HVACR Business March 2019 by HVACR Business

It’s Your Time to Shine By Pete Grasso 5

Mini-Splits: The Way of the Future By Vincent Coakley 14

Benefits of Preventative Maintenance By Jamie Kitchen 16

Know Your True Costs By Ruth King 19

Keyword Rankings are Irrelevant By Alyssa Young 20

HVACRBUSINESS.COM MARCH 2019 / VOL.14 / NO.3

7 Essential ACCOUNTING PRACTICES FOR YOUR BUSINESS Page 7

ALSO INSIDE » Industry News ................................................................6 Executive Roundtable: Residential Ductless Technology ............................... 9 Product Focus .................................................................21 20 Questions with Brian Stack President of Stack Heating, Cooling & Electric .... 22

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CONTENTS

MARCH 2019 / VOL.14 / NO.3

F E AT U R E S

7 9

D E PA R T M E N T S

7 Essential Accounting Practices for Your Business Familiarize yourself with your financial statements and have a good understanding of your company’s accounting. By James Leichter

Editor’s Notebook

Industry News

Executive Roundtable: Residential Ductless Technology Ductless technology has come a long way since it was first introduced to the US market, as it continues to become a mainstream offering for contractors. By Pete Grasso

Mini-Splits: The Way of the Future

Benefits of Preventative Maintenance

The case for high-efficiency mini-split air-source heat pumps as an alternative to oil- or gas-fired heating systems. By Vincent Coakley

21 22

It’s important to know in advance what constitutes the scope of preventative maintenance for both you and your customers. By Jamie Kitchen

It’s your time to shine … you put in the effort, now show off your fleet in our annual Tops in Trucks Fleet Design Contest. By Pete Grasso

Product Focus 20 Questions with Brian Stack President of Stack Heating, Cooling & Electric in Avon, Ohio

CORRECTION

C O LU M N S

You’re Headed Toward Your Goal — Know Your True Costs

Keyword Rankings are Irrelevant — Learn to Measure SEO Success

By tracking all of your costs you can make decisions about whether the costs are acceptable or whether they should be cut. By Ruth King The ultimate measurement of success for a digital marketing campaign is conversions. By Alyssa Young

In the February 2019 issue, the column “Increase Your Social Media Returns” (pg. 21) was incorrectly attributed to Elaine Duraes. The correct author for that column is Colton Bollinger, digital marketer & content creator, co-founder and CEO of Jumper Media. We regret the error.

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EDITOR’S NOTEBOOK

BY PETE GRASSO 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 BARBARA Kerr Executive Assistant bkerr@hvacrbusiness.com

ADVERTISING STAFF EAST COAST/SOUTHEAST JIM Clifford Regional Sales Manager Tel 201-362-5561 Fax 201-334-9186 jclifford@hvacrbusiness.com

It’s Your Time to Shine

MIDWEST ERIC Hagerman Regional Sales Manager Tel 216-409-3246 Fax 440-731-8750 ehagerman@hvacrbusiness.com

leet vehicles remain the main source of advertising for many service companies, and standing out is becoming more and more competitive. Gone are the days of simply relying on word of mouth. Today’s HVACR contractor has to put forth an image that is both professional and memorable.

WEST COAST TERRY Tanker Publisher Tel 440-731-8600 Fax 440-731-8750 ttanker@hvacrbusiness.com

Fleet vehicles are the main — if not only — investment many contractors make in marketing. It’s an important line item in the budget to leave to chance, and smart contractors know how to make the most of their rolling billboards.

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©2019 by JFT Properties LLC. No part of this publication may be reproduced in any form or by any means, electronic or mechanical, or by recording, or by any information storage or retrieval system, without written permission from the publisher. 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) Published monthly by JFT Properties LLC., 31674 Center Ridge Road, Suite 104, North Ridgeville, OH 44039. POSTMASTER: Send address changes to HVACR Business, 31674 Center Ridge Road, Suite 104, North Ridgeville, OH 44039. Periodicals postage paid at Cleveland, OH and additional mailing offices. (USPS 025-431)

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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I spoke with Brian Stack recently for this month’s 20 Questions (page 22). When Stack Heating, Cooling & Electric changed their business from a hydronic and radiant heat focus to a more traditional forced air heating and cooling, they didn’t put a lot of money toward advertising.

This is evident each and every year when we showcase the best of the best in our annual Tops in Trucks Fleet Design Contest. Since its inception, the submissions have gotten more sophisticated — which shows that the industry is paying attention and getting better at taking advantage of this prime advertising real estate. At the heart of it, the Tops in Trucks Fleet Design Contest is a celebration of branding excellence in HVACR.

You put in the effort, now show off your fleet in our annual Tops in Trucks Fleet Design Contest.

Stack grew the business organically over time, but one thing he did from an advertising perspective was to invest significantly in his fleet. A runnerup in our inaugural Tops in Trucks Fleet Design Contest in 2007, the Stack Heating, Cooling & Electric vans remain the top source for leads. Stack is a company that serves my local area, so I can attest at just how prominent these trucks are … I see them all the time. The graphics are big and bold and stand out from all other vehicles on the road. It’s no wonder Stack has seen more than $5 million growth in the past 10 years. In a survey done by Service Nation Alliance of it’s members’ customers, a large percentage of respondents say your company stands out when your trucks are frequently in their neighborhood. That’s true, but only if your truck catches their attention. It can’t look like all the other white vans in the neighborhood. White vans blend in. They might as well be invisible to consumers. Throughout the past decade, service vehicles have continued to evolve from the boring, white van with black lettering into the attention-grabbing mobile billboards you see driving around city streets every day. Savvy HVACR contractors are moving away from the tired old sunshine and snowflake designs that have long been associated with heating and cooling, opting instead to spice things up with a fleet design that will leave a memorable impression with customers and potential new business.

The process of branding requires the integration of many things: vision, mission, message, image, differentiation, advertising, logo, name recognition, customer service, training and teamwork. These factors come together to produce a consistent and unique company service model.

A great truck design is more than simply good looks — it’s a communications tool that emphasizes the company’s brand. Whenever I interview the Tops in Trucks Fleet Design Contest winners, the number one thing they tell me is they wish they’d made this investment sooner. Not one has expressed any regret over spending the money on branding their vehicles. The point of branding is to have the customer view you as the only solution to their problem. To do that, you have to get their attention and communicate in a clear and concise way. Over the years, our winners have showcased their understanding of what it means to communicate who they are using the biggest asset they have; their fleet. You’ve invested a lot of money in your fleet and making sure it represents your company and generates business. Now is your chance to gain some recognition for all that effort. I personally invite you to show off your pride and joy. There’s still time to enter this year’s Tops in Trucks Fleet Design Contest. Entry deadline is April 15 ... so get your trucks to the car wash and take some photos! So, grab your camera and take some hi-resolution photos of your fleet, then head to hvacrbusiness.com/topsintrucks to fill out an entry form. I’m counting on you to make the judges’ job even more difficult this year. u

HVACR BUSINESS MARCH 2019

INDUSTRY NEWS » ACCA Members Contribute Significantly to Thermostat Recycling Corp.’s Collection Efforts

Ingersoll Rand Launches Oxbox, a Durable Residential Line for Budget-Conscious Customers

FORT WASHINGTON, Pa. — A recent review by the Air Conditioning Contractors of America (ACCA) shows that its members are some of the nation’s top recyclers of mercury containing thermostats that are included in the Thermostat Recycling Corp.’s (TRC) collection efforts. TRC maintains a network of more than 3,600 collection sites nationwide.

