AHRI is an indispensable resource in the global community, helping to accelerate environmental sustainability, energy e ciency, and regulatory compliance.
6 Is There a Way to Prepare for Industry Trends?
Where the industry heads next is an imperfect science, but this broad, thoughtful overview will help.
By Ryan Kalmbach
8 The Refrigerant Transition: What to Expect
The refrigeration change is closing in, and here is what to expect.
By Tim Brizendine
10 Facebook Ads: What’s the Deal?
Let’s face it, most of us need some direction with Facebook Ads. Now you have a compass.
By Jen McKee
12 Why HVAC Contractors Should Care About Business Valuation Now
Paying attention today will lead to a successful business sale tomorrow.
By Jon Buehler
14 Communication Strategies: Here’s a Plan
We know that proper communication is paramount. But the sticking point is the plan. This comprehensive guide will help.
By Doug Wyatt
17 4 Steps to Develop a Winning Sales Strategy
Here’s a fresh, clear approach to your sales process.
By Jerome Johnson
COLUMNS
19 Give Your Wealth Plan a Stress Test
Reducing your stress with a financial stress test.
By Keven Prather
20 Selling Your Business Part III
The mistakes to avoid when selling your business.
By Ruth King
5 Publisher’s Page | Micromanagement: The Silent Productivity Killer
Micromanagement is a prevalent issue in many workplaces, yet few are willing to openly address it. Terry Tanker
MRS | Editor’s Choice
Unless you’re an accountant, do you really understand your company’s numbers? Financial Intelligence by Karen Berman helps clear the fog and make sense of what your financials mean.
Editor’s Choice Management Resource Shelf
It’s always about the numbers, or so we’ve heard. But in real life, we also know it’s not quite true. It starts with understanding what those numbers mean and then going a step further: Why do they matter? Owners and managers need to understand how financial data helps to drive your business decisions. Financial Intelligence: A Manager’s Guide to Knowing What the Numbers Really Mean gets you comfortably to first base.
Financial Intelligence: A Manager’s Guide to Knowing What the Numbers Really Mean
By Karen Berman, Joe Knight, and John Case
Inc. magazine calls it one of “the best, clearest guides to the numbers” on the market. Readers agree, saying it’s exactly “what I need to know” and calling it a “must-read” for decision makers without expertise in finance. Accessible, jargon-free, and filled with entertaining stories of real companies, Financial Intelligence gives nonfinancial managers the confidence to understand the nuance beyond the numbers—to help bring everyday work to a new level.
Think Again: The Power of Knowing What You Don’t Know
By Adam Grant
Renowned Wharton professor Adam Grant spotlights one of the most important and impactful themes of our time: questioning one’s own deeply held beliefs. Grant frames true knowledge as not knowing everything, but rather, listening as if we knew nothing at all in this intrepid book that is what our present moment requires.
The Coaching Habit: Say Less, Ask More & Change the Way You Lead Forever
By Michael Bungay Stanier
In Michael Bungay Stanier’s The Coaching Habit, coaching becomes a regular, informal part of your day so managers and their teams can work less hard and have more impact. Drawing on years of experience training more than 10,000 busy managers from around the globe in practical, everyday coaching skills, Bungay Stanier reveals how to unlock your people’s potential. He unpacks seven essential coaching questions to demonstrate how—by saying less and asking more—you can develop coaching methods that produce great results.
Thanh Pham and Brooks Duncan lead The Productivity Show, a podcast dedicated to helping listeners become more productive and efficient in their personal and professional lives. The podcast covers a wide range of productivity-related topics, including time management, organization, goal setting, and technology tools. While not exclusively targeted at management, the strategies and techniques discussed on the podcast can be valuable for managers looking to improve their leadership skills and optimize their workflow.
https://www.asianefficiency.com/our-podcast/
The James Altucher Show
Hosted by James Altucher
The website of an entrepreneur who started 20 businesses and had 17 fail—and everything he learned along the way. James Altucher teaches practical business advice with psychological tips too.
https://jamesaltucher.com/blog/
Chris Winfield
Hosted by Chris Winfield
A self-improvement website focusing on productivity hacks and how to get ahead in life. Chris Winfield teaches readers how to wield the transformative power of helping others.
http://www. chriswinfield.com/blog/
THE HVACR MANAGEMENT MAGAZINE
TERRY Tanker Publisher ttanker@hvacrbusiness.com
TOM Perić Editor in Chief tperic@hvacrbusiness.com
MEGAN LaSalla Art Director mlasalla@hvacrbusiness.com
BRUCE Sprague Circulation Manager bs200264@sbcglobal.net
BARBARA Kerr VP Operations bkerr@hvacrbusiness.com
ADVERTISING STAFF
TERRY Tanker Publisher Tel 440-731-8600 ttanker@hvacrbusiness.com
HVACR Business, founded January 1981, is a monthly national trade magazine serving contractors, mechanical engineers, manufacturers, manufacturer representatives, wholesalers, distributors, trade associations, and others in the heating, ventilating, air conditioning and refrigeration (HVACR) industry primarily in the U.S.
The editorial focus and mission of HVACR Business is to provide business owners and managers with the very best business management concepts available. Critical topics covered include leadership, management, strategy, finance, sales, marketing, training, education, staffing, operations, human resources, legal issues, customer service and more. We are dedicated to helping contractors master these key management skills and provide them with the resources necessary to build strong, profitable companies. Every effort is made to provide accurate information, however, the publisher assumes no responsibility for accuracy of submitted advertising and editorial information.
No part of this publication may be reproduced or retransmitted in any form or by any means, including, but not limited to, electronic, mechanical, photocopying, recording or any information storage retrieval system, without the prior written permission of the publisher. Unauthorized copying may subject violators to criminal penalties as well as liabilities for substantial monetary damages up to $100,000 per infringement, costs and attorneys’ fees.
This publication should not be utilized as a substitute for professional advice in specific situations. If legal, medical, accounting, financial, consulting, coaching or other professional advice is required, the services of the appropriate professional should be sought. Neither the authors nor the publisher may be held liable in any way for any interpretation or use of the information in this publication.
The authors will make recommendations for solutions for you to explore. Any recommendation is always based on the authors’ research and experience. The information contained herein is accurate to the best of the publisher’s and authors’ knowledge; however, the publisher and authors can accept no responsibility for the accuracy or completeness of such information or for loss or damage caused by any use thereof.
Subscription Rates: Free and controlled circulation to qualified subscribers. Non-qualified persons may subscribe at the following rates: U.S. and possessions:
1 year $48; 2 years $75; 3 years $96; Canadian and foreign, 1-year $108 U.S. funds only. Single copies $8. Subscriptions are prepaid, and check or money orders only. Subscriber Services: To order a subscription or change your address, write to HVACR Business, 31674 Center Ridge Road, Suite 104, North Ridgeville, OH 44039 or call (440) 731-8600; or visit our Web site at www. hvacrbusiness.com. For questions regarding your subscription, please contact bkerr@hvacrbusiness.com.
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31674 Center Ridge Road, Suite 104 North Ridgeville, OH 44039 Tel: (440) 731-8600
Web site: www.hvacrbusiness.com (ISSN: 2153-2877)
BY TERRY TANKER
PUBLISHER’S PAGE
Micromanagement: The Silent Productivity Killer
Micromanagement is a prevalent issue in many workplaces, yet few are willing to openly address it. This controlling leadership style, where managers excessively scrutinize and dictate every detail of their employees’ work, is often a source of frustration and discontent. The detrimental effects of micromanagement can be farreaching, leading to wasted time, increased costs, decreased morale, and ultimately, a loss of talented employees who feel undervalued.
One of the key reasons behind micromanagement is the insecurity and fear of the unknown by many managers.
