Less is More Pete Grasso 5
Prepare Your Fleet Jeff Barron 13
Fleet Management Tips Emily Newton 15
Proper Business Valuations Keven Prather 19
HVACRBUSINESS.COM JUNE 2021 / VOL.16 / NO.6
TOPS IN TRUCKS FLEET DESIGN CONTEST
Page 6
FLE ST ET DE SIGN CONTE
ALSO INSIDE » Ruth King on Gross Margins .............................18 20 Questions with Victor Rancour Owner of Absolute Airflow …................................ 22
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CONTENTS
JUNE 2021 / VOL.16 / NO.6
F E AT U R E S
6
13
15
Tops in Trucks Fleet Design Contest This year’s winners — Absolute Airflow Plumbing, Heating & Air Conditioning and Village Plumbing & Air — showcase fleet designs that are simplistic and eye-catching. By Pete Grasso
D E PA R T M E N T S
5
Editor’s Notebook
22
20 Questions with Victor Rancour
Prepare Your Fleet for Peak Demand This Season With a continued increase in business, it’s critical that managers properly service their vehicles to ensure no delays that could impact your ability to conduct business. By Jeff Barron
5 Strategies for Successful Fleet Management Simple adjustments to vehicle fleet management processes can help HVACR business owners cut down costs and make life easier for their team. By Emily Newton
C O LU M N
18
7 Places to Look if Your Gross Margins are not Consistent
19
What You May Get Wrong About Business Valuations
Accurate financial statements require that your gross margin is consistent every month. By Ruth King Business valuations can guide you toward several answers about the future of your business. By Keven Prather
Today’s marketing-savvy contractors opt for bold, simplistic designs aimed at catching the attention of potential customers. By Pete Grasso
Owner of Absolute Airflow Plumbing, Heating & Air Conditioning in Westminster, Calif.
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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
ADVERTISING STAFF ERIC Hagerman National Sales Manager Tel 216-409-3246 ehagerman@hvacrbusiness.com TERRY Tanker Publisher Tel 440-731-8600 ttanker@hvacrbusiness.com
BRUCE Sprague Circulation Manager bs200264@sbcglobal.net 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.
EDITOR’S NOTEBOOK
BY PETE GRASSO
Less is More
I
n the summer of 1776, the Continental Congress put forth a motion to declare independence from Great Britain. While the delegates went back to their respective states for direction on how to vote, a committee was formed to draft a formal declaration in preparation for an affirmative vote. Among the delegates on that committee were Benjamin Franklin, John Adams, Roger Sherman, Robert R. Livingston, and a quiet Virginian named Thomas Jefferson. Franklin, the most famous and prolific writer in the group, refused to author the document as he vowed “to avoid becoming the draftsman of papers to be reviewed by a public body.” Adams, who feared his fiery reputation would be an obstacle toward ratification of the document if he was the chief author, nominated Jefferson to write the draft. Reluctantly, Jefferson agreed.
When he finished, the committee itself had only a few minor edits. But then, after the Congress reconvened on July 2 and voted in favor of independence, the real editing took place.
Jefferson was dismayed as, one-by-one, members of Congress made their own remarks and suggestions to the document. Franklin, who for this very reason refused to author it himself, turned to Jefferson to console him with this story: “One of my friends, an apprentice hatter, had decided to open a shop for himself. His first concern was to have a handsome signboard with a proper inscription. He composed it in these words: ‘John Thompson, Hatter, Makes and Sells Hats for Ready Money,’ with a figure of a hat subjoined. But he thought he would submit it to his friends for their amendments. “The first man he showed it to thought the word ‘hatter’ was superfluous because it was followed by the words ‘makes hats.’ Thompson agreed and struck it out.
POSTMASTER: Send address changes to HVACR Business, 31674 Center Ridge Road, Suite 104, North Ridgeville, OH 44039.
“The next friend observed that the word ‘makes’ might as well be omitted, because the customers would not care who made the hats, as long as they were good ones. Thompson agreed and struck it out.
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“‘Sells hats?’ said his next friend, ‘why, nobody will expect you to give them away. What then is the use of that word?’ Again, poor Thompson conceded. “Moments later the word ‘Hats’ went into oblivion when another friend pointed out that there was one painted on the board. So, he was left with a sign that said: ‘John Thompson’ beneath the painted hat.” It may not have been of much comfort to Jefferson at the time, but he was known to relay this story later in life. What Franklin was trying to do was illustrate how everyone has their own opinion and the more people you show something to, the more edits you will receive.
Today’s marketing-savvy contractors opt for bold, simplistic designs aimed at catching the attention of potential customers.
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)
31674 Center Ridge Road, Suite 104 North Ridgeville, OH 44039 Tel: (440) 731-8600 Web site: www.hvacrbusiness.com (ISSN: 2153-2877)
because none of the local merchants sold on credit. Again, Thompson bowed to the will of the majority, and now had a sign which said, ‘John Thompson Sells Hats.’
“A third friend suggested eliminating ‘for ready money’
If you look at this parable from Franklin in a different light, however, you could come away with a different — and, perhaps, more valuable — lesson: Less is more.
