Serenity Now; Insanity Later Pete Grasso 4
Get Your Books in Order Brian Cohen 9
Strategic Planning for Future Success Eric Knaak 11
The Importance of a Hiring Process Ron Smith 16
Solve Self-Made Problems Keven Prather 20
The First Step to Recruiting Steffan Busch 21
HVACRBUSINESS.COM FEBRUARY 2021 / VOL.16 / NO.2
HOW TO MANAGE CHANGE IN YOUR COMPANY Page 6
Hire for Culture, Train for Success Page 13
ALSO INSIDE » Industry News .............................................................5 Ruth King on The Rules of Wealth................19 Product Focus .............................................................22 20 Questions with Jacob Huck President of Williams Comfort Systems .....................23
CONTENTS
FEBRUARY 2021 / VOL.16 / NO.2
F E AT U R E S
6 9 11 13 16
How to Manage Change in Your Company
Develop a communication strategy and support structure within your organization to help facilitate change. By Michael Rosenberg
D E PA R T M E N T S
4
Editor’s Notebook
5
Industry News
Run Your Business Today Like You’re Selling it Tomorrow
Be prepared for the day when you may want — or need — to make a transaction. By Brian Cohen
Strategic Planning for Future Success
Benjamin Franklin said, “don’t put off until tomorrow what you can do today.’ By Pete Grasso
Your plan is your living, breathing roadmap for your business and it deserves your attention. By Eric Knaak
22
Product Focus
Hire for Culture, Train for Success
23
20 Questions with Jacob Huck
Find a candidate who fits well with your company, then train and nurture them to be a great employee. By Matt Marsiglio
President of Williams Comfort Systems in Carmel, Ind.
How to Hire Co-Workers
Think of the hiring process as a sales presentation — putting your best foot forward will net results. By Ron Smith
C O LU M N
19
Wealth Rule No. 9: Have a Sound Debt Policy
20
Two Self-Made Problems that Can Harm Your Planning
21
The First Step of Successful Recruiting
Increasing debt to equity ratios mean your company is becoming more debt ridden. By Ruth King One of the most important factors of planning for future success includes having a next-level management team. By Keven Prather Recruiting should be discussed during department meetings and all-staff meetings. By Steffan Busch
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THE HVACR MANAGEMENT MAGAZINE
TERRY Tanker Publisher ttanker@hvacrbusiness.com PETE Grasso Editor pgrasso@hvacrbusiness.com MEGAN LaSalla Art Director mlasalla@hvacrbusiness.com BRUCE Sprague Circulation Manager bs200264@sbcglobal.net
ADVERTISING STAFF ERIC Hagerman National Sales Manager Tel 216-409-3246 Fax 440-731-8750 ehagerman@hvacrbusiness.com TERRY Tanker Publisher Tel 440-731-8600 Fax 440-731-8750 ttanker@hvacrbusiness.com
BARBARA Kerr Executive Assistant 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©2021 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 ©2021 is published monthly by JFT Properties LLC,31674 Center Ridge Road, Suite 104, North Ridgeville, OH 44039, Phone: 440731-8600. 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 Fax: (440) 731-8750 Web site: www.hvacrbusiness.com (ISSN: 2153-2877)
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EDITOR’S NOTEBOOK
BY PETE GRASSO
What are You Waiting For? Act Now!
T
he NBC sitcom “Seinfeld” spurred many catchphrases during its nine-year run. There’s “No soup for you!” and “Not that there’s anything wrong with that” and, of course, “Yada, yada, yada.”
Perhaps my favorite, however, is the one first uttered (or, screamed, rather) by George’s father Frank Costanza (and then by Kramer and then by George himself ): SERENITY NOW! You see, in the episode, Frank via an instructional tape is advised to say “serenity now” every time he gets angry in an effort to keep his blood pressure down. Of course, he angrily screams the phrase and when George asks if he’s supposed to yell it, Frank calmy replies, “The man on the tape wasn’t specific.”
your business and your employees succeed after you’re gone. It’s a daunting task to be sure, and the thought of life after your business seems so far off ... why not worry about it another day? Serenity now; insanity later. You’ve worked hard for many years to build a successful business. It’s been your life and, although you may enjoy hobbies outside of your business, pursuing those hobbies in lieu of working may seem far-fetched. But it’s not! All it takes is a little planning and hard work — you’re not afraid of a little hard work, are you?
Benjamin Franklin famously said, “Don’t put off until tomorrow what you can do today.”
I recently finished reading “Benjamin Franklin: An American Life” by Walter Isaacson. It was a lengthy, fascinating read about one of our country’s most accomplished founding fathers.
It becomes a running gag throughout the episode as Frank continues to scream the phrase every time he gets upset. Kramer also picks up on it and tries using the phrase as he tries to calm his emotions.
We’ve all heard many of the stories surrounding Franklin, but there was so much about him that I’m sure not many people know.
Toward the end of the episode a frustrated George, in a fit of rage, screams “SERENITY NOW” only to be informed by his rival Lloyd Braun that the “serenity now” mantra is actually harmful, as it bottles up emotions.
I learned a lot reading the biography, and one thing that really struck me as interesting happened in 1748. Mind you, the Second Continental Congress in which the Declaration of Independence was drafted is still 27 years away.
“Serenity now; insanity later,” Lloyd quips. As with most things from “Seinfeld,” this is humorous, yet also is instructional. While saying (or screaming) “serenity now” may make you feel better in the short term, Lloyd is right in his assessment. You’re only putting off the inevitable. The lesson, to me anyway, is to avoid procrastination — easier said than done. How many times have you avoided doing something you know needs to be done, thinking you can always do it later? We often have this reaction when the task is difficult or unpleasant. Putting it off doesn’t make it any less pleasant, it just pushes it off to another time and only placates you in the current moment. Serenity now, insanity later. The only thing stopping you from doing what needs to be done is you. Let’s use your retirement as an example. Sure, you may not be ready today, or this year or even within the next five years, but one day you will want to retire. Planning for retirement involves a lot of work ... you’ll have to ensure you’re financially able to retire and put a plan in place for that, not to mention all that goes into ensuring
Already an established printer — and a successful one at that — Franklin had a keen interest in science (experiments with electricity, in particular). So, at the age of only 42, Franklin decided he would like to spend more of his time conducting his experiments and retired from his printing business. He put a plan in place that handed over the majority share to his business partner and retired — at 42 — so he could, essentially, tinker with science. Because he enjoyed it. He walked away from his business — after careful planning, of course — to pursue his passion. Though he didn’t know it at the time, Franklin lived another 42 years and accomplished much more than he could have imagined. I can only imagine how different his life’s story would be if he had put off retiring from his business when he did. Retirement is just one example. There are many things in life that we put off until another time when we could (and should) do them now. We only put off the insanity until later for some serenity now. As Franklin famously said, “Don’t put off until tomorrow what you can do today.”
INDUSTRY NEWS » Trane Named America’s Most Trusted HVAC Brand
RLS Launches New Online Training Portal
DAVIDSON, N.C. — Trane has once again been named America’s Most Trusted HVAC brand by Lifestory Research for the seventh year in a row since 2015. The 2021 ranking is based on a survey conducted of 6,453 U.S. based consumers, who shared real opinions about a wide range of brands and products across various categories.
SHELBINA, Mo. — RLS LLC, manufacturer of the first press-to-connect fittings for the HVACR industry, has launched its new RLS Certified Installer online training program. The new training portal walks HVAC/R contractors through the step-by-step process of making reliable, permanent copper tube connections using RLS press technology.
By winning the No. 1 trust rating, Trane now has the distinction of being recognized as the most reliable HVAC solution to fit American’s indoor comfort needs. Lifestory’s evaluation process is rigorous and thorough, with consumers detailing why they trust specific brands. Trust is calculated via the Lifestory Research Net Trust Quotient in which a score of 100 is average for all brands included in the study. >> trane.com/residential.