DAVIDSON, N.C. — Ingersoll Rand (NYSE:IR), announced the launch of Oxbox, a new line of affordable, durable residential heating, ventilation and air conditioning (HVAC) equipment for single- and multifamily replacement and homebuilder markets in North America.

“We are both pleased and impressed with the ACCA members who demonstrated best practices by removing and safely recycling mercury containing thermostats while on service calls,” said Ryan Kiscaden, executive director, TRC. “This demonstrates that the backbone of our industry, the contractor, is the first line of activity in protecting the environment in the removal of all mercury containing thermostats.” HVAC wholesalers and hazardous waste collection sites serve as the lynchpin of TRC’s collection efforts. TRC and ACCA have also created a Mercury Thermostat Compliance Policy handbook available for free download that contractors are encouraged to have their employees follow. “The relationship between TRC and ACCA members demonstrates what happens when there is an exceptional degree of cooperation between two organizations that are aligned to meet a common goal that benefits the consumer and safeguards the environment,” Kiscaden said. >> thermostat-recycle.org

Jay Leno to Headline EGIA’s EPIC2019 Educational Conference for Home Services Contractors SACRAMENTO, Calif. — Television icon Jay Leno, longtime host of NBC’s world-famous The Tonight Show, will headline EPIC2019 as closing keynote speaker of the educational conference for home services contractors. Hosted by EGIA, EPIC2019 — which stands for “Educating Professionals in Contracting” — will feature a roster of speakers that includes New York Times bestselling author Weldon Long, along with renowned consultants and educators Gary Elekes, Drew Cameron, Steve Shallenberger, Mark Matteson and Brigham Dickinson. Each will lead an invaluable discussion on subjects that have been proven time and again to be primary drivers of success in home services companies – including leadership; recruiting and hiring; marketing to different generations and customers; mindset training; delivering unrivaled customer experiences; and much more! “In EPIC2019, we’ve created an event that will offer attendees of all levels of success the tools and proven roadmaps to grow their contracting businesses in exactly the way they’ve always dreamed of,” said Bruce Matulich, CEO of EGIA. “We’ve already put together the most accomplished group of industry educators ever assembled at a single industry event. The addition of Jay Leno brings a comedy legend as well as a voice of authority when it comes to reaching the apex of one’s field.” Taking place October 3-4 at the Bellagio in Las Vegas, EPIC2019 is designed to not only reinvigorate and entertain contractors, but also for attendees to walk away with the tools, resources and knowledge they need to take their businesses to the next level of success. All contractors are welcome, and free registrations are available at most EGIA membership levels.

Oxbox is a new brand endorsed by Trane that offers options for customers seeking affordable HVAC. The Oxbox portfolio includes air conditioning units, heat pumps, air handlers, coils, packaged units and furnaces that will be sold through new distribution. “Our customers have been asking for more value options for HVAC equipment that meets Trane brand approval for quality and durability,” said Bryan Davenport, general manager for Oxbox. “We are confident that the Oxbox brand will serve the needs of these value-oriented customers.” >> oxboxhvac.com

Modernize Releases Findings of What Customers Need From Home Improvement Contractors AUSTIN, Texas — Modernize, the leader in home improvement contractor lead generation services, has released its latest Modernize Homeowner Index, a quarterly research study that measures sentiment among thousands of U.S. homeowners currently considering windows, roofing, solar, or heating and air conditioning projects. This particular study covers how homeowners educate themselves about the improvement projects they are interested in, how they find and choose what contractors to work with, and how they think about paying for those projects. The latest wave of the study found that 51 percent of homeowners utilize online articles as the primary source for research on their home improvement project. And they spend substantial time in their research, with 35 percent of homeowners spending between 1 and 5 hours investigating their project before submitting a lead and a full 28 percent spending more than 10 hours researching on their own. Then, when they’re selecting a contractor, homeowners shun bad communication skills, with 23 percent listing that as a factor that would prevent hiring a contractor; by contrast, only six percent listed “Ego” as a factor that would prevent a hiring. “The continued prevalence of homeowners’ online research for information and guidance on their home improvement projects points to the importance for contractors to communicate and make connections online,” said Jason Polka, CEO of Modernize. When it comes to kicking off their home improvement project, many homeowners are nervous about their understanding of costs and want help. Eighty-six percent of homeowners surveyed had not created a budget for their project, and of homeowners who paused their project, 58 percent did so because it was too expensive. Across all trades 42 percent of homeowners would like to finance up to half of their project, and 19 percent would like to finance the entire project. >> modernize.com

>> egia.org/epic2019

HVACR BUSINESS MARCH 2019

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7 Essential ACCOUNTING PRACTICES FOR YOUR BUSINESS Familiarize yourself with your financial statements and have a good understanding of your company’s accounting. BY JAMES LEICHTER

ccounting is the basis of good business decisions. For that reason, you must familiarize yourself with your financial statements. These include Balance Sheet, Profit & Loss, and Statement of Cash Flow (or Cash Flow Statement).

Purchase orders should contain specific information about what items or services were agreed upon as well as exact pricing and terms of the sale.

DON’T BE A VICTIM OF EMPLOYEE THEFT

ALWAYS USE PURCHASE ORDERS

Purchase orders should contain specific information about what items or services were agreed upon as well as exact pricing and terms of the sale. When orders are picked or delivered to you, there should be a packing slip. Carefully compare the packing slip to what you are picking up or what was delivered. Sign the packing slip and turn it in to the office. Your next step is to acknowledge receipt of the items. In many software programs, this is called an item receipt. This is where the purchase order (permission slip) is converted to a financial transaction. You can think of an item receipt as a temporary bill.

Not a month goes by without our office hearing from a contractor that discovered an employee was robbing them. The last call I took was from an owner who discovered that a trusted employee had been

Be sure your company uses purchase orders for all purchases. Keep in mind, a purchase order is a permission slip to buy something and it is the basis of all good bookkeeping systems for contractors.

This process gets the item(s) into inventory quickly so that you can keep your financials up to date and get your invoices out quickly. When the bill arrives, evaluate it against the item receipt and the

KNOW YOUR FINANCIALS A Balance Sheet shows the company’s total assets, liabilities, and equity at a particular point in time. Your Profit & Loss (or Income Statement) shows the revenues generated and expenses incurred during a particular date range. The Statement of Cash Flow shows details of the flow of cash (in and out) as a result of the company’s operating, investment, and financing activities.

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stealing from him. He discovered that at least $55,000 had been stolen over the course of three years. Most victims have a few things in common. They are usually companies owned by a single person who has little to no interest in office work, especially accounting. There is a single primary person in charge of bookkeeping and accounting functions. The company does not have an outsider perform basic audits or even perform bank reconciliations.

purchase order. All item numbers, quantities, and prices should match. Many of our clients are very surprised how often there are pricing mistakes — mistakes that are not in their favor. Purchase orders should also be used for ordering services. For example, if you need to call to have your copier repaired, create a purchase order and tell the vendor to include that PO number on their bill. When the bill is being evaluated for payment, the bill payer will look to the PO for verification. An old trick was for a wouldbe fraudster to call companies and ask for the model and serial number of a copier, or other appliance. They would then send an official looking bill for repair work. Many times, an unknowing worker paid the legitimate looking bill.