A sign that says ‘John Thompson’ beneath an image of a hat is simple but conveys all the pertinent information. The same can be said for your own advertising, specifically when it comes to your fleet. It’s not necessary for contractors to list every service they provide on the sides of their trucks. Marketing-savvy contractors opt instead for bold, simplistic designs aimed at catching the attention of potential customers. Only the most relevant information is needed, as well as appreciated, by the viewer. Simply look at the slate of winners and honorees in this year’s Tops in Trucks Fleet Design Contest (pg. 6). These trucks aren’t cluttered — they’re attractive, bold designs that tell you everything you need to know about the company. Most of the time, your fleet vehicle is being recognized by a potential customer that is driving or a passenger in their own vehicle, so your brand must be quickly identifiable in addition to your contact information. All your services, products and anything else your company might do — leave that for your website. When it comes to creating a winning, eye-catching design, simply remember: Less is more! u
HVACR BUSINESS JUNE 2021
5
TOPS IN TRUCKS FLEET DESIGN CONTEST
BY PETE GRASSO
I
n the 15th year of the Tops inTrucks Fleet Design Contest, HVACR Business received a record number of entries and a marked improvement in the quality of designs from years past. The competition was as close as it’s ever been, with many of the entries garnering respectable scores from the judges. Company vehicles are the main source of advertising for many HVACR contractors. And when that’s the case, the trucks better feature high quality, compelling vehicle graphics. HVACR contractors also must realize that an investment of several hundred to a few thousand dollars per vehicle means there’s little room for error. Bold, simplistic designs dominated the field, making a lasting impression on the judges as they scored each submission. Projecting the right image is crucial for positioning yourself in the marketplace and establishing brand identity. Nowhere is image more important for a contractor than on its most valuable asset — the fleet.
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HVACR BUSINESS JUNE 2021
FLE ST ET DE SIGN CONTE “The result has been phenomenal. The customers love it, and employees love it too … It has been very well received.” — Victor Rancour, Absolute Airflow Plumbing, Heating & Air Conditioning
Clean design, legible, eye-catching, great layout, strong colors — these are descriptions that describe all of this year’s honorees. Above all, however, the 2021 Tops in Trucks Fleet Design Contest winners, runners up and honorable mentions featured fleets that are simply outstanding.
WINNER
Absolute Airflow Westminster, Calif. | 50 vehicles VICTOR RANCOUR, OWNER When Victor Rancour started his business, Absolute Airflow Plumbing,
Heating & Air Conditioning, in 2018, he got his logo from a low-cost graphics service online. He thought it was good enough and didn’t give it a second thought as his company began to grow rapidly. “We grew to a $5 million in the first year, so I thought everything was good,” Victor says. “I thought our logo was good too, until I ran into Dan Antonelli from Kickcharge Creative at Service World Expo.” Antonelli, who had been following Absolute Airflow on social media, was complementary — but also honest — when he spoke to Victor. “He acknowledged how well my company was growing, but said that my logo was terrible,” Victor recalls. “He told me to give him a call when I was ready to get a real brand.” A couple of months passed before Victor, who kept that passing conversation in the back of his head, decided to act. “I was like, you know what, I want to grow to be a $100 million business quickly,” he says. “And I want to make sure
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we had the right look.” He called Antonelli and worked with Kickcharge on a new brand identity and truck design. The two of them worked together and within a few weeks, they came up with a winning design. “I trusted Dan and gave him a rough idea of what I wanted,” Victor says. “The whole process was fast, and I was really happy with the new design.” Having just wrapped about 20 of his trucks with his old logo, Victor made the decision to quickly reverse course. “I decided to just pull the band-aid off and redid all my trucks right away,” Victor says. “I got new signs out in front of my building and redid all the branding for the company.” The result has been phenomenal. The mixture of colors stands out and really pop on his fleet of more than 50 Ford Transits. “The customers love it, and employees love it too … it really makes people want to work here,” Victor says. “It has been very well received and my only wish is that I had done it sooner.”
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The colors, too, were something Kelli paid close attention to so as not to stray from the company’s history.
“(Monica) is very much the visual of the company. She has always been the focal point of our television and print ads, so it just made sense to make her the focus of our trucks as well.”
“We’ve gone through a lot of logos over the years,” Kelli recalls. “We’ve always used blue and yellow, but in the past, they’ve also used maroon.”
— Kelli Victorian, Village Plumbing & Air
WINNER
Village Plumbing & Air Houston | 45 vehicles MONICA RYAN, OWNER Village Plumbing & Air has been around since 1946, started by Monica Ryan’s father. Monica, a master plumber, bought the company from him in the 1980s and has been the face of it ever since. “She’s very much the visual of the company,” Kelli Victorian, marketing manager, says of Monica. “She has always been the focal point of our television and print ads, so it just made sense to make her the focus of our trucks as well.”
Victorian worked with a local marketing company to create the design using a photo-realistic caricature based off a photo of Ryan holding a wrench. She then blew up the logo as large as possible to accompany the image of Monica. “Our logo itself is very square and has a lot of elements,” Kelli says. “I had many versions of designs that I went through and just couldn’t get it to look right balanced with her, plus the phone number and all the elements I needed.” The result is a stunning logo that covers almost the whole truck, with a large, friendly image of the female master plumber owner as the focal point.