HVACR Industry Loses Pioneer Turner Collins MOUNT PROSPECT, Ill. — It is with great sadness that HVAC Excellence announces the passing of Turner Collins, one of the founding fathers of HVACR programmatic accreditation. Collins, a veteran of the Vietnam War, served as a paratrooper in the 82nd airborne division, an elite infantry division of the army that specializes in parachute assault operations. Upon returning home, he embarked on a 40-year career in the HVACR industry. As he mastered his craft, he was recruited to become an HVACR instructor, where he spent thirty-years as senior HVACR instructor with what is now the Tennessee College of Applied Technology in Jacksboro, Tenn. It is in this role where Turner left his mark on the HVACR industry. In the late 1990s the Tennessee Board of Regents mandated that their technological programs obtain programmatic accreditation, but quickly realized that no such process was in place for HVACR programs. Two educational leaders in the state of Tennessee, Turner Collins, and his immediate supervisor Coy Gibson, were tasked with identifying an organization that could establish national standards, and accreditation guidelines for HVACR educational programs. As a result, HVAC Excellence assembled a team of subject matter experts, including Collins and Gibson, to collaborate and develop such standards. >> escogroup.org.hvac
HARDI Reports 3.6 Percent Revenue increase in November COLUMBUS, Ohio — Heating, Air-conditioning & Refrigeration Distributors International (HARDI) released its monthly TRENDS report, showing the average sales performance by HARDI distributors was an increase of 3.6 percent during November 2020. The average annual sales growth for the 12 months through November 2020 is 3.2 percent. “This month was warmer than normal and warmer than November 2019 in six of our seven economic regions,” said Brian Loftus, HARDI market research & benchmarking analyst. “November is an important month for annual furnace sales, and the weather was not helping demand.” The Days Sales Outstanding (DSO), a measure of how quickly customers pay their bills, is now at 44 days. “The normal DSO for January is 48 days,” Loftus said. “It is increasing from the summer lows consistent with the normal annual pattern. One of many things that was unique about this year is how low DSO was this summer due to the unusually high share of cash transactions.”
“We’re very excited to offer this comprehensive new training program for users of RLS press fittings,” said Paul Schubert, president of RLS. “The new portal explains our patented press technology, how and why it works so well, and the steps required for proper installation.” Users must pass a series of quizzes as they work through each section of the training program, as well as a final test after completing the entire course. After passing the final test, a customized certificate of completion can be downloaded. >> training.rapidlockingsystem.com
Superior Boiler’s Wright Named Chair of ABMA HUTCHINSON, Kan. — Doug Wright, CEO of Superior Boiler, has been named chair of the American Boiler Manufacturers Association. Wright will serve a two-year term in the role. “In 2020, effective organizations pivoted quickly to respond to the innumerable changes inflicted by COVID-19,” Wright said. “ABMA did this ably, helping its members manage the impacts of the pandemic. Despite the unprecedented challenges, ABMA remains as strong as ever.” With ABMA staff, Wright will be involved in developing BOILER 2022 –ABMA Boiler Conference & Expo, a two-day trade show and educational event that is the first of its kind. Scheduled April 11-13, 2022, the event will share the latest boiler technology advances and educate on all facets of the boiler room. It is part of a strategic initiative for ABMA that shifts the focus to the end users of boiler products. >> superiorboiler.com.
Hunter Industrial Launches Lifetime Warranty NASHVILLE, Tenn. — Hunter Industrial Fans debuts a lifetime warranty policy for all of its HVLS industrial fan lines. Hunter Industrial is the only HVLS fan company to offer a lifetime warranty policy on all of its HVLS products. The new lifetime warranty policy is effective January 1, 2021, and allows customers to work directly with Hunter Industrial on a return, repair or replacement. “Our products are reliable, built-to-last and top-of-the-line,” said Mark D’Agostino, senior vice president and general manager of Hunter Industrial. “Our priority is to provide innovative and quality products to our customers, and this new lifetime warranty is proof that we stand behind our fans.” Hunter Industrial specializes in various industrial and commercial fans for industries including automotive, manufacturing, warehouse/distribution, food and beverage, agriculture and fitness. >> hunterfan.com/industrial
>> hardinet.org
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HOW TO MANAGE CHANGE IN YOUR COMPANY
Develop a communication strategy and support structure within your organization to help facilitate change. BY MICHAEL ROSENBERG
C
hange can be one of the most difficult challenges in an organization. People deal with change differently and it can have a huge psychological effect. Change, however, is necessary for a business to grow and prosper. To manage change, an organization must first clearly define the change and align it with the goals of the business. As the owner, it is necessary to ask yourself if the defined change will help improve the business in the long run. It is important to determine whom it will affect in your
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It is important to create buy-in from everyone. Sometimes training is required to correctly implement the change. organization and how this change impacts each of them.
Sometimes training is required to correctly implement the change.
You need to develop a communication strategy to educate your entire team and make sure everyone understands the change and why it is being done. It is important to create buy-in from everyone.
A support structure can be implemented so that people have someone to go to in order to ask for help or voice concerns. Finally, the effect the change has on the business should be measured. After a
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period of time, you should be able to determine if the change has been positive or negative.
FORCED CHANGE Some examples of normal change within our organizations include replacement of employees or turnover, changes in your dispatch or accounting software, changes to a procedure within your organization or a change to your primary equipment brand. Last year, however, a major change outside of our company forced us to change
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within our company. The COVID-19 pandemic forced many businesses, including my own, to make significant changes, often on a daily basis. In March of 2020 the world was shaken by COVID-19. Many organizations like ours were unsure how this would change the way we did business. We wondered if we would be able to keep our doors open due to government regulations. Would our business be designated as essential? Fortunately, our industry was designated as an essential business and we were allowed to keep our doors open. We had to make changes, however, in the way we did things in order to cope with the pandemic, sometimes making changes suddenly. First, we had to make changes in our organization to help protect our employees. Everyone was given hand sanitizer to clean their hands. At the office, a mask mandate was put in place and all meetings were moved into a space that allowed for 6 feet of distancing. For our clients, all service technicians and installers were given plastic gloves and masks. In the past, we would never agree to provide a cooling tune-up without being able to enter a client’s home.
Positive feedback, rewards and competition is an encouraging way to help your employees cope with change. Getting buy-in and excitement for any change from your team helps people manage and embrace the change. computer and telephone technology as well as process changes to make sure work continued to be completed while people were away from the office.
COMMUNICATION For every change in policies and procedures there should be a communication meeting with the individuals affected so that everyone understood the change and why it was necessary. We have done this regularly throughout the pandemic, but it is beneficial at all times. People in organizations take to change differently. Some people thrive on change and love it, but some do not. For example, five years ago we had to make a change in our dispatcher. That dispatcher had been with our company for more than six years, but she was causing issues with other office
staff members and some of the technicians. These issues were causing bigger problems in our company and we had to make a change. Because the dispatcher position is a key position, making a change from someone that knows your business to someone new is tough.
TURNOVER Keeping a problematic employee, however, will stunt your growth and cause continued friction. We had to pull the band aid off quickly and move on. Once we made the change, we quickly communicated to our entire team what we had done. We then shifted some current employees to temporarily fill the dispatch position until we were able to replace the position with someone full time. Because we communicated why the change was made and what the plan was
to solve the problem, we had few uneasy feelings and deterred rumors within the company. Another change in our company focused on sales culture. Our organization had never had a heavy focus on the sales of accessories on tune-ups and service calls. Recently, we decided to emphasize sales and trained our team and tracked their accessories sales. They are now looking at every opportunity on each call to offer accessories to our clients. This was a major change in our technician’s mentality. In the past they focused only on doing a great job performing the actual tune-up. They were trained to perform all the tasks required in a quality manner. Now they are adding sales opportunities on each call to improve our clients HVACR system. In the past few months, we have dramatically increased the sale of air purification systems and carbon monoxide detectors. To make this change a successful one, we clearly defined why this change was necessary. We communicated this to our team, we provided effective training and incentives to help them buy into the change. We are also tracking this change to continued on page 8
We changed this policy and if a client requested that we provide a cooling tuneup from outside the home, we did it. For two months, many of our commercial clients were either no longer in their buildings or they were not allowing vendors into their offices. This created a huge void in work for our technicians that provide Commercial PM to our clients. We had to change by shifting these workers to other areas of the business where there was active work. We also had to change the way we dispatched service calls. When we reminded our clients of their upcoming appointment, we asked if there was anyone in their household that was sick. If the answer is yes, we rescheduled the appointment to keep our employees safe. Some companies now offer “virtual” service calls and sales appointments. Zoom or FaceTime can be used to communicate with clients without setting foot in their homes. Communication has been important during the pandemic. Many companies have allowed their office staff to work from home during the pandemic. This required changes in
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see how successful it is. Another recent change during this year was the loss of one of our senior commercial technicians. He had been with us for nine years and was a great team member. We brought him up from one of the trade schools and we trained him to become one of our top technicians. This technician was involved in many of our more complicated controls accounts. A health issue required him to find a job that was less strenuous on his body.