I have a friend who is being micromanaged, and it’s painful to watch the demoralization of this highly motivated, highly successful person. My friend is the director of operations at a midsize company. A CEO retired, and a new one was brought in. She brought in several new people to be part of her management team. After 18 months, things aren’t going well. Unfortunately, one of the new VPs has demoralized her direct reports going as far as requesting to be cc’d on every email from the director of operations regarding anything to do with the operation and maintenance of the building. During the holidays, the VP scolded the director of operations for not including her regarding Christmas decorations for the building. Apparently, no decisions were too small for her oversight.
In the course of 18 months, the VP has driven an A player to someone looking for a new job. But until that happens, the A player has developed a serious “I don’t care” attitude.
One of the key reasons behind micromanagement is the insecurity and fear of the unknown by many managers. Managers who are promoted based on a set of skills may struggle to transition into more strategic leadership roles, clinging to their familiar operational tasks instead of empowering their team to do their job(s). This reluctance to let go of control not only hinders personal growth but also undermines the potential of the team as a whole.
A lack of trust and respect for subordinates often fuels micromanagement. Managers who feel the need to oversee every detail of their team’s work are not only stifling creativity and innovation but also sending a clear message of distrust
in their employees’ abilities. This constant need for control can lead to a toxic work environment where employees feel suffocated, unappreciated, and undervalued.
One of our most interesting 20 Questions interviews was with Captain Mike Abrashoff of the United States Navy. https://www.hvacrbusiness. com/news/2017/apr/12/20questions-mike-abrashoff/. Mike had been promoted to Captain of the USS Benfold, one of the worst-performing ships in the Pacific Fleet. He realized that the typical command and control style of leadership so prevalent in the military wasn’t going to work. He also realized there were many ways to get to the ship’s goals, and the Benfold sailors knew better routes to take. His method— clearly communicate the goal and time frame and let the sailors manage to that end. Managers and employees who take ownership of projects always do better than being told what to do and when to do it. Pride of ownership and responsibility is a powerful management tool. If you haven’t read this interview, I highly recommend that you do.
Recognizing the signs of micromanagement is crucial in addressing this issue before it escalates. Slow decision-making processes, redundant approvals, and a general lack of autonomy for employees are all red flags that indicate a micromanagement culture within an organization. Addressing these behaviors and fostering a culture of trust, empowerment, and open communication is essential in combating the negative impacts of micromanagement on both individuals and the organization as a whole.
In conclusion, micromanagement is not just a managerial style; it is a silent productivity killer that can erode employee morale, hinder growth, and ultimately harm the overall success of an organization. By promoting a leadership approach based on trust, collaboration, and empowerment, organizations can break free from the shackles of micromanagement and create a more positive and productive work environment for everyone involved. u
CATCHING THE WAVES OF INDUSTRY TRENDS
BY RYAN KALMBACH
Skate to where the puck is going to be, not where it has been.”
Wayne Gretzky
It seems we are facing not only an increasing amount of change, but an increasing rate of change. Humans don’t deal well with change; our biological wiring is homeostasis, and any change, even positive, we perceive as a threat by our mind and body. The HVAC industry is also experiencing a growing amount of change. As leaders, it is our responsibility to guide our teams through these changes and to turn them into an opportunity. Navigating the rapidly changing HVAC industry is much like surfing; it’s all about catching the right wave at the right time.
Energy Efficiency and Sustainability
Regulation is the primary driver of energy efficiency trends. In addition to regulation, consumer preference is shifting toward products perceived as “green.” Rising energy prices further
Navigating the rapidly changing HVAC industry is much like surfing; it’s all about catching the right wave at the right time.
encourage consumers to seek out energyefficient systems.
The A2L refrigerant transition is here; this is not so much a trend but a current reality. At the time of this writing, equipment manufacturers are converting
their production lines from R410A to an A2L refrigerant. A2L products will begin to ship in the coming months. Now is the time to get technicians and installers trained. Now is the time to prepare an updated sales lineup.
Electrification is a trend that is picking up momentum. Adoption varies across the country; in California, for example, no one will sell new gas-fired appliances after 2030. In California, where we operate, we considered heat pumps a specialty product three years ago. Over the last three years, we have experienced a dramatic shift toward heat pumps. The innovation adaption lifecycle shows the typical adoption of new technologies such as heat pumps in Figure 1.
For many years, inverter heat pump products lived in the “innovators” phase. With the combination of regulation and rising consumer preference for environmentally friendly and energyefficient products, heat pumps are rapidly moving through the early adopters and into the early majority phase of the lifecycle. Navigating the innovation adoption lifecycle is much like catching a wave in surfing. Paddling out too early or too late can result in missing the wave entirely. The wave is coming, don’t let it pass you by.
Demographic
Some call it the “silver tsunami”— more than half of the Baby Boomers are now over 65 years old. This means the rate of retirement is increasing, leading to a significant loss of knowledge and experience. Coupled with the fact that Millennials were often encouraged to pursue college degrees rather than trades, we have a recipe for a major labor shortage that will persist for years. This worker shortage isn’t a surprise to anyone. The challenge for HVAC contractors is to solve the problem of building their own workforce.
On the positive side, there are signs that Gen Z is pushing back against the “college-bound” trend. They are wary of going into debt and see the potential in learning a trade. Some have even called this the “Tool Belt” generation. Additionally, Gen Z are digital natives, which positions those who choose to enter the HVAC trade to take advantage of technology trends that will reshape the HVAC industry.
Technology
Technology is probably the first trend that comes to mind when thinking of trends that will impact any industry. Technologies such as the Internet of Things and AI will disrupt many industries, including HVAC. It is challenging to know precisely how because technology advances in an exponential rather than linear fashion as seen in Figure 2.
This means that a nascent technology like AI will dramatically disrupt industries seemingly overnight. This makes it hard to see the future from where we stand.
Here are some ways that technology will impact the HVAC contractor:
1. More Complicated Systems:
HVAC systems are getting more hightech, integrating IoT and smart sensors. This makes them much more complex to install and maintain. As a result, contractors must continuously learn new technology and help their people upgrade their knowledge and skills.
2. Predictive Maintenance:
AI will analyze data from HVAC systems to predict potential failures before they occur, allowing contractors to perform maintenance proactively.
3. Real-Time Monitoring: HVAC systems will allow remote
The challenge for HVAC contractors is to solve the problem of building their own workforce.
monitoring, providing contractors with real-time data and alerts about system performance and potential issues.
4. Virtual Diagnostics:
Contractors will diagnose problems remotely, which will streamline the troubleshooting process and reduce the need for on-site visits.
5. Enhanced Customer Experience:
1. Personalized Recommendations:
AI can analyze data to provide customized recommendations for system upgrades or maintenance based on a customer’s specific needs and usage patterns.
2. Improved Communication:
Chatbots and virtual assistants will handle customer inquiries and service requests efficiently, providing faster and more accurate responses. This will also reduce internal overhead and help manage aspects of the customer experience.
3. Self-Service: Customers will have the option to purchase HVAC services, including system installs, completely online without human interaction.
6. Workforce Augmentation: Augmented Reality (AR): AI combined with AR can provide technicians with real-time, handsfree instructions and support during installations and repairs.
7. Marketing:
AI will change contractor marketing through personalized marketing campaigns. AI’s ability to analyze vast amounts of customer data enables it to
create highly targeted and customized marketing strategies.
8. Operations Management: Technology will automate and streamline many operations functions, such as:
1. Invoice generation and tracking
2. Dispatching
3. Inventory management and replenishment
4. Payroll processing and compliance
Consolidation
As Boomers reach retirement age, this also means that many small business owners are looking to retire and exit their businesses. In recent years, we’ve seen a flurry of both private equity acquisitions and merger and acquisition activity between contractors. As Boomers continue to age, there will remain an ample “supply” of businesses looking to sell for the foreseeable future. On the demand side, private equity still has large amounts of cash to invest and sees the following factors that make HVAC an attractive investment:
• The high profitability and cash flow of an HVAC contractor.
• A massively segmented market seemingly provides opportunities for efficiencies of scale.
• Robustness of the industry during COVID as an “essential” business.
