HVACR BUSINESS NOVEMBER 2023 by HVACR Business

Service Leads to Profitability Heather Langone 5

Improving Staff Retention with Authentic Appreciation Paul White, Ph.D., & Kasee Hamilton 6

Attracting Millennials in the Industry Matt Serdar 8

Marketing to Your Customer Base Will Merritt 16

Navigating the Skills Shortage Marne Martin 14

HVACRBUSINESS.COM NOVEMBER 2023 / VOL.18 / NO.11

BUYING A BUSINESS: DUE DILIGENCE CHECKLIST Page 12

ALSO INSIDE » Management Resource Shelf ............................................. 4 Planning Now Keven Prather............................................. 18 Four “Bewares” Ruth King.................................................. 20 Product Focus ................................................................................ 21 20 Questions with Aaron Lee CEO of Smith.ai & Former CTO of Home Depot ..... 22

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CONTENTS

NOVEMBER 2023 / VOL.18 / NO.11

F E ATU R E S

D E PA RT M E N T S

6 Improving Staff Retention with Authentic Appreciation

An insightful article on how authentic appreciation of employees makes a difference in employee retention. By Paul White, Ph.D., and Kasee Hamilton

8 Attracting and Keeping Millennials in the HVAC Industry

Why HVACR owners should make a concerted effort to train and attract millennials. By Matt Serdar

Leads to Profitability Understand the true meaning of service, the service profit chain, and how to leverage the two for profitability. Heather Langone

4 MRS | Making an Impact

12 Buying a Business: Due Diligence Checklist

Bolen maps out the steps entrepreneurs must take before making acquisitions. By Brandon Bolen

14 Navigating the Skills Shortage Minefield

How technology is providing the tonic to empower the workforce of the future Focus on technology to empower your workforce and attract top candidates. By Marne Martin

16 Are You Marketing to Your Existing Customer Base?

Will Merritt is back with more marketing advice for field service industry companies. By Will Merritt

CO L U M N S

18 Why Planning Now Beats Planning Procrastination

Succession planning starts years before you plan to leave your company. By Keven Prather

20 Four “Bewares”

Four warnings that will help you safeguard your business accounts from theft. By Ruth King

COMMUNITY MODE. Delivering thoughtful innovation coast to coast. As we expand our brand to include more specialty companies under the Modigent name, we’re able to offer a comprehensive suite of capabilities that create safe, intuitive, future-proof workplaces. With more sustainable solutions, we’re helping each of the communities we serve to flourish.

Infrastructure + Technology + Energy

5 Editor’s Notebook | Service

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In the business world, making an impact is about more than just turning a profit. It’s about fostering innovation, creating value for customers, and contributing positively to society.

21 Product Focus 22 20 Questions with Aaron Lee CEO of Smith.ai and Former CTO of Home Depot

Management Resource Shelf

MAKING AN IMPACT In the business world, making an impact is about more than just turning a profit. It’s about fostering innovation, creating value for customers, and contributing positively to society. By focusing on sustainable practices, ethical decision-making, and customer-centric strategies, businesses can leave a lasting, positive impact that transcends financial success. Although opinions differ on the subject, here are our top podcast and book choices that cover varying notions of making an impact in business and beyond.

Impact Podcast Hosted by John Shegerian Impact Podcast is a weekly podcast featuring conversations with some of the greatest business minds and thought leaders on the planet. John Shegerian, Co-Founder and Executive Chairman of ERI, the nation’s leading fully integrated IT and electronics asset disposition provider and cybersecurity-focused hardware destruction company, serves as host. Impact is produced by the same team that created the world’s number one environmental and sustainability business podcast, “Green is Good,” which was also hosted by Shegerian, and featured interviews with many of the planet’s most recognizable brands. https://podcasts.apple.com/us/podcast/ impact-podcast-with-john-shegerian/id1527166638

Everyone Communicates, Few Connect: What the Most Effective People Do Differently by John C. Maxwell The most effective leaders know how to connect with people. It’s not about power or popularity, but about making the people around you feel heard, comfortable, and understood. Your ability to achieve results in any organization is directly tied to the leadership skills in your toolbox. While it may seem like some folks are born with a commanding presence that draws people in, the fact is anyone can learn to communicate in ways that consistently build powerful connections. Bestselling author and leadership expert John C. Maxwell offers advice for effective communication to those who continually run into obstacles when it comes to personal success. https://www.amazon.com/Everyone-CommunicatesFew-Connect-Differently-ebook/dp/B003BWL0TE/

The Diary of a CEO with Steven Bartlett Host by Steven Bartlett The Diary of a CEO with Steven Bartlett is all about authenticity. This podcast is designed to offer insight into the true challenges of starting a business. Hosted by the ex-CEO of Social Chain in the UK, this show welcomes special guests from a range of backgrounds and companies. You can expect to learn something new in every episode! Steven goes deeper than most business-focused podcasts, choosing not to focus so much on his guests’ accomplishments, but rather on the road that led there. Still, it is so fascinating that you are bound to take some nugget of knowledge back to your company. https://podcasts.apple.com/gb/podcast/ the-diary-of-a-ceo-with-steven-bartlett/id1291423644

The Partnership Economy By David A. Yovanno and Todd Crawford The Partnership Economy podcast was created for businesses, partners, agencies, and consumers alike—the show highlights how the power of partnerships brings these groups together and creates authentic trust between all parties. Hosts, David A. Yovanno and Todd Crawford unpack how partnerships can scale revenue growth for brands, agencies, and partners while, at the same time, can put the consumer first. Simply put, partnerships reach consumers in a way they want to be reached. https://open.spotify.com/ episode/33Ap5zmLxzRTLiXU4cCoLd

HVACR BUSINESS

NOVEMBER 2023

How Highly Effective People Speak: How High Performers Use Psychology to Influence With Ease By Peter Andrei Why do we think what we think? Think we know what we think we know? Believe what we believe? Like what we like? Do what we do? Why do others trust or distrust us? Respect or disrespect us? Listen to or ignore us? Reach out to or neglect us? Like or dislike us? Praise or slander us? Believe or doubt us? Why do others follow our lead or stand in our way? Give us opportunities or send them elsewhere? Support our striving for success and appreciate our message or toss it – and us – aside? Decades of cutting-edge (but unheard-of) scientific research presents an answer. https://www.amazon.com/How-Highly-Effective-People-Speak/dp/ B089CSW3Y6/

Exactly What to Say: The Magic Words for Influence and Impact By Phil M. Jones Often the decision between a customer choosing you over someone like you is your ability to know exactly what to say, when to say it, and how to make it count. Phil M. Jones has trained more than two million people across five continents and over fifty countries in the lost art of spoken communication. In Exactly What to Say, he delivers the tactics you need to get more of what you want. https://www.amazon.com/ Exactly-What-Say-Influence-Impact/dp/1989025005/

www.hvacrbusiness.com

THE HVACR MANAGEMENT MAGAZINE

TERRY Tanker Publisher ttanker@hvacrbusiness.com HEATHER Langone Managing Editor hlangone@hvacrbusiness.com

ADVERTISING STAFF TERRY Tanker Publisher Tel 440-731-8600 ttanker@hvacrbusiness.com

MEGAN LaSalla Art Director mlasalla@hvacrbusiness.com BRUCE Sprague Circulation Manager bs200264@sbcglobal.net BARBARA Kerr VP Operations bkerr@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. Copyright©2023 by JFT Properties LLC. 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. HVACR Business (ISSN 2153-2877) Copyright ©2022 is published monthly by JFT Properties LLC,31674 Center Ridge Road, Suite 104, North Ridgeville, OH 44039, Phone: 440-731-8600. Periodicals postage is paid at North Ridgeville, OH and additional mailing offices. (USPS 025-431) POSTMASTER: Send address changes to HVACR Business, 31674 Center Ridge Road, Suite 104, North Ridgeville, OH 44039.