His absence caused a huge void in our technical team which required us to make some organizational changes. We cross-trained several of our commercial technicians to handle the accounts that were handled by the departing technician. We also put in place a procedure for communicating to our commercial clients why this employee was no longer with us and our plan to make sure they were well taken care of. Sometimes losing a long-term employee can be a good change. If you have someone
Change can be a good thing and can help strengthen an organization. that thinks they should receive special treatment because they have been with your company for a long time, it can cause problems with other employees. For example, if a technician questions every call that the dispatcher sends him on, this can cause friction with the dispatcher. By changing the employment status of a single employee, the entire company culture can shift for the better. Some larger companies make it a policy to change a certain percentage of their workforce each year by regularly replacing their lowest performing employees. Fortunately, this has not been a policy implemented in my own business, but it may be a useful motivator for another.
why the change in software is going to be best for the company may motivate them to learn the new programs. Positive feedback, rewards and competition is an encouraging way to help your employees cope with change. Getting buy-in and excitement for any change from your team helps people manage and embrace the change.
OPERATIONS
Coaching and good communication can soften uneasiness or even fear. Change can be a good thing and can help strengthen an organization. It is necessary that management focuses on communicating, supporting and welcoming change in order to make sure the team understands that the goal is for the benefit of everyone involved. u
Another major change in an organization can be replacing the dispatch and service management software or accounting software. Changing software requires a huge training curb with your employees.
Michael Rosenberg is president of Rosenberg Indoor Comfort in San Antonio. For additional information, visit rosenberghvac.com.
Many people become used to using the same software and learning a new one can be really overwhelming. This change can be detrimental to the business if it is not handled right. Putting together a sound training program with video training documents before the software is implemented is helpful. Communicating to your team
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RUN YOUR BUSINESS TODAY LIKE YOU’RE SELLING IT TOMORROW
Be prepared for the day when you may want — or need — to make a transaction. BY BRIAN COHEN
S
elling your business is a complicated process that brings about a range of emotions. Your company is something you have poured your sweat and tears into, and letting go, or partnering for growth, no matter the price, is always bittersweet. That being said, it makes good sense to be prepared ahead of time for the day when you may want — or need — to make a transaction. Staying proactive and preparing your business for sale before that day comes is paramount to the bottom-line price you will receive. By focusing in on a few important items, you can immensely improve the attractiveness of your business to outside buyers. The idea is to run your business today as if you were going to sell it tomorrow.
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When an owner has created a strong “bench” of key managers who are able to run the operation on their own, it allows the buyer to feel at ease with the transition of the business after the sale. GET YOUR BOOKS IN ORDER Having your financials in order and in accordance with Generally Accepted Accounting Principles (GAAP) should be done well in advance of selling. It allows for consistency when comparing to prior periods and competitors in your industry. This includes making sure that your financial statements are reliable through accurate and timely reporting. We oftentimes see that larger companies, have CFOs handling this role/
responsibility while smaller companies are using a bookkeeper. Whichever way you are handling your financial reporting, you should be working to keep your books in order, it will make your process smoother and easier when you are ready.
UNDERSTAND VALUATIONS Deals in the contracting space are usually done based on the trailing 12-month EBITDA [Earnings Before income, Taxes, Depreciation and Amortization (and add backs!)] times a multiple —
EBITDA x Multiple. The multiple is influenced by a multitude of factors including the size of the business, the market in which it operates, its service contract base and its key management team. Multiples have been on the rise in the last several years and we are now seeing companies that would have been paid 5x for the business several years ago are now receiving offers at 7x. Over the course of the last year, we have seen larger businesses sell for double digit multiples. We always recommend to contractors that they should know what their business is worth and check into that valuation on a yearly basis. While this may look time consuming continued on page 10
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and expensive at first glance, there are other, less expensive ways to accomplish this. As mentioned above, however, the higher the revenue number, the higher the multiple.
WATCH YOUR EXPENSES When a business is in its growth stage, costs tend to be on the higher side. However, when the business is in the mature stage, it’s important to control costs. Look to control your expenses and focus on removing any redundancies. A lean, cost-efficient operation is attractive to buyers because it shows that you know how to run your business and that they will not have to come in and try to overhaul what you have already done. Most transactions in reality are partnerships whereby a private equity company is looking to pay you to partner with you and your management team to help grow the business along with their other contractor holdings. They see your business as less valuable when you are not as efficient.
BUILD BENCH STRENGTH When buyers are looking to acquire a business, they need to know that the business is not reliant on one person. When an owner has created a strong “bench” of key managers who are able to run the operation on their own, it allows the buyer to feel at ease with the transition of the business after the sale.
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An expansive customer base that has low customer concentration, to the extent possible, is very appealing to buyers. While you usually want to eliminate redundancies, this is one area where the goal is for you, the owner, to become redundant yourself. A good question to ask yourself if you are trying to figure out if you have a strong bench is, “How long can I (as the owner) be away from my business and it keeps moving in the right direction?” Can you take a 2-week vacation and your staff doesn’t need you? How about four weeks or more? We know many owners that live in different states and check in with their managers weekly to review the KPIs. The less you have to be involved in the day-to-day operations of your business the better your bench strength (management team).
BEEF UP SERVICE CONTRACTS Buyers love the idea of a fence around a customer base that service contracts represent. This is recurring revenue that prospective buyers will be able to count on in the years ahead, which will allow them to focus on other growth efforts within the business. In addition, an expansive customer base that has low customer concentration, to the extent possible, is very appealing to buyers. For example, if you are a residential
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HVACR contractor, having thousands of maintenance service agreements shows a buyer that if they helped you add plumbing, you have a potential built in service base. A seller once showed us that they are guaranteed to be in the home at least 2x per year and, with almost nine different services they could offer, they would get 18 selling opportunities per year per maintenance agreement they had. Because of this, they rarely had a shoulder season.
CONSIDER ACQUISITIONS The bottom line is that the higher the revenue number, the higher the multiple and the larger the valuation. By expanding through acquisitions that allow you to eliminate back office positions and take advantage of increased buying power, it is easy to see that one plus one is sometimes greater than two. Although this is a more challenging route, when executed properly it could pay huge dividends at the time of your transaction. If you would like to discuss making an acquisition or how to avoid some of the pitfalls, please feel free to reach out to me directly and we can discuss what you are looking for and how it can integrate and grow your business.
DEVELOP A GROWTH PLAN A feasible growth plan that will allow prospective buyers to exploit new opportunities is a very attractive piece of a business. Whether you’re considering expanding through acquisition, as mentioned above, or planning to grow organically by tapping into underdeveloped markets, buyers always want to know how they will build on their investment and what their next steps could be. A passive, reactive approach where a business attempts to shore up these items as they are looking for prospective buyers will result in a lower valuation, since it’s already too late and the track record won’t be considered reliable. Acquisition activity in the contracting space has been heating up in the past few years, and by focusing on these factors and staying proactive, you’ll be ready when the opportunity presents itself to sell your business at the highest possible valuation. u
Brian Cohen is a business strategist for SF&P Advisors. Prior to joining SF&P, Brian ran a small home improvement organization with more than 100 employees and four locations. For additional information, visit sfpadvisors.com.