Previous truck designs used photos with tag lines, but none of them were consistent. “There were probably 10 or 15 different designs,” Kelli says. “They did all kind of match because they have the same theme, but each one was unique to itself.” The new, winning design is currently emblazoned on 30 of the 45 vehicles in the Village Plumbing & Air fleet, making for a consistent marketing message. The response from employees has been enthusiastic, and the community has responded well too. “Our call volume has steadily increased year after year since we made our branding upgrades in 2018,” Kelli says. continued on page 8
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continued from page 7
RUNNER UP
Cool Techs Linden, Va. | 5 vehicles JASON & STEPHANIE WADEL, OWNERS When Jason and Stephanie Wadel purchased a new Chevy Silverado Trailboss for their business, Cool Techs Heating & Air, they wanted to make sure it really stood out. So, they turned to Dan Antonelli and Kickcharge Creative, who they had worked with in the past to come up with their penguin logo. “We knew we wanted bright but bold colors that would make us stand out and let me tell you, it’s impossible to miss this super cool design coming down the road,” Stephanie says. “The black background with the blue snowy mountains really helps show off the colorful penguin and banner.” With their business and home both surrounded by the beautiful Shenandoah Valley mountains, the Wadels wanted to be sure Kickcharge incorporated their “back yard” into the design of the wrap. The penguin, too, was an important element.
“Penguins are known for their long-lasting relationships with their mates, and really, that’s exactly who we are. All of our customers, we want to be their long-life partner for their home. So, we thought it was perfect.” — Stephanie Wadel, Cool Techs Heating & Air and having a full wrapped design was definitely something that we wanted,” Stephanie says. “As soon as we changed to a bolder brand, I mean, the recognition hasn’t stopped. Our customers love our new design.”
RUNNER UP
Western Heating and Air Orem, Utah | 32 vehicles RYAN & ANGIE SNOW, OWNERS Ryan and Angie Snow, who started
Western Heating and Air in 1995, have grown considerably over the years. Their original branding and color scheme did well for them, but they realized last year that it was time for an upgrade. “We wanted to remain loyal to the original color scheme but give it a modern look,” Ryan says. “But we also wanted something that could tell our story.” Having grown up on a farm, Ryan remembers that his dad always carried a handkerchief in his pocket. “He would use it to wipe away the blood, sweat and tears of a hard day’s work,” Ryan says. “Now it represents the
values that were taught on the farm: hard work, integrity, doing things right the first time.” To convey these values in their branding — with the red handkerchief as a focal point, the Snows worked with the design company Redkor. “We were very involved with Redkor and together we built the new brand,” Ryan says. “We rebranded the entire company. The marketing campaign was first, followed by the electric sign on the building, then the vehicle wraps and the new website.” With an investment of a little more than $80,000 just in vehicle wraps for his fleet of 32 vehicles, Ryan has already seen a return. “The consistency of it is turning heads and our call volume has gone up,” he says. “Customers love how (the trucks) stand out and how they tell the story that makes us unique … the red handkerchief is unique to us and it promotes our values.” continued on page 10
“Penguins are known for their longlasting relationships with their mates, and really, that’s exactly who we are,” Stephanie says. “All of our customers, we want to be their long-life partner for their home. So, we thought it was perfect.” Previously, Cool Techs had a logo and design that Stephanie admits was “generic.” But after three years in business, the Wadels knew they needed to do something to stand out. “We knew that we wanted to make ourselves different than our competitors
“Customers love how (the trucks) stand out and how they tell the story that makes us unique … the red handkerchief is unique to us and it promotes our values.” — Ryan Snow, Western Heating and Air
8
HVACR BUSINESS JUNE 2021
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MARK GRAY President
PHILLIP GRAY Original Owner
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“We saw what Kickcharge Creative has done in the past and it looked like a really good thing to do because our marketing was kind of floundering.” The company name, Arizona Comfort Specialists, stayed the same, but everything else about the brand is new, from the colors to the roadrunner mascot.
“With all that was going on in the country — the pandemic, the election — we wanted our neighbors to know that we’re here for each other.” — Dylan Rucker, All Heart Heating and Cooling
continued from page 8
HONORABLE MENTION
All Heart Heating and Cooling Lancaster, Calif. | 14 vehicles DYLAN RUCKER, PRESIDENT At the end of 2018, Dylan Rucker was exiting a partnership for his company, DS Heating and Air Conditioning. At the time, he wasn’t considering a name change. “What really changed was, I was in the office one day listening in on a phone when someone asked what ‘DS Heating and Air Conditioning’ stood for,” Dylan recalls. “And the person answering the phone didn’t know … and that was my fault, because I didn’t teach them.” After focusing on his own leadership, Dylan realized that the name, which was personal to him, didn’t represent the company. So, he decided to completely rebrand — starting with the company name.
“We want to represent something new in our community that seemed to be lacking,” he says. “With all that was going on in the country — the pandemic, the election — we wanted our neighbors to know that we’re here for each other.” One suggestion that stood out and stuck was All Heart Heating and Cooling. With that idea in mind, Dylan turned to Dan Antonelli at Kickcharge Creative to turn that into a bold, brand and beautiful design for his trucks. “He asked me ‘What exactly is your primary focus?” Dylan says. “I gave him a breakdown of what we wanted to represent and he says, ‘I have this idea of this little heart and I’d like to go off of that.’”
HONORABLE MENTION
Arizona Comfort Specialists Phoenix | 4 vehicles JOHN AND KATHI MILLER, OWNERS Sometimes, a good idea comes from the most unlikely of places. Such was the case for John and Kathi Miller, owners of Arizona Comfort Specialists.
“That was all Kickcharge … they took a lot of information from us, given our location and what we do, and sent us a couple of proofs and we kept fine tuning it,” John says. “And that’s what we ended up with.” To help with the rollout, the Millers used their other marketing materials. “We put the trucks out on the roads and featured them in our newsletter,” Kathi says. “After they were wrapped, we put pictures of the new trucks in the newsletter and let our customers know to be on the lookout for our new look.” The most rewarding aspect of the new look, of course, has been the reaction from customers. “We’ve gotten a lot of good feedback from just people around town,” Kathi says. “They’ll call us up and say, ‘Hey, we saw your truck in our neighborhood. Love it,’ and, ‘Hey, can you guys come and service my AC?’”