31674 Center Ridge Road, Suite 104 North Ridgeville, OH 44039 Tel: (440) 731-8600 Web site: www.hvacrbusiness.com (ISSN: 2153-2877)

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BY HEATHER LANGONE

EDITOR’S NOTEBOOK

Service is at the Heart of Profitability

he Harvard Service First Business Review In the article, the authors Employee satisfaction results from published an cite mega-moguls who article about the high-quality support services, policies, were early purveyors of this service industry a little over business model to show how and technology that enable a decade ago that I believe it led to better business. Like bears revisiting. The piece is William Pollard, the chairman employees to deliver exemplary titled, Putting the Serviceof ServiceMaster, who is 1 Profit Chain to Work , and service to customers. just one example. Pollard is about how service leads to underscores the importance of “teacher-learner” managers, profitability. The authors drill down the true meaning of service who have what he calls “a servant’s heart.” and explain that to grow in a service industry, CEOS should refer to the profit chain model. The hierarchy of the model is: For many of these CEOs, the focus is first on serving executives serve employees who serve customers – and the chain customers and employees. The piece references the late continues. The notion is that this way of looking at service is Herbert Kelleher, former CEO of Southwest Airlines, and not only about a tangible, quantifiable value for the service billionaire, stating that he “could often be found aboard but also the intangible value – and both are equally important. airplanes, on tarmacs, and in terminals, interacting with This shift in focus asks owners to adopt a deeper understanding employees and customers. Kelleher believed that hiring of what service means. According to the research, a chain of employees who have the right attitude was so important profitability occurs and can be quantifiably maximized and that he told Forbes, ‘The hiring process takes on a patina traced when owners approach service from this model. of spirituality’ – a term he used to describe his philosophy in 1996. In addition, he believed that entrepreneurs who viewed work solely in terms of material wealth were missing An Opportunity for Growth the very heart of business profitability in the service industry According to the article, the service industry business – the people.” model has changed since the 70s and 80s. No longer solely about delivering supplies or fixing an HVAC system – the The Profit Chain – No Weak Links mere competent delivery of the service or product – but it’s now also essential to understand the softer intangible notion According to the profit chain theory, there is a direct of service and adapt it as an overall value tier within your correlation between profitability, customer loyalty, employee business. That value shift can provide an opportunity for satisfaction, and in turn employee loyalty, and productivity. profitability, growth, and employee retention! It’s a circular chain that apparently has been proven to Practically, if a customer orders a service and you deliver maximum profitability. deliver on the promise, you will make money. That is the The links in the chain are as follows2: quantifiable part of being in a service business. However, the authors ask entrepreneurs to ponder how a deeper 1. Profit is stimulated primarily by customer loyalty. understanding of being in the service field can increase 2. Loyalty is a direct result of customer satisfaction. profits. As it applies to business – i.e., how you treat 3. Satisfaction is influenced by the value of services employees, company values, and how you model these values provided to customers. translates to the customer. Is this your paradigm? If it’s not, 4. Value is created by satisfied, loyal, and productive and your model is product and money-focused first, that employees. is completely legitimate, but the alternative model, at least 5. Employee satisfaction results from high-quality support according to the profit chain, claims to potentially offer a services, policies, and technology that enable employees more profitable alternative by flipping the old model on its to deliver exemplary service to customers. head. In 2008, the date of publication, the idea of making your employees as important as your product may have been a newer concept. However, according to those entrepreneurs referenced in the piece who live by this profit chain model, understanding the very heart of service is essential to be maximally profitable. To quantify the meaning of a service as only the B2C delivery of what is commercially promised – a repair, a product, a replacement part delivered for money – is to miss the point.

While it isn’t the truth for all business owners, it’s certainly an interesting approach and one that resonates with the now uber-sensitive, hyper-vigilant consumer base. Things to think about… u

Happy Thanksgiving from HVACR Business! Putting the Service-Profit Chain to Work (2008) by James L. Heskett, Thomas O. Jones, Gary W. Loveman, W. Earl Sasser, Jr., and Leonard A. Schlesinger (1) (2)

https://hbr.org/2008/07/putting-the-service-profit-chain-to-work

HVACR BUSINESS

NOVEMBER 2023

IMPROVING STAFF RETENTION WITH AUTHENTIC APPRECIATION BY PAUL WHITE, PH.D., AND KASEE HAMILTON

ork, by definition, is difficult. As anyone who has worked in providing HVACR services, for even a short time knows, working together to serve clients effectively has unique challenges and stressors. Some of the jobs can be physically demanding, entail long hours, and involve exposure to extreme heat or cold. This stress can deteriorate staff morale over time, both for individual technicians, and the company.

High Staff Turnover is Detrimental to Business The retention of quality employees (whether full-time, part-time, or contract) is essential to the success of a business. Staff turnover is frequently cited as the most non-productive business expense. The loss of productivity, relational damage among team members, and additional training time, all combine

HVACR BUSINESS

Good employees are not easy to find, develop, or keep. Anyone who has lost a key team member (especially unexpectedly) and tried to find a replacement knows this. to create significant costs for employers. Good employees are not easy to find, develop, or keep. Anyone who has lost a key team member (especially unexpectedly) and tried to find a replacement knows this. Finding a person with the training and experience needed to do the job and someone who has the character and qualities you desire, is difficult.

The Real Motivating Factors for Employees Supervisors and managers are at risk of misunderstanding what their team

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members want or what is most important to them when remaining loyal to a company. Many owners and managers believe their employees are motivated primarily by financial gain. But what motivates people is different from what makes them feel valued. Yes, people want to earn more money but one study found that 79% of employees reported that the primary reason they left their job is because they didn’t feel appreciated.1 Additionally, the Sloan School of Business at MIT recently found that not feeling appreciated was three times more predictive of employees leaving than compensation factors.2

And, in a global study of 200,000 employees, the Boston Consulting Group found that the number one factor employees related to enjoying their job was that they felt appreciated (financial compensation didn’t show up until #8).3 Many leaders think they are doing okay in this area – that their employees know they appreciate them. But this doesn’t appear to be the case. A national Globoforce employee recognition survey found that 58% of managers think they do a pretty good job of recognizing employees for work well done. However, the problem is: that only 29% of the employees who worked for those managers felt the manager did an adequate job of recognizing them for doing a good job.4 There is a disconnect somewhere. Communicating authentic appreciation is different than using a “going through the motions” approach to employee

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recognition, or just saying, “Good job.”

1. Communicated regularly (not just once or twice a year at a performance review) 2. Shared in the appreciation language and actions most important to the recipient (not what makes you feel appreciated) 3. Delivered individually and personally (not to the whole group) 4. Perceived as authentic (not just “going through the motions”)

What we have found is that the following is truer: 1. Employees want to feel valued and appreciated at work 2. Most employees don’t feel appreciated 3. A majority of leaders and managers either: a) Don’t care how their employees feel b) Think they are doing an adequate job of communicating appreciation, or c) Don’t know what else to do (beyond what they’ve been doing.)

How Appreciation Impacts the Financial Health of a Business Ultimately, running an HVAC business is about serving your customers well and making a profit doing so. As a result, many leaders think, “I want people to enjoy their work, but I’m not a cheerleader. We’ve got work to get done.” True. But consider this. We know that when team members (regardless of their level in the organization) truly feel valued and appreciated, good things happen. Conversely, when employees don’t feel valued, the following is also true: • tardiness increases • people call in “sick” more often • productivity decreases • policies and procedures are not followed regularly (which can lead to safety concerns) • more conflict occurs over petty issues • “on-the-job” accidents are reported more frequently • the number of customer complaints grows • turnover is an ongoing challenge5 The importance of your staff feeling appreciated becomes obvious.

Employee Recognition Isn’t the Same as Authentic Appreciation Although virtually all companies have some form of employee recognition program, employee engagement and job

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Your employees are your company’s most valuable asset. If you disagree, try accomplishing the tasks at hand without them! satisfaction ratings continue to decline.6 Why? While employee recognition can be effective at rewarding performance, it does a poor job of helping employees feel valued as individuals. Most employee recognition programs are designed in a way that is generic (everyone gets the same certificate and gift card), groupbased (a lot of introverts hate going up in front of a group), focus solely on high performers (leaving out most employees), and are viewed as inauthentic (“It’s the eastside’s turn to get the award this month”).