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STRATEGIC PLANNING FOR FUTURE SUCCESS Your plan is your living, breathing roadmap for your business and it deserves your attention. BY ERIC KNAAK
T
he streets are packed with people, confetti falling from the buildings above. Music is playing, drivers are honking their horns, vendors are selling balloons. It feels like a festival and in many ways it is. Your favorite team has just won the Super Bowl and everyone is enjoying the moment — but how did this happen? How did your team go from being a middle of the road club to becoming the national champions?
IT STARTS WITH A PLAN In sports it’s called a game plan, in the military it’s a mission plan and in business it is called a strategic plan. It’s the step-bystep process that will get you from where you are, to where you want to be and rightfully so, we all like to be winners. The value of a well-developed strategic plan is appreciated by those organizations that use them and completely foreign to those organizations that have never had
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The strategic plan is the living, breathing roadmap to future business success and it deserves your attention. one. When it comes to growing your business, increasing profits and developing leaders, the strategic plan is your map. It’s the living, breathing roadmap to future business success and it deserves your attention when being created and while being implemented by the team. There are several ways your plan can be developed and there are numerous outcomes based on who leads the process, who you include in the planning, the amount of homework that is done outside of the formal sessions and, most importantly, the culture of your organization. If those participating in creating the plan are truly given the ability to influence and impact the process, then you will end up with a powerful document. If, on the other hand, there is just one person
who decides what will be included in the plan and how the team will get there, you do not have a strategic plan, you have a memorandum. A successful strategic planning process is conducted over a period of 4-8 weeks, but it can be handled in a shorter or longer time frame, depending on the approach. Traditionally, my organization would have two days of Strategic Thinking and one day of Execution Planning, but that changed during COVID-19 and proved to be very effective. The pandemic forced us to do shorter and more frequent Zoom meetings and we discovered the time in between sessions allowed for additional free thinking and exploration. Truthfully, we felt 2020 was our most productive Strategic Planning event yet.
ELEMENTS OF SUCCESSFUL STRATEGIC PLANNING Interview, hire and meet with the facilitator. A strong facilitator is what can make or break the process and while you do not have to hire an outsider to your organization, I would strongly recommend it. They will not see things the same way you and your team do and I have found bringing in that impartial third party can be very effective. A true facilitator does not provide you with the answers, they challenge you with great questions. Assign pre-work to all participants and have them collaborate in advance of the scheduled strategic planning event. This is where the different leaders within the organization can identify the key areas for improvement or change as they see it, establish preliminary goals and create their vision for what the company could look like. continued on page 12
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The pre-work will allow the team to get together at the strategic planning session(s) and jump right in without taking up valuable time.
We use a process called STEP (Strategic Thinking and Execution Planning). The first part (strategic thinking) is where all the ideas, possible goals and strategic moves are shared, discussed and vetted by the team.
The second portion is execution planning. During this step the strategic initiatives are formalized, the KPI’s are established and all targets and opportunities are finalized by the team. The STEP process is separated by 2-4 weeks between the
two phases so participants have time to strengthen their ideas. Once the STEP has been completed, the facilitator pulls everything together into a One Page Strategic Plan a concept that was borrowed from the Vern Harnish book “Scaling Up.” This is the written plan all leaders use to make decisions and track progress throughout the year. We go so far as to laminate a copy for each leader and ask that they always keep it on their desk for reference. The final step is to check-in with the team and share updates on the progress being made. Our Strategic Leadership Team meets monthly to discuss current goals, progress towards those goals, any obstacles encountered, any new opportunities that may have arisen.
A true facilitator does not provide you with the answers, they challenge you with great questions. We also assign a champion for each of the Key Performance Indicators and they are responsible for two things. Reporting the numbers monthly and providing commentary if any of their KPI’s are not within the desired range, including steps being taken to correct them.
RETHINK YOUR UPFIT. RECHARGE YOUR BUSINESS.
There are many ways to approach the process and you will need to find what works best for you and your team. Regardless of how you do it, you will become a stronger, more focused and better run organization by going through the strategic planning process. You need to start somewhere and if you remain dedicated to the process you will find each year gets better than the last.
TOUGH JOBS CALL FOR TRUSTED PARTNERS.
At Adrian Steel, we do more than just create high-quality products. We look at the big picture, taking into account all of your business needs and the way you work in and out of the van. Then, we provide you with custom solutions that make your job easier and give you the biggest ROI possible. To learn more and locate your nearest distributor, go to adriansteel.com/distributors
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Here’s to your organization’s Super Bowl. u
adriansteel.com/distributors
Eric Knaak is vice president of operations for Isaac Heating & Air Conditioning in Rochester, N.Y. and past-chairman of the Air Conditioning Contractors of America (ACCA). For additional information, visit isaacheating.com.
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HIRE FOR CULTURE, TRAIN FOR SUCCESS
Find a candidate who fits well with your company, then train and nurture them to be a great employee. BY MATT MARSIGLIO
C
ulture is a way of thinking, behaving or working that exists in a place or organization. Every company has one and those who use it as a guideline to build strong, loyal teams are some of the most successful around. Whatever your company culture is, you’ll have the most success recruiting if you hire based on those principles. If, like many companies, your culture is to be in business to help people, then finding the right employees to achieve that is most crucial.
ATTITUDE VS. APTITUDE It’s no secret in this industry —
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If you can find a prospect with a great attitude that matches your company culture of like minded people, you won’t have to spend a great deal of time trying to “re-program” them to fit within your company. good technicians can be difficult to find. Consider this: 53 percent of HVACR field personnel are within 15 years of retirement age and enrollment in HVACR programs is down 32 percent. Suddenly, it’s painfully apparent that finding the “good ones” is only going to continue to be difficult in the years ahead.
That said, it’s time to change the way we, as an industry, recruit and hire technicians. Most companies look at both the aptitude of a prospect and his or her attitude. Each has it’s own set of pros and cons and, while one can be taught, the other can be extremely difficult to change. A prospect with good aptitude has an
instant ability to generate revenue and can replace an experienced employee, most times, without missing a beat. In many cases, they may also be familiar with your company’s service system, which also adds to the speed at which you can bring them up to speed. On the other hand, they also bring with them habits, both good and bad. In many cases, a prospective employee with good aptitude often believes they know a better way to do things than, perhaps, you’re comfortable teaching. If they have experience and are looking for a job with your company, there may be continued on page 14
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To move up a level, each technician must pass written and practical exams.
a good reason they’re available and their attitude may not fit well with your company culture.
To be promoted to a Level 1 Technician, they must obtain all tools listed in their job description. Once they’re on their own, we have a technical supervisor ride with them on a weekly basis for an additional six months.
A great attitude cannot be taught. If you can find a prospect with a great attitude that matches your company culture of like minded people, you won’t have to spend a great deal of time trying to “re-program” them to fit within your company.
When a technician moves into a truck on they’re own, they’re also given the next level job description, so they’ll know what is required to move up. To move up a level, each technician must pass written and practical exams.
Of course, if they lack the technical skills needed for a position with your company, it will take some time to get up to speed. Ideally, you want employees with both great aptitude and a great attitude — and if you can find that person, hire them immediately. Often, though, you’re faced with a one or the other choice. In those cases, it’s better to go with a great attitude rather than the “quick fix.”
In addition, technicians who move from Level 1 to Level 2 must earn NATE certification. Each technician is required to attend 40 hours each year of in-house, technical training. Technical training is designed to advance technicians through the ranks, preparing them for the written and practical exams.
Nearly 20 years ago, we hired a high school co-op student with a great attitude who we’ve been able to teach and train throughout the years. Today, he is our lead commercial service technician. It took many years to realize this worked well, but now it’s the primary way we hire new technicians. Hiring for attitude doesn’t mean you can totally overlook aptitude. Sure, we want employees who are going to fit well within our company culture, but we also require them to have either completed an HVACR program or currently be enrolled in one.