Home Services
An increasing number of HVAC Contractors are realizing that they are not just in the HVAC business but also in the
home services business. Acquiring new clients can be both costly and challenging, prompting the question of how to maximize the lifetime value of client relationships. Cross-selling other home services, such as plumbing and electrical work, is a logical choice.
Homeowners are increasingly seeking out seamless experiences when it comes to home maintenance and repair. They see the value in having a single trusted relationship to call upon when issues arise. This also ties into the next trend of leasing.
Leasing
Consumer spending patterns have shifted toward embracing subscription models for purchasing products and services. On average, Americans maintain between 12 to 15 monthly subscriptions, reflecting the growing popularity of this approach. In addition, there’s a rising demand among consumers for hassle-free, worry-free experiences with the products and services they choose.
In line with this trend, finance companies have expanded their offerings to provide leasing options, which include maintenance and service throughout the lease.
Riding the Wave to Success
Navigating the HVAC industry is much like catching a wave. Just as a skilled surfer adapts to the ever-changing ocean, HVAC contractors must stay agile and proactive to succeed in a dynamic market. Contractors must time their approach perfectly to ride the wave of opportunity. Maintaining control requires adaptation and balance, which ensures that contractors can ride these waves smoothly, staying ahead of the competition. u
Ryan Kalmbach is the CEO of Johnstone Orion Distribution with 12 locations and 125 employees in California. He has more than 20 years of experience in operating a family distribution business. The core passion at The Orion Group is to partner with its customers and employees to help them to grow. Contact Ryan at https://www.powerofjsog.com/.
THE REFRIGERANT TRANSITION: WHAT TO EXPECT
BY TIM BRIZENDINE
The HVACR industry is on the cusp of a significant shift with the refrigerant transition from R-410A to R-32 or R-454B. This transformation takes effect in 2025, reflecting the impact of new environmental regulations and a growing demand for more sustainable solutions. Tim Brizendine, Vice President of Product Management at Lennox Residential HVAC, offers his expert insights on specific aspects of the transition, including the impact of installation and training practices for dealers, the differences between the new refrigerants and R-410A, changes in service tools, financial implications for dealers, and the timeline for the introduction of compliant products.
QUESTIONS
1. How will the refrigerant transition impact installation and training practices for dealers?
Unlike previous refrigerant transitions, the shift from R-410A to either R-32
Unlike previous refrigerant transitions, the shift from R-410A to either R-32 or R-454B will be far less nuanced.
or R-454B will be far less nuanced. It will not involve the same complications dealers faced with past transitions, like flush line sets or the need to confirm oil incompatibilities from the previous refrigerant to the new refrigerant. With the two new refrigerants being introduced in 2025, we will actually see a lot of similarities to R-410A, making practices used today very similar moving forward.
2. How are the two new refrigerants, R-32 and R-454B, different from R-410A?
One of the key differences is that R-32 and R-454B are slightly more flammable refrigerants than R-410A. HVAC OEMs, including Lennox, are proactively addressing this and installing refrigerant
detection systems in their products that can sense refrigerant leaks and ensure that dealers are aware of any system maintenance that needs to be addressed, providing homeowners with peace of mind.
Lennox has selected R-454B as their refrigerant of choice due to its ability to support the life expectancy and durability expected of a system, compatibility with existing product components and applications, as well as its ability to efficiently cool and heat a home in extreme weather conditions.
3. Will dealers need to make any changes to the tools they are using to service HVAC equipment?
Due to R-32 and R-454B being slightly more flammable, it is important
that tools like vacuum pumps and recovery machines are listed for use by an A2L. Gauges will not have the same requirement.
4. How will dealers be financially impacted by the refrigerant transition?
Although exact costs may vary across manufacturers, dealers should expect prices to be higher for units that are 2025 refrigerant compliant compared to units that use R-410A. With compliant refrigerant costs still fluctuating and the additions of new sensors and controls to products, the cost of full systems is expected to increase, and the industry will have a clearer picture on the average cost increase as HVAC OEMs continue to release their 2025 refrigerant transitioncompliant lines.
5. When will dealers start to see 2025 refrigerant transition-compliant products from HVAC manufacturers?
Product lineup and availability will depend on each OEM, but you can expect to see most products hit the market this summer, ahead of the transition on Jan. 1, 2025.
Lennox has been actively preparing for the refrigerant transition for years and carefully considering how to make installation and maintenance for dealers as easy as possible while continuing to provide perfect air for homeowners. When designing their refrigerant detection system, which will be installed in the Lennox R-454B product line, factors like dust and humidity were considered in the design, allowing less maintenance and ease of installation for dealers.
6. What are the best ways dealers can prepare for the 2025 refrigerant transition?
Dealers should ensure they have completed training and understand the difference between R-410A and the new 2025 compliant refrigerants. Refrigerantfocused training materials can be found through LennoxPros.com, ESCO Institute and AHRI.
In addition, dealers should consider their inventory and make sure they have the right product mix on hand to meet future demand in their local market. This includes having a strategy on whether they want to stock up on R-410A products now and convert to new refrigerant systems later on or if they’re going to proactively convert to new compliant systems. This decision should be based on the unique needs of each dealer’s business and their strategy for growth.
7. Looking forward, how can we expect low HFC refrigerants to impact the HVAC industry?
According to the EPA’s guidelines, the next refrigerant transition is expected to take place in 2034.
With environmental sustainability becoming a growing priority across the country, many states are creating their own regulations on low GWP refrigerants. Lennox is involved on a local level to help make the transition as feasible as possible for distributors, dealers and homeowners.
The upcoming refrigerant transition from R-410A to R-32 and R-454B in 2025 is expected to be smoother than previous transitions, with fewer complications in installation and
training for HVAC dealers. These new refrigerants, while slightly more flammable, will be supported by advanced detection systems to ensure safety and ease of maintenance. Financial impacts are anticipated, with higher costs for new refrigerant-compliant units due
to the inclusion of additional sensors and controls. Dealers should prepare by undergoing relevant training, managing their inventory strategically, and staying informed about evolving regulations. Lennox, favoring R-454B for its efficiency and durability, is leading efforts to ensure
a seamless transition while maintaining optimal performance and environmental sustainability. u
Tim Brizendine is Vice President of Product Management, Lennox Residential HVAC.
WHAT’S THE DEAL WITH FACEBOOK ADS?
BY JEN MCKEE
Do Facebook ads even work? That’s a question that I think a lot of contractors have. Many people have tried to run Facebook ads and they just haven’t seen much of a return. I believe that a lot of this comes from not understanding the Meta platform, not grasping the way that ads work, and maybe just not running the correct offers. I have found a couple of actions that ring true when it comes to successful Facebook ads, with the most significant issue being that when you’re creating content, it needs to be engaging no matter what. So let’s talk about what works on Facebook ads and how you can start to see a return and use them to bring in leads during your slow time.
How do Facebook ads work?
If you are not a professional marketer, it is unlikely that you know a lot about how to use ads. If that’s the case, I highly recommend finding somebody who has knowledge about the Meta
Many times when I get in the back end of Facebook ads accounts, I find that the ads are set up incorrectly.
platform before you get started. I say this because the Facebook ads platform is a complicated beast. Many times when I get in the back end of Facebook ads accounts, I find that the ads are set up incorrectly.
One thing to note about the Meta ads platform is that at the beginning of an ad, you’re telling Meta what your objective is. If you’re telling it that you want people to just go to your website, but you actually want leads, you will struggle to ever get the leads you’re looking for. If you actually want lead information from people, you have to tell Meta that that is what you want. Before you go further in this article, if you’re currently running ads, the first thing that I want you to do is ensure that you have told Facebook what you actually want it to do.
