Bob Wilkins (right) discusses business strategies with an ISL contractor member after his seminar.
COLORADO SPRINGS, Colo. - All HVAC contractors, be they owners or managers, need to know or be refreshed on the basic items of running a successful business. The problem is many don't take the time to and wind up running a business that is neither successful nor profitable. One way for contractors to brush up on business basics is to join a contractor group such as International Service Leadership (ISL) and attend one of several business meetings like the one held in early May at the Cheyenne Mountain Resort in Colorado Springs.

Bob Wilkins, ISL vice president of operations and owner of Wilkins Mechanical Service in Bedford, N.H., helped kick off the three-day meeting by hosting an all-day HVAC Business Management class (one of several designed for personnel from all job classifications). Wilkins told attendees that he was going to keep the instructions simple and "break business basics down to the most common denominator."

The core of his presentation was Key Performance Indicators (KPI), which allows a business to grow through the daily tracking of benchmark figures. Wilkins said these figures provide a platform for understanding where the business is financially on a daily basis. "They also allow you to understand where the company is headed in the short term," he added.

He gave an example of how KPIs can help a business. "Let's say you are getting a [fixed] percentage for labor on a job, but it is taking you two days to complete the work," Wilkins said. "KPIs would identify this as a problem and would allow you to fix it in the future.

"You need to get your numbers daily in order to adjust your strategies on a daily basis."


Wilkins said that contractors should put a great deal of time and investment in their service and maintenance departments, starting with maintenance agreements. He noted that for every $1 million in sales, contractors should have at least 1,000 maintenance visits.

"Traditionally in the HVAC business we run our trucks off the road for a couple of months keeping up with service," Wilkins said. "And then we lose all that we gained in the months afterward when the demand is not there. Maintenance agreements help manage the weather, and maintenance work is the backbone of the business, what drives the ship."

But he also noted that companies can't exist on service and maintenance alone. This department should serve as a basis for bringing in future leads, which will help to keep the company growing.

"I don't think I've ever seen a company that can survive on only service and maintenance," Wilkins said. "If that were the case, the business would become a call center and not a profit center."

He added that successful HVAC businesses have a minimum of two employees in the field for every one in the office. The really excellent companies maintain a three-to-one ratio. Wilkins noted that maintaining a good ratio is a key to keeping overhead in check.

There is also a middle area between selling a job and completing the installation which Wilkins said must be managed and controlled, using KPIs, to ensure that costs are kept under control. "A replacement job has to be done in one day," he said.

"This is replacement of the furnace, condensing unit, coil, and line sets. A two-person crew must get this type of job done in one day, including add-on accessories. Custom ductwork may be the exception and make the installation more than one day."

He stressed trying to get the job done in one day, even if it meant longer hours and overtime pay. Wilkins added that if the job spills over into a second day, that whole day is basically gone.

Again, Wilkins said that knowing this information on a daily basis, e.g., KPIs, is what separates the good companies from the good and profitable companies.

"Operating expenses change on a monthly basis," he said. "Bad weather will affect your figures, which means you will need to increase your sales. Watch the weather and make the necessary adjustments. You need to run a proactive, not reactive, office to minimize the peaks and valleys of the business flow."

The bottom line is that business owners need to identify what information they need to get every day. "You can't wait until the end of the month to make a decision because it will be too late to make adjustments," he emphasized.

Wilkins said that keeping employees happy and involved is also something that needs to be tracked on a regular basis. He knows that without happy and involved employees, a business can fail - even if it has enough maintenance agreements and replacement jobs to keep it busy.

He gave the example of how he sat down with one of his employees who had set a goal of buying a home in 12 months. "We figured out how much he needed to earn and save - based on his family's normal budget - in order to afford the down payment," Wilkins said. "It served as a powerful message that we cared about an employee's personal goals."

Publication date: 05/29/2006