THE HIRING PROCESS There are many places to find candidates today, with multiple job posting sights on the Internet. In addition, it’s a good idea to build relationships with local trade schools and community colleges. And, don’t forget about referrals — customer referrals can be a great source of business, and employee referrals can be an excellent way to find additional, like-minded employees. You can certainly sweeten the deal by offering a recruitment reward for employees. After you’ve targeted your potential candidates, the first step should consist of a brief phone interview. If you’re satisfied with that initial interview, you can have the candidate take an employment survey, such as the one offered by Acumax (acumaxindex.com), which will help
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On a weekly basis, the department manager, technical trainer and field technical supervisor have a brief meeting to discuss the new employee’s progress.
MEASURING PROGRESS, PERFORMANCE narrow down the position for which each candidate is best suited. If the results come back as a match for your needs, you can proceed to the next step of the hiring process. If not, send the candidate a polite rejection letter. The next step is to schedule multiple visits/interviews, which will ensure all questions on both sides have been addressed, as well as give both parties a better idea about the candidates fit within the company culture. The first interview should take place with the reporting manager and another member of the management team. After that, the candidate moves on to a twostep, second interview. In the first step, have the candidate bring their tools and meet with your technical trainer. They may have limited experience, so you should look at their sense of how to proceed with troubleshooting. After the assessment from your technical trainer, the candidate should meet with two different members of the management team. Finally, upon completion of those first
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two interviews, the technical trainer, reporting manager and members of the management team should meet to compare notes and make a hiring decision. A third interview with the candidate is nothing more than a job offer, which, if accepted, is contingent on passing a background check and drug screening. Upon completion of the first two interviews we will meet with the technical trainer and compare notes and make our decision.
THE TRAINING PROCESS The majority of our new hires work in the warehouse for a period of time, generally less than six months. Once they graduate to the field, or if they’re placed directly into the field, they ride with one of two field technical supervisors. Each technician rides for a minimum of four weeks before they’re promoted to a Level 1 Technician. In addition to the ride-along training, our new technicians complete 20 hours of technical classroom training and enroll in our service system training.
Employees should have a semi-annual review, performed by their department manager. The review should consist of multiple parts, which may include: • A core values analysis • Major job functions • Specific job measurements (KPIs) • Career path (Goals/initiatives within the company) • Future plan of action In addition, it’s a good idea for your service technicians to receive a performance report on a monthly basis, as well as a customer feed back report. Making sure you recognize those who are an active part of your culture is key, and spreads like wild fire — in a good way. Celebrate and reward those employees who are caught going above and beyond and you’ll soon have a workforce that is strong and loyal to your company. u
Matt Marsiglio is operations manager at Flame Heating, Cooling, Plumbing and Electrical in Warren, Mich. For additional information, visit flamefurnace.com.
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THREE THINGS YOU COULD LOSE TOMORROW 1. Your Wallet 2. Your Keys 3. Your BUSINESS EDGE RENEW NOW
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HOW TO HIRE CO-WORKERS Think of the hiring process as a sales presentation — putting your best foot forward will net results. BY RON SMITH
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ecruiting people is much different than hiring people. Recruiting is the practice of getting people interested in working for your company. Hiring is the practice of convincing people that your company is the one they should choose as their place of employment. In fact, hiring is only the second of six elements that must be addressed in properly staffing a company. The six are (in this order): recruiting, hiring, orientation, training, motivation and retention. It’s time to put to rest the phrase, “You
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Experienced and skilled service technicians and installers are in high demand and can go work most any place they desire. To hire them, you must be an employer of choice. just cannot find or hire good people anymore.” That is absolutely wrong and you must start your recruiting and hiring practices by refusing to accept that notion. I’ve owned and managed four different HVACR contracting companies and have
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consulted and been associated with hundreds of others. I know better. The reason many companies have problems hiring and retaining competent co-workers is simply because the companies have not created a pleasant workplace environment.
Experienced and skilled service technicians, installers and other co-workers are in high demand and can go work most any place they desire. To hire them, you must be an employer of choice. Many good things that happen in business are a result of sales. That includes hiring. Think of hiring someone as presenting convincing reasons why they should work in your company rather than another company. Sounds like an effective sales presentation to me! Think for a moment of a replacement-equipment sales presentation. We
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all learned in sales training that we should follow some sort of format and structure along with having a presentation manual and other sales tools. We have to be well organized in our sales presentation, yet flexible enough to respond to different and changing conditions without losing our flow and continuity. If we are properly prepared and do this well, we may leave someone’s home with a $9,000 sale.
Often, hiring decisions are made too quickly. Fast hiring practices sometimes result in firing decisions.
HIRING STRUCTURE Spend some time developing a hiring structure. It will not take long and will result in you being more successful in your hiring practice and save you countless time in the future. First, make a list of all of the items you should present and discuss in your new co-worker candidate interview session. The following are some of the items I recommend: • Wage plan; • Training calendar; • Commission Program — Reward your co-workers with compensation for participating in the sales process by making sales or developing sales leads; • Personnel policy; • Co-worker career path opportunities; • Co-worker benefit package; • Testimonials from customers; • Examples of the forms and documents you use; • Flat-rate service manual — If you are talking to a service-technician candidate. Gather each of these various items and have them filed and ready for when you need them. Second, be prepared to take the candidate on a tour of your facility. Show them
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Having a get-acquainted meeting will make you different from other contractors in the area and will impress the candidate.
INTERVIEW MEETING Assuming the get-acquainted meeting results in mutual interest, the interview meeting is when you convince the coworker candidate to come to work for your company.
If it makes sense to go to a prospective customer’s home well prepared to make a replacement-equipment presentation resulting in a sale, doesn’t it make sense to sit down with a prospective co-worker and be equally well prepared to make a presentation? Successfully hiring an experienced, skilled co-worker is worth much more than a $9,000 sale, yet most company owners and leaders do not have a format or structure they follow when trying to hire someone. They basically “wing it.”
do not take an unnecessary chance of losing the candidate’s interest.
Remember, experienced and skilled co-workers can work at most any company they wish. Your objective in this meeting is to carefully make an effective “sales” presentation on why they should choose your company.
where they would be working and introduce them to a few of the co-workers they would be interacting with if they join the company.
to be on a winning team. High-performing co-workers result in high-performing companies. Mediocre co-workers result in mediocre companies.
On the tour, be sure they see your training room, your inventory of material and parts, and what the company vehicles look like and how they are stocked and maintained.
GET-ACQUAINTED MEETING
Remember throughout this entire process that it’s not just the co-worker candidate that must impress you, just as importantly you must impress them. They should have your complete attention. Work on your co-worker sales presentation — it’s the most important tool you’ll have to win the battle of attracting good co-workers. When considering hiring a co-worker, I recommend a series of three meetings: the get-acquainted meeting, the interview meeting and the mutual-hiring-decision meeting. This process takes less time than you may think and helps guard against a high turnover rate. Often, hiring decisions are made too quickly. Fast hiring practices sometimes result in firing decisions. Being diligent, cautious and thorough in determining who the people are that are selected to work in your business is very important. This interview process increases the possibility of staffing your company with high performers — co-workers who are competent at their work and have a desire
This is not an interview session. Unlike some interview sessions, a get-acquainted meeting should not create any tension with the co-worker candidate. This is a short meeting, usually about an hour or a little longer. The purpose of this first meeting is simply to determine if there is mutual interest in going forward with the process. It is even more non-threatening if you establish a neutral site for the session. Meet candidates at a restaurant and the very first thing you should say is that this is not an interview and there is no reason to be uncomfortable. There is another reason for a neutral site — the co-worker candidate may be employed with another local company and prefers not be seen in your offices. At this meeting, do not ask for an application or resume, it isn’t time for that yet. The objective is only to get to know one another and for the candidate to learn your company’s philosophies in how you conduct your business. If the session results in mutual interest, you and the candidate need to establish the date and time for the next meeting. Schedule the next meeting as soon as possible. If you’re interested in the candidate,
During this meeting, the candidate needs to fill out an employment application, take a technical test if the candidate is interviewing for an installer or service technician position, and complete a behavioral characteristic profile survey form. You must obtain permission from the candidate for your company to request a vehicle driving report and a complete background report including any criminal activity, credit worthiness and prior employment verification. A quick Internet search on “employee background reports” will call up lists of companies that provide the service. Additionally, there are several providers for behavioral characteristic reports. Finally, if the candidate does not want you to contact a present employer, you need to agree. If there is still mutual interest when this meeting concludes, you need to set a date and time for the last of the three meetings — the mutual-hiring-decision meeting. Schedule the meeting at the earliest date that allows time to obtain and review the requested reports along with any other helpful information.