The best offers to run
Let’s say that you set up your ads
correctly. You have somebody working on them or you know what you’re doing, and you’ve set up everything in the Business Suite correctly. The next thing that I would look at is the offer that you’re running. A lot of HVAC companies try running offers like a free furnace with the purchase of the AC and low-dollar financing or free service calls. The problem with these offers is that they aren’t evergreen offers for the customer. People are not on Facebook looking for who they’re going to purchase their AC from. Usually, ads target people who are scrolling through the newsfeed looking at their friends’ celebrations and kids or memes or watching videos. Your offer must be something that reminds people of something that they should be doing all the time. I strongly suggest that low-dollar-hit-em’-in-the-pain-point offers. For residential HVAC, a tune-up
special is probably going to be your best bet. Especially when the weather is in that shoulder season, and it’s not quite hot or cold. That’s when you want to go hard on those tune-up offers. Expert note: Don’t just tell them they need a tune-up; remind them what they’re going to lose if they don’t get one.
The best type of ads to run
You have a great offer, you know how to set up the Meta platform but your ads still aren’t converting or they’re costing you way too much money. The next thing to do is to look at the ad you created, both picture and text. Let’s go back to what I said before about that about what people are doing on Facebook before they see your ad. Your ad needs to fit in with Facebook and stand out at the same time. Your ad needs to be funny, relatable, and SCROLL-STOPPING. Just putting out a graphic with your branding all over it and your offer on it isn’t that exciting, and it’s not going to get much engagement. If you put enough money behind it you might get in front of
enough people, and you might start to see some leads, but it’s going to cost you a lot to bring those leads in.
Instead, I recommend this rule of thumb: Be sure that the content that you’re putting out would be engaging whether you were spending money or not. An excellent way to check this is to look back at the content on your social media that is already performing better than the other content. Things that I see perform well are relatable memes—things that are applicable to the people in your area—usually weather-related works really well or video—this, generally, is highly engaging. It gets put in front of more people and could be great as a lead generation ad. Expert note: Be sure that you’re using people in your ads and not stock images, and stay away from the highly graphic types that you’re getting directly from Canva.
Be sure that the content that you’re putting out would be engaging whether you were spending money or not.
How to measure success
How are you going to measure success?
The most important element after you have the lead ads going is that you’re able to capture the information quickly and get your lead booked. Make sure that you have a system set up with your CSRs or someone in the office who captures leads and takes care of it until they become your customer. Automation can help with this process. You can set this up natively in Facebook or with AI tools that will reach out to them via text or phone. Automation helps with this process. Facebook allows you to start conversations in the Messenger app with future inquiring customers. Or you can use AI tools to ensure the leads that are coming in are getting to your CSRs by email. You can even use tools to respond automatically to your Facebook leads and get them booked via text.
Once you’ve booked the lead, be sure that you’re tracking the leads that you’re booking and the ones you’re not booking and why. This will give you data that you can optimize in your ad moving forward.
Maybe your ad isn’t quite reaching the correct ZIP code or perhaps it’s just not speaking to the right people. It’s essential to look at the data often so that you can make decisions about your ads and not waste money.
Facebook ads can be a really great way to bring in new leads to your HVAC business. It’s important to review these different aspects of a campaign before you start and before you decide it won’t work for you.
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WHY HVAC CONTRACTORS SHOULD CARE ABOUT BUSINESS VALUATION NOW
BY JON BUEHLER
You’ve put in the blood, sweat, and tears to build your HVAC business. Those long nights and weekends have finally paid off. Your company is thriving, and now you’re starting to think about the future—dreaming of retirement, traveling, spending more time with family, or diving into hobbies you’ve put on hold for so long. Selling your business seems like the perfect way to fund that next chapter. But before you get too carried away with those retirement dreams, it’s crucial to make sure your business is actually ready to sell.
Here’s why it matters to you, and why it matters right now.
Why Should You Care?
1. Avoid Disappointment
Imagine you’re sitting down with a professional to get an idea of what your business is worth. You’ve put everything into this company, so you expect a high valuation. But then, the adviser starts asking tough questions:
• How many hours do you personally put into the business?
• How easy would it be to replace you, and what would that cost?
• How much of your revenue depends on your top five customers?
• What does your management team look like?
Suddenly, the value of your business doesn’t seem as high as you thought. This scenario is all too common. Your years of hard work should be reflected in the value
Improving your business’s value takes time.
of your business. Knowing your business’s worth now allows you to make necessary improvements, avoiding the shock and disappointment of a lower-than-expected valuation.
2.
Maximize Retirement Benefits
Selling your business is a big part of your retirement plan. The more valuable your business, the more financially secure you’ll be when you retire. By focusing on increasing your business’s value now, you can ensure a smooth transition into retirement with ample funds to enjoy it fully.
3. Ensure Business Continuity
Prospective buyers are looking for a stable, thriving business that can operate independently of you. If your business relies too heavily on you, it can deter buyers and lower your valuation. Ensuring that your business can run without you makes it more attractive to potential buyers and secures its future success.
Why Should You Care Now?
1.
Time to Implement Changes
Improving your business’s value takes time. The sooner you start, the better positioned you’ll be when it’s time to sell. Implementing changes one to three years before you plan to sell can significantly increase your business’s value and attractiveness to buyers.
2. Capitalize on Market Conditions
The HVAC industry is evolving, and market conditions can impact your business’s value. By preparing your business now, you can capitalize on favorable market conditions and trends, ensuring you sell at the most opportune time.
3. Proactive Planning
Proactive planning allows you to address potential issues that could hurt your business’s value. This includes improving financial performance, enhancing growth potential, increasing recurring revenue, reducing owner dependency, and improving cash flow.
Strategies to Increase Your HVAC Business’s Value
Alright, now that you understand why it’s essential to know the value of your HVAC business and why you should start caring right now, let’s dive into how you can actually increase that value. Here are some key strategies you can start working on today to make your business more attractive to buyers and ensure you get the best possible price when you decide to sell.
1. Improve Financial Performance
First things first, let’s talk about your financials. Quality record keeping
and financial systems are foundational. Accurate financial statements act as a scorecard for your business and help identify areas needing adjustment. Here are some tips:
• Separate revenue and COGS by department.
• Ensure direct labor is included in COGS.
• Use an electronic price book to adjust prices as needed.
• Benchmark gross margins by department against industry KPIs.
• Manage pricing with vendors.
Think of your financials as the backbone of your business. Keeping them in top shape not only helps you run your company more efficiently but also makes it more appealing to potential buyers. They want to see clear, organized records that show your business is profitable and well-managed.
Quick Takeaway: Solid financials are like a well-tuned engine. They keep your business running smoothly and signal to buyers that your company is in great shape.
2. Enhance Growth Potential
Do you have solid sales and marketing systems in place? If not, it’s time to invest. Buyers want to see a well-oiled machine that runs smoothly. Here’s how you can boost your growth potential:
• Invest in marketing systems like SEO, PPC, social media, referral programs, newsletters, email and text marketing, radio advertising, and branding.
• Build comprehensive sales systems with comfort advisers, tech sales, and office CSRs.
• Align your sales team with a compensation plan that supports company goals.
Think of this as planting seeds for future growth. A solid sales and marketing system is like a magnet for potential buyers—they’ll see the potential for future profits and be more willing to invest in your business.
Quick Takeaway: A robust sales and marketing strategy is your ticket to future success. It shows buyers that your business has room to grow and thrive.
3. Increase Recurring Revenue
Maintenance agreements are the cornerstone of recurring revenue in the HVAC industry. A strong maintenance program increases lifetime customer value and supports other revenue streams. Focus on:
• Creating a thriving maintenance program.
• Promoting the benefits of maintenance agreements to all customer-facing employees.
• Offering indoor air quality (IAQ) solutions through maintenance programs.
• Recruiting and training future service techs and company leaders.
Recurring revenue is like a safety net for your business. It ensures steady income and reduces the risk for potential buyers. They’ll appreciate the stability and predictability that comes with recurring revenue streams.
Quick Takeaway: Recurring revenue is your business’s financial backbone. It offers predictability and stability, making your business more attractive to buyers.
4. Reduce Owner Dependency
Your business should thrive without you at the helm. Reducing owner dependency makes your business more attractive to buyers. Steps include:
• Assessing and delegating your roles and responsibilities.
• Creating an organizational chart with a clear hierarchy.
