I agree. Contractors brag about their sales. Almost no one brags about his or her profits. If you look at the industry averages from Robert Morris and Associates' annual studies, the HVAC industry's average net profit is less than 5 percent. That means the average profit is less than a nickel on each dollar. That's not much. It's no surprise many contractors are losing money each year.
There are also some very profitable contractors with profits over 20 percent per year. Some people look at those profitable contractors and say that they are stealing from customers. Perhaps they are jealous. Is it stealing to earn two dimes for every dollar? I don't think so, as long as you are providing value for customers.
Your goal should be to take care of customers. It costs money to provide good quality, train employees, offer top benefits to attract the best workers, and provide top equipment to properly install, diagnose and repair customers' equipment.
If you truly believe that you are taking care of customers and customers agree, then you should have a net profit of more than 5 percent, and preferably more than 10 percent. If you don't, then it's time to do something different. Sometimes that means raising prices, sometimes it's doing a thorough diagnostic on what's wrong with your company.
Remember, volume is vanity. Profits are sanity.
Make each call countOne place to look is at your service technicians. They are your eyes and ears. Some technicians understand that it is their responsibility to do what's good for customers. That means knowing what's going on in customers' environments. Technicians should be looking for things that will cost customers money. This means looking for work.
I don't mean changing parts that don't need to be changed or charging the customer for things they don't really need. The technician's job is to educate customers and bring up things that can potentially cause problems in the future - preventive maintenance.
One of the greatest money losers is when customers only pay for a diagnostic charge. In most cases, there is a problem with the technician. Either the customer didn't trust the technician or he or she didn't do a thorough exam of the system.
If a circuit breaker tripped, find out why. Fix the disease rather than the symptom.
Write everything down. Technicians will often find dirty systems, out-of-balance blower wheels, worn bearings and leaks. Tell them to bring these to the customers' attention and quote the repair. If your company has a flat-rate pricing system, the technician just looks in the book.
When technicians quote a repair, many times, customers will immediately agree. That's additional work on the same service ticket.
If customers decline, then your technicians have potential work to do during slower times of the year.
Imagine what would happen if you increased revenues by just $10 per ticket. The technician is already there. Most of that $10 will fall to the bottom line. If you generate 1,000 service tickets per year, that is almost $10,000 extra in your pocket.