MUTUAL-HIRING-DECISION MEETING Let’s assume you’re hoping to hire a high-performing service technician — the type of candidate that’s extremely competent and has a great attitude. This is the “Michael Jordan of service technicians.” All five reports you gathered: the application, technical test, driving record, continued on page 18
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Having a get-acquainted meeting will make you different from other contractors in the area and will impress the candidate.
background report and behavioral characteristic profile have checked out perfectly. This person could go to work in most any company and start tomorrow. It is clear after the two previous meetings this candidate does not need to convince you he can do the job — you need to convince him that your company is where he should be employed. You can expect to be asked early in this meeting “What does this job pay?” If you answer “$28 per hour,” you have probably already lost the candidate’s attention because the candidate may already be making $28 per hour or even more. So how do you address this question? I recommend this answer: “However much you wish to make.” This may prompt another question, “What do you mean by that answer?” You need to explain that your company’s wages and benefits are equal to or exceed other HVACR companies in the area. But in addition to the hourly wage, coworkers can earn significant spiffs by selling service agreements and accessory items as well as turning in replacement equipment sales leads. And they can even get paid spiffs for co-workers they introduce to the company that are interviewed and hired. By further explaining how additional money can be earned, you actually allow the co-worker candidate to build his or
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her own projected total compensation. Continue the exercise with a hypothetical scenario between the two of you: You say: Let’s imagine you run an average of six service calls a day. I’ve already explained our service-agreement program along with the pricing, the high-quality precision tune-ups we provide, the customers’ benefits, the attractive document we use and how, with our service flat-rate manuals we can clearly show the customer that we provide a 15 percent discount on the repair that you just completed should the customer invest in a service agreement. Now ask: Out of the average of your six daily service calls, how many of those customers do you believe would invest in a service agreement? (My experience has been that they will normally answer three or four.) Now ask: Of those six average daily service calls, how many customers do you believe would allow you to arrange for a comfort consultant to come to their home and make a presentation on a new replacement equipment system — regardless of whether or not the customer decides to invest in the system? Their response to this question is normally one or two. Ask the same question
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about them getting a sale on your system-enhancement products (system enhancements is my term for what is commonly called accessories). Assuming you have a variety of these products available, as you should, the normal response to this question is that they would sell one or two a day from the six opportunities. Here is how I personally sum it all up: Our company’s service agreements are available for one, two or three years. Considering all first-time service-agreement customers, the average agreement is 1.5 years. Many customers in this area have two or more systems in their homes. Let’s assume all of your new service agreement customers have an average of 1.5 systems. We pay $10 per system and $10 per year. You projected three or four sales. Using the lower number of three sales multiplied by 1.5 years each multiplied by an average of 1.5 systems each you would earn an average of $67.50 per day in serviceagreement sales. For replacement equipment presentations, we pay $40. You estimated one or two customers per day would allow a comfort consultant to come to their home.
Using the lower number of one, you would earn $40 per day. You also estimated that you would sell one or two system-enhancement products per day. Using the lower number of one sale multiplied by the average spiff amount of $30, you would earn another $30 a day. Add it up: Using your projections, actually the lower number of your projections, you would earn through spiffs an average of $137.50 a day. I’m being careful and cutting it in half — meaning a more realistic average answer of $68 per day, or $8.50 per hour. On top of your spiff earnings, whatever they are, you will earn wages of $28 per hour. This is the time for you to be silent. The technician candidate will do the addition and realize he has the potential to earn $36.50 per hour. It is very important that you do not create unrealistic expectations. Keep in mind that they will probably be optimistic in their responses. It’s most often appropriate to reduce the expectations as I did in this example. u
Ron Smith is a well-known authority in the HVACR business with more than 50 years of experience as a contractor, franchisor, consolidator, and consultant. He is the author of HVAC Spells Wealth, More and New HVAC Spells Wealth and HVAC Light Commercial Service Agreements. Contact Ron at 615-791-8474 or visit ronsmithhvac.com.
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FINANCE
BY RUTH KING
Wealth Rule No. 9: Have a Sound Debt Policy
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good debt policy looks at your receivable days and your debt percentages. All residential service work should be COD. All residential maintenance enrollments should be on monthly recurring revenue (preferred) or paid in advance. All residential replacements should be paid upon completion of the job (or the financing paperwork signed on completion of the job). Commercial work should be billed the day of service. Whenever possible, get a down payment on projects. For larger projects with progress billing, make sure you get your payment requests in on time. Otherwise, you will wait another 30 days to be paid. Always have the ability to get paid by credit card.
RECEIVABLE DAYS Receivable days are just that, how many days is it from the time you send an invoice to the customer to the time you get paid. Your company’s receivable days show whether the company is headed toward a collection problem. Figure 1 shows the trailing receivable days for a client. When the days start increasing collection calls get made and the receivable days decrease again.
Figure 1
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Increasing debt to equity ratios mean your company is becoming more debt ridden. To calculate receivable days:
To calculate these ratios:
Receivable Turns = Annualized sales Accounts receivable(+cash) Receivable days = 365 Turns If at least 50 percent of your company’s sales are COD, add customer accounts receivable plus cash. Do not include accounts receivable from employees or owners.
DEBT RATIOS Debt ratios are the second part of a good debt policy. There are two measures of debt, i.e., is your company starting to increase debt or is it too debt ridden? These are the debt-to-equity ratio and the long-term debt to equity ratio. The debt-to-equity ratio looks at all debt, current and long-term liabilities. The long-term debt to equity ratio looks only at long term debt — those liabilities the companies owes for more than one year. These ratios are computed from your balance sheet each month.
D/E = Total Liabilities
Total Equity (i.e. net worth)
LTD/E = Total Long Term Liabilities
Total Equity
Increasing debt to equity ratios mean your company is becoming more debt ridden. The most critical ratio is the longterm debt to equity ratio. For many businesses, it should be between zero and one. Any value over one means the company has taken on too much debt and it is a burden to the company. The debt-to-equity ratio doesn’t have “an average value.” I’ve seen this ratio as high as 11 — and the company was still profitable. Most of the time when the debt-to-equity ratio increases dramatically, several large, long-term projects are in their initial stages. The company is purchasing significant quantities of equipment and materials. When this happens you’ll also see a high
Figure 2
jump in accounts receivable, as the company bills for these materials. Figure 2 shows the monthly graph of the debt ratios. It’s difficult to see what is happening because there are months where the debt-to-equity ratio is high and months where it is low. The longterm debt-to-equity ratio is staying fairly constant. Figure 3 shows the trailing data or the trend of the debt ratios. Each point takes one year’s data and divides it by 12. The company initially had a lot of short term and long-term debt. Now all ratios are decreasing and the long-term debt is almost negligible. If you find your receivable days are increasing, it’s time to make collection calls. If you find the company’s debt ratios are increasing, find out what is begin spent and whether those expenses are necessary. 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.
Figure 3
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BUSINESS PLANNING
PROVIDED BY KEVEN PRATHER, CFBS
Two Self-Made Problems that Can Harm Your Planning
P
lanning for your business’ future success is a long-term effort in problem solving. Usually, the problems you’ll try to solve result from the natural evolution of the business. For example, as your business has grown, you may have hired more employees or managers to keep pace. Problems like these are good problems to have.
One of the most important factors of planning for future success includes having a next-level management team.