Employees Have Different Value Languages A key concept to understand is that not everyone feels appreciated in the same way. Not everyone values a verbal compliment. From our work with over 375,000 employees7 who have taken our online assessment,8 less than 50% choose words of affirmation as their primary appreciation language. Some people feel valued when you spend some individual time with them. Others appreciate working together on tasks or getting some practical help. We’ve identified five languages of appreciation important in the workplace.9 These five ways of expressing appreciation are Acts of Service, Words of Affirmation, Quality Time, Tangible Gifts, and Physical Touch. In the HVAC industry, acts of service might look like a coworker stepping in

to help another technician reorganize his truck after a long and busy week. For a technician who values words of affirmation, a supervisor could “build up” the technician to a customer by saying something like, “This is one of my best technicians and you are in excellent hands!” To demonstrate quality time, a service manager could stay on a troubleshooting call from one of their techs longer than normal to ensure they felt comfortable and follow up with an in-person conversation the next day. Or, for tangible gifts, a supervisor might drop off an ice-cold sports drink to a technician (in her favorite flavor, of course) on a hot day. While the last language, physical touch, isn’t as common, it can be shown by a fist bump high-five, or handshake (depending) after a job well done. It’s also true you cannot know what all your employees view as acts of appreciation. So, getting to know employees is the first step. You can do this through surveys or regular communication. Or you might try mixing up the value appreciation rewards.

Keys for Communicating Authentic Appreciation

Your employees are your company’s most valuable asset. If you disagree, try accomplishing the tasks at hand without them! Increasingly, finding quality team members has become a limiting factor to growing one’s business. To be successful, you need to make sure you know how to communicate appreciation in ways that are meaningful to each of your employees. If you don’t, they won’t perform as well, and you will eventually lose key team members. That is a headache you don’t want — and that you can avoid. For all references and citations please refer to https://www.hvacrbusiness.com/ news/2023/nov/01/improving-staffretention-with-authentic-appreciation/ u

Dr. Paul White is a psychologist, speaker, and leadership expert who “makes work relationships work.” He has been interviewed by the New York Times, BBC News, and other international publications. Dr. White is the coauthor of the best-selling book, The 5 Languages of Appreciation in the Workplace, which has sold over 575,000 copies (with Dr. Gary Chapman, author of The 5 Love Languages.) For more information, go to www.appreciationatwork.com.

Kasee Hamilton is an instructional designer and trainer in the HVAC/ Plumbing/Electrical industries. She has a Master of Science in Public Health and a Master of Science in Educational Leadership, where she completed her thesis on appreciation in the workplace.

In working with employees from thousands of companies and organizations across the world, we’ve found four key factors necessary for employees to truly feel valued. Employees will feel truly valued when appreciation is:

HVACR BUSINESS NOVEMBER 2023

ATTRACTING & KEEPING MILLENNIALS IN THE HVAC INDUSTRY

Millennials Will Dominate the Global Work Force BY MATT SERDAR

t’s a story as old as time. The younger generation is lazy. They don’t want to work. They’re soft.

Every generation gets that label at some point, and in today’s world, it’s the millennial. The fact is, there are lazy and soft workers in every generation. But there are also smart and motivated workers. In the HVAC world, it’s so important that we value, attract, and keep those young new talents. That’s who will grow your business to the next level long after you’ve made your mark. In the next two years, millennials will make up 75% of the global workforce according to all of the research. Already, the Air Conditioning Contractors of America says the average HVAC worker is 55 years old. At the same time, the U.S. labor market is constricted with only 3.8% unemployment in 2023, according to the Bureau of Labor Statistics1.

What Matters to Millennials? It is business-critical to understand what drives millennials. For this generation, work isn’t a method of earning money to live. It’s an extension of life itself.

HVACR BUSINESS

It is business-critical to understand what drives millennials. Growth. Millennials want to feel fulfilled in their work while knowing that they are continually being trained for improvement. They also communicate in an ongoing, real-time way. Consider how a social media feed rolls with endless conversation. Similarly, millennials expect to be in regular, ongoing contact with colleagues.

More than 80% of millennials say that wellness is among their top priorities, according to digital marketing company ThriveMyWay. That means 12-hour workdays or spending time in unhealthy environments will be a quick turnoff for this group. Technology. Nearly three-quarters

of them believe their smartphone is a professional benefit. Technology is their problem-solving tool – and savvy Internet navigation is a skill you’ll be happy they have. From cross-checking online repair manuals to sending electronic invoices, millennials can help boost both your efficiency and productivity through

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technological adoption. As the industry continues to develop smart tools and tech-based HVAC products, it will need technicians who move fluidly through those systems. And millennials are smart – a full 40% hold a college degree. The sky could be the limit when bringing these brilliant minds into the HVAC field. Yet, millennials are not knocking down the door to break into this industry. That’s not going to change until HVAC businesses are intentional about funneling the younger generation into this industry. So where should you start? Developing a millennial base within your company – particularly during a tight labor market – comes down to three basic concepts: Recruit, train, and retain.

Recruiting Top Millennial Talent The first step in having a great

workforce is recruiting top candidates. That requires an aggressive approach to recruiting, rather than simply waiting for candidates to come to you. • Cultivate Local Relationships To begin, develop relationships with your local trade school or community college. Offer to be a guest speaker or to tour students around your facility as a field trip. When it comes time for those students to get their first jobs, both they and their instructors will remember you. • Donate Old Equipment Pour any resources you can into trade schools. If you have old equipment they can use for hands-on training, donate it. The more effectively students are trained at school, the better candidate pool you will have down the line. • Forecast Staffing Gaps It’s also crucial to forecast your staffing needs. Don’t simply plan for next week or next month. Instead, vision-cast your business three to five years down the road. Hire and train the team you believe will make your future business successful.

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• Invest in New Technology Finally, tout the new technology available in HVAC careers with your company. Millennials are the first generation to grow up entirely on technology. They will be attracted by advanced furnace and thermostat software systems. • Benefits, Culture, and Work-Life Balance It’s important to note that millennials won’t be wooed by an uppity job title or big responsibilities that aren’t commensurate with pay. But you’ll create loyalty among younger workers when you empower them and simply provide well: pay and benefits, a good work culture, and a solid work-life balance. Remember, too, that not all pay comes from dollars and cents. Provide good benefits like a 401k, comprehensive health plans, and training programs that will help your employees view this as a career, not a job. • Train The Covid pandemic changed the face of continuing education forever – and that’s a good thing when it comes

to millennials. Comfortable with technology and virtual interactions, this age group flourishes with virtual training opportunities. Many learners don’t retain information well when it’s provided in a book-and-lecture format. Recognize that and offer plenty of hands-on training for your workers as well. Consider the way other fields train their workers. Many use a system that takes them from apprentice to master journeyman. That’s something you can establish in-house, even though the HVAC field doesn’t require it. Imagine the potential of a staff that has been trained well and consistently. There’s power in cross-training peers and incentivizing shared knowledge or lessons learned among coworkers. Show your employees that upward mobility through ongoing training is an option at your company. Hone their abilities, keep them challenged, and make it clear there’s room for them to grow. You’ll keep employees happy and engaged when they know there’s advancement within their current workplace and they are on a training path to get there. • Retention Focus on retention. What happens when hourly workers grumble about

low pay at the very moment their boss pulls into the parking lot in a brand-new sports car? Talk about a morale killer. Above all else, take care of your employees first. Doing that will motivate them to take good care of your customers in return. Remember that workers have no problem jumping to the shop down the street if it’s paying an extra dollar an hour, especially millennials. So be aware of your competition’s pay rate and make sure you’re meeting it. At the end of the day, a $1 increase is only $40 per week – that could be a bargain compared to the income you lose hiring and training someone new. Finally, offer your employees job satisfaction on a deeper level. According to the Manufacturing Institute2, a full 83% of young workers say job satisfaction is a top factor in keeping their current job. It’s important to note that 69% of workers under 25 also say that career advancement and job training keep them content at work. Millennials are focused both on helping people and the environment. In the HVAC world, this makes them perfect for the advent of green technology and energy-efficient products, allowing them to take home a paycheck while still finding meaning in their work.