“One of our local competitors, with whom we have a business relationship, recommended redoing our brand because it was kind of bland,” John says.
From there, the Heart mascot was born and with it, a complete rebranding that stands out from the competition and represents all that Dylan and his team stands for.
“They’ll call us up and say, ‘Hey, we saw your truck in our neighborhood. Love it,’ and, ‘Hey, can you guys come and service my AC?” — John Miller, Arizona Comfort Specialists
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HVACR BUSINESS JUNE 2021
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“My wallet hurts but the excitement and brand we have to stand behind is more than worth it. This is part of a larger branding initiative; the logo and mascot were our first task.” — Chad Bird, Georgia Air
HONORABLE MENTION
Georgia Air Richmond Hill, Ga. | 3 vehicles CHAD BIRD, OWNER Sometimes, when coming up with a new brand, the obvious choice is the best choice. That was the case for Chad Bird, owner of Georgia Air, who consulted with Dan Antonelli of Kickcharge Creative. “Dan and I came into this with the same logo idea, he just made it come to life for us,” Chad says. “We both agreed on the peach idea and the Kickcharge team went to work.” While Chad readily agreed on the giant peach logo, the rest of the creative process wasn’t as easy for him. “Talk about a pain point! We did a competitor analysis and went outside the box,” Chad recalls. “Dan took me well out of my comfort zone, but now I am so thankful I listened.” While the design is fairly new — implemented in March of this year — Chad says they’ve already received a lot of attention. “My wallet hurts but the excitement and brand we have to stand behind is more than worth it,” Chad says. “This is part of a larger branding initiative; the logo and mascot were our first task.” Once that was created, Chad says they started on the vans, cards, equipment stickers, brochures, folders, magnets and other items. “Who doesn’t love a happy peach man named Fuzzy?” Chad asks. “I think (the fleet) is unique … from the Georgia Air logo to the peach man, the wood grain background to resemble old peach crates,
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to the tag-line, to the colors — it’s a head turner and a very sticky brand.”
SPECIAL MENTION
All Pro Plumbing, Heating, Air & Electrical Ontario, Calif. | 88 vehicles RICHARD BLACK, OWNER Back in the year 2000, Richard Black, owner of All Pro Plumbing, Heating, Air & Electrical, was enjoying a few cold ones with his engineer friend, Manny Medina. Together, they came up with an idea that started as a joke, but quickly became a “what if ?” — a toilet car. Richard wanted to find a way to bring together his love for cars, his passion for plumbing, and his desire to do something special for his community.
electrical, or HVAC services or driving around in a toilet car, you can trust us to do it all with pride and maximum enthusiasm.” In addition to being a unique, headturning vehicle, the toilet car features a premium stereo system, A/C, high-tech lighting, a flushing handle, five state-ofthe-art cameras and five high-definition screens. It also has a hydraulic toilet lid, porcelain door handles and a vanity plate that says, “FLUSH-IT.”
Pete Grasso is the editor of HVACR Business magazine. To download an entry form for the 2022 Tops in Trucks Fleet Design Contest, visit hvacrbusiness.com/topsintrucks.
“All truck designs, while functional, need to get your branding recognized and remembered,” Richard says. “The toilet car ranks with the Oscar Meyer Wienermobile.” u
The vehicle was custom built from the ground up. Richard and Manny spent the last 15 years bringing their vision to life and in 2020, the 11-foot-tall, pristine Toilet Car made its big debut in Ontario, Calif. “We at All Pro take the betterment of our community very seriously,” Richard says. “Whether achieving our goals takes delivering premium-quality plumbing,
HVACR BUSINESS JUNE 2021
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PREPARE YOUR FLEET FOR PEAK DEMAND THIS SEASON With a continued increase in business, it’s critical that managers properly service their vehicles to ensure no delays that could impact your ability to conduct business. BY JEFF BARRON
W
ith summer finally upon us, HVACR companies find themselves on the precipice of peak customer demand. Just as business owners and fleet managers prepare their operations and staff to withstand the increased volume of business, it is imperative you do the same with your fleets. While many industries rely on the upcoming peak season to offset some of the negative business implications the coronavirus pandemic caused over the last year, the same is not necessarily true for the HVACR industry, which has been operating under peak season conditions for more than a year. Given the airborne nature of the coronavirus, the role of HVACR systems in minimizing transmission and improving air quality was emphasized by health organizations. This, coupled with other factors such as an increase in home construction projects, resulted in many HVACR companies reporting a sales boom in 2020. And there are no signs that the industry will slow any time soon. A recent report estimates the HVACR global market will grow $6.8 billion between now and 2025. With this continued increase in business, it’s critical that managers properly service their vehicles to ensure that no dead battery, shredded tire, or faulty system has the potential to cause any
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in administrative processes, so servicing and replacing fleets can remain a top priority.
It’s important to monitor these parts as a shift in weather can have an impact of varying severity, especially after a particularly cold winter.
THE IMPORTANCE OF CYCLICALITY
delays that could impact the company’s ability to conduct business.
and repair brakes, hoses, belts, cables, and other important components.
HOW VEHICLE MAINTENANCE HAS EVOLVED
It’s important to monitor these parts as a shift in weather can have an impact of varying severity, especially after a particularly cold winter.