DON’T MANAGE YOUR COMPANY ON A CASH BASIS Cash basis is the simplest form of accounting. You recognize and record revenue when cash is received, not when the continued on page8

HVACR BUSINESS MARCH 2019

continued from page 7

While cash basis reporting can be necessary when paying sales tax or preparing your tax returns, it is a very dangerous way to manage your company.

work is done. Expenses are recorded when bills are paid, not when the item was used. In the accrual method, revenues are recognized and recorded when earned. Expenses are recognized and recorded when consumed or when an invoice is received. Remember, when using this method, revenues and expenses don’t have to be paid before they are recognized. Some accounting software allows you to print your reports using the cash basis of accounting. While cash basis reporting can be necessary when paying sales tax or preparing your tax returns, it is a very dangerous way to manage your company. Do not use cash basis reports to analyze your financial performance or to help you make day-to-day management decisions.

NEVER MIX PERSONAL WITH BUSINESS EXPENSES Your personal finances should never be mixed with your business finances. Your company should have its own bank accounts, checking accounts, and credit cards. According to Publication 535 from

the IRS, a business expense must be “both ordinary and necessary.” An “ordinary” expense is one that is common and accepted in your trade or business. A “necessary” expense is one that is helpful and appropriate for your trade or business. Don’t be tempted to write-off personal expenses, pleasure trips, or anything else that is not a legitimate business expense.

DON’T IMPORT TRANSACTIONS FROM A WEBSITE Would you let your credit card company or parts supplier sit down at your desk and enter their own bills for you to pay? Would you let your banker drop by to enter all of your banking activity into your accounting software? Would you trust their work so much that you would skip the normal process of “checks and

Precision is not Negotiable

balances” to verify these transactions? Most people would say no. But, that might be exactly what you are doing when you own software that allows you to download banking activity, credit card transactions, and vendor bills. Importing transactions directly into an accounting program can allow employees to skip critical internal control mechanisms that guard against fraud, theft, and errors due to omission.

HIRE AN ACCOUNTING FIRM When is the last time your accountant called you to ask you questions about your financial statements? Most contractors only hear from their accountant when its time to work on their tax returns. In this case, they don’t have an accountant; they simply have a tax preparer. Your accountant should review your financials

quarterly and discuss the numbers with you. They should ask you probing questions designed to test your accounting practices and controls. Their job should be to give your company a “financial physical” by checking all of your vital signs. While absolutely vital to profitability, financial structure and accounting practices are often the least understood elements within a contracting company. Editor’s Note: For easy help learning to master financial structure, download a free package of training resources, research data, plug-and-play templates and more at EGIA.org/hvacr-financial/. u

James Leichter is a founding faculty member at EGIA Contractor University. He is a longtime HVAC contractor, consultant and public speaker. Leichter is president and CEO at Aptora Corporation, a maker of contracting business management software. He is the editor of MrHVAC.com and BlackBeltContracting.com. James is a majority partner at RA Tax and Accounting, Inc.

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EXECUTIVE ROUNDTABLE: RESIDENTIAL DUCTLESS TECHNOLOGY

Ductless technology has come a long way since it was first introduced to the US market, as it continues to become a mainstream offering for contractors. BY PETE GRASSO

erhaps the biggest growth segment in this industry over the past several years has been in the residential ductless market. While this technology has been around for a long time, even in the U.S., it has only relatively recently started to become more mainstream. And, while more and more contractors are offering some kind of ductless product as part of their portfolio, there remains a huge growth potential for savvy contractors looking to increase business. I recently met with a handful of top executives at many of the top ductless manufacturers to get their thoughts on the acceptance of ductless technology in the U.S., how contractors should market these solutions to customers and where they see the market headed. This Executive Roundtable panel included Woo Young Choi, product www.hvacrbusiness.com

Business-minded contractors who really understand the opportunity of ductless to solve myriad problems have embraced it. manager for ductless at Bosch; Jerad Adams, director commercial product management for Friedrich Air Conditioning Co; Nick Shin, vice president and general manager of VRF & ductless systems for Johnson Controls; Kevin McNamara, senior vice president and general manager at LG Electronics; Steven Scarbrough, senior director of residential business at Mitsubishi Electric Trane HVAC US; Allan Dziwoki, vice president and general manager at Panasonic; Randy Roberts, vice president of sales for Rheem; and Russell Tavolacci, senior vice president & COO at Samsung HVAC.

How has ductless technology evolved in the U.S. market in the past decade? Tavolacci: We’ve seen more VRF technology, which is a commercial product, but it has a residential capability now as well. It’s that addition to what was the conventional ductless product that has widened the bandwidth. What you can do from it started out to just a single one-toone like a conventional central system, you now have, of course, multi-split systems, you have multi choices of ductless and ducted.

Roberts: The flexibility of the products, and certainly the contractor awareness of how they can use those features and benefits to sell to a greater population of problems than they did before. Generally, ductless was isolated to some very niche parts of their business and so with time and good education and training and additional features and benefits; it’s now helping them solve more problems. The products have improved a lot too. If you look at it over the last 10 years, their efficiency levels are even much higher today. Dziwoki: The contracting community is who really influences the sale of residential air conditioning, no question. So the more contractors got comfortable with ductless technology and really understood the applications of the product, the more they embraced it. Business-minded contractors who really understand the continued on page 10

HVACR BUSINESS MARCH 2019

EXECUTIVE ROUNDTABLE PANEL

Woo Young Choi, product manager for ductless at Bosch

Allan Dziwoki, vice president and general manager at Panasonic

continued from page 9

McNamara: The development of the multi-zone systems, we’re able to have one outdoor unit that could service multiple rooms with its own individual local source

Nick Shin, vice president and general manager of VRF & ductless systems for Johnson Controls

Steven Scarbrough, senior director of residential business at Mitsubishi Electric Trane HVAC US

Randy Roberts, vice president of sales for Rheem

Ductless is the fastest growing segment of HVACR. The growth has been staggering.

opportunity of ductless to solve myriad problems have embraced it. Scarbrough: We have progressed all the way into hybrid solutions, where we can integrate both traditional ducted products together with ductless to provide the customer with countless opportunities to solve any of their needs. Contractors can now provide customers with significant zone comfort solutions with the benefit of only paying for what they need.

Jerad Adams, director commercial product management for Friedrich Air Conditioning Co.

for heating or cooling has been a really big step forward. As the applications were developed to do heating and cooling more efficiently, and as the products became better in a short amount of time, this technology became much more attractive to homeowners.

cold climates. When I say cold climates, we’re talking down to -22F. You could still produce 70 to 80 percent capacity in heating. That’s very critical because more than half the population lives in the northern part of the world. Now, the variable speed ductless product can run four seasons instead of two or three. This has helped gain acceptance in a larger portion of the U.S.

Shin: The next big evolution is the advancement of the compressor technology to be able to run the heating mode in very

Adams: Ductless is the fastest growing segment of HVACR. The growth has been staggering. With the mechanical

HVACR BUSINESS MARCH 2019

Kevin McNamara, senior vice president and general manager at LG Electronics

Russell Tavolacci, senior vice president & COO at Samsung HVAC

contractor interest and now consumer demand, we are evolving at an even faster rate. Technologically, ductless has come a long way. Compressor technology switched from ‘standard’ to variablefrequency drive (VFD) ‘inverter’ compressors, increasing performance. Evaporator unit fan motors evolved from direct-drive to DC- or ECM-type to minimizing sound levels and power consumption. Heat exchanger technology has evolved to include intricate highperformance coil designs, which are minimal in surface area but maximize heat transfer to ensure system capacity. continued on page 12

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continued from page 10

It’s hard to imagine a contractor that’s not engaged in it today quite frankly. Contractors who haven’t ventured into this area should be aware that probably their competitors are.