Without a doubt, millennials are the future of the HVAC industry – and your business in particular. Leave your generalizations about young workers at the door. Just as with any generation, excited and ambitious young leaders exist among millennials. Find and invest in them. Your business will be better for it. u News Release Bureau of Labor Statistics (U.S. Department of Labor, October 2023) 1

https://www.bls.gov/news.release/pdf/empsit.pdf Manufacturing and Engagement Retention Study (APA, July 2021) 2

https://www.themanufacturinginstitute.org/wp-content/ uploads/2021/07/APA-Study_final.pdf

Matt Serdar used his background in construction technology to launch a contracting business before entering the HVAC field. Today, he is the Director of Customer Support for HVAC distributor Munch’s Supply, a Marcone Company. As the father to two millennials, he is passionate about training the younger generation for careers in HVAC. www.munchsupply.com

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HVACR BUSINESS NOVEMBER 2023

BUSINESS INSIGHTS»» BUSINE SSINSIGHTS

ADVANCED ADVANCED SOFTWARE SOFTWARETECHNOLOGY TECHNOLOGY

ECI | ThermoGrid: Contractor Management Software Q&A

e sat with Laryssa Alexander, President of Field Service Division to talk about ECI | ThermoGrid, an HVAC-R service management software, built to help businesses centralize estimates and manage inventory, installations, repairs, and invoicing all in one place, providing HVACR (Heating, Ventilation, Air Conditioning, and Refrigeration) dispatchers and technicians with a seamless and organized experience.

Laryssa Alexander President, Field Service Division ECI Software Solutions, Inc. 800-959-3367 ecisolutions.com

FOLLOW UP: Find out how to dispatch the right tech and grow your business with ECI | ThermoGrid. Visit us at www.thermogrid.com.

BUSINESS INSIGHTS: Advanced Software Technology brought to you by ECI | ThermoGrid

Q: What are the benefits of using one convenient platform? A: Software provides secure, centralized access to scheduling, dispatch, inventory, payments, and more. This makes it easy for businesses to manage all operations from one place.

Effective inventory management means lower costs and faster job completion.

Q: What value do technicianfriendly workflows provide my business?

means that your technicians and back office use the same information and are always aligned.

A: Easy-to-use software allows businesses to create their custom processes, which will enable businesses to tailor the software to their specific needs and industry type. For example, if you are an HVAC company, but have an electric business as well then, your workflow needs may differ.

Q: I’ve heard the name, but what does SMART Dispatching do?

Q: What are the mobile advantages for contractors on the go? A: Access on your tablet or smartphone makes staying connected to the business easy, even when you’re stuck somewhere without network service. Centralized job information is stored in real-time, so your techs in the field can upload all job-related info, access customer history and equipment service info, and search inventory for parts. Real-time access to all data

HVACR BUSINESS

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A: ECI | ThermoGrid SMART dispatching system assigns technicians to jobs based on their role, skill, location, and performance. This ensures that the right technician is always assigned to the right job.

Q: Can I improve overall business productivity and profitability with software business insight reporting?

Q: Will it help me keep track of all my estimates, quotes, and service agreements? A: ECI | ThermoGrid automates the entire process of creating estimates, quotes, work orders, and service agreements. Centralized management means no more manual entry and seamless workflows easily convert estimates to work orders, minimizing errors and optimizing response times to your customers.

About ThermoGrid by ECI Software Solutions: For over 20 years, businesses worldwide have relied on ECI Software Solutions to help strengthen their operations and plan for the future. ECI | ThermoGrid is a powerful HVACR business management solution that helps businesses of all sizes improve their operations. It’s the perfect solution for businesses that want to streamline processes and improve their bottom line. ◆

A: Track inventory from receiving to the warehouse, truck, and job. Software ensures the secure use of parts and stock, along with efficient workflows to manage POs, in-field transfers, and stock arrival notifications.

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Maximize Your Team’s Time to Get More Done Optimize your service business processes and reap revenue benefits HVAC-R business owners like you are increasing revenue and gaining more business by using ECI | ThermoGrid to manage teams more efficiently. Whether you’re working from your laptop in the office, or in the field without internet access, our ECI | ThermoGrid contractor management software keeps everyone connected. With features like Smart Dispatching, the right tech is automatically matched with the right job. This helps you respond faster, increase first-time fix rates, and make more money.

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BUYING A BUSINESS: DUE DILIGENCE CHECKLIST

BY BRANDON BOLEN, VP - SERVICE CONTRACTORS AT LIVE OAK BANK

here are countless benefits to buying an existing HVAC service business, including better financing options, established clientele, and reduced start-up time. However, the acquisition’s success greatly depends on a comprehensive business analysis known as due diligence. For buyers, the due diligence process verifies you are buying what you think you’re buying. It also ensures a fair price, uncovers issues early, and increases the likelihood of a successful acquisition. Because it’s a complex and intensive process, it’s ideal to have your attorney and accountant support you. With their expertise, they’ll be able to identify areas of concern and help uncover any issues. In this post, we’ve compiled a thorough due diligence checklist to serve as a guide.1

• Transparency If possible, meeting with key employees can be an important piece of due diligence when acquiring a company. Still, in many cases, the seller will wear many hats and will be the one you meet with to learn about all facets of the company. While it’s unlikely a buyer will receive unlimited access to the seller’s team, your team’s ability to go in and ask questions of all senior management before closing allows you to conduct quality due diligence. Both parties must

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If the seller has been passive, they can be replaced. However, the transition becomes vital if they hold key relationships or specific essential knowledge of the product or service. determine a mutually agreed upon time to meet with key employees early enough to adjust the deal structure if the borrower’s team identifies significant risks in the discussions.

• Dependencies During due diligence, it’s vital to be aware of potential dependencies. Dependencies can exist from the seller, key employees, vendors, or even customer concentrations, to name a few. For example, a common reliance is for the business’s success to be tied directly to the owner-manager or key employees. People don’t have infinite lives, and companies can live longer than their founders. Therefore, owners must consider transition strategies to maximize a company’s value and ensure scalability.

• Customers Ensuring the customer retention rate is critical during the due diligence phase. The buyer should unearth how the seller runs the business and

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the client’s expectations. It may be beneficial to schedule meetings with several significant clients to gain insight into their expectations and goals and whether they’ll remain a client after the transaction. They are in no way obligated to transfer their business to the buyer. Additionally, make sure you have a clear understanding as to why the owner is selling. Ask the right questions to ensure that you are not inheriting unsatisfied customers. In addition to customer satisfaction and retention rate, another consideration is customer concentration. In general, the more diverse the customer base, the better. Concentrations always increase the company’s risk, even with top-quality customers. Examine what percentage of sales the top customer accounts for, as well as the top five and 10. Even better, see if you can find out how much each of these contributes in terms of profit. If the top three clients account for more than 35% of the total, run a financial projection if two are lost the day after

you close. If the business can still sustain adequate cash flow, it is a deal worth considering. Have the seller call the top customers with the buyer on the phone to see the relationship’s state and their plans to use the company in the future. Consider a seller note tied to retaining a key customer/event for the business. If the customer/event is not retained in the following year, the note should be forgiven to right-size for the loss.

• Stability Ask for the top 10 customers’ sales volume over the past three years. Are the majority increasing? Are the names the same year after year? If so, it shows the company is providing a good product or service and should have a more stable revenue base to grow from. Conversely, if customers drop off, find out the reasons why. Does the business have new competitors? Are there product quality issues?

• Quality Some companies may lower their credit standards to increase revenues and profits before a sale. Therefore, it is vital to examine the Accounts Receivable (A/R) aging, especially examining accounts aged 60+ past the invoice date. If there are more than 10% of accounts over 90+ days, it may indicate a poorquality customer base. www.hvacrbusiness.com

• Seasonality Get a quarterly historical pattern of revenues. Then, ensure there is enough working capital in the buyer’s budget for these normal seasonal fluctuations in the business.

• Cyclicality How susceptible is the business to an economic downturn? One way to gauge is to ask for financial statements from 20072010 to see what impact the last recession had. Can the company survive a similar decline in revenues and profits from the current run rate once the acquisition debt is on it? If the company does not have records from that time, investigate the typical cycles of the customer base. Test the target company’s cash flow. How far can revenues and margins decline (typically both drop in a recession) before the company can no longer serve its obligations?