• Defining decision-making capacities within the organization.
• Hiring a General Manager.
• Cross-training personnel.
• Taking Fridays off to test the business’s independence.
Buyers want a business that can run on its own.
Imagine your business as a ship that sails smoothly, even if the captain steps off. Buyers want a company that can run on its own, ensuring that they won’t have to step in and take over your role completely.
Quick Takeaway: Independence from the owner means your business is self-sustaining. Buyers will feel confident knowing the business can thrive without you.
5. Improve Cash Flow
Healthy cash flow makes your business more attractive to buyers and easier to manage. Focus on:
• Generating cash-flow positive revenue (demand service and installation).
• Reducing accounts receivable (A/R) cycles.
• Offering early payment discounts.
• Managing inventory efficiently.
• Extending vendor payment terms using credit cards.
Think of cash flow as the lifeblood of your business. Steady and healthy cash flow shows buyers that your business is not only profitable but also well-managed and sustainable in the long term.
Improving EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is also critical. It starts with:
• Preparing an annual budget.
• Improving labor efficiency (keeping techs on jobs, managing overtime).
• Maintaining a three-to-one field-tooffice staff ratio.
• Reviewing financials monthly.
• Using industry averages for benchmarking.
Quick Takeaway: Cash flow is king. Healthy cash flow and improved EBITDA are signs of a robust and wellrun business that buyers will love.
Conclusion
Being proactive about improving your HVAC business’s value and saleability can make a significant difference. Start implementing these strategies 2-3 years before you plan to sell. Getting a professional valuation early on gives you a starting point to set goals and make necessary adjustments. Viewing your company as a sellable asset can create
a profound mindset shift, providing ultimate freedom and financial security.
Remember, a sellable company isn’t just about the numbers—it’s about building a legacy that continues to thrive even after you’ve stepped away. Make the most of your hard work by ensuring your business is ready for the best possible sale.
You’ve already done the hard part— building a successful business. Now, take
the steps to ensure that when the time comes, you will get the most out of it. Start today, and you’ll thank yourself in a few years when you’re enjoying a wellearned retirement, knowing you left your business in good hands. u
Jon Buehler is a Business Intermediary with Gateway Business Advisors. Contact him at 904-713-1432, jon@ gatewaybusinessadvisors.com or visit www.gatewaybusinessadvisors.com.
COMMUNICATING WITHOUT CONFLICT
The Six Foundations to Effective Communication Strategies to Inspire Your Team & Serve Customers Better PART I
BY DOUG WYATT
What if our team and our customers had an indicator dial on their forehead that shared how our words and conversations impacted them? Are we creating conflict? Are we creating sales resistance? Or are we eliminating it?
What if our customers became less concerned about a cheap price and more concerned with uncompromising quality?
What if our technicians became the ultimate professionals, showing up on time, looking the part, acting the part, smelling the part, speaking the part, and effectively communicating with our team members and customers professionally at all times?
There are six foundations to effective communication, and most of us ignore five of them.
What if our CSRs answered the phones before the second ring, never waived a diagnostic investment, communicated the unique value we bring to the marketplace, input every note perfectly into our software, pulled every permit as agreed, created all job packets on time, and never complained about a technician again?
Too good to be true? Something out of the Twilight Zone?
Perhaps. Or perhaps not.
There are six foundations to effective communication, and most of us ignore five of them.
1. The Ground Rules: Communicating to Persuade, Not to Manipulate.
What constitutes the difference between persuasion and manipulation? The difference can be distilled down into a single word. INTENT. The
foundations of effective communication, persuasion, and sales don’t change, but how we communicate them, and for what cause makes all the difference.
We could deliver a presentation in the same masterful ways, implementing all of the same techniques and strategies. Yet if we intend to trick or deceive, then we have become nothing more than a masterful manipulator.
But if we intend to persuade another party to decide on their best interest, then we are simply a Master of Persuasion. We believe a determining factor is how we intend to behave after we’ve persuaded someone to make a decision. Do we stand
behind our product or service? Do we continue to do what we said we would when we said we would do it?
What I share in this article is a belief that the reader will implement what follows with honor, character, and integrity, adhering to their own moral compass. The great news is that most of us are already implementing this First Foundation of Effective Communication.
So we begin on the grounds of The Grandmother Rule. If we wouldn’t recommend something to our very own grandmother, then we believe we shouldn’t recommend it to the person we’re serving.
2. Becoming a Wordsmith: The Words We Share Matter.
We’ve identified well over one hundred words that we recommend Wordsmithing during our conversations with our team and our customers. Words such as Price, Cost, Fee, and Charge are all likely to conjure up negative emotions for our customers.
Let’s help them see this price, cost, fee, or charge for what it truly is: an investment. This applies to any time we ask a customer for money for any of our products or services.
Instead of sharing with a customer what our price, cost, fee, or charge for a product or service is, we’d recommend wordsmithing that to the word investment.
Words such as price, cost, fee, and charge are all likely to conjure up negative feelings, emotions, and situations. No one wants to “pay the price,” as this is a term used to describe a punishment. When price is a part of the conversation, we as consumers are conditioned to negotiate, argue, debate, and sometimes outright battle.
In terms of “cost,” this is perceived as something we lose. It’s an expense and doesn’t communicate value. “That’s going to cost you an arm and a leg.” A fee is typically a word that is most often used to
describe things most of us don’t like, such as ATM fees, parking fees, baggage fees, and late fees… and they all have negative connotations.
And can we talk about the word charged for just a second? When we think about being charged, for most of us it conjures up images of being charged with a crime, or charged by a bull, or overcharged by a contractor.
However, from the time we are small children, most of us are conditioned to “invest our money wisely,” … to “invest our time wisely,” … to “invest in ourselves,” … to “invest in our future,” to “invest in real estate,” … and to “invest in the stock market.”
We feel as though any time we invest, we are doing something good
for ourselves and our family, and we are behaving responsibly.
Research has shown that negative words can actually increase the activity in our amygdala, also known as the fear center of our brain. The amygdala then releases stress-producing hormones and neurotransmitters, which block our brain’s ability to think logically, even when a decision could be in our own best interest.
What could we wordsmith the terms dispatch fee or trip fee? Most of our customers don’t want to pay a dispatch fee or trip fee. They don’t want to be charged for it, nor do they want to spend their money on it either.
Let’s help them see this price, cost, fee, or charge for what it truly is: an investment. This applies to any time we ask a customer for money for any of our products or services.
For example: the total investment for this project is $28,765.43.
continued on page 16
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“To own this new system, your family would be looking to invest $28,765.43.”
We strongly recommend wordsmithing our “diagnostic fee” to our “diagnostic investment” and if that doesn’t quite roll off our tongue the way we would hope, perhaps we can try “an investment to diagnose” instead.
In addition to these initial six words, there are hundreds of words most of us are accustomed to sharing daily that we would recommend Wordsmithing!
3. Becoming a R.A.R.E Listener: Listening with The Intent to Understand, Rather than to be Understood.
Ineffective Listening is when we’re only listening with the intent to respond. We’re preparing our response as we listen to others while our focus is on our own needs, desires, and feelings.
Effective Listening is when we’re listening with the intent to understand While effectively listening, we set aside our own opinions, clearing our minds to hear what the person is sharing. This does not mean that we have to agree with the other person.
We’ve developed a simple four-level formula to help us master our effective
Every word we share and how we share each one has an impact. The other person’s dial is moving toward a positive or negative direction at all times. We must decide if mastering these six foundations is worth it. We can have two things in life, but never at the same time. Results or Excuses.
listening skills. The R.A.R.E. Listening Sequence works wonders in both our personal and business lives in a surprisingly short amount of time.
R.A.R.E. is an acronym that stands for Repeat, Acknowledge the emotion, Rephrase, and Express. Let’s examine each of them briefly.
R.A.R.E. Level 01: REPEAT
It forces us to stop thinking about a response and listen to what is being said. We simply listen to their words and REPEAT their words back to them.