How can contractors use ductless technology to offer additional solutions to customers? Tavolacci: The quintessential solution with ductless that contractors have offered was the ability to do an add-on room, but now that has now grown to being able to do a full house, a complete home with ductless systems. Roberts: Contractors are now able to use ductless to promote whole home solutions that meet the wants and needs of the homeowner, and they can often do that more effectively and cost efficiently. Ductless offers more flexibility. It allows the customers to customize the units to their spaces. Scarbrough: One of the things that we talk about with our contractors is the fact that we can solve a tremendous amount of issues in customer’s homes. We can do it with a product that is generally much easier to install. The contractor now has a very large arsenal to go to the customer, based on just about any need that they could possibly have, and come up with a solution. McNamara: As people are building smarter homes, they’re building more efficient homes, there’s no question the right technology is here as far as the inverter technology is concerned for a home. Shin: In the beginning, we had these single zone systems. Contractors used it for some odd type of applications like room additions, bonus rooms, and those types of things. But now, as the capabilities have increased, and with the multi zone offerings contractor’s can use this technology to design whole home solutions. Adams: Ductless offers homeowners a highly efficient, customizable, all-season HVACR solution. When it was first introduced, it was a niche product for sunrooms or spot heating/cooling. Ductless has evolved into a whole home solution. The technological changes have continued to push performance and capabilities. Choi: We’re moving toward ductless as a primary source for heating and cooling — not only with the single zone, but with the multi zone as well to the customers. It’s easier for contractor’s to work on in terms of the installation and serviceability compared to traditional systems. So that’s how they’re pushing it to the market.

What are some of the main benefits contractors should highlight when it comes to ductless systems? Tavolacci: The efficiency in ductless systems is in the 20s and 30s in terms of SEER. Their ability for super quiet, low sound where you don’t have to worry about hearing the air blowing into the space. And, of course, there’s efficiency as well as the maintenance. The reliability of these systems has been proven for generations overseas, and coming into the U.S. market in relatively recent past. The quality is there, and therefore there’s a lot less maintenance to be associated with the homeowner. Dziwoki: Comfort control is the big one, where you can individually heat and cool rooms at their own temperature is a big selling point. Because in every house, there is always a room somewhere that’s too hot in the summertime and too cold in the wintertime. Subsequently, not only do you have individual temperatures in those rooms to satisfy the occupants of those rooms, but also you can turn rooms on and off and save energy. Scarbrough: Health, comfort and efficiency. Those are really our three keys when we look at the residential market. McNamara: The contractors win because if they’re able to present to the homeowner as part of their value proposition that the homeowner is going to get a rebate, for example from the utility, to help incentivize them for this change, that’s a big win. Shin: The biggest benefit is efficiency. When you get rid of the ductwork — all the metal ducting you’ve got to push air through takes up about 30 percent of wasted energy. Plus, with variable speed, you’re talking about energy savings of 50 to 60 percent compared to the traditional systems. Adams: The increasing availability of ductless system options — providing room-by-room comfort, customizable to the specific needs of a space — is what’s driving demand on the residential and

HVACR BUSINESS MARCH 2019

commercial side. This type of design flexibility, matched with high efficiency performance, makes ductless the best system option in many instances. It used to be that ductless was an option mainly for areas of a home or business that didn’t have existing ductwork, but now with how efficient and effective they are, customers are realizing that ductless systems are a great option instead of central air. Choi: First is ease of use for the system. Most of the time it comes with the wireless thermostat, the customer can track it quite easily with the controlling feature as well. It’s got the display on the unit so they can see the actual unit and see how it’s running. Also it’s easy to clean compared to traditional systems. They can take the filter out once in a while, clean it, dry it, put it back on and it runs like a fresh new unit.

What are some challenges still facing ductless technology? Tavolacci: Educating the customer versus what they’re used to in the conventional central system or the conventional heating system. I think the customer still has to get more educated that these are a completely great alternative solution to what they’re used to, the awareness of what their flexibility is, the awareness of what their range of choice is … if you’re talking about the customer, they need to know what their choices are like any consumer product. It’s not simply that it’s going to save them money and it’s going to be more comfortable — they expect that — but what are their choices? If you give them more choices, then you pull that consumer in, and that’s better for the contractor because they have a lot of options. Roberts: So many of the homes in the US that have been built over the years, have really been designed around ducted solutions. You’re seeing some new construction with ductless, especially some of the high rise, some of the lofts, some of the things where ductwork is such a challenge to be put back into those retrofits. But you still have a lot of history of homes that are

being built with duct work and with the new zoning systems and things along those lines, the ducted solutions have even more options as well, just like ductless does. Dziwoki: It’s going to be the price point because compared to traditional heating and air options; residential end users are going to be more price-conscious. That has been a challenge from the beginning, so it’s not new. But that’s going to continue to be an obstacle, as it becomes a larger portion of a contractor’s business. It may slow down the rate at which it will grow as a part of the contractor’s portfolio. So that has to be mitigated through consumer financing and energy driven rebates. Scarbrough: The biggest hurdle we have is the cost. Sometimes it takes both the customer and the contractor back a little. Not only do we have to work with the customer to overcome that obstacle, we have to work with our contractors. Many times, a contractor doesn’t believe their customer is going to go for that purchase option, even though it’s the best option for what they want. McNamara: The challenges in the residential world is kind of twofold. The initial first cost is probably still a little bit higher than a standard unitary system. And, you have this entrenched design approach to homes that’s very difficult to change. I think that’s the challenge. As time passes, however, these systems become more accepted. Adams: One of the biggest challenges is greater adoption by the trade and making it easier for contractors and installers to sell and provide ongoing service for ductless systems. As a relatively recent growth category in the U.S., not all trades are yet familiar with or have incorporated ductless as part of their business plans, and a big reason for that is because servicing individual ductless units vs. a single central air system can seem daunting at first. Choi: In different parts of the country, electricity cost is a little bit higher than others and there’s a little bit pushback. But with the better efficiency of the product we are trying to get through those obstacles.

How will this market change over the next few years? Tavolacci: It’s going to assimilate more to what conventional systems do or can do, but with a technology that comes with ductless. I think you’ll see more efficiency www.hvacrbusiness.com

and more flexibility in the ductless systems themselves. The market acceptance will continue to be greater as well. I say that because of the technology surrounding us. The consumer is much smarter today because of the information that’s out there, and they’re identifying this type of technology that they want for their home. Roberts: Growth of ductless is outpacing growth of ducted. It has for a number of years. It will continue for the foreseeable future. And it’s going to represent a double-digit percentage of the market; it’s going to get to 15 percent of a contractor’s business pretty quickly. And if a contractor doesn’t get involved and get engaged, they need to look at that as lost sales opportunity. Dziwoki: People are starting to see this as a whole home solution. We’re not anywhere near there yet, but it’s happening. Higher end residential homeowners will consider this as a solution. Some niche builders will consider this as a solution in their new residential building construction. I think the price will continue to go down in the next several years because market pressure will force that to happen. There are too many competitors in the market to feed the current demand and they’re all trying to create demand and work within a limited channel. All of that pressure is going to bring the price down. Scarbrough: As we look to make this more of a mainstream option for consumers, we realized that we needed to be more flexible. Not simply integrating ducted units with ductless units, but also creating

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environment, then they should certainly be looking at the things that are out there. I think that’s where inverters fit in nicely in ducted and ductless technology.