• Revenues Pulled Forward Sellers may be tempted to sell very hard just before a sale, especially if they keep the A/R as part of the purchase agreement. They can offer customers discounts or other incentives to book sales before closing. If they do, the buyer may experience a revenue “trough” right after closing. We have seen this behavior in many deals we have financed. Usually, a company recovers from it, but it makes the first few months of ownership very stressful. To prevent this, ask for a monthly sales report each month before closing. If you see a spike, dig in to understand why.

• Coasting to the Finish Line The company feels a similar impact to the revenues pulled forward if the seller loses focus on driving sales in the period leading up to the sale. The buyer can experience a revenue “trough” due to the lack of leads and sales activity. To monitor this, ask for the historical sales pipeline of the company or how the company tracks future orders. Ensure you don’t see a sharp decline in the months leading up to the sale.

• Verification of Revenues To verify revenues, at minimum, we suggest that the buyer’s CPA conduct a reconciliation of the business deposits over the past year (from copies of the bank statements to the reported cash revenues for that same period). This is one of the most common complaints we hear about early problem loans. The buyer says that the revenue/customers represented by the seller were overstated. www.hvacrbusiness.com

For buyers, the due diligence process verifies you are buying what you think you’re buying. We get tax transcripts from the IRS to verify the seller’s tax returns, but more due diligence is needed to confirm that those numbers are accurate.

• Inventory Verify the inventory being purchased is salable. Despite many HVAC service companies having minimal inventory on hand, ensure that the inventory being purchased is not obsolete and has not been sitting on the shelves for a significant period. Study the company’s normal cash conversion cycle and inventory days/turnover. Also, verify that the industry has no supply chain issues and that you can get all the inventory needed to run the business. Finally, remember to look for any vendor dependencies or concentrations that could cause problems down the road.

• Employees What has the seller’s role been with the company? If the seller has been passive, they can be replaced. However, the transition becomes vital if they hold key relationships or specific essential knowledge of the product or service. Consider a contingent seller note to ensure their continued interest during a transition period if they are important to the business. For example, are there special licenses required to do business? On a side note, explore why they are selling. If the seller is still relatively young and is leaving to pursue “other interests,” beware. Additional questions to consider regarding employees: • Who are the other key employees? • Who holds the relationships with the customers? • Are these people tied to the company through non-competes/nonsolicitation agreements? • Are they aware/supportive of the sale? • Are there pending retirements? • Have any key employees left in the past year? • Does the seller or any employees hold licenses that are required for business operations? • Who possesses the technical knowledge to run the business? The buyer should consider incentives to keep these employees with the company.

• Margins & Cash Flow Most companies trade on a multiple of earnings before interest, taxes, depreciation, and amortization, referred to as EBITDA. In most cases, the reported EBITDA is “adjusted” by the seller to reflect “normalized” operations. Therefore, a vital piece of due diligence is verifying any adjustments.

• Addbacks Many adjustments to the reported EBITDA are valid addbacks. However, to be valid, they must be quantifiable and verifiable. For example, the seller’s salary (assuming they are leaving the company) is a valid addback. It can be quantified and verified through the company’s tax return, payroll journal, or W-2.

• Trend Analysis Seek to understand significant changes in margins or sales. Beware of situations where the margins (or sales) significantly improved in the most recent period. If the reasons aren’t well-defined and verified, consider basing the valuation on the average margin over the past few years. Remember, in cash-based accounting, not paying your bills can lead to higher reported profits. Make sure you examine the company’s accounts payable to guard against this. Many of the business trends will be driven by market trends, so it is important to understand the demographics in the area and industry trends. What are the demographics of the area? What competition do you face in your local community? Is the local population growing?

• Equipment Do a physical inspection of all equipment. Is it in working order? Is a clear equipment list included in the purchase agreement? Will you need to replace the vehicles purchased quickly, and will you need financing? If so, you’ll want to factor that into your financial analysis of the projected cash flows for the company you are purchasing.

• Working Capital In almost all cases, the seller retains all cash in the company and pays all funded debt of the company. In a stock purchase transaction, the working capital (accounts receivable (A/R) + inventory – Accounts Payable and other current accrued liabilities) should be set at a normalized

level. A “target level” is sometimes set, and the difference in working capital at closing can lead to a slight increase or decrease in the purchase price. Typically, the seller should not retain the A/R in a stock transaction. In an asset purchase, the A/R may or may not be retained by the seller. If the seller retains A/R, the overall purchase price will be increased since you will need cash to fill this initial hole in the balance sheet after closing. Make sure you factor this in when agreeing upon a purchase price. This is an area where a seller may attempt to get more than what their company is worth by tacking on A/R. When acquiring a residential service company, it is important to understand the seasonal needs of the business as it relates to working capital. The shoulder seasons may not be as profitable as the summer months, so you’ll want to make sure you have access to liquidity via savings or a line of credit to tap to manage the seasonal shoulder seasons. Once the due diligence phase concludes, you should clearly understand whether this business is a good investment or one you should walk away from. It’s a critical component of the acquisition process and allows you to fully understand your target business. While you may never find a “perfect” deal, due diligence will enable you to identify and properly mitigate risks before buying. Due diligence can help you negotiate the purchase agreement and set yourself up for a smooth ownership transition process. u This article is originally sourced and edited with permission from Live Oak Bank – Experienced Lenders Dedicated to Plumbing and HVAC Contractors (Live Oak 2023) 1

https://www.liveoakbank.com/service-contractor-loans/ hvac-plumbing-contractor-lending/

Brandon Bolen, VP - Service Contractors at Live Oak Bank Brandon Bolen is a loan officer at Live Oak Bank on the service contractors lending team, dedicated to service contractors in the HVAC, plumbing, and electrical industries. He actively works with service and maintenance contractors across the country to create loan packages that meet their business needs. Prior to this role, Brandon was an analyst on the emerging markets team at Live Oak where he helped launch new industry concentrated lending divisions, including service contractors. Brandon joined Live Oak in 2014 as a business advisor where he managed a portfolio of loan customers. He then served as an underwriter and underwrote over $250,000,000 in SBA loans. To connect with Brandon, visit liveoakbank.com/ contractors.

HVACR BUSINESS NOVEMBER 2023

NAVIGATING THE SKILLS SHORTAGE MINEFIELD How technology is providing the tonic to empower the workforce of the future

BY MARNE MARTIN, PRES. OF IFS

usiness leaders across many consumer-facing industries are facing up to the harsh reality of trying to remain competitive and profitable in a resource-scarce economy where costs are constantly on the rise. They can no longer throw more people at the problem—and Marne Martin, President of IFS Service Management Business Unit (SMBU), knows all too well the pain points of today’s service providers. More importantly, she knows the solution—it will require exploiting technology to work smarter to attract, upskill, and retain talent. See her expert advice below. Today’s service landscape faces a pressing set of challenges—a lack of knowledgeable and skilled workers, evernearing sustainability targets, and a need to effectively address growing consumer expectations. The time to find the right formula for this field service management conundrum is upon us. Having the right technology has never been more vital for success, particularly when it comes to how companies manage their service and maintenance operations. The results of a recent global IFS report, “State of Service 2023”1, underline

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The current skills shortage has impacted businesses across the globe. Currently, a record 74% of U.S. employers have difficulties in filling positions. In the State of Service 2023 report, technicians not having the necessary knowledge and skills to complete the job at hand was ranked a top concern for field service companies. this current scenario. Industries were aware that skills shortages were upcoming over a decade ago. But what they weren’t prepared for was the extent of how bad these workforce challenges have become. The most innovative companies are now working smarter by using modern field service technology to fill the void.

