What's your problem?
No where could the advantages be seen better than in one session called, appropriately enough, "What's your problem?"
Contractors got to toss out their problems, questions, complaints, regrets and suggestions to whatever topics they wanted. With a roomful of contractors of various size companies and from various geographic areas, there was plenty of input on topics ranging from software to employee retention.
Aside from the annual ACCA meetings, contractors are encouraged to join a MIX group (Member Information Exchange). These meet throughout the year as often as the members can agree on, and zero in on a particular topic they find of mutual interest. They are limited to 9 to 12 members. One contractor said he got the idea from his MIX group to look into the workers compensation rates he was paying; it seems he was paying more than most of his colleagues. He found out why: his insurance company had his workers classified as millwrights, at a higher rate than hvac technicians. He was able to recoup $26,000 in costs paid out over several years.
Ray Isaac, Isaac Heating & AC, Rochester, N.Y., quipped that instance alone would more than make up for the time and effort spent in getting to a MIX group. Isaac, along with his three brothers and a cousin, represent the third generation in their 55-year-old family business.
Contractors asked other contractors about their experiences with flat rate pricing; most of those present said they already charge a flat rate as opposed to time and material. They shared their experiences which, by the way, were highly in favor of flat rate pricing.
Steve Miles, general manager of Jerry Kelly Heating and AC Company, St. Charles, Mo., went so far as to say that "the two best things you can do as a contractor is join a MIX group and move to flat-rate pricing." Miles uses his MIX group as an unpaid board of directors. As for flat rate pricing, he said his company doesn't even quote an hourly labor rate over the phone. Consumers are turned off by it, he says.
Vince DiFilippo, DiFilippo's Service Co., Paoli, Pa., started in the hvac business at age 12, working for his brother. DiFilippo said there are other advantages of joining ACCA and joining a MIX group. His company tries to restrict service normally to a 12-mile radius. Outside of that area, he said, he recommends fellow ACCA contractors and especially his own MIX colleagues. He feels confident they won't fail the customer.
Others asked about what sort of business software other contractors typically used. One said his company could speak from experience that dated back to 1982, while another said his company was computerized for the past 13-14 years but had just introduced a Windows-based platform. The consensus was that no one brand name holds a clear lead; find one that works for you, train more than one person on it, but put one person in charge of being the expert.
Another point of agreement: don't try to be low bidder just to land a customer. To avoid losing money on a job, it's essential that you know your costs, Miles said. Isaac added, "You don't see people going into Nordstrom's looking for a bargain." And DiFilippo wore a tuxedo to a session last year, an appropriate visual aide in getting contractors to realize the value of the services they perform, rather than cutting prices just to sell a job.
There was a lack of consensus, however, on whether service techs should be relied on to sell equipment. Most said a separate, trained sales force is necessary; but it was pointed out that service techs should also be ready and able to do so, since they often already have the ear of the customer, and are perceived as being knowledgeable about the systems they service.
Future for fixing ductsJust as the economy dips and new construction slows in California, it looks like hvac contractors may find their services needed just as much, but in a different way.
Jim Hussey, Marina Mechanical, San Leandro, Calif., told Snips the state is looking closely at its energy code for ways to save energy, besides just replacing equipment with higher efficiency units. One way, he said, is to limit the amount of duct leakage allowable in homes. If it is over a certain amount, there may be state money available to pay for repairs.
Another potential energy savings may come in requiring proper charges on air conditioning units. Utility company studies have shown many installed units have an improper charge, which impedes their operation and energy efficiency. Hussey is president-elect of ACCA. In 1980, he founded Bay Point Control, Inc., a building automation and energy conservation company. In 1990, he acquired Marina Mechanical, a 40-year-old Northern California design-build HVAC service and construction company. Today he serves as president of both companies. He is a board member and past president of the Construction Craft Training Center and an advisor to the California Energy Commission's Public Interest Energy Research Program for Small Commercial and Residential Buildings.
What do you charge?What should you charge for service? Charge too much and you'll have no customers. Charge too little and you'll stay busy, but won't have anything to show for it.
One of the great mysteries of contracting is how much to charge your customers. Marcus Metoyer Jr., or "Butch," has been in business for 40 years, and has been general manager and president of Fay Lett & Sons Heating and Cooling Inc. for more than 30. The business was started by his grandfather in Lansing, Mich. Metoyer also operates Omega Energy Consultants Ltd., which offers hvac training programs for private industry and hvac wholesalers such as the Behler-Young Co.
A common mistake is for contractors to charge too little for their services, according to Metoyer. "Often times a small contractor mistakenly thinks that since his overhead is small, in terms of dollars, that he may sell his products and services for less than his larger competitors and still make a profit."
In fact, smaller contractors often operate at a disadvantage when it comes to pricing, because their overhead is actually a larger percentage of total sales versus a larger contractor.
Too many contractors forget all the various factors that comprise overhead. They think of salaries, uniforms and truck expenses, but forget to include bad debts, depreciation, trash removal, lost time, etc.
He also advises that different types of jobs could wind up with different pricing, even if the bottom line is the same. Jobs requiring little in the way of equipment but more labor should be calculated accordingly; labor costs carry more overhead.
Metoyer also is a proponent of flat rate pricing versus time and materials. He has successfully used flat rate pricing over the past 11 years "and would never go back to time and materials."
A common mistake is for contractors to charge according to what their competition is charging. Another common mistake is in marking up costs incorrectly.
"When I show them how to properly arrive at pricing, some say 'But if I charge those kind of prices I wouldn't get any business.' I tell them that if that's the case, then they should be in some other line of work."
Metoyer's firm was one of the few in its area to continue to service oil furnaces. But his own knowledge of accurate pricing caused him to step away - as well as the lack of trained technicians. Properly servicing a home oil furnace in the field required Fay Lett to charge $185. Few customers would pay this, opting instead for the quickie alternative of $69 or $79 which didn't allow for a complete job.
Metoyer said he is easing out of the family business, intent on expanding his training opportunities while forsaking his role as the company's service manager. He plans to stay in touch, however, and students may see him busy on his cell phone during class breaks.