When it comes to buying HVAC equipment, parts, and supplies, your customers have an ever-growing list of options. Online stores, like WalMart, Amazon, and E-Bay, are trying hard to take business away from you. You’ll never win a price war with big-box stores, so, instead, focus on all the dollars and cents benefits your customers want and Amazon can’t provide.
Your No. 1 job in two-step distribution is to help your customers be successful. You’re not just selling great equipment and parts, you’re selling increased cash flow and profit improvement. For example, it usually takes an hour or more for a technician to leave a job and chase a needed part. If your customized truck-stocking program saved three parts-chasing service techs just two hours each week, you’ve created an additional 300 billable hours per year. If the average service ticket is $500, you contributed up to $150,000 in added cash flow and revenue.
Here’s what makes these numbers even more exciting. Gross profit becomes net profit once overhead is covered. Overhead is typically built into the cost of every planned job. Because the 300 billable hours you added are unplanned, overhead is already included, which allows net profits to soar.
$150,000 x 40 percent gross margin = $60,000 net profit.
Use this exercise to get the benefits of the truck-stocking conversation started. Ask customers what numbers are reasonable for their company and use those.
LOWER OPERATING COSTS
Customers benefit because you maintain a warehouse. Just imagine how much it would cost your customers if they had to operate their own warehouses? The costs of a building, fork lifts, additional payroll, administrative time, transportation, shrinkage, and obsolescence quickly add up. When you help your customers do the math, it’s amazing how much your warehousing and other processes reduce their operating costs.
Do your customers know all the ways you help lower their overhead? How much would their overhead increase if you didn’t deliver to job sites? How much is added to their bottom lines when they use your trucks, drivers, and insurance? How many hours a year do your billing procedures and warranty return policies save? How much time and money do they save using your payment terms and financing? The more your customers know, the more value you provide.
LESS UNAPPLIED LABOR
Unapplied labor is money utilized for non-billable work. Callbacks are a leading cause of unapplied labor. The best remedy for callbacks is the technical training you provide. The faster HVAC technology evolves, the more technical training your customers will need to reduce callbacks and keep consumers happy.
One of the biggest benefits most Heating, Air-conditioning & Refrigeration Distributors International (HARDI) distributors provide is no-cost technical consulting. Sooner or later, every service technician gets stuck and needs help. Having a knowledgeable ally to call reduces callbacks, cuts job time, and increases profits. Ask your customers to imagine trying to call Amazon to find an expert who could answer their questions and help solve their problems. They know that phone call would be a pure waste of time. Customer are more loyal once they know all the profit-producing benefits you provide.
The way to improve your sales is to help your customers improve theirs. The investments you make in sales training should move the needle on two key performance indicators (KPIs): market share and mix shift.
INCREASED MARKET SHARE
Your market share improves when your customers sell more. A 10-20 percent increase in closing ratio is common after an effective sales training program. If all your customers consistently sold 10 percent more jobs, your market share and their income would be through the roof. Aristotle taught contractors the secret to selling comfort when he said, “The fool tells me his reasons; the wise man persuades me with my own.” The most successful sales training focuses on three core elements: asking questions, listening, and satisfying desires.
MAXIMIZING MIX SHIFT
Mix shift happens when your customers sell bigger-benefit premium comfort. When given an opportunity, 80 percent of today’s homeowners will pay more for something better than hot and cold air on demand. The magic of mix shift is the fact that it takes the same overhead to install a premium comfort solution as it does a basic heating and cooling system.
A typical sale at a cost of $5,000 with $1,500 in overhead and $3,000 in job costs results in a $500 net profit. A premium sale of $10,000 also carries $1,500 in overhead and $6,000 in job costs. The difference is the premium job offers $2,500 in net profit. Everybody wins when you help your customers sell premium comfort.
DOCUMENT YOUR VALUE
Value not documented in your customer’s mind doesn’t exist. The most successful companies demonstrate the most value. Value is determined by the benefits customers want. There will never be a better time to sit down with your customers and monetize all the amazing benefits you offer that Amazon can’t provide.
Sending “How Are We Doing?” surveys is a fantastic way to help you place your value top-of-mind. It's also an effective way to have your customers determine which factors of your business exceed expectations and which need improvement.
For example, a sample “How Are We Doing?” survey could ask customers to rank your business on a 1-10 scale on any of the following factors:
Easy to do business with;
Parts and accessory reliability;
Convenient hours; and
Going the extra mile.
To download a complimentary customizable copy of our “How Are We Doing?” survey, visit http://www.nopressureselling.com/HARDI.
Publication date: 04/05/18