Tackling The Growing Skills Shortage The current skills shortage has impacted businesses across the globe. Currently, a record 74%2 of U.S. employers have difficulties in filling positions. In the State of Service 2023 report, technicians not having the

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necessary knowledge and skills to complete the job at hand was ranked a top concern for field service companies, with 64% citing this as the number one reason for multiple site visits. The issue is a complex one, but it is true across the globe — between a low birth rate and an aging workforce, businesses simply don’t have enough skilled workers to fill the job openings. The same research conducted in 2018 found skills shortages ranked as number six in a list of concerns. Today, no matter the size of the company, the struggle to find, employ, train, and backfill thousands of people to fill skilled labor positions has become a prominent concern.

Businesses across all industries need to address these issues and they need to do so urgently. Today there is less and less new blood entering the workforce, further entrenching the old ways of doing things and causing people to be retrained on the way the old employees have worked. It’s a never-ending cycle, which is impacting the adoption of new technologies.

A Shift In Mindset: Empower And Encourage, Not Manage And Control For some time, service companies have struggled to transform field engineers into digital workers — that’s due, in part, to undervaluing the role, a lack of change management, and, in some cases, a lack of attention to issues around business transformation or the adoption of digital tools. But all this is putting pressure on field supervisors and the wider operations model, forcing a shift in mindset. The conversation among service leaders has now changed to less about “how we control them”, and more about “how we empower them.” Keeping employees satisfied is important for the performance and long-term health of any company — with research finding that empowered

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employees have more than three times3 the engagement levels of their lessempowered counterparts. Here, not only can technology help “plug the gaps” in field service worker shortages, but it can also help empower and retain current employees out on the frontline to reduce attrition rates. Innovation will need to start from the very beginning, right through to the use of tools that accelerate the speed of onboarding for new workers. To ease some of the burden, companies must focus on implementing solutions that help expedite new worker training and encourage employees in the long term. For example, remote assistance powered by augmented/virtual/merged reality can be tied to knowledge management and self-service to help technicians perform self-diagnosis or resolution. With 44% of organizations planning to implement and 21% having it on their wish list, remote assistance has become a primary focus to remain competitive. Workforce planning and AI-powered scheduling optimization can also be key in this context. It makes working with a constrained workforce more effective and takes complex SLAs, ones as stringent as 2-hour windows to resolve an issue and makes it possible for technicians to deliver on those expectations.

It’s also put reverse logistics in the spotlight — it’s even become a desired component of modern field service management platforms, as 54% of service organizations currently have reverse logistics capabilities, with another 28% planning to implement them. Having the correct tools in place to anticipate wear and breakage, combined with the digital processes to remedy issues in a timely way, helps companies control operational costs, and manage their sustainable impact. The sustainable impact matters to employees, and in a scarce economy, companies should be putting staffing needs at the top of the priority list. Promisingly, IFS research revealed that 40% plan to implement scheduling optimization and automation, with another 15% having it on their wish list.

Overcoming The Shortage Challenges One Technology At A Time Those that transition to an engaging and personalized approach, will be the companies that gain a competitive advantage — and it can be made possible with modern service management tools that can help companies serve customers more efficiently while also attracting talented employees. u

Bridging The Sustainability Gap To Attract New Talent The power of AI-powered scheduling optimization now goes way beyond meeting customer expectations, it provides significant sustainability benefits too — and the direct incentives of “going green” now go way beyond a commendable corporate objective. As net-zero emission goals creep closer, the spotlight is firmly on organizations proactively making an impact — and workers from the younger generations are watching. Recent research has found that more than half of employees would be more likely to work for a company that provides resources and tools for them to become more sustainable, with a quarter saying they would never work for businesses that profit from unsustainable practices. Here’s where technology can help. With a sophisticated planning and scheduling optimization tool companies can reduce technician travel time between 35% – 50%, which significantly reduces their carbon footprint.

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Marne Martin, President, IFS Service Management Business Unit As President of IFS Service Management, Marne’s focus is to continue to elevate the strategic importance of service management to the success of the overall IFS business. Marne works strategically to ensure the entire portfolio of IFS’s service management solutions provides customers with the business value they expect from a global industry leader in field service management (FSM). Connect on LinkedIn at https://www.linkedin.com/ in/marnemartin/

FORANE® REFRIGERANTs Forane® R-32 is the low-GWP alternative to R-410A, offering 30% refrigerant charge reduction that reduces the direct emission impact on global warming. Learn more about Arkema’s commitment to sustainability at ark.ma/hvacr-bus-nov

IFS State of Service Report (2023) https://www.ifs.com/assets/service-management/ state-of-service 1

2023 Talent Shortage (Manpower Group, 2023) https://web.manpowergroup.us/ talent-shortage-solutions 2

3 Forbes, The 6 Key Secrets to Increasing Empowerment in Your Team (Folkman, 2017)

HVACR BUSINESS NOVEMBER 2023

ARE YOU MARKETING TO YOUR EXISTING CUSTOMER BASE? Capitalize on Your Established Relationship BY WILL MERRITT

re you capitalizing on your established customer relationships? If you are not, you should be. Your HVACR business has already established a level of trust with your customers. You can leverage that existing relationship. Given that you are their chosen service provider to keep their family or business comfortable, that indicates a level of ongoing trust and loyalty. And people love to share with others what works. The key is to stay “top of mind” with them. How do you do that? Well, I’ve had contractors tell me stories that you might think could never happen. Most would consider these “far-fetched”. But they are real. An example: The contractor comes out for the homeowner’s semi-annual maintenance only to discover that the customer has replaced one of their systems! How could this happen? Why would they not call their existing HVAC company? But it happens! This is why you must stay in touch with your customers regularly. Remember the homeowner, “your customer”, is not thinking about you unless you work to maintain the relationship. Just like any other relationship, it must be handled with care. In the following sections, I will explain how you stay in the first position. If you follow the tips, not only will you be top of mind when repairs are needed, but when others ask for referrals, your name will come up.

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How do stay top of mind with your customer? You must be very consistent with your overall marketing and messaging. Stay “Top of Mind” With Your Customer How to stay top of mind with your customers? You must be very consistent with your overall marketing and messaging. This can include everything from your company’s website, TV commercials, company branding messaging, mail, direct marketing, and fleet advertising. Keep your message consistent everywhere so there is no way anyone can confuse you with another service provider or worse, forget your name. An occasional in-touch message from your business is a good thing.

Email Marketing Marketing to your customer base through email is a great way to stay in touch with your customers. Did you know the United States is the only country where you do not have to get permission to email without their consent? Other countries around the world require you to give an opt-in or permission when sending out email blasts, so that is a distinct advantage in our country. A “just because” email with a holiday message or a recent discount is always a nice touch. Remember they

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chose your company as their HVACR service provider. The bottom line, the messaging must be the same everywhere, or you will risk competing with yourself. Email marketing is always a great way to passively touch your customer especially if there is an occasion to do so – i.e., an announcement, a sale, or a holiday greeting. Let’s look at the overall messaging, frequency, and content of your email marketing.

Messaging: Best Practices So, what is your message to your customer? We recommend that less is more in the form of content and frequency. Don’t go overboard with too much content on your email blast, people’s attention spans are short these days. If you are sending company newsletters via email, we recommend not more than once a month or quarterly. Remember, your HVACR company already has an established relationship with the people you’re emailing. So, you want to treat them as such, a current customer or friend. We recommend not to lead with sales offers, rather view your email marketing in a more holistic approach.

1. Thank them for being a loyal customer of your HVACR company 2. Educate them on industry changes, SEER 2, or upcoming refrigerant changes 3. Tell them about your company: • Charities or community involvement • Company milestones, such as, “Years in Business” • New employees, promotions, birthdays, anniversaries, achievements • Added services such as plumbing, duct cleaning, IAQ testing 4. Reminders: Time to schedule your fall maintenance 5. Offers: Financing or Rebates 6. Wish them a Happy Birthday or Happy Holiday 7. Celebrate their equipment anniversaries

Review Blasts Review blasts via email is a great way to drive reviews. I know many of you use services such as Birdeye or Podium, and we have employed both. Sending a follow-up email to all the customers that you did business with the prior week works great as a backup. Sometimes they forget to leave you a review, even though your technician asked at the end of the service or maintenance call. Send out the review blast on Tuesday nights with a direct link to Google, you’ll be surprised how many reviews you will capture. *

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Finally, if you do nothing else, be consistent with your list of customers and subscribers. At least remind them that you are still serving the area and let them know how well you are doing. Send them updates, testimonials, and recent reviews. They will be happy you did when their systems fail and you will be happy when they send you new business.