R.A.R.E. Level 02: ACKNOWLEDGE THE EMOTION
We’re not nearly as focused on the words they’re sharing but rather on the way they feel about the subject matter.
R.A.R.E. Level 03: REPHRASE & RELATE
Part 01: REPHRASE. We must think about what is being communicated. We then interpret their communication and
put their words into our own.
Part 02: RELATE. We try to imagine being in their shoes and relate to what they are experiencing. If we can’t relate, share that we “can’t imagine” what that must be like.
R.A.R.E. Level 04: EXPRESS
Most of us are very skilled and practice this one consistently, without regard for the first three levels. The key differences here are that Express now comes last, begins with a request, and seeks to understand the other before being understood ourselves.
Becoming a R.A.R.E. Listener is surprisingly simple, but it’s not easy. The closer the relationship, the higher the stakes, the more emotion that is involved, and the more difficult this becomes. Those of us who master this skill will have unlocked magic in our lives that we likely could not have imagined, lowering sales resistance and conflict all along the way.
CONCLUSION
If we’re determined to become a more effective communicator, and we’re seeking to lower sales resistance while practically eliminating conflict from our conversations, you now have a proven formula for doing so. Now that it’s been summarized into Six Foundations, it’s surprisingly simple, yet it can have a positive effect on your company’s profits. Every word we share and how we share each one has an impact. The other person’s dial is moving toward a positive or negative direction at all times. We must decide if mastering these six foundations is worth it. We can have two things in life, but never at the same time. Results or Excuses. u
Doug Wyatt, a former award-winning contractor and two-time Lennox Partner of The Year, founded Synergy Learning Systems. Recognized as Service Nation Alliance’s Preferred Training Partner, Synergy won “The Most Value Added to Your Business” award in April 2023. Doug has trained over 5,000 HVAC and plumbing technicians and worked with over 1,000 home service businesses. Synergy offers live and virtual training, focusing on solving implementation challenges in call centers, service departments, sales departments, and leadership teams. Doug is also a 7 Habits Certified Leadership Instructor.
4 STEPS TO DEVELOP A WINNING SALES STRATEGY
BY JEROME JOHNSON
As a sales coach for Nexstar Network, I spend most of my time consulting with sales leaders in our industry. On any given day, hopping from one member call to the next, I’m inspired by their approach.
What’s required for salespeople to succeed is curiosity and intention to perfect the process, an openness to tap into the expertise of others, being receptive to share training techniques, and perseverance to put their proven tools to good work on their journey to continuous improvement. I’ve gathered a few key takeaways related to how exactly you can implement the best sales strategies:
1. It all starts in the mind
Before you do anything, you have to figure out what winning looks like for
What does it mean to develop a winning sales strategy?
You have to figure out what winning looks like for your team, your customer, and your company.
your team, your customer, and your company. For most of us to declare something a “win,” it needs to be a win for the customer, a win for the company, and a win for the team members involved. Ideally, “win-win-win” is a core value for your business and your team. Viewing sales success through this multifaceted lens should drive all of your business decisions.
It’s essential, too, to take time to define and appreciate as a team what a “win” looks like from each vantage point. I encourage sales teams to have ongoing, candid conversations around these shared achievements both on a professional and personal level. To be crystal clear, I’m not
talking about huge wins here. It’s crucial to learn how to first identify the small wins and then build upon them.
Another key learning element – one I coach every day – is to avoid viewing losses as purely negative; look at losses as lessons. Some losses are inevitable, and when you and your team face defeat, take a moment to reflect together and identify what happened. Then, it’s time to ask some hard questions. Why did we miss that sale? What was the turning point when things started to fall apart? How can you improve next time? When you understand the distinct link between a loss and a lesson, you learn from your mistakes, and you automatically begin
to refine your best sales strategies. These failures are fruitful for growth. And while they are frustrating, I challenge you to pause with your team and turn those lemons into lemonade.
2. A good product is key
The second step links directly to the quality and value of the product or service you’re selling. It turns out that people will spend money on things that they need, but they’ll spend even more money on things that they want. And if you have a great product? People will buy it.
It’s a known fact that well-made products win customers over time and again. Think about Apple, Samsung, Toyota, and Nvidia – these companies are leaders in their respective categories, and that’s why they have invested in the front end
continued on page 18
to achieve a stellar reputation built on customer loyalty. Sure, flashy marketing campaigns add interest. However, it’s not about the glitz or the status symbols utilizing said products; it really comes down to those delighted day-to-day customers who expect excellence from a brand. Then, they become repeat buyers, they tell their friends, they leave a review – or all of the above. This customer loyalty and word-of-mouth influence is invaluable.
3. You must have the right process
Your sales process is critical in helping secure that coveted win-win-win. How many times have you heard that familiar line: “Follow the process”? When you do – and you see how you and your team, your company and your customers are consistently winning together – it means you have a suitable sales process in place.
Consider Amazon: Their convenient sales process is, by far, one of the best and most effective in today’s vast landscape of
Your sales process is critical in helping secure that coveted win-win-win.
e-commerce offerings, allowing customers to go from shopping cart to doorstep with a few quick taps on the app. Their team has cracked the code when it comes to streamlining the shopping experience –from selecting product options to ease of purchasing to hassle-free returns. Most of us who turn to Amazon know the process works incredibly well – in fact, it’s almost too convenient! And that’s why Amazon has scaled into the giant company it is today.
The key takeaway here: Putting in the work to refine your sales process is worth your time, energy and resources. If your sales processes are clearly defined, simplified, and replicable by your team members and deliver a seamless customer experience, sit back and watch your sales skyrocket.
4. Have a heart to serve
A winning sales strategy is much more than making more money and earning that bonus. Real success happens when you enhance an individual’s life with your offering and with your service. Do this consistently and at a high level, and money will never be an issue. Having a heart for serving and supporting others will serve you better than having a good quarter or a record sales month or a banner year.
A heart-led, servant-leader mindset will guide you and your sales team throughout your careers, and I guarantee it will shine through every interaction you engage in. If you genuinely want to serve others, it will show, and the money will follow. u
Jerome Johnson is a Sales Coach with Nexstar Network and has more than 10 years of sales and HVAC installation experience in both residential and commercial areas of the industry. He has a passion for meeting people and helping them get to where they need to be. Contact Jerome at JeromeJ@ NexstarNetwork.com.
PROVIDED BY KEVEN PRATHER, CFBS
It May Be Time To Give Your Wealth Plan a Stress Test
One of the best plans to take from the financial playbook of the Super Rich—those with a net worth of $500 million or more—is to work with professionals to help manage your financial and lifestyle concerns.
But, as the Super Rich know, you can’t stop there. We also need to regularly assess whether the financial advice we get—and the financial solutions we rely on—are truly up to snuff.
The Super Rich regularly take this step, and so should you. One reason: As your circumstances or the world around you changes, the solutions you have in place may no longer be optimal for your needs. “Life happens,” as they say—and strategies that were ideal for you a decade ago might be in need of revision.
That’s where a technique known as stress testing can make a big difference.
From piecemeal to comprehensive
A stress test can help you see whether the wealth management solutions you are using are not only in alignment with your goals and objectives but also appropriately state-of-the-art. Stress testing is a systematic way to determine how your wealth management solutions are likely to hold up under different scenarios—and ultimately deliver the results you expect.
There are two main reasons why the Super Rich regularly conduct stress tests:
• To avoid potentially destructive economic and legal situations.
• To ensure they are benefiting from all possible opportunities.
One big reason why your wealth planning efforts may need fine-tuning (or possibly more) is that far too many investors do piecemeal planning. That means they address one concern without considering their more significant situation. Then, maybe two years later, they address another consideration— again without factoring in other aspects of their financial lives.
Often, that results in little to no
Stress testing is a systematic way to determine how your wealth management solutions are likely to hold up …
coordination among the various professionals helping them and little to no coordination among the different financial solutions or strategies they implement. Because of the fragmented and disjointed way that a plan was developed, it may not be set up in the best way to succeed.