With the evolution of technology, the intervals in which vehicles need to be serviced are greater and the maintenance required is less than in years past. Managers should still monitor core parts such as belts and hoses, brakes, tires, batteries, and wiper blades to keep their employees safe while on the road, especially in hot climates like the south and southwest. While some companies do this inhouse, for businesses located in warm regions, fleet managers should consider having the vehicle inspected by a professional technician to ensure its safety and longevity through the duration of peak season. Despite the convenience they offer, experts recommend that quick-stop maintenance shops should be excluded from this inspection category. While fleet operators use these facilities for an oil change and tire pressure check, they aren’t always able to thoroughly inspect
A recent report found that there are long-term financial benefits for keeping a car for 200,000 miles — for consumer vehicles, this could add up to $30,000 or more. While the frequency, duration and cargo demand within the HVACR industry are certainly different than driving a personal car, it provides a relative benchmark for what savings could look like when routinely maintaining a fleet of one; imagine multiplying that by five or more, depending on your company’s size and number of vehicles operated. A vehicle owner’s manual offers specific guidance and suggested maintenance intervals that fleet managers should reference regularly. But for companies that are busier than ever, owners and managers should also consider implementing a fleet maintenance program. These programs are designed to identify and create efficiencies
A great way to prepare for the peak season is to ensure that your fleet is on a cyclical maintenance schedule, as well as a proper replacement schedule. Cycling vehicles is a cost-effective way to manage repair costs since replacing vehicles using industry standards can help companies avoid major (and costly) repairs like transmission and engine overhauls. For companies with larger fleets on a cycling schedule, vehicular replacements typically take place in the fall and spring to align with the auto season. But when the coronavirus pandemic hit early last year, no industry was left undisrupted, for better or worse. For the auto industry, it was the latter: there was high demand and limited supply due to production delays. After a year, the impact of these delays is still being felt across retail and commercial auto dealers alike, as supply remains limited and 2021 orders were cut off early. This is now coupled with the latest semiconductor chip shortage, again bringing big-time automakers to a standstill. So, what does this mean? If business continued on page 14
HVACR BUSINESS JUNE 2021
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continued from page 13
owners and fleet managers haven’t already made plans to get new vehicles
in 2021, they’ll likely need to stick with maintaining their current fleet until 2022 models arrive later in the year. But for companies cycling their
vehicles, using a structured, staggered replacement schedule helps. By staggering their approach, fleet managers can replace vehicles on a rolling basis, softening the
financial impact on a company’s budget and bottom line. A good fleet management partner can help in planning a proper replacement cycle to keep both vehicle acquisition and maintenance costs at a minimum. They can also be a helpful intermediary. As the impact from the global supply chain shortage continues to play out with no concrete end to the ripple effects in sight, a fleet management partner can be a guiding force through the unforeseen.
A good fleet management partner can help in planning a proper replacement cycle to keep both vehicle acquisition and maintenance costs at a minimum. What happens if the order gets cancelled? What does it mean if your cancelled order is no longer a carryover product? What if the model you’re looking for is no longer available? What are the cost differentials? How will vehicular changes impact upfitting? Certified to NSF/ANSI 61 & 372
These questions are now an integral part of how fleet managers are thinking about and managing the replacement cycle while the supply chain remains fluid. As your company vehicles hit the roads this peak season, be confident that they will get the job done, safely and effectively, by following these maintenance best practices. u
Jeff Barron is managing director, head of leasing national sales for The Bancorp Commercial Fleet Leasing with 30 years of commercial fleet leasing experience. For additional information, please visit thebancorp.com.
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5 STRATEGIES FOR SUCCESSFUL FLEET MANAGEMENT Simple adjustments to vehicle fleet management processes can help HVACR business owners cut down costs and make life easier for their team. BY EMILY NEWTON
E
very HVACR company depends on a fleet of vehicles that help move equipment and workers between client buildings and the business’ home base. As a business grows, coordinating an increasingly large service vehicle fleet can become a challenge — even for those with experience with this process. Fortunately, with the right combination of technology and best practices, it’s
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possible to manage a fleet efficiently — reducing gas costs and cutting down on maintenance while still delivering highquality service to customers.
ways to successfully manage an HVACR vehicle fleet.
streamline fleet management. There’s a wide range of platforms available. These tools can help business leaders keep track of essential information about their vehicle fleet — like current location, service history and any repairs that may be necessary soon.
FLEET MANAGEMENT SOFTWARE
These five strategies are some of the best
Using the right software can help
The technology is also essential for owners or managers who want to keep track of metrics related to their fleet.
Training is necessary for employees to know how to securely store tools, tanks and other equipment.
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HVACR BUSINESS JUNE 2021
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With the right tool, you can track assets — both vehicles and equipment — warranty information and maintenance status, giving you a view of your fleet’s health at a glance. Some tools also provide route and scheduling optimization features, which are good for businesses that have struggled to coordinate their fleet or ensure drivers
The right information can paint a picture of where a company is spending the most money, or where it may be underusing resources. arrive at jobs on time. These route planning tools draw on a combination of data — including traffic info, local laws and even weather data — to help you create optimal routes for your drivers.