Newsletters Newsletters are exactly what the name implies, it is news delivered in letter form. Today we have options for company newsletters. Yes, we can go the traditional route and mail our customers a paper newsletter, or we can do the same thing via email. Just like email blasts, company newsletters are a great way to keep in touch with your customers. As we mentioned earlier; the frequency of your mailings or emails is critical. Don’t we all get annoyed, when we get too many emails from a company? They are trying to sell us something every time they communicate with you? It’s annoying. So, less is more. Newsletters unless they are dedicated and specific, should not go out any more than once per month, but ideally, we recommend once per quarter.

Keep it Light! Your goal here is simply to remain relevant with your customers. Here are some ideas for content: 1. A letter from the president’s or owner’s desk, thanking them for being a loyal customer 2. Let them know about news at your organization, recognition, expansion, or a heartfelt testimonial. 3. If you sponsor local teams or participate in any charity races, share team wins or post pictures from the race. 4. Educational updates on industry changes, such as the recent SEER2 requirement or the 2025 refrigerant change – these are always a good share. 5. Employee spotlight (Ex: Employee of the Month.) 6. For a family-run legacy business, recipes are a nice touch, especially around the holidays! But make sure to relate it to the company i.e., share pictures of the staff eating cookies baked from a family holiday recipe.

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Surveys Surveys can be a great source of feedback from your customers. It can be difficult to hear true feedback from your customers especially if it’s more negative, but would you rather not know? You may already get a lot from online customer reviews, but surveys can take it to the next level. You can ask more probing questions and gain insight into how our customers truly feel about our services.

How to get Started with Surveys 1. Make It Easy Make it easy for your customer. We recommend you let them know that you will be sending them a survey. You should convey how important they are to your business, and how much it will mean to you if they take the time to fill it out.

confused with SPAM. This pertains to all the forms of messaging we discussed in this article. It’s a fine line between too much contact and not enough. Be deliberate, thoughtful, and consistent and you will avoid SPAM.

Familiarity, Good Service and Trust Equals Lifelong Customers Lastly, I know you hear me say this often, but the topic of “heating and air” often once fixed, is out of sight and out of mind to your customer. Keep in touch and do that at most once per month or once per quarter. Also, encourage your employees to interact with your

customers as much as possible. The more comfortable your customers are with your technicians, the more honest the feedback and communication you will get! This familiarity and trust will drive better business and lifelong customers. u * https://birdeye.com/ https://www.podium.com/home-services/

Will Merritt is the managing partner at Effective Media Solutions in Charlotte, NC. He has more than three decades of experience creating marketing solutions for business owners. For more, visit http://myeffectivemedia.com or email will@myeffectivemedia.com.

2. The Best Time to Send The best time to send out a survey to your customers is right after they’ve had service from your HVACR company. Have your office contact them or have your service technician let them know at the end of their service or maintenance visit. Again, thank them and let them know how important the survey is to your company. 3. Length of the Survey Keep it short! Consumers’ attention spans are short. Create a survey that will take them no more than five minutes to complete. 4. Questions to Ask Here’s where it gets difficult for business owners. Sometimes the truth hurts, but it is paramount to the improvement of your company. Start with a couple of broad questions and then narrow it down. Examples Include: • Please rate your overall satisfaction with our company. • How likely are you to recommend us to others? • Overall quality of work? • How timely were we? • Did we explain our services in a way you could understand? • Overall appearance of our company personnel?

Reminder: Top of Mind is Not SPAM Staying in touch and keeping your brand top of mind should never be HVACR BUSINESS NOVEMBER 2023

FINANCE

PROVIDED BY KEVEN PRATHER, CFBS

Why Planning Now Beats Planning Procrastination

ll successful business owners must eventually face a stark reality: One day, they will no longer run their businesses! If this idea makes you uneasy, you are not alone. Today, we’ll show you how preparing for a future – even if you are not ready for it now – can benefit you both today and when you are ready.

Looking to the Future Can Benefit You Now Even if you aren’t ready for a future outside your business just yet (and even if you plan to die at your desk), taking steps toward planning for that inevitability can provide important benefits for you right now. By confronting the reality that no business owner owns their business forever, you can create plans to maximize your success while you are at the helm, while simultaneously giving yourself more freedom to pursue your goals inside and outside the business.

Overcoming ‘I’m not ready’ If you’re like many business owners, your business likely relies heavily on your presence for success. Your business may also support your family and nonbusiness-related goals. This may make the idea of preparing the business for a future without you, seem preposterous, especially if you have no plans to leave your business anytime soon. But consider the other side of the coin: If your business, family, and personal goals rely on your presence as a business owner, what happens if you were unexpectedly forced from the helm – by death, injury, or otherwise? In other words, if you’re indispensable to your business, it becomes extremely challenging to leave it, even when you are ready. To reduce the likelihood that you’ll face this fate, consider taking the following actions, which can benefit you and your business now and in the future.

Hire Next-Level Management It’s hard to overstate the importance of next-level management. Next level management can provide the expertise to shore up your business’s strengths, improve its weaknesses, and directly contribute to your most important goal: financial independence. Better still, next-level management teams can help you focus on what you want for yourself, your business, and the things that matter most to you in the future. That’s because next-level managers can take your business’s most pressing issues off your plate.

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If your business, family, and personal goals rely on your presence as a business owner, what happens if you were unexpectedly forced from the helm — by death, injury, or otherwise? Finally, next-level management is crucial to increase the value of your business. Next-level managers have track records of growing businesses to achieve ambitious goals. This growth can have a cascading effect, giving you more freedom to determine what a successful future looks like. In short, next-level management can give you more control over your goals, both now and in the future.

Create Business Continuity Instructions Business Continuity Instructions are another crucial aspect of planning for a successful future. These instructions can guide co-owners, managers, family members, and advisors in case you are unable to run the business (e.g.,

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unexpected death or incapacity). This can help mitigate risks and offer solutions for the people who rely on you and your business to maintain their lifestyles. Additionally, Business Continuity Instructions can help you uncover weaknesses in your business and improve upon them. For instance, a key aspect of Business Continuity Instructions is determining how to handle future contracts with important clients. In the process of creating these instructions, you may find that your company relies too heavily on one segment of business (new construction for example) or that a few of your largest clients represent a disproportional amount of revenue. This, in turn, will help you determine how to diversify your clientele and strengthen your business in the short and long term.

We strive to help business owners identify and prioritize their objectives concerningtheir business, their employees, and their families. If you are ready to talk about your goals for the future and get insight into how you might achieve those goals, we’d be happy to sit down and talk with you. Please feel free to contact us at your convenience. 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.

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FINANCE

BY RUTH KING

Four “Bewares”

eware – scammers are out there and they may not even be within your business. With random number generators and an easily obtainable bank routing number, your hard-earned cash could evaporate. The scammers are looking for viable bank accounts and viable credit cards from which to steal. Here are four situations you might encounter:

1. Your Bank Accounts and Credit Cards Please monitor your checking and savings bank accounts daily. It takes less than five minutes to do. You can do it from anywhere (if the Internet is secure where you are). Take the time to do it. Review all the transactions from the previous day. Make sure you recognize all of them. If you do not, then investigate and make sure those transactions are legitimate. If they are suspicious, call your bank immediately. Likewise, look at your credit card transactions daily with the same intent. Call your credit card company if you see suspicious or invalid transactions.

field. Here is how quickly theft can occur if you get complacent. A customer pays a technician by check at a service appointment. The technician tells the customer, not to worry, he will fill in the “Pay to the Order Of ” section. Then he fills in that line with his name. In the evening, he goes to the ATM and deposits the check into his bank account. Done. If you are not watching, you have just been stolen from. You may say, “We don’t accept checks, so we aren’t worried.” Think again.

These texts were suspicious because none of these payments were late. I verified this was the case. Had I clicked on the link and entered information, my bank accounts/credit cards would have been compromised – IN SECONDS. bank accounts/credit cards would have been compromised – IN SECONDS. If you get an email, text, or other message saying your payments are late or wanting to change the payment method, NEVER assume these communications are legitimate.