Stress testing allows people and families to look at their situation holistically to see whether they’re addressing the goals and objectives and using the most appropriate, cost-effective and up-to-date strategies and solutions.
The good news: The overall trend of democratization in financial services— which has brought once-exclusive solutions to more investors—is also bringing stress testing to a larger audience.
A good time to consider a stress test on your finances is whenever you are not sure you are using the best available wealth management solutions—and, as a result, you are concerned that:
• Your wealth plan may have errors.
• Opportunities to improve your plan may be missing.
By stress testing your plan or specific aspects of it, you can potentially confirm that you are on target—or identify corrections that will put you on the right
track toward the end results you most want to achieve.
We suggest the following steps to help ensure a high-quality professional is doing a stress test.
1. Seek out professionals who can clearly explain the process of stress testing and its value.
It’s a good sign when a financial professional can explain stress testing— the value it can bring and the reasons for doing a stress test in the first place. For starters, stress testing is not about being sold services or products, nor is it going to always result in making any changes to the current wealth plan.
Instead, think of stress testing more like an annual physical checkup. You may not have any medical concerns going into the appointment, but you show up because you want to ensure the doctor uncovers any unidentified or hidden problems. That way, you can take steps before the problems become serious.
2. Work with professionals who focus on the human element. The purpose of stress testing is to help
you see if that strategy is still best suited for you based on your needs, wants and preferences. Therefore, a stress test has to take into account important personal and even emotional traits to be effective. This human element is vital in ensuring you are getting the desired wealth management results—and that those results are within the parameters you establish.
That means the professional who does the stress test must have a deep understanding of you—including your goals and values as a person, not just your net worth. Such an understanding takes some time to develop and often relies on individuals sharing their concerns as well as their hopes and wishes. The professionals who employ systematic processes to develop insights into their clients and are able to “connect the dots” based on these insights will be best able to consistently create significant advantages for their clients through stress testing.
3. Work with professionals who are highly technically proficient.
Although the human element takes center stage, it won’t do much good if the person doing the stress test can’t expertly evaluate your current wealth solutions or ones that potentially could be a good fit for you.
A highly proficient professional can evaluate sophisticated and complex wealth management solutions to see if they are working as expected and are not in any way skirting laws or regulations. He or she will also be knowledgeable about alternative strategies and products and be able to bring in specialists if needed to evaluate current strategies and potential alternatives that may be superior. u
Keven P. Prather is a registered representative of and offers securities and investment advisory services through MML Investors Services, LLC. Member SIPC. Call 216-592-7314, send an email to kprather@financialguide. com or visit transitionextadvisors.com.
BY RUTH KING FINANCE
12 Most Common Financial Statement Mistakes to Fix Before You Sell – Part I
Whether you are planning to sell your business to family, employees, or outsiders, you must show a potential buyer clean, accurate financial statements.
You should have clean, accurate financial statements — even if you are not planning to sell your business. They are necessary so that you can analyze them properly to spot major impending issues, such as decreasing cash flow or profitability, and resolve them before they become major crises.
There are 12 common financial statement mistakes that you must avoid. I’ll write about the first three this month. Remember, to present your company well, you must have clean financial statements showing that your company is growing in profitability.
Mistake #1: Operating your Business on a cash basis rather than an accrual basis.
Anyone doing due diligence on your company will insist on your financial statements being reported on an accrual basis. An accrual basis allows a company to record revenue it has earned but hasn’t yet received payment and also to record expenses that haven’t been paid.
Why? In cash-based accounting, you NEVER know whether your company made a profit or had a loss. It creates a sale when you get the money in the door for that sale. It creates an expense when you pay that bill. A potential buyer doesn’t have a clue whether your company is truly profitable.
On a cash-basis accounting method, since you don’t knowingly write checks without money in the bank to cover them, your company is almost always profitable … even if it isn’t.
Even worse, your gross margin is never
In cash-based accounting, you NEVER know whether your company made a profit or had a loss.
consistent. You have a financial statement fruit salad. Revenues never match the costs of doing that work in cash-based accounting. So, a potential buyer can’t tell if your pricing is accurate on a cash basis accounting.
Finally, in cash-based accounting, there are no receivables and payables. Your company probably has both. In the due diligence process, the buyer will want to see both of these aging reports — even if the purchase is an asset sale.
Reporting on an accrual basis is easy. In QuickBooks®, just click the accrual basis button rather than the cash basis button. In other software packages, in the setup area, click accrual rather than cash accounting.
Mistake #2: The profit and loss dates
don’t
match the balance sheet date.
Before you give a potential buyer financial statements, please make sure
the dates match. If they don’t, then it is a signal that the financial statements are sloppy and inaccurate. If this happens your bookkeeper is NOT paying attention. It sets up a “red flag” — what else is wrong with the statements?
Here’s how it happens: Your bookkeeper is printing out the year-end financial statements for your potential buyer. She does this on Jan. 26. She prints out the profit and loss statement as of Dec. 31. Then, when she tells the accounting software to print the balance sheet, she forgets to change the balance sheet date to Dec. 31and your accounting system prints the balance sheet as of the 26th of the month.
The dates on your profit and loss statement and balance sheet must match. If they don’t then the information on the two statements won’t be consistent. It’s like trying to install a piece of equipment with the instructions for the wrong piece of equipment.
Mistake #3: The balance sheet doesn’t balance.
It takes five seconds to make sure the total assets match the total liabilities plus net worth. They should always balance — that’s why it’s called a balance sheet.
If you are using accounting software, this mistake is never made unless someone manually enters a one-sided transaction – HINT – and the person is probably embezzling!
Sometimes QuickBooks does get out of balance. You’ll get a notice that says your balance sheet is out of balance. Do you want to rebalance it? The answer is usually yes. Then QuickBooks does whatever it does behind the scenes to rebalance your checkbook.
It’s easy to make sure you are avoiding these first three mistakes. And they are easy to fix. Next month, I’ll write about the following common mistakes. u
Ruth King has more than 25 years of experience in the HVACR industry and has worked with contractors, distributors and manufacturers to help grow their companies and become more profitable. Contact Ruth at ruthking@hvacchannel.tv or at 770-729-0258.
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NORITZ AMERICA
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A.O.SMITH
A. O. Smith announces the Voltex® MAX hybrid electric heat pump water heater (HPWH) to its growing family of sustainable products. The Voltex MAX HPWH uses a new smart valve to deliver maximum hot water while the heat pump technology provides maximum savings at all times. Voltex MAX unit’s smart valve technology allows a contractor to install a smaller tank in an area where space is tight and still get comparable performance to a larger tank by using the unit’s Hot Water + modes. It also allows homeowners to customize the unit’s performance to exactly the way they live and use hot water.
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TRANE
The Trane® Thermafit™ Air-Source Modular Multipipe Unit Model MAS is the newest addition to the Thermafit family of modular units designed to bring more buildings into the future of sustainable comfort. The Thermafit airsource modular multipipe unit is a 30ton (433 MBH) unit that is expandable up to 300 tons (4330 MBH bank ). It’s an all-electric, all-in-one solution capable of 3 modes of operation, cooling, heating, or simultaneous heating and cooling, to meet different building loads. Engineers can integrate the Model MAS easily into new or existing systems. www.trane.com
DAIKIN
Daikin Applied announced the addition of air-source heat pumps to its lineup of Rebel® and Rebel Applied® packaged rooftop systems. With electricitypowered heat pumps, low-GWP R-32 refrigerant and ultra-efficient inverter compressors, the new Rebel Applied and Rebel units will help building owners optimize comfort and cost while decarbonizing their facilities. The units also include features that increase performance, especially in cold climates, and simplify installation for both new construction and retrofits. With inverter compressors and the unique operating envelope of R-32, Rebel Applied and Rebel rooftop units are proficient in lower ambient temperatures. With Rebel Applied, this is accomplished with additional outdoor coil surface and a supplemental compressor that kicks in when temperatures drop.