Ductless has a tremendous amount of benefits and contractors can make a lot more money if they focus a portion or a significant portion of their business on that. different styles of ductless units. Ones that we can integrate up into the ceiling, or something that we can put in a floor space. All of that has helped us become far more recognized as a real-world solution than just the traditional wall unit.

product portfolio, but also how is it offered? A contractor’s time is extremely limited. They have to focus most of their time, obviously, in the field hopefully installing more and more systems.

McNamara: The residential segment is growing 20 to 25 percent a year. And you have multiple layers of players as well as far as products go. Everybody wants to be in it. Right? Because it’s growing. I think you’ll continue to see it move in that direction.

Roberts: Take advantage of all the training that is out there. At Rheem, we invest a significant amount of dollars into training in order to help the contractors not only understand the technical side but also the business side and the advantage of ductless and how it can help support their business.

Adams: Ductless continues to gain acceptance and most industry pundits now forecast ductless will capture approximately 15 percent of the total market. If this happens, it certainly changes the current industry dynamic, from manufacturing and branding to advertising. Specifically, key consumer messaging for all types of HVAC will likely need to evolve to stay relevant in the consumers’ mind.

Dziwoki: If they’re not selling it today or they’re doing it on an as asked for basis, I’d tell them to take it more seriously. Not just because I work for a ductless air conditioning company, but also because ductless is a true problem solver. It’s got a tremendous amount of benefits and contractors can make a lot more money if they focus a portion or a significant portion of their business on that.

How should contractors go about adding ductless solutions to their portfolio?

McNamara: It’s hard to imagine a contractor that’s not engaged in it today quite frankly. Contractors who haven’t ventured into this area should be aware that probably their competitors are. If they want to have a differentiated offering, or something different in their competitive

Tavolacci: Education and training is the key thing. What manufacturers offer not only education and training on their

Shin: It’s easy, but you still have to know how to install the products properly. Once you do that, really the market’s wide open. It’s growing at double digits for many years and, right now, the penetration’s been only about 10 percent of the market, so there’s still 90 percent of the market that can be converted to ductless products. Adams: Getting into ductless makes sense for a contractor because it’s a growth opportunity and they need to understand it in order to be able to compete. We have seen contractors now devote their entire business growth to ductless solutions, so being engaged is important. We highly recommend partnering with a brand that offers an extensive ductless training curriculum, like our Friedrich Ductless Academy courses. Choi: Ductless is one more avenue for contractors to generate business as well as offer more solutions to their customer. So, maybe traditionally if they had only one or two ways of getting the home cooled or heated now they have one more feature, one more solution to add on to it. Get educated right away and start offering these solutions to your customers. u

Pete Grasso is the editor of HVACR Business magazine. To contact him, email pgrasso@hvacrbusiness.com.

HVACR BUSINESS MARCH 2019

MINI-SPLITS: THE WAY OF THE FUTURE The case for high-efficiency mini-split air-source heat pumps as an alternative to oil- or gas-fired heating systems.

BY VINCENT COAKLEY

n a recent project, involving the replacement of an old one-bedroom cottage, the common question of (heating) fuel choice for the new structure emerged. The existing house was heated with an oil-fired boiler and cast iron baseboard radiators. Domestic hot water was provided by a coil in the boiler, which was set to maintain year-round (minimum) water temperature of 120 degrees.

Conventional wisdom would indicate a tradeoff between up-front cost, effectiveness and running cost. So, all combinations were considered in detail. mini-split system would likely be viable. • Though operating cost was important, up-front (installation) cost was considered to be paramount.

The old house was about 650 square feet and would be replaced by a 950 square foot modular structure. The choices of fuel would be oil, propane or electric. Several factors contributed to the unusual consideration of electrical energy as the primary energy source:

Based on the above factors, several combinations of fuel — for heating, cooling and hot water production — were considered. Myriad combinations were studied, each with their pros and cons.

• Though the total square footage would be increased, energy usage was expected to drop due to superior insulation performance of the new structure. Therefore, total energy cost was not expected to be very high.

1. Propane (or oil) fired hot-air furnace, central ducted system; a cooling coil in the same duct; separate propane or oil hot water heater.

• Natural gas was not an available alternative. • Cooling was also a requirement, and budget was an issue, so a combined heating-cooling system (sharing ductwork), or even an all-electric

PROPANE OR OIL

2. Propane (or oil) fired hot water boiler with hydro-air central-ducted heating; split cooling system using the same duct; separate (propane or oil) or boiler-fired hot water heater. 3. Propane (or oil) fired hot water boiler with baseboard radiators, a separate

HVACR BUSINESS MARCH 2019

central ducted split (or non-ducted mini-split) cooling system and separate or boiler-fired hot water heater.

ELECTRIC 1. Electric baseboard heat; Ducted split (or mini-split) cooling; electric hot water. 2. Air-source heat pump central ducted system; split cooling system using the same duct; electric hot water. 3. Mini-split heat pumps, with combined heating and cooling, either combined or multiple systems; electric hot water. Conventional wisdom would indicate a tradeoff between up-front cost, effectiveness and running cost. So, all the above combinations were considered in detail.

ELECTRIC HEAT AND AIRSOURCE HEAT PUMPS The result was surprising — and surprisingly conclusive — in that a highly effective system (mini-split heat pumps)

had both a low installation cost and low operating cost. The explanation for such a surprise lies in the fact that this relatively new technology is not well understood — and indeed the performance claims may be discredited — by the general public and, in many cases, even those in the heating and cooling industry. The general consumer, and many in the heating industry, tend to rule out electricity as an energy source for residential heating based on its prohibitive cost per unit of energy. Regardless of efficiency (heating elements may be considered to be 100 percent efficient), the operating cost of conventional electric heat is considered to be prohibitively high in normal situations. Heat pumps, however, perform a little magic, somewhat counterintuitive to our expectation that nothing can be more than one hundred per cent efficient. The magic, of course, lies in the fact that a heat pump uses the energy of warm air or water as its source. As a simple example, let’s say the outside temperature is 40F, and we want to heat a house to 70F. A heat pump has the ability to take in two pounds of 40-degree outside air and split it into, let’s say, one pound of air at 70F (which it delivers to www.hvacrbusiness.com

the inside of the house) and a pound at 10F (which it exhausts to the outside). The result (the warm and cold air) has no less or more energy than when we started, but the air is free and the house is warmer. There’s more to the technology, humidity and other factors come into play, and the process itself requires (electrical) energy, but this is the basic “magic” of a heat pump. Heat pumps were, for many years, considered to be suitable only for milder climates, and enjoyed widespread use primarily in the Southern States. The efficiency and capacity of the earlier systems dropped rapidly in ambient temperatures below 40F. Over the years, efficiencies improved and heat pumps were designed and produced to operate at lower and lower temperatures. Several of today’s models operate at full capacity in temperatures

an option, based on his opinion that it might not provide sufficient heat in cold weather. Nonetheless, several installation prices were obtained.

High-efficiency air-source mini-split heat pumps are not only a viable alternative to gas or oil heat, they are likely a superior choice for a wide range of applications. down to 5F and at close to full capacity down to -13F. Typically a heat pump system will combine heating and cooling in one unit. The most efficient systems available today yield almost incredible efficiencies in both modes: • A HSPF (Heating Season Performance Factor) of 13.5 which translates to producing 4 Kilowatts of heat for every Kilowatt of electricity consumed!

• A SEER (Seasonal Energy Efficiency Rating) value of 30.5. Relating to cooling efficiency, this is an unprecedented value in conventional systems, where a SEER 16 system is considered to be super-efficient.