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TRAINING PROGRAMS FOR DRIVERS Driver training is one of the best ways to ensure road safety, keep vehicles in good condition and collect all the data necessary to correctly manage a fleet. Before a new employee goes out on the road, they should undergo a basic training program. This program should ensure they have all licenses needed to operate the particular vehicle they’re driving — like a Class B CDL license or similar certification. Training will also ensure that they know how to log their miles, report issues with a vehicle or handle common maintenance problems that may arise while driving. For HVACR companies, training programs typically address a few common problems. Safe and efficient equipment storage, for example, can help prevent damage to equipment or injury. Training is necessary for employees to know how to securely store tools, tanks and other equipment — as well as which pieces of equipment are most dangerous if mishandled. This training is especially important for drivers who will transport, store or regularly handle potentially dangerous equipment, like oxy-acetylene tanks or refrigerant cylinders.
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DEFINED GOALS AND GUIDELINES Setting clear goals, guidelines and standards across a company is an excellent way to smooth the fleet management process.
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Training programs also help ensure drivers are familiar with all local commercial vehicle regulations. For example, in many cities, anti-idling laws mean drivers may get a ticket if they leave their vehicle idling. Awareness of these laws will help reduce the risk of idling incidents, potentially saving time and money.
For instance, purchasing standards can help ensure a more uniform fleet that’s
easier to maintain. Van organization guidelines can help ensure drivers find what they’re looking for, even if they’re not in their usual vehicle. Most vans have a shelving or organization system that allows drivers to store necessary tools and equipment — like pliers, pumps, refrigerant gauges, scales and thermometer screwdrivers. Requiring drivers to label van shelving or storage or organizing equipment in a specific way can ensure workers know where to find everything — and that each vehicle has all the tools needed for most HVACR repair work. Company-wide safety protocols can also make driving safer and reduce the risk of accidents. For example, safe storage protocols can provide a defined process for drivers and workers who regularly transport and store potentially dangerous equipment. Over time, this can help business leaders cut down overall operating costs and potentially reduce vehicle insurance premiums.
MEASURE THE RIGHT METRICS When managing your fleet, data is one of the best resources available. The right information can paint a picture of where a company is spending the most money, or where it may be underusing resources. Trying to measure everything, however, may lead to an overwhelming volume of data. It’s also possible to build a dataset of patchy and incomplete information that’s not particularly useful. Measuring the right metrics can help owners and managers answer essential questions about their business. For example, they can measure asset use, which represents how often each vehicle in the fleet is on the road or at a job. This metric can help business leaders discover underused vans or trucks that are costing extra money in storage space or maintenance. Other vehicle fleet metrics include accident rate, customers serviced and total lifecycle costs. These measurements help identify and manage high-cost vehicles. Inventory and asset tracking metrics can also be especially useful for HVACR fleet managers. If you’re regularly dealing with inventory loss or damage, fleet or inventory management software can identify the
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circumstances under which your inventory tends to get lost or damaged. This may help you pinpoint employees, vehicles or types of jobs associated with inventory loss and damage.
PREVENTIVE MAINTENANCE The right approach to maintenance can help keep repair costs low and vehicles running for longer.
Organization standards, fleet management software and a training program are all excellent ways to simplify vehicle management and identify underperforming vehicles or areas where companies aren’t getting their money’s worth.
With a preventive maintenance plan, business owners take proactive steps to ensure their vehicles stay in good working condition. Rather than waiting for problems to emerge — a check engine light, a broken windshield wiper — they regularly schedule checkups with a technician, who thoroughly inspects each vehicle for issues. This practice can help keep vehicles working well for longer and may prevent more severe issues. While preventive maintenance may require some upfront spending, it helps drive down overall maintenance costs by allowing HVACR
testo
1981 - 2021
managers to avoid significant issues and preventing sudden, unexpected downtime. Simple adjustments to vehicle fleet management processes can help HVACR business owners cut down costs and make life easier for their team. Organization standards, fleet management software and a training program are all excellent ways to simplify vehicle management and identify underperforming vehicles or areas where companies aren’t getting their money’s worth. u
Emily Newton is the Editor-in-Chief of Revolutionized, an online magazine discussing the latest industry innovations and trends. For additional information, please visit revolutionized.com.
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HVACR BUSINESS JUNE 2021
17
FINANCE
BY RUTH KING
7 Places to Look if Your Gross Margins are not Consistent
G
ross margin, defined as gross profit divided by sales, measures whether your job costs are consistent as a percentage of revenues. Unlike gross profit dollars, gross margin should not vary in slower or busier times since it is a percentage.
Accurate financial statements require that your gross margin is consistent every month.
SOMEONE IS STEALING
FINANCIAL STATEMENT FRUIT SALAD
Revenues and expenses incurred producing those revenues must be in the same month. Financial statement fruit salad is a recipe for disaster. In months where you have revenues and no expense against those revenues, your gross margin will be artificially higher, and your profits will be artificially higher. In months where you have expense and no revenue, your gross margins will be artificially lower, and your profits will be artificially lower. Unfortunately, I’ve also seen negative gross margins. Apart from warranty and callbacks, gross margins must be positive. Otherwise, for example, you are buying a part for $1 and selling it for $0.80. Not likely. Financial statement fruit salad is the most common reason for inconsistent gross margins. Make sure your bookkeeper puts the revenues and the expenses incurred to produce those revenues in the same month. This ensures your margins are consistent and
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Unapplied time is not billable to a customer. So, if non-billable labor is in cost of goods sold, then there is no revenue to offset that labor cost. Your gross margin decreases. Unapplied labor should be in overhead. Putting it here helps ensure that your gross margin is consistent.
A consistent gross margin means that your profit and loss (P&L) statement is probably accurate (unless you discover overhead mistakes). Here are seven places to look if your gross margin is not consistent.
Assume that January is an apples month and February is a peaches month. Your revenues for a job go in January’s P&L. Your costs for that job go in February’s P&L. When you job cost, you must look in two months — January and February. You are looking at apples and peaches. You have fruit salad.