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WAGO
WAGO has added four new second generation controllers to its PFC100 family. These controllers include increased memory, are programmed with CODESYS 3.5 and can be easily configured using the controller’s Web Based Management System. With TLS encryption, VPN capabilities and a builtin Firewall, these controllers are equipped with optimum security standards. These PFC100 G2 controllers support multiple fieldbus protocols including EtherNet/ IP Adapter and Scanner, OPC UA Sever/ Client, EtherCAT, MODBUS TCP/ UDP, and MODBUS RTU enabling gateways between any of these interfaces. They also support MQTT protocols helping ensure seamless connection to your SCADA and Cloud service applications.
www.wago.us
GREENHECK
Greenheck’s SYNC-180TCE™ is a top port ERV featuring a 75-200 cfm operational range and offers precision balancing when paired with the PrecisionSYNC™ Controller and 77% Sensible Recovery Efficiency (SRE). All Greenheck SYNC™ and ASSURE™ ERV models include a Total Recovery Core that transfers heat and moisture between two crossflow airstreams without allowing cross-contamination. When used for balanced mechanical ventilation in humid environments, the unit helps to reduce air conditioning (AC) energy costs. In colder climates, moisture transfer is reversed and the unit helps to moderate humidity with its core acting as a highly efficient heat exchanger.
www.greenheck.com
WATERFURNACE
The new TruClimate 900 Heat Pump Chiller from WaterFurnace International can operate as a hot water or chiller water system or a simultaneous heating and cooling source. Unlike traditional chillers that are either dedicated to heating or cooling, the TruClimate 900 delivers 44-degree F chilled water and 140-degree hot water simultaneously from a single chiller – saving money and freeing up square footage in or on your building. Available in 30 ton sizes, up to 10 units can be banked to achieve a total capacity of up to 300 tons. The TruClimate 900 provides 100 percent heating capacity down to 5-degrees while producing 140-degree water. It shines in extreme conditions, offering the capability of continuous operation at temperatures as low as negative 25 degrees.
www.waterfurnace.com
with MICHAELA POLLARD 20QUESTIONS >>
Editor Tom Perić recently chatted with Michaela Pollard, Co-Owner of Kings Heating, Air, & Electric in Lynnwood, Washington. The two discussed being a winner of the 2024 Tops in Trucks Fleet Design Contest, challenges women face in business, providing quality service to customers, and operating a third generation family business.
1. How did you get started in the HVAC industry?
My grandfather started the business in 1973 as Pollard Heating. My pops started working for him when he was 12. In 1993, my parents bought the business from my grandfather and renamed it to Kings Heating. I worked at Kings through high school, cleaning the office. I started working for Kings full time in 2015. It’s been one of the best decisions I’ve ever made.
2. Why did you choose the name Kings? I’m the third generation in my family business. My pops named our company Kings Heating because all his nieces and nephews called him Uncle King, and a quarter would magically appear from behind their ear.
3. In 20 words or less, can you describe your company?
We are your trusted family HVAC business; reliable, experienced, and dedicated to keeping homes comfortable year-round. Quality service with a personal touch.
4. Other than finding employees, what is your most immediate challenge?
In the first quarter of 2024, it was tough keeping our install department busy as many folks were holding onto their cash due to the change in our economy.
5. How are you addressing that?
We made a business decision to increase our advertising and marketing budget. We started advertising on TV, which has made a huge difference in our incoming calls and sales leads. It was a scary decision to spend more when the cash flow was lower than normal. In the end, it worked out for the best, and we couldn’t be happier with our decision.
6. Was entering our Tops In Trucks Fleet Design Contest part of your strategic marketing plan?
It was not part of any plan. I thought “why the heck not” and here we are!
7. What was the tripwire that finally made you decide to rebrand your seven trucks?
Our parents had the same logo for over 40 years. Our trucks were white with red and blue lettering. We decided it was time to spice up our brand and attract more eyes when they were on the road.
8. How deeply involved were you and your brother in the design?
Josh and I were deeply involved with the design. We wrote about our life story, our family’s legacy and about the type of people we are. This set the background for the design. We think this design is different, bold and exciting.
9. What was your reaction and that of your employees when they realized Kings was one of our contest winners?
It was exciting! The employees were told at our weekly company meeting, and they literally cheered with excitement. We went on to celebrate that weekend off with good vibes and good fortune for this amazing opportunity. It was a memorable moment here at Kings.
10. What was the message you wanted to convey with the logo, design, and the colors?
To convey top-tier workmanship, quality equipment, excellent customer service, treating every customer like royalty and bringing comfort to their castle.
11. Did you track the cost and ROI? To date, the cost is just over $65k. We expect to spend more as we aren’t completely finished rebranding everything. It was 100% worth it in terms of ROI. We’ve already seen a tremendous increase in calls. This by far was one of the best business decisions my brother and I have made at Kings.
12. Is there anything you would do differently?
I’m not a big believer in dwelling on the past. The only thing I can say is I wish we initiated the rebranding sooner.
13. If you had to advise other contractors who are thinking about rebranding, what would you tell them? DO IT! JUST DO IT! And think really hard about it. Don’t listen to what others think is “cool.” Do what feels right in your heart and soul.
14. As a woman owner, what unusual challenges have you faced in this male-dominated industry?
Maintaining a happy, positive attitude when men are “mansplaining” things to me that I’m already educated on.
15. Do you think that your leadership style is different from men? If so, how? My leadership style is more centered on being a teammate rather than a boss. I want to assure my team knows that I’m always there for them to find a solution to any problem in order to keep all customers happy and in their personal lives as well.
16. Are people surprised when they discover a woman is the decision maker in an HVACR firm?
Older generations seem surprised. As you may expect, younger generations are not. As years progress, it will be less and less surprising to see women in typical male-dominated industries. I think the most important question is why aren’t more women dominating in the trades?
17. When you talk to young people about the industry, what reasons do you give for joining the industry?
First, it’s a great industry to be in. In Washington state, we’re moving toward electrification. This is creating plenty of work for all the heat pump installations, and honestly it’s just getting started. You can live a very comfortable life in the HVAC industry, and there’s plenty of opportunities for growth.
18. Are there still supply chain issues?
We’ve been quite fortunate not to have this issue since 2021, when manufacturers were playing catch-up because of COVID. When we experienced 112 degree weather during the summer of 2021, we needed 20 AC units. My father had a connection in Texas. He flew down to Texas, rented a semi-truck and drove all those units back to our shop here in Washington to ensure our customers received their AC units.
19. What are you forecasting for 2024?
The first half of 2024 has been excellent compared with last year, which was a bit of a struggle. After looking at our most recent numbers, we are expecting to have one of our best years yet!
20. You’re a Tops In Trucks Fleet Design Contest Winner, so what’s the next challenge?
This was such an honor to receive this award. The next challenge is finding the next community program to get involved with to help families during this tough economy get more efficient heating and cooling systems in their homes. We are here to help our local communities stay comfortable all year round. We’re a family business who cares. We will always be here to do that and we’ll always strive for greatness.
CONNECTIONS ARE POWERFUL
Never, ever underestimate them. In the home services industry, we connect with our customers to add value and offer comfort; we connect with our teams to strengthen and grow; and we connect with our peers to level up. Nexstar Network is built on connections. In 1992 Nexstar founders – like-minded contractors – forged relationships focused on success through education and sharing. They changed our industry for better. This small group has evolved into a network of more than 1,000 of the most successful home service companies in North America and beyond.
Member-owned, we are committed to our valued members, those working to tirelessly to support the rising tide of the trades. Their greatness sets them apart and we celebrate their commitment to their businesses, their communities, and our industry. If you are interested in learning how Nexstar can supercharge your professional and personal growth, we’d love to talk.
Call us today at 888-240-7827, or schedule an introductory call at nexstarnetwork.com/contact, and learn more about our mission to turn the world’s best tradespeople into the world’s best businesspeople.
Brian Williams, Founder and Visionary Ashton Service Group Nexstar Member since 2011