But as many owners create road maps for future success, they can create problems for themselves. Self-made problems are much more difficult for owners to solve, mostly because they don’t see the problems as problems at all. Like a quietly growing mold, unidentified self-made problems can eat at the foundation of your plans for future success. Let’s look at two of the more common self-made problems and what the consequences of those problems can be.
PRIDE As a successful business owner, you likely take pride in the business you’ve built. You’ve created the business from scratch or taken it to new levels. You’ve been the primary decision maker and driver of success. Your business supports families, employees and maybe even communities. There’s a lot for you to be proud of, but that pride can also create problems when you begin planning. For example, one of the most important factors of planning for future success includes having a next-level management team. These are the people who will eventually run the business in your stead. Many business owners understand this concept, but when it comes to delegating responsibilities to others, reluctance starts to set in. Think about the last time you delegated an important task to someone else, something that had a noticeable impact on the business. Did you give up full control of the task or did you still play a role in completing the task? Did someone have to get
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the okay from you before they finalized it? When things went differently than you expected, did you let the person in charge solve the problem or did you swoop in to solve it? In short, can the business continue to hum if you ever wanted to take an extended vacation? Many business owners can’t do that because they don’t have the confidence others can do what they do. This usually means they can’t ever truly be away from the business. This can create cascading consequences: If you can’t ever take time to be away from the business, then the business relies on you. If the business relies on you, it’s much harder to build its value for future success. If you can’t adequately build business value, it becomes nearly impossible for you to ever leave it without jeopardizing your family’s lifestyle and the business’ existence.
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There’s nothing wrong with being the expert. But planning for future success often means letting other people take on the kinds of big problems you’re used to solving. It’s easy to fall into the trap of thinking, “No one can do this as well as I can,” because to this point, that’s been true. However, carrying this mind-set indefinitely makes the business more and more reliant on you.
RESOURCES Sometimes, owners think they don’t have the resources — specifically, time and money — to create road maps for future success. They might figure if what they’ve been doing has worked to this point, why should they dedicate time and resources to fix what they don’t see as broken? However, planning for future success isn’t necessarily a matter of fixing. It’s a
matter of enhancing. If your business provides for you and your family today, it might not seem like you need to do much else to improve it. But one day, you might want to leave the business and never have to work again. Or you may want to grow it so you’re a bigger player in your market. You know growing your business from startup to success took time and resources. The same is true of turning a successful business into something that can support you even after you leave it. If you don’t dedicate time and resources to do things like install next-level management; document your operating systems; and create a proven growth strategy; you may find that potential buyers, whether outside parties or insiders, won’t offer you the funds you’ll need to eventually leave your business on your terms. This can also lead to problems for your family and employees if you were to be suddenly forced from ownership — such as because of an unexpected death, illness or divorce — especially if you rely on the business to maintain your lifestyle. When planning for future success, a modicum of modesty — along with time and resources — can help you avoid these negative consequences. Please contact us today to find out how you can start the process of avoiding these self-made roadblocks in planning for future success. 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 for additional information.
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RECRUITING
PROVIDED BY STEFFAN BUSCH
The First Step of Successful Recruiting
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s a home service contractor, you’ve probably heard the mantra “always be recruiting” more times than you’d like to think about. But what does this mantra mean? Does it mean posting your ads to job boards every few weeks? Does it mean visiting supply houses periodically to drop off fliers? Does it mean frequently sharing “now hiring” content on social media? Sure, those activities are all effective; they certainly contribute to your “always be recruiting” goals. But are you really thinking about your strategy? Are you applying an intentional, disciplined approach to recruiting in your business? Over the last three years, I’ve facilitated periodic recruitment trainings. During one exercise, I ask participants to brainstorm the daily, weekly, quarterly, and annual processes and procedures that go into successfully running a business. I invite volunteers to share some of their answers.
Recruiting should be discussed during department meetings and all-staff meetings. Remind employees what openings are available. what openings they have. Then, each department head commits to a proactive recruiting-related activity they will work on for the day. This includes reaching out to people in their network, family, friends, suppliers, former and current employees, and former applicants. A daily, constant focus on recruiting sets the tone from the top down that recruiting is an important part of running a business. Recruiting should be discussed during department meetings and all-staff meetings. Remind employees what openings are available; make sure to plug your company’s employee referral bonus. If your
company doesn’t have an employee referral bonus, why not? You’d be surprised how effective this can be! Recruiting updates should also be a topic of leadership meetings. If you have an in-house recruiter, invite them to these meetings so they can give a status update on each position. Which positions are open? How many people have applied? How many phone and/or in-person interviews were conducted the prior week, and how many offers or hires were made?
Discussing recruiting constantly and during meetings adds a level of intentionality and focus to the important and legitimate business process that is recruiting. Recruiting is woven into the fabric of who your company is. When real focus is placed on recruiting, success will follow. u
Steffan Busch’s career in human resources and recruiting has spanned more than 14 years. At Nexstar Network, he loves consulting with leaders on how to best position their companies so they can become employers of choice, which helps their recruitment of the best and brightest job candidates in the industry. Steffan can be reached at steffanb@nexstarnetwork.com.
If your company does not have an inhouse recruiter, each department head should be prepared to give a similar update for their respective department.
Participants frequently mention answering phones, running service calls, paying bills, payroll, month end, inventory, fleet management, etc. I then ask, by a show of hands, who listed recruiting as a business process. I have yet to see a hand go up in response to that question. Why don’t we consider recruiting a legitimate business practice that’s just as important as running service calls or closing month end? If you’re not recruiting and hiring people, there won’t be service calls to run or month ends to close. People are everything to your business. You can’t run your business without a team. Disciplined, intentional recruiting is a daily task. The contractors who are having the most success with recruiting — even during the COVID-19 restrictions — are discussing recruiting daily. Success looks like this: Each department head discusses
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HVACR BUSINESS FEBRUARY 2021
21
PRODUCT FOCUS »
AMANA
APRILAIRE
DAIKIN APPLIED
GREENHECK
With exceptional heating performance — up to 98 percent AFUE — the Amana brand AMVM97 gas furnace provides precise indoor comfort in a feature-rich package integrated with pioneering ComfortBridge communicating technology.
Aprilaire’s 8145 fresh air ventilator is designed to bring in precisely the right amount of outdoor air into energy-efficient homes. Integrated controls allow the ventilator to be hardwired. The powered damper is removable.
Daikin is introducing an inverter scroll compressor for its Rebel Applied rooftop HVAC system (from 30-40 tons). Inverter compressor technology provides continuous load matching by modulating capacity to enhance thermal comfort while delivering leading full- and partload efficiencies as high as 12 EER and 20 IEER, respectively.
Greenheck direct drive square inline fans now incorporate mixed flow wheel technology for a unique combination of high efficiency, low sound and ease of installation in a square housing design. AMCA certified for sound and air performance, mixed flow model SQ is available in eight sizes, 16-33, with performance ranges up to 27,497 cfm and up to 3 in. wg. Model SQ is available with a single-phase or three-phase direct drive Vari-Green motor up to 10 hp for improved energy efficiency and low maintenance.
ComfortBridge off-the-wall technology gives HVAC contractors the capability to customize energy-efficient performance, the flexibility to use any single-stage thermostat or smart thermostats, and more. It works to ensure the system operates at peak, energy-efficient performance.
Only 15 lb., the lightweight design and snap-on mounting brackets make install quick and easy. Durable, polycarbonate construction withstands jobsite abuse. The slim design offers increased maneuverability in attics and closets. Better air exchange control versus exhaust ventilation.
>> amana-hac.com
>> aprilaire.com/8145
GRID CONNECT
MITSUBISHI ELECTRIC TRANE
NORTEK GLOBAL HVAC
ZIP-A-DUCT
Grid Connect, Inc. has a new ConnectSense Smart Power Cord that turns non-networked machines like commercial furnaces, industrial pumps and healthcare equipment into IoT devices that stream operational data as it happens to predict maintenance, track usage and manage energy consumption.