UNAPPLIED TIME IN DIRECT COST
you can see whether the month was profitable.
INVENTORY AS AN EXPENSE When you purchase a large stocking order or materials/equipment that are not sold, then you have inventory. Inventory is an asset and goes on the balance sheet. If you expense those materials as cost of goods sold, then you have an expense and no revenue to offset it. Your gross margin decreases, and your profits decrease artificially.
JOBS OVER OR UNDER IN LABOR Materials expense is usually accurate and is not significantly over or under budget. Labor expense can vary. If a job is bid at 16 hours and comes in at 24 hours, then gross margin decreases because you have more cost than projected. Likewise, if a job is bid at 16 hours and comes in at 12 hours, then gross margin increases because you have less cost than projected. Watch the job estimates. Discover why the jobs were over or under projections.
WARRANTY OR CALLBACKS With callbacks you have little or no
revenue to offset the labor and material expenses. Your gross margin decreases. Warranties have some revenue from manufacturer or third-party reimbursements. The amount that is reimbursed, however, is lower than the revenues you would receive as a retail call. A lot of warranty work or callbacks decreases your gross margin and profit.
INACCURATE ACCOUNTING FOR MAINTENANCE PLANS If you enroll a maintenance plan customer in January that enrollment is deferred income unless you do the maintenance in January. It is very similar to financial statement fruit salad. If you receive payment in January and consider it a sale without doing the maintenance work, you have revenues and no expense. Gross margin is artificially increased. When the maintenance work is performed, there is no revenue to offset the expense and your gross margin is artificially decreased. This is how your field labor can be busy and your P&L shows a loss.
If you do not have reasons one through six and your gross margin is starting to decrease or is variable, then someone is stealing materials. No one enjoys this situation. Cameras can help you identify the culprit. Someone is taking materials (usually copper) and selling it. Or, someone is going to the supply house and consistently purchasing two parts where only one is needed. The second part is used personally or sold. I’ve even seen cases where someone took the scrap metal, sold it and kept the money without authorization. If your gross margin is decreasing by a percentage or less every month and the company purchases are increasing slightly every month and there is no logical reason why, someone is stealing materials. Find out who it is and have that person put in jail. Accurate financial statements require that your gross margin is consistent every month. These are seven places to look if it is inconsistent. 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 call 770-729-0258.
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EXIT PLANNING
PROVIDED BY KEVEN PRATHER, CFBS
What You May Get Wrong About Business Valuations
B
usiness valuations are important to successful planning. They tell you what your business is worth to a potential buyer. Though business valuations seem simple on the surface, even the smartest and most successful business owners can misinterpret their importance. Business valuations generally tell you two things. First, they tell you whether you can sell or transfer your ownership, right now, and achieve financial independence. Second, and more importantly, they tell you how much more work you must do to build your business’ value to achieve that
Business valuations can guide you toward several answers about the future of your business. financial independence. Financial independence is the most important goal of planning for your business’ future. Other goals are important. But by definition, an Exit Plan must give you financial independence to be successful. It’s likely that your business is the most valuable asset you hold and thus will play a huge role in achieving financial
independence. Knowing what it’s worth and what you must do to build its value is commonly the bedrock of a successful plan, whether you intend to exit or keep your business forever. Consider the story of Luca Montez, a business owner who made some common mistakes about business valuations, and how his mistakes affected his planning.
Luca Montez had owned his widget company, MontezCo, for 35 years. He was an integral part of the company’s success. When his acquaintance and friendly competitor, Julia Deming, told him that she was selling her business, Luca started thinking about his own retirement. He was very excited to learn that Julia received $6 million for her business. He saw their businesses as similar and figured he could get that much, too. Julia offered to put him in touch with some of the advisors that had helped her, but Luca politely declined. “No, that’s too expensive I bet. I know
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incentive plans to keep his best managers tethered to the company, with help from his advisors. It took several years, but Luca managed to build his company’s value and get the $6 million he wanted and needed.
continued from page 19
what my business is worth now. I think I can handle it.” Luca decided to put his business on the market. The highest offer he received was for $2 million, much lower than what Julia had been offered. He became frustrated and asked Julia to put him in touch with some of her advisors.
Business valuations can guide you toward several answers about the future of your business. Perhaps most importantly, they can tell you where you are financially, which can guide you toward what you must do to get to where you want to be. u
When Luca met with the Advisor Team, he vented his frustrations. “My company is bigger than Julia’s. I work with some well-known customers. I put a lot of work into making this business successful. Why am I not getting the same $6 million as Julia, if not more?” After a few meetings and a lot of questions, Luca grudgingly agreed to get a proper business valuation. He had resisted for quite some time because he was convinced that his company was as valuable as Julia’s, and he didn’t want to pay for a formal “opinion of value” at top dollar. His advisors instead suggested that he get a less expensive “calculation of value” from
a business valuation specialist. Using a calculation of value process, Luca’s business valuation specialist said that Luca’s business was currently worth $2 million, just as he had been offered. She explained that the company had three glaring weaknesses. 1. It was too reliant on Luca for its cash flow. 2. It worked with three well-known customers, but those companies represented 80% of MontezCo’s annual sales.
