We thought the summer of COVID was going to be a challenge. It’s nothing. It’s this summer of shortages that will really challenge your ability to run your contracting business. Here are eight simple strategies to help your business survive the summer of shortages.
1. Pass Along Cost Increases Immediately
Prices have already gone up once. There’s another price hike coming. Unless you pass along the increased costs, you are subsidizing your customers. Are you in business for charity or profit? When you get charged more, you need to charge more in turn.
Do not forget to maintain your margins. If you are charged a dollar more for a part, you cannot simply raise prices by a dollar. You need to reprice so you maintain your margins.
Watch overhead. Fuel costs more. Higher energy prices mean higher utilities. This means your overhead is higher. Identify what is likely to increase and build it into your pricing now.
2. Communicate With Customers
By now, everyone in the trade has heard about the supply chain issues besetting manufacturers. There’s the chip shortage, the transportation bottleneck, and labor shortages at factories and warehouses. You know we are having trouble finding coils. You know certain configurations are challenging. Your customers probably do not know this.
Communicate with your customers about the issues in the industry. Let them know that it might take time to source parts and products. If customers suspect there might be a problem with their comfort systems, advise them not to wait until complete breakdowns occur.
Review your files to identify customers who have faced a number of repairs over the past two or three years. Reach out to them, asking how their system is performing while noting the industry’s supply chain issues and stressing that you do not want to see them have to go without air conditioning this summer.
3. Install Temporary Equipment When Necessary
When you replace a working system, keep the condensing unit so that you can install it as a temporary system to get a homeowner cool in the event of dead-on-arrival compressor when you cannot get the right system. It will probably not be very efficient, but it will cool down the house well enough to get by until you can source the right system.
To keep customers from getting too comfortable with the temporary arrangement, repaint the condensing units a color that people will not want long-term next to their homes. You can also use a rental agreement with them, where the use of the temporary unit is free if they purchase a new system from you — otherwise, they agree to a $500 charge against their credit card (or other amount).
4. Offer Loaner Window Units
If you lack working units for temporary use or simply do not want the hassle, buy a few window units. A number of HVAC salespeople have used window units as a closer by asking, “What if I can get you cool right now?” They can also bridge the gap between a failed compressor and the availability of a replacement unit.
5. Provide Second Chance Offers With Repairs
There are going to be cases where a homeowner might opt for a repair simply because that is the fastest way to get cool. Give them until the end of the year to change their mind with a second chance offer where you will credit the current repair against a replacement in the current year.
6. Communicate With Suppliers
It is really important for you to stay in touch with your suppliers. Keep them apprised of your sales, plans, and commitment. Ask them to keep you up to speed on any supply chain issues they see.
In normal times, it is not recommended for contractors to stock a lot of inventory unless it is consigned. A stack of air conditioners is a stack of money. But this is not a normal summer. Stock as much as you can because you cannot sell what you do not have. If you can’t stock it and your suppliers do not have eyes on it, do not sell it.
8. Sell Your Company Brand
Chances are good that your favorite supplier will not be able to obtain everything you need through the whole summer. You might have to switch to an alternative equipment brand on any given job. While it is a good idea at any time to push your company brand over an equipment brand, it is essential this summer. Just like the compressor and fan motor are parts in a condensing unit, the condensing unit and coil are parts in a comfort system you build in the field. Stress your brand.