INSTALLATION COST Four HVACR contractors were asked to look at the project, and to provide pricing. While none were enthusiastic about the idea of using the mini-split heat pumps, one even refused to consider it as

OPERATING COST To compare the cost of energy alternatives in a clear manner, we’ll use the BTU (British thermal unit) as the standard unit of energy: FUEL TYPE:

GAS

OIL

ELECTRIC

PurchasedUnit:

Therm

Gallon

KWH (Kilowatt-Hour)

BTU/Unit purchased:

100,000

140,000

1,400

100,000 BTU =

1 Therm

.714 Gallons

29.4 KWH

Comparing an efficient air-source heat-pump to oil heat, and using the indicated energy prices, the following numbers don’t need much further analysis. SYSTEM:

OIL

ELECTRIC

100,000 BTU energy used takes:

0.714 Gallons of oil;

29.4 KWH Electricity

“System Efficiency” (see above):

80%

400%

100,000 BTU of Heat delivered uses:

0.893 Gallons of oil;

7.35 KWH Electricity

@ Fuel Cost:

$3.30/Gallon

22c/KWH

Cost per 100,000 BTU of heat delivered:

$2.93

$1.62

Now, to get back to the cottage. Based on maintaining a 70 degree inside temperature during the entire heating season: Per the modular company’s calculations, the total structure heat Loss = 27,000 BTU/Hour (∆T=85oF). This is 317 BTU/Hr/F (27,000/85)

All electric baseboard is historically considered to be the least expensive installation for heat, but operating costs are so high that such a system was dismissed as prohibitive. And, cooling and hot water systems would also need to be provided separately. The second lowest installation cost was for mini-split air source heat pumps. Even using the high efficiency units analyzed above, the installed cost is lower than any of the hybrid combinations mentioned. Combined with the mini-splits for heating and cooling, an air-source heatpump hot water heater was installed. Though the installation cost was about twice that of a conventional electric hot water heater, combined with rebates from the electric utility, the installation cost will be quickly amortized in energy savings. It is calculated that this unit will use about 40 percent of the energy as a conventional electric water heater.

CONCLUSION Based on installation cost, performance effectiveness, and operating cost, there is no doubt that high-efficiency air-source mini-split heat pumps are not only a viable alternative to gas or oil heat, they are likely a superior choice for a wide range of applications. Recognition of the extent of the efficiency of these systems, and their economic advantage, is not high either amongst the public or in the industry. This is likely due to the somewhat counter-intuitive logic of heat pump hyper-efficiency, combined with skepticism of new technology, and lack of incentive on behalf of the industry to change. u

Degree Days for Ossining, New York, based on 70F, 2014 heating season: 7,210 Heating Degree Days Energy requirement per heating season = 7,210 x 317 x 24 / 100,000 = 54,800,000 BTU. So, the annual heating cost is projected as follows: SYSTEM:

OIL

ELECTRIC

Cost per 100,000 BTU delivered (see above):

$2.93

$1.62

Usage (net) per season:

54,800,000

Cost per season:

$1,605.00

$887.00

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Vincent Coakley is a construction project management and engineering professional based out of Port Chester, New York with more than 28 years experience as a licensed PE. For additional information, email him at vc@laserlinebuilders.com.

HVACR BUSINESS MARCH 2019

BENEFITS OF PREVENTATIVE MAINTENANCE It’s important to know in advance what constitutes the scope of preventative maintenance for both you and your customers. BY JAMIE KITCHEN

reventative maintenance (PM) is a proactive service performed to help ensure that more expensive repairs do not occur, or occur far less frequently, and that a system is operating optimally.

Without a good PM program, a high efficiency air-conditioning system can operate with low efficiency over time.

For contractors and their customers alike, it’s important to know in advance what constitutes the terms and scope of the preventative maintenance, how often and when it is to be done, and what can be expected in return for the effort and expense — the payback on the investment.

to the customer and will comprise the

BENEFITS TO THE CUSTOMER

core of your ‘value statement’ when

to the contractor and it is these two key

Energy Efficiency. To do its job, an air-conditioning system requires a temperature difference exist between the refrigerant in the evaporator and condenser and the air or water from which it is taking or adding heat.

This last part is what will be important

benefits that we will explore in this article.

The compressor is the component that

recommending a PM program to them. Having customers sign on for PM programs also present a substantial benefit

HVACR BUSINESS MARCH 2019

supplies the energy to increase the pressure and temperature of the refrigerant in the condenser where the energy absorbed by the evaporator and added by the work of the compressor is rejected. The closer the refrigerant and air/water are in temperature, the less energy that is required to move the heat. This is due to a smaller pressure difference between the evaporator and condenser, so the compressor is required to do less work to increase the pressure between the two. Without a good PM program, a high efficiency air-conditioning system can www.hvacrbusiness.com

Make sure that your technicians are well versed and skilled in this area, as the benefits of a PM program must be made clear in a simple but thorough way so that customers can grasp its value. operate with low efficiency over time. Dust, lint, and hair can build up on the indoor coil and cause it to run colder than necessary, using more energy to provide less cooling. This can also result in liquid refrigerant returning to the compressor, which can further damage operability. Life Expectancy. Any compressor that has run for 15 years or more very likely never operated in a system with dirty coils, low airflow, or poor voltage supplied to it. A dirty condenser coil with a TXV metering device can result in hot motor windings that can rapidly degrade the motor insulation and reduce motor life very quickly; with a piston-metering device, it can mean replacing flooded compressors that have failed due to liquid return. Slow leaks can cause low suction pressure and poor compressor motor cooling, which can also result in failed windings and dead compressors. The same goes for poor voltage. Worse yet, manufacturers and distributors are likely to refuse warranty claims for components that failed due to “application related failures,” which can be detrimental news for customers who think that their system was still covered by a warranty, when in fact the warranty will not cover repairs because the system was not operating correctly. Luckily all these things can likely be caught and rectified before damage can occur if a proper PM program is in place and carried out. The customer has made a major investment and just like planned maintenance on a car, a PM program can more than pay for itself through energy savings and long-life expectancy. Financial Security. Identifying issues before they become major problems can save a lot of money as replacing components that have failed can add up quickly. For a customer, having a coil cleaned or a weak start capacitor replaced is a bargain compared to having a compressor replaced. Making the customer aware of what was done and the benefit of doing www.hvacrbusiness.com

it in terms of cost savings and improved comfort will add value to the service you provide in his mind.

If Time Is Money, Meet Your Newest Money Maker.

Costs aside, a heat exchanger in a gas furnace that has an excessive temperature rise across it can spell major grief in January when it cracks in -10F weather. Correcting the airflow issue earlier in the year so it runs fine all winter is very much preferable. Customer Buy-in and Trust. Customers who are regularly updated and informed by their contractor of how their system is performing and what if anything is needed to make it operate better may take more interest in ensuring that they replace the indoor air filter on a regular basis and make sure the outdoor unit is clear of hedges and other obstructions that can impair performance. Good communication with customers is imperative. Make sure that your technicians are well versed and skilled in this area, as the benefits of a PM program must be made clear in a simple but thorough way so that customers can grasp its value. Additionally, customers that trust your company and its service personnel are far more likely to be open to suggestions for system upgrades when the time is right if they have been happy with how their existing system has operated historically and how they have been taken care of. If they understand what is important for their systems to operate correctly and the basics of how they work, upgrading their next system to a more efficient model will be easier as they should be able to quickly understand the benefits and trust your recommendation.