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3. It didn’t have a management team that could run the company without Luca, so a buyer would be stuck with Luca for several years or provide their own management team. Once Luca learned these facts, he and his Advisor Team knew they needed to get to work. They began to install next-level management. This made the company less reliant on Luca. The management team also knew how to diversify MontezCo’s customer base. As the company grew, Luca created
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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20QUESTIONS >>
with VICTOR RANCOUR
We sat down with Victor Rancour, owner of Absolute Airflow Plumbing, Heating & Air Conditioning in Westminster, Calif., a 2021 Tops in Trucks Fleet Design Contest winner. Rancour discussed the importance of training, growing his business and his winning fleet design. 1. When did you get started in the industry?
I’ve only been in HVACR for six years and knew nothing about it when I started. In March 2015, I started with a company as a technician, and they trained me. I quickly became the top selling technician in the country.
2. Wow! What did that lead to?
In 2017, I was recruited by another company and paid a lot of money to go run their business. The owner wasn’t around — he was living in Hawaii, and I was running his business in California, making him rich. I didn’t really see him, and he had little involvement in the business.
3. So, you did it all?
Yes. I was the service manager and sales manager; I was out in the field and running all the sales calls … it was insane. I have an entrepreneurial spirit and decided to start my own company.
4. What was that like?
We’ve been in business about two and a half years now and it’s taken off exponentially.
5. Was there a learning curve to being an owner?
Yeah, I had no idea. You don’t realize … obviously, I was running the other guy’s company, but I wasn’t doing, I wasn’t the call center rep. I wasn’t a marketer; I wasn’t the installer. The first couple of months we just worked out of a parking lot. We didn’t even have a shop. Within four months we had 10 employees. So, I’m learning how to deal with employees and learning all the laws and how to pay them and how to do all this stuff. There was a lot of the backend stuff I didn’t really know.
6. How do you explain your fast growth?
A lot of it is my training background. I became a good salesman, and I was training a lot of guys for one of the biggest companies in the country. So, I had a good process behind how we enter homes, how we deal with customers … the customer service aspect of it. And then it just took off as we’re providing high level service.
7. What about marketing?
A lot of people followed us through social media, and I got a lot of employees who wanted to work for me. I started a marketing company out of necessity because I felt like the marketing companies in the home service business weren’t great. That took off fast too, doing my own marketing for the business, and I’ve been able to grow it exponentially without having to deal with marketing companies.
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8. Do you still get out in the field?
I haven’t been in a customer’s home for a year now.
9. Where’s your focus now?
I stepped away from Absolute Airflow and I’m focusing on my marketing venture right now. I still check in with the team, but I have a staff that runs the company now. I’ve also started a training company and I’m building out a training app right now.
10. What’s the app going to do?
Training for HVACR and plumbing. Imagine a HVACR technician is in the field, he wants to sell a part, but he doesn’t know how to sell the part. He can go on the app, and we’ll have a video on how to explain it to a customer, how to make them want to buy it and then how to install it. And they’ll have the corresponding video for every repair you can think of. It’s pretty in-depth.
11. What’s the most important aspect of your job?
Recruiting. Because I’m the face of the business, I’m the one who’s getting people in the door at this point. People want to come work. People know me all over the country now, so I got people that are moving here to come work for me.
12. And you help with training?
Yes. I still help on training days. We train all our guys from scratch. I don’t really like to take our technicians from other places. I built out a training facility for my employees to come and learn from me.
tickets to go see Toby Keith this weekend and my install staff is going paint balling as well. There’s a lot we try to do to make everybody happy and want to work here. The number one factor for our growth is that employees that work here, they love it.
15. What makes your company different? We’re young. I know how to get guys engaged, how to get young guys … what they want, what their needs are, how to work their schedules and make sure they’re happy. That’s given us a big competitive advantage.
16. How do you manage the growth?
I’ve tapered it back. Me stepping aside a little bit has allowed the team to catch up. Now we can do $30 million without really anything else and I’ll probably let my team kind of work the numbers from there. Then, as we grow next year, I’ll bring in more technicians before summer. But as we head into next year, we’ll be in more of an acquisition mode.
17. Have you made acquisitions in the past?
We made our first acquisition last year and we’ll be making more acquisitions going forward so that we’ll be able to bring on bigger databases to capture more clients.
18. What made you decide to rebrand your marketing?
Yes, especially right now with COVID-19 and all these other companies not hiring … people might’ve gone and been a server or bartender. Well, that job’s not applicable now. So, they’re coming into train and I’m teaching them. Now they’re going to be loyal, they’re not going to go somewhere else after you teach them.
I got my original logo off Fiverr.com or something like that. I was about a little over a year in a business, and we’d taken off like crazy. Started from scratch, grew to a $5 million business in the first year. I thought everything’s good. I thought our logo was good. Then I ran into Dan Antonelli from Kickcharge Creative at Service World Expo at the end of 2008. And he’s says, ‘Hey man, I’ve been following you on social media … Looks like you’re growing fast but your logo is terrible. Let me know when you’re ready to get a real brand.’
14. How important is company culture?
19. How did you react?
13. Has that helped with recruitment?
It’s massive. I’m 32, and everybody in my business is also young and it’s an exciting place to work. We do a lot of events. For example, I just got my whole staff
We had just met in passing. And I was like, ‘Oh, whatever dude.’ And then a couple of months went by and I was like, you know what, I want to grow to be a hundred million dollar business pretty quick. I want to make sure it has the right look. I worked with Dan, and we went back and forth, and it worked out. We have become good friends after that.
20. What was the process like?
It was fast. I trusted Dan. I gave him an idea of what I wanted. He had some ideas and within three weeks we came up with the design. It was just me and him. We hashed it out and then he made it and the trucks look great.
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