Every HVAC company owner starts a business with the hope that one day it will grow into a profitable and well-respected venture. Growing your HVAC company is a good goal and you should always work toward growing your business to the level you have always dreamed of. However, there are right ways and wrong ways to grow, and growing the wrong way can put your company in a financial hole you may be unable to dig yourself out of. Growing your HVAC company requires a plan and established infrastructure to ensure you and your team can handle the influx of new business. Business growth without a plan is the equivalent of pulling a plane straight up on take-off; growing too fast will cause your business to choke, stall and crash. Here are a few things you need to do to ensure your business is growing at a healthy rate.
Know Your Capacity
In order to prepare for growth, you need to figure out what your capacity for growth is. You need to figure out what the market capacity is for your business and then figure out what your capacity is to play into the market. This means figuring out how much growth you and your business can personally handle. The market might allow your HVAC company to do $100 million in business, but your company may only have the ability to deal with $5 million of that $100 million market.
You can understand your market capacity by analyzing how much work your technicians can do, how much time it takes to complete a job, and then multiply those factors by the number of technicians you have. This will give you a general idea about how many jobs your company can handle on a weekly or even monthly basis. Knowing your capacity allows you to establish a level of visibility and predictability of what your business can handle, and you can use that information to slowly hire new staff and add more jobs. The goal of knowing your capacity is to help you feed your business with enough steady work to maintain slow and steady business growth so that you can cash flow your growth. Growth requires capital, which is acquired through cash flow if you have not other sources. Hyperactive growth will stretch your cash flow and stall your business.
Build a strong scheduling and dispatch team
One of the most important ways an HVAC company can manage and prepare for growth is to put together a strong dispatch and scheduling team. A scheduling team allows you to see what jobs you are getting, obtain job estimates, and see which of those leads are turning into sales. Having an efficient scheduling team allows you to plan where to put your technicians to maximize their productivity and ensure they are not being overworked. Having these two teams established will allow you to look further down the pipeline and let you know if your schedule is filling up to the point that you need to hire more manpower or obtain more resources. Even if you have not secured new work you can reasonably estimate how many of your leads will convert into actual jobs by looking at the average percentage of estimates you close.
Manage your cash flow before growing
One of the biggest issues I see with rapidly growing HVAC companies is managing cash flow before they grow. I am currently working with an HVAC company that is dealing with a cash flow issue caused by rapid growth. This company grew from nothing to over $4.7 million annually in the span of two years. The problem is that you have to do the work before you get paid and this company is struggling to find the capital to pay for labor and purchase the necessary equipment needed to finish their jobs and get paid. This company and many other HVAC companies with the same cash flow issues are forced to borrow money to complete these jobs. Fast growth can often cost your business more since you have to keep borrowing capital at high interest rates to fulfill your obligations. One of the best ways to combat cash flow issues is to make sure you build up your company’s cash reserves before increasing the amount of business you take on. It is important that you establish 30 to 60 days of cash reserves to ensure you have the cash flow to complete this new influx of work. Once you have that established cash flow and improved your processes you can begin to grow at a healthy rate.
Growing your business should be the goal of every HVAC company owner. However, it is important that you grow with purpose and a plan in mind. Growing too fast can be the death of your company. Create a growth plan, hire enough people, establish new processes, and build up your cash reserves. Doing this will allow you to grow at a healthy and steady rate.