Closing a checking account or a credit card account is irritating. However, it is much better than being stolen from.

Always call your contacts, go to your vendor/customer website, your bank accounts, and verify payments you have made.

2. Legitimate Looking Letters and Emails

3. Changing Payments Sent and Received

It is easy to send thousands of emails and text messages with legitimate looking messages.

A. Changing how you get paid Suppose you receive a letter or an email from your customer saying they want to change how they are paying your invoices. The letter/email looks legitimate.

I can attest to the veracity of this as I received two texts recently – one from my gym and another from my insurance company. Both texts said that my payment was past due, followed by a link that instructed me to “click here.” These texts were suspicious because none of these payments were late. I verified this was the case. Had I clicked on the link and entered information, my

HVACR BUSINESS

The message contains instructions to change their payment to you from a different bank or changing from paying you by check to paying you by direct deposit into your account through ACH payments. Do NOT assume this is legitimate. Double-check with the source in every case.

NOVEMBER 2023

B. Changing how you pay your vendors Like A, let us say you receive a letter or email from your vendor saying they want to change how your payments to them are made. The letter/email looks legitimate. They want you to send payments to a different bank account or to a different ACH payment. Again, call your customer at your known telephone number and verify the changes…do NOT call the telephone number on the letter or email – even if the letter looks like it came from your customer/vendor. These examples are very real. I have been told about two very recent painful losses: One for more than $50,000 and another for more than $78,000. Pay attention and you will not find yourselves in this position. Remember, it is not only the cash loss that hurts. Assuming that your net profit is 10% then that means that you must generate $500,000 or $780,000 just to recover from the losses.

4. Track All Payments Made in the Field Track all the payments made in the

A customer asks to pay via debit or credit card. Do you have a device that tracks these payments? Make sure the device that is being used is your company’s device. It is extremely easy to get a Square with your company’s name, your company Federal and State ID numbers (they are on the W-2’s you give to employees at the end of the year) and the technician’s bank account. You must have a system of checks and balances to keep your accounts safe. Your bookkeeper should verify that the company receives all payments from the field daily. If the technicians know you are watching, they are less likely to steal. Stay vigilant. If you see something suspicious, investigate immediately and resolve the issue. It is your responsibility to monitor all the money going in and out of your accounts to protect your hardearned cash. 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.

AVAILABLE ONLINE Visit: www.hvacrbusiness.com/documents/ to download the template for profit sharing.

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HVACR BUSINESS NOVEMBER 2023

20QUESTIONS

>> with AARON LEE

Managing Editor, Heather Langone sat down with Aaron Lee, Founder and CEO of Smith.ai, to discuss the necessity of the human factor in AI, lessons learned as the former CTO of Home Depot, and the importance of immediacy in customer service.

1. What does a day off look like for you?

Time to relax – I love hiking, skiing, and spending time with my family and friends. I have three girls – twelve, eight, and three. So, it’s fun.

2. What is your definition of service?

If you order a book on Amazon, a book is a book. For me, service is personal.

3. Do you celebrate Thanksgiving? If so, what does the day look like for you? Yes, my family loves to cook and eat. It’s a day to be together. Everyone brings a favorite dish. It’s a non-stop eating event!

4. What makes you happy?

Of course, if I go out with friends, I’m happy. But that’s transient. Bringing joy to other people makes me happy.

5. Who do you consider the most influential business leader(s) of the decade?

My mentor, former CEO of Home Depot, Frank Blake, a lawyer by trade, understood the business and worked harder than anyone. He knew all the associates’ names. A true leader who led by example.

6. What is the mission of Smith.ai?

To transform the customer experience for every business.

7. How do you combine the two? It’s not just chatbot AI or FAQ?

11. As the former CTO of Home Depot, why the move to this start-up?

My obsession with customer experience. At Home Depot, I talked to thousands of different businesses and customers, different pros, verticals and industries. One problem arose repeatedly – the pain of not being able to get back to customers quickly enough.

12. If you could advise a business owner who hasn’t caught up to technology, what are good first steps?

Don’t think you need to understand how AI works. You only need a willingness to adapt. If you want to keep up with technology and keep up with innovation, you need to work with companies that deliver AI.

13. How do you think AI will benefit the field service industry? HVAC companies not only employ service technicians out in the field daily, but they must keep up with increased demand seasonally. AI provides the knowledge to the human agent to answer questions quickly and expedite service. And no algorithm can replicate human empathy. You need both. If a mother calls in during the hottest summer month because her A/C is broken and she has an infant for instance, then time is vital. She needs repair now and she needs a CSA to empathize. Not only does AI speed up the service but the agent can then escalate a call like that.

14. The idea that AI will eliminate jobs for service workers – is that a fair assessment?

Humans are part of the experience. If a customer has a question about your specific business, personalized AI provides answers. We boast a 99.7% accuracy rate.

I don’t think so. Will there be jobs eliminated? Yes. But I don’t perceive we will ever eliminate the human element. AI simply makes businesses more efficient which is good for business.

8. Why is data management and analysis important in the HVACR Industry?

15. Where do you see Smith.ai in the next five years?

A small heating and air conditioning business, for example, needs data to be more efficient and increase productivity. Who is the target customer? Should there be extra staff on Thursday afternoons and less on Mondays?

9. What do you think is the most common customer service oversight of business owners? They, don’t realize the importance of immediate engagement. No one would disagree that good service is important, but immediacy is the number one factor customers need to have addressed.

We will become the de facto platform for handling any inbound or outbound omnichannel communications. Most companies are building a system that I call “a thin wrapper” on top of the Chat GPT. The way we build AI, with eight years of experience, no one has the amount of data we do or has built as much infrastructure. In a very noisy market, we plan on continuing to lead in the space.

16. How did being a CTO at Home Depot help you transition to this role?

Home Depot is one of the companies I admire most because the human experience is deeply rooted in their culture. It is one of the few companies that promotes from the most entry-level position up to Senior VP. The amount of training and promotion opportunities they provide is unprecedented. I modeled my company around that culture. It is our secret sauce.

17. Roosevelt said, “It is not the critic who counts; not the man who points out how the strong man stumbles… The credit belongs to the man who is actually in the arena.” What is your opinion on this as it pertains to business?

This is my second startup, so of course I learned a ton from the first one. I took a lot of risks because I didn’t know anything. As l learned more, I discovered that there are risks you cannot foresee. Starting a business is incredibly challenging. Kudos to all of you who took the risk. I have profound respect for anyone who dares to throw a hat in the arena.

18. Do you think AI will level the playing field in terms of equality in the workplace?

People who are willing to embrace the new technology will have an edge over the people who don’t want to learn about this new thing. Being adaptable will provide the edge.

19. What is the overarching objective for Smith.ai in 2024?

To drive more innovation and enhance what we call the magical experience for customers. So, our clients say, “This is unbelievable. She is as good as one of my CSA employees,” and to help more SMBs understand that the traditional way of running a business has evolved.

20. One of the obstacles in the HVAC industry is the labor shortage, do you think AI helps to solve this issue in any way?

Yes, if you grow, you attract more business. If you look more attractive, you attract more employees. If you grow, you can pay higher wages. If you pay higher wages, you attract better candidates, and so on. Millennials care about those benefits, and that’s who you should be looking to attract in the labor shortage in the years to come.

10. Has AI changed the role of CTOs. Yes. AI is the new and essential programming language every CTO must learn now.

HVACR BUSINESS

NOVEMBER 2023

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And the award goes to... 20

At American Standard Heating and Air Conditioning, our dealers are as trustworthy, resilient, and dependable as the products they’re selling. But there are some who go above and beyond to build a higher standard for their employees, customers and community. Congratulations to the 2023 winners of our Building A Higher Standard Distinguished Dealer Award.

Mark Gibson | Gibson’s Heating & Plumbing

David Simpson | Spencer Heating & Air

Barry, Mike & Mark Hyde | Hyde’s Air Conditioning

Visit amsd.us to learn more about joining the American Standard Heating and Air Conditioning family.

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