Mitsubishi Electric Trane HVAC US (METUS) unveils an extended lineup for the SUZ universal outdoor unit with Hyper-Heating INVERTER (H2i) technology, with the addition of three new sizes: 24,000, 30,000 and 36,000 BTU/H.
Nortek Global HVAC has added the premium SD Series, a 95-percent AFUE, ultra-low NOx residential furnace that offers easy installation/service features.
Zip-A-Duct is a modular, pre-engineered fabric duct product allowing HVACR contractors to quickly design an air distribution project in-house and then purchase the fabric air dispersion system from thousands of traditional HVACR wholesale distributors throughout the U.S.
Grid Connect supplies its industrial-grade, UL- and RoHS-certified Smart Power Cord with a cloud-based application that machine builders and operators can use to monitor an unlimited number and array of remote devices such as furnaces and motors.
>> greenheck.com
>> daikinapplied.com
The SUZ with H2i technology delivers indoor comfort in extreme cold weather conditions maintaining performance at outdoor temperatures as low as -13F. At 5F outdoors, the system can deliver up to 100 percent of its rated heating capacity. >> mitsubishicomfort.com
>> gridconnect.com
22
With no off cycle and modulated capacity, the compressor provides constant supply temperature and dehumidification for precise temperature and humidity control, critical for optimum comfort and air quality.
HVACR BUSINESS FEBRUARY 2021
The single-stage, upflow/horizontal, natural gas-fired furnaces are available in both Frigidaire (FG8SD) and Maytag (MGC3SD) brands. Each brand’s two models range in thermal input from 50,000 to 100,000-Btuh and feature a solid 22-ga., high finish cabinet with a low-boy 35-inch height, 28-inch depth and widths of 14 and 21-inches that fit most retrofit and new construction furnace spaces.
Designed for smaller to medium-sized, non-plan/spec ventilation projects, ZipA-Duct is a time-saving, cost-cutting solution that’s applicable to 90 percent of retrofit and new construction ventilation projects. >> zipaduct.com
>> nortekhvac.com
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20QUESTIONS >>
with JACOB HUCK
We sat down with Jacob Huck, president of Williams Comfort Air in Carmel, Ind.. Huck discussed growth through acquisition, finding the right company and the importance of communication. 1. How long have you been in business?
The parent company, Williams Comfort Air, has been in business since 1966. We took ownership of it in 2007 and we’ve done acquisitions off and on since then.
2. Who is ‘we’?
Our ownership group. I call our company Round One and Round Two, because we actually sold it and bought it back. In Round One we had seven owners and Round Two, we have nine. I’m the president of the company. In this round of ownership, I have the largest share count.
3. What’s your business makeup?
We’re 98 percent residential. Our bread and butter is HVACR replacement. We also have a decent sized plumbing and sewer business. For 2020, we closed out at $65 million in revenue. And as far as the mix, maybe a third of that is plumbing and two thirds is HVACR.
9. What makes a company attractive?
We typically need somebody with a great brand. We’ll look at Google reviews. We’ll make sure they don’t have a bad reputation in their market. We love seeing longstanding clients. They need to have an information system with their customers in it. I’m very data-driven, probably to a fault, and I like being able to look in and see that they do have repeat customers that go back quite a ways.
10. What’s a red-flag?
If they’re all paper-driven and they have no technology, that’s definitely a red flag for us.
11. What’s your growth strategy?
I was just doing the math on that and we have done 14.
Mostly, it has been growth through acquisition in lieu of marketing. We’re trying to reach out to clients that they’re happy where they’re currently at and, candidly, no amount of advertising from us is going to get them to call us, so we’re going after those clients. We can also use it as a recruiting tool. You’ve probably not heard from anybody that it’s hard to hire people right now.
5. How do you find companies?
12. Has that helped?
4. How many have you acquired?
That’s always the hard part. We typically find them through word of mouth. We make sure people know we’re always looking and then somebody will hear that Joe down the street is getting tired and doesn’t have a kid to hand the business off to. We typically find things that way. We’ve also sent out letters, trying to gather anybody who’s interested. And then, kind of a lesser-known path, is to talk to distributors.
6. Do you have an acquisition team?
We don’t currently, but that is something I feel like we need to add in the next year or two, given our size and our ability to acquire. There’s no reason we shouldn’t have eyes looking at all times.
7. What’s the due-diligence process?
The first and foremost questions are really about what kind of client base they have and how the revenue splits up. Client-base-wise, to match with our company, we’re looking for somebody who’s not really dealing with commercial clients, not really dealing with builders. We want to go direct to consumers. If we find a company that has a large percentage of new construction, it’s typically not going to be a good fit for us.
8. What other factors do you evaluate?
There are other things that make a company more preferable or less preferable. For example, if they have the exact same selling model as us, where basically we want to hold on to a customer with a maintenance contract, to earn the opportunity to replace the system when the time comes … if they’re doing the exact same thing, there’s typically less upside because basically we’re going to get the same results they had. If it’s a company that, for 30 years, has simply maintained systems and tried to not replace them, it’s going to be a much more valuable deal for us. www.hvacrbusiness.com
We can buy a company with great technicians and just do what we have to, to hang on to them. We’re looking at expanding our footprint in other locations that I believe will happen this year. We really haven’t added any locations since 2015.
13. How do you fund your acquisitions? We’re really rather unique in that we pretty much keep all the capital in the company. We don’t take much out. We’re financially in a spot where we have the cash outright. We do frequently try to get the owner to carry back a piece. It’s always good that your desires align with theirs.
14. How long does an acquisition take? It is all up to the seller. Some guys, it’s their life’s project. They’re very hesitant. They don’t want to go too fast, and so you basically just go at their pace. Other guys are done with it. They’ve got almost like senior-itis from high school and they just want to move on. The fastest we’ve done an acquisition is two weeks. Realistically, if you don’t have to get funding, you should be able to do it in two to three months without much effort.
15. What’s the transition process?
We believe you just need to go in and rip the Band-Aid off. Literally on day one, when it’s announced, we start switching them to our information system, specifically on the office side, so booking calls and all of that. We then waterfall things out into the technician world throughout that first week so that by the time we get done with the first week, we’ve probably switched the majority of the technology and processes over.
16. Does that always work?
We play this by ear, because if you go too fast, you’ll basically alienate some of the people who are not comfortable. But we’re pretty good about keeping our finger on the pulse. We’re constantly checking in with them. We have meetings every day.
17. Do you keep any processes in place?
It really depends on how big they are. Smaller companies, we typically don’t take on most of their processes just because we’re oriented so differently. We have 420 employees. To do that, you have to have some fixed processes like payroll. But on the bigger companies, we absolutely want to hear what they’re doing. We love learning from their field managers how things operate.
18. How do you incorporate the management teams?
That’s probably the most difficult thing of all. We’ll happily give an employment contract to try to get them a little bit more secure with their role in it. But candidly, it’s really hard for a prior owner to change his role. We’ve done it. We actually have at least five prior owners that still work with us. But it’s a big mindset change and you have to work closely with them. With the non-owner managers, frequently we’ll find that they’re actually pretty excited about it because maybe the old owner was reluctant to change things.
19. How do you communicate the transition?
Once we’ve announced it to the new company, we typically shoot off an email letting everybody know to welcome them to the team. When we have our regular meeting, which last year has been an anomaly, often we’ll call it out and basically introduce them. For the team we’re acquiring, usually the morning of, we schedule a meeting on site to make the announcement. We try to keep it short. We don’t want to throw too much at them. And we, obviously, do this in person and then we meet with them individually.
20. What makes a smooth transition?
There’s always so many questions those first several days. Basically, every day that first week, we have a meeting first thing in the morning, and we tell them, “Go off and do your regular day.” We don’t want them to feel like how they serve customers is changing. It’s really more about the back office that’s changing. HVACR BUSINESS FEBRUARY 2021
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IT’S NOT TOO EARLY TO ENTER YOUR FLEET FOR THE 2021 CONTEST
FLE ST ET DE E T N SIGN CO
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