will allow you to put a customer’s address in and get the name, address, and telephone number of their 20 closest neighbors. We mail and call behind that.
One of the biggest sources of business contractors have is what they leave out there in missed sales. Contractors think when they make a sales presentation, if they don’t get the job, it went to someone else. In fact, statistics show that 60-70 percent just don’t get the work done. We went back through our customer list of people who decided not to buy after our sales call and did telemarketing and direct mail. We experienced a 28 percent response on the direct mail and a 75 percent closing ratio on those. We do the same thing on repairs that were unfinished.
Everyone wants to know how to get new leads, but, the fact is, they throw so many leads away now that if they did not do that, the need for new leads would decrease by 50-60 percent. The sales are so much easier when you are selling to an existing base.
The NEWS: What profitability percentage should residential HVAC contractors expect to hit?
Cunningham: Net profits can be deceiving. Are you living out of your company? Are your kids’ vehicles and cell phones running through the business? Real-deal net profit, you have to shoot for 10 percent. Does that mean you hit that mark the first couple of years? Probably not. As you start-up from nothing, your marketing costs are going to be high. The average HVAC company runs overhead at 30-35 percent, marketing at 5-6 percent — or 10-15, if you are aggressive — labor at 20 percent, parts at 17 percent, etc. So, what is left? It all starts adding up. A lot of guys don’t realize the true cost of doing business, so they don’t price for profit. You need to price your services so that you can make some money on this thing. If you set your pricing at 55 percent gross margin, you are going to be OK if you keep everything in line and don’t let overhead run away on you. If you don’t have your pricing where it needs to be, you’re not going to hit that 10 percent net. Pricing hurts contractors more than anything else.
NEWS: What is the biggest mistake most contractors make?
Cunningham: Two things, pricing and marketing, because the two work together. Pricing is a problem because most people don’t charge enough. A lot of times they don’t charge enough because they don’t market well enough or have enough people to see. They panic and don’t have enough money so they sell a system by knocking $2,000 off the price. Because they have no money, the first thing they do is cut down on marketing. It’s just a vicious cycle. They just can’t figure it out. The reality of our business is you will not make any money until you realize you are a sales and marketing company that does HVAC work and not an HVAC company that only does marketing when whipped into submission. Those who wait too long to look for leads won’t make it. The seasonality of our business can destroy us.
NEWS: What was your reaction to being named Consultant of the Year at Service World Expo?
Cunningham: It was quite an honor. I don’t know how many technicians and contractors I have trained, but for them to believe enough in my services and use them enough to know they work — it’s quite an honor for them to tell me they think I’m the best one out there. I am truly humbled. I never thought that would happen. It’s absolutely amazing. My goal is to help every contractor become more successful than they have ever been before, and it’s a goal I’ll continue to pursue for as long as I’m continuing to do this.
Publication date: 1/30/2017