FRIEDRICH, THE EASIEST DUCTLESS TO INSTALL, CLEAN AND SERVICE

40%

D E S I G N

FASTER*

TO INSTALL

45%

FASTER* TO CLEAN

50%

FASTER*

TO SERVICE

NEW Floating Air® Pro & Premier Series Friedrich FastPro design makes installation easier and gives you the fastest access to the parts and components that typically require cleaning and service. *Faster than similar installation, cleaning and service performed on standard ductless wall-mounted units.

BENEFITS TO THE CONTRACTOR Opportunity to Show Value. You have great technicians with strong technical aptitude. The problem is, they do a great job installing a system or servicing an existing one, but you never hear from the customer again because the system just keeps running for the next few years. continued on page 18

MAKE MORE MONEY ON DUCTLESS ! Visit http://info.friedrich.com/fastpropreview or call 1-866-623-7822

Friedrich_HVACR Business_March._FINAL.indd 1

HVACR BUSINESS MARCH 2019 2/26/2019

12:12:15 PM

continued from page 17

In five years, the same customer wants to upgrade his or her system with a new one and a neighbor recommends somebody who installed their system a few months back and it â&#x20AC;&#x153;seemsâ&#x20AC;? to be ok. With a PM contract, your technicians could have continued and nurtured the relationship, reducing the chance of the customer going to another contractor for their new system. Profitable Relationships. Hiring good employees is challenging. Often, developing solid relationships with good employees to retain them and prevent turnover is more beneficial for both the company and other staff. In many ways it is the same for customers. Developing a long-term and profitable relationship with customers ensures stable work and sales opportunities down the road. Even if those customers move across town, they will likely prefer to still have you as their service and sales provider because of the trust they have established

Good service also results in positive customer recommendations in social media as well as traditional word of mouth among neighbors and relatives. with your company Imagine how having a good base of loyal returning customers can help provide a stable and reliable source of business income. Increased Sales Opportunities. A PM program can also provide opportunity to increase revenue without having to incur the cost and burden of acquiring a new customer. Just like employees, customers can be divided into different value levels. Ideal customers, like those who pay on time and have disposable income, are ones for whom you want to make sure you do everything possible to keep them as customers. PM programs are a great tool for building these types of long-term relationships that are valuable to both parties. Keeping an ongoing dialogue with these customers is critical to ensuring your business grows and moves with them over time.

SUMMARY The benefits of a preventative maintenance program for customers is the peace of mind that their system is inspected and maintained on a regular basis without the worry of what steps are required and when to keep their system healthy and working properly. Any issues that occur are likely to be caught early and corrected before they can become major problems and result in a large expenditure to correct. This goes for both heating and cooling systems. While a broken air-conditioning system can be a real nuisance in warmer months and climates, a dead furnace in colder seasons and regions can also be a disaster. They will also save a substantial amount of money in operating costs due to the

system working as intended and not wasting energy working harder than is necessary. For the contractor, maintaining an ongoing relationship and communication with quality customers will result in greater revenue opportunities and lower effort required to acquire new or additional business. Good service also results in positive customer recommendations in social media as well as traditional word of mouth among neighbors and relatives. u

Jamie Kitchen is an account manager for Danfoss. He previously was the training manager for Danfoss in North America. Jamie has worked in several positions around the world to develop an expertise on the various considerations each region requires to achieve its air treatment needs â&#x20AC;&#x201D; whether through refrigeration, air conditioning, heating or humidification. For additional information, visit danfoss.us.

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FINANCE

BY RUTH KING

You’re Headed Toward Your Goal — Know Your True Costs

ou’ve launched. You know where you want to go and how you think you’re going to get there. Now it’s tracking time to ensure you get where you want to go. First, understand all of your costs. By tracking all of your costs you can make decisions about whether the costs are acceptable or whether they should be cut.

occurs, the technician’s time and part cost is usually transferred to the service department to cover that cost. Most contractors only cover the direct cost, however. Some cover the overhead cost per hour too.

By tracking all of your costs you can make decisions about whether the costs are acceptable or whether they should be cut.

None that I know will let the service department get a profit on warranty expense. As a result, the department loses the amount of profit they could have generated for a “real” service call.

There are four types of cost: Direct, Indirect, Tangible and Intangible.

When you bill a manufacturer, they give you a labor rate, which never covers all of your intangible costs. The most expensive is lost revenue opportunity cost. Not only do you have expense of paying for the technician’s time, truck and overhead expenses, you cannot generate revenue during that call.

DIRECT COSTS Direct costs are those costs you incur because you sold something. If you don’t sell, you don’t incur these costs. Direct costs usually include labor used to produce jobs, equipment, materials, commissions and SPIFFs, warranty, freight, subcontractors, union dues and permits. Labor cost can be tricky. Only the job labor goes in direct cost. Vacations, holidays, meeting time and other unapplied time are overhead expenses. You can’t bill for this time. Yet, you pay the employees for it. Some contractors put payroll taxes for the field employees in direct cost. It doesn’t matter where you put it. Other than being consistent from month to month, gross margin doesn’t matter (see last months’ column, Prepare for Liftoff, pg. 18). Commissions are always included in direct cost. No sale. No commission. If you pay a sales person a salary plus commission, that salary goes in overhead.

INDIRECT COSTS Indirect costs are all of the costs you incur to stay in business. These include rent, utilities, office salaries, etc. Look at the overhead cost list on your profit and loss statement to see all of them.

TANGIBLE COSTS Tangible costs are costs that you can see. www.hvacrbusiness.com

These are the costs that you write checks for. They include the direct and indirect costs for your business.

INTANGIBLE COSTS Intangible costs are the most dangerous types of costs because they are “hidden” and can dramatically affect your profitability. One of the typical intangible costs is sales cost. Owners accept a lot of intangible sales cost. If your sales person’s closing ratio is 25 percent, he is “burning” three out of four leads. How much do those leads cost? Is burning three out of four acceptable? Lead cost includes all marketing and advertising, including referrals, web costs, social media costs and traditional advertising costs such as radio, television and newspaper. Track the number of leads generated from these types of media. It’s as simple as asking, “How did you hear about us?” when a new customer calls or “What prompted you to call us today?” for a customer in your database. Most software packages can track this for you. It’s as

simple as putting in the data. Look at sales closing rate from a profitability perspective. Assume your average sale is $10,000, your desired net profit per hour is $100 and it takes two men eight hours to install a residential system. That generates $1,600 net profit for each job (16 hours times $100 per hour). If your sales person is given 500 leads a year (10 leads a week for 50 weeks), his closing ratio increases from 125 closed jobs to 250 closed jobs. This generates an additional $200,000 in profit ($1,600 times an additional 125 jobs). What amount of intangible lead cost are you willing to accept? The other major intangible costs are warranty and callback expenses. Even if you expense a small percentage of material cost for every job and put it on the balance sheet as accrued warranty expenses to cover the inevitable warranty costs, the amount on your balance sheet is not your true warranty cost. When a warranty call or callback

If a technician takes two hours to perform that warranty call, that is two hours that he cannot generate revenue. If your average service ticket revenue is $250, then you’ve lost the ability to generate $500. Add the lost opportunity cost to the warranty expense. The most expensive callbacks are stupid mistakes — leaving a disconnect off, not putting a panel back on a unit, etc. How many are you willing to accept before firing that employee? Track all of your costs, tangible and intangible. Then make sure they are what you’ve planned for your journey. If not, take steps to correct the costs to get them back in line. 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.

