Texas HVAC Contractor Offers Midlife Refresh on Equipment
A High Profit Margin Option If Replacement Is Not An Option
Repair or replace? That has been a question HVAC contractors have been asking homeowners for quite some time. Of course, we all know that most contractors are hoping for the answer to be replace.
Unfortunately for HVAC contractors, sometimes the market dictates that the homeowner wants to repair instead of replace. Replacement might be a sound decision, but they might not be in the place financially and in the right consumer confidence headspace to pull the trigger.
But what if I was to say there was a third option out there? And what if I was to say that the third option had a 75% profit margin?
I know, I was interested, too, when Billy Stevens brought it up to me during a discussion on the life expectancy of HVAC equipment. Stevens is an HVAC contractor in the Dallas-Fort Worth market who also runs the HVAC software company Sera Systems. He has some very innovative ideas.
Stevens explained to me the third option, which is the midlife cycle refresh. For the sake of this column, I will simply call it the refresh option. This is what Stevens’ company suggests when the equipment is in the 5- to 9-year-old sweet spot, a market sometimes overlooked.
“It really opens up an area that people are not really working on or marketing to,” Stevens said. “The 5- to 9-year-old equipment gets forgotten by a lot of HVAC contractors.”
So that is why Stevens came up with the refresh. It costs the homeowner $4,000 and has a 75% profit margin for the HVAC contractor. Yes, you read the right — 75%. In fact, it can bring in more profit than a system replacement.
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What is the refresh exactly? According to Stevens, with the help of JB Warranties, it allows the equipment to get back up to factory levels. It includes but is not limited to replacing capacitors, contactors, the drain pain, and armaflex, while also rehanging the system and using WD-40 on the equipment both inside and out.
“We basically replace the things that fall over time. We want the system running at peak performance when we are done,” Stevens said.
They measure performance before and after so the customer sees what improvements were made. You need to show them the data.
Stevens does this refresh option instead of having the traditional maintenance agreements that a lot of HVAC contractors use with their homeowners. Instead of going into the home once or twice a year to do the tune-up, his company promotes the refresh option. His company does have a membership program, but that offers other advantages rather than annual checkups.
The logic is sound. Once a homeowner pays for the maintenance plan, they feel they are paying that much as almost a guarantee that nothing will go wrong with their system. When something inevitably does go wrong, you oftentimes have an agitated customer who is not excited to pay any more money.
“Our customers have really responded to the midlife cycle refresh option,” Stevens said. “As we have found in the past, it really takes educating the homeowner. For them, this looks a lot better than doing a completely new system.”
Over the last few years, a lot of HVAC contractors have been trying to hit the 80-20 rule. This is especially true of the contractors that were recently invested in by private equity money. The 80-20 rule dictates that the goal should be flipping 80% of the calls by selling them a new system while doing service on the remaining 20% of the house visits.
This, indeed, worked well in the recent past when the economy was humming and consumer confidence was riding sky-high. But now with interest rates remaining high, consumer confidence a bit shaky, and homeowners less likely to replace the entire system, it is a great time for an HVAC contractor to have an extra option to offer their customers.