HVACR BUSINESS MARCH 2019

DIGITAL MARKETING

BY ALYSSA YOUNG

Keyword Rankings are Irrelevant — Learn to Measure SEO Success

f you’re like a lot of business owners, you’re obsessed with where your website appears when you Google the keywords you believe most people use to find your services. When you’re not No. 1, or maybe not even on Page 1, you interpret the results to mean your SEO campaign isn’t working. So you’re frustrated. On the ambiguous, mysterious, competitive Internet, keyword ranking feels like a tangible measuring stick for your organic visibility. Besides, entrepreneurs are competitive by nature, so you equate ranking first as winning. But it’s time to shift your attention elsewhere — because keyword rankings are irrelevant. Let’s explore the reasons and learn what measurements truly gauge your online success.

KEYWORD RANKINGS It’s true that effective SEO campaigns are built on a foundation of strategically chosen long-tail keyword phrases. This set of keywords, selected based on research about search volumes in the target market, is used to optimize copywriting, metadata and link-building strategies. They’re one of the essential building blocks of an SEO campaign. Well-chosen and properly implemented keywords ensure the right pages on your website appear in relevant searches for the right people who are in the right places. Where you rank for each exact search phrase does not matter, however, in part because there is no single ranking. Google personalizes search results based on the searcher’s history, location, device and other data. The search engine uses artificial intelligence known as “machine learning” to provide better answers for each user’s query. It’s moving away from using rule-based algorithms that automatically respond and instead is customizing search results. There is less predictability and control over what Google shows.

The ultimate measurement of success for a digital marketing campaign is conversions. The top 10 results you see can be completely different than what your friend who is 5 miles away sees for the same query. Now take into account the likelihood that both of you will search the same exact words: It’s low. Visitors phrase their queries in myriad ways, depending on their exact needs and preferences, whether they’re using voice search — and whether they’re good spellers. Google Search Console proves this point: Your campaign might target the phrase “air conditioning san diego,” for example, but people find your website in first position for various other phrases, such as: • • • • • • • •

a/c repair near me central air service a/c repair companies residential air conditioner service ac company best ac company near me air conditioner service near me home air conditioning

This shows that people searching for the services you provide often don’t even use a town name in their query, yet if your SEO campaign is strong, they still see your website in first-position placement. The takeaway is that it’s unreasonable to judge organic success on the average ranking of one exact four-word phrase, when numerous other word combinations that people are actually using are showing your site in the top spot. An effective SEO strategy builds your website’s relevancy in your desired geographic area for known terms related to the services you provide. This approach ensures the site will be visible for a variety of search phrases, not just a handful of specific keywords. By focusing on relevancy, your campaign casts a wider net to increase the number of opportunities to be

HVACR BUSINESS MARCH 2019

seen among results.

MEANINGFUL METRICS So, if you should ignore keyword rankings, how do you assess the health of your SEO efforts? There are several metrics that track whether your relevancy and visibility are growing. Monitor the number of new users arriving to your website via organic search, month to month and year over year. These folks find your site by doing a search for a service or product you offer and clicking on a result outside the paid advertising links. Organic traffic does not capture people who arrived at your website via these other common traffic channels: • Direct (people who knew your brand or your URL) • Social (from networks such as Facebook or Instagram) • Referral (followed a link from another website) • Paid (pay-per-click advertising campaign, such as Google AdWords or Google Home Services) If your SEO campaign is effective, the number of visits and new visitors from within your target market should be growing. This means looking not only at the total visits, but where users who visit your site are located. Traffic from people who find and visit your website from other towns where you don’t do business is irrelevant. SEO campaigns that over-optimize blog posts so that they get national attention are not helping you grow your business because page views from out-of-town users won’t translate into revenue. If your website is optimized well, people in your target market need not include local modifiers (town names) in their search terms, and they’ll still find you.

The ultimate measurement of success for a digital marketing campaign is conversions. When analyzing SEO efforts specifically, you should focus on whether website visitors who arrived via organic search initiated a conversation with your company. After all, a visible website that generates no leads still isn’t doing its job. Once someone finds your site, its design, content and user experience should make it easy to facilitate a relationship with your company by calling or submitting a form. Measure this by tracking the number of unique phone calls to a website call-tracking number and counting the number of forms submitted via organic traffic.

GOOD SEO GETS RESULTS Business owners who are obsessed with keyword rankings often admit they’re ego-driven. It gets under their skin when they search their “go-to” keyword and a smaller competitor appears higher in the results. Don’t waste your energy. It’s important to remember that your personal search experience does not represent the effectiveness of others’ SEO campaigns or the ability of their websites to convert customers. Savvy business owners focus on building an SEO campaign that uses a proven process and branded content, and they monitor metrics that matter. The ultimate goal is to get your phones ringing, flood your email inbox with contact forms and fill your schedule. u

At KickCharge Creative, Alyssa helps to ensure that clients’ websites are valuable resources for existing and future customers. Overseeing the content team and digital marketing efforts, she is responsible for maximizing the sites’ visibility, conversions and user experience — so that they translate into business success. For additional information, visit kickcharge.com.

www.hvacrbusiness.com

PRODUCT FOCUS »

FRESH-AIRE UV

GRUNDFOS

LENNOX

NAVAC

Fresh-Aire UV introduces the Mini UV DST (discrete spectrum technology), the first LED light disinfection system designed specifically for ductless minisplit air conditioners and other limited space HVAC applications.

Grundfos has released the newest generation of the legendary Grundfos CR pumps. The much-anticipated, redesigned pumps offer best in the market efficiency and reliability, making them a perfect solution for pressure boosting in various applications.

The Lennox Healthy Climate Carbon Clean 16 combines industry-leading MERV 16 filtration with activated, carbon-coated fibers to remove allergyaggravating particles from your home’s air. It provides powerful filtration without restricting the airflow of your comfort system.

NAVAC’s new NRDD Recovery Unit has a twin-cylinder compressor and over-sized condenser with two rows of microchannel coils which offer exceptionally efficient vapor recovery.

The patented Mini UV DST is a 2019 AHR Innovation Award IAQ category finalist. It features a 30-light LED array embedded on a self-adhesive, sizecustomizable 1/2-inch-wide (12.7-mm) flexible strip. The LED array maintains mini-split blowers, drain pans and coils free of mold and other biological contaminants without producing airborne ions, ozone or reactive oxygen species (ROS).

The pumps are being released after extensive research, development and testing of new hydraulic designs, and are engineered using state-of-the-art production methods, including a fully automated and flexible production line. Once the new generation is fully released, it will include three extralarge flow sizes of up to 580 psi pump pressure.

The Carbon Clean 16 helps prolong the life of your heating and cooling system by keeping it free from dirt and dust buildup. It’s compatible with any system, and no additional power source is needed to keep it running.

Exemplifying NAVAC’s overall mission of making technicians’ jobs simpler and more efficient, the NRDD Recovery Unit features a brushless DC motor that allows it to provide substantial power in a compact size and weight of just 25 pounds. This DC technology also provides better starting performance under low voltage conditions.

lennox.com

navacglobal.com

freshaireuv.com

grundfos.com

NAVIEN

RESIDEO

RUSKIN

SIEMENS

Navien has unveiled the new NFB-C commercial fire tube boiler. Shown in two sizes NFB-C-301 (299,900 BTU/H) and NFB-C-399 (399,900 BTU/H) the NFB-C uses the same patented stainless-steel fire tube technology from the NFB series released in 2018.

Resideo Technologies, Inc. released its new Honeywell Home T10 Pro Smart Thermostat that incorporates wireless sensors, and a completely refreshed Contractor PRO channel program that will help expand the contractor’s business in 2019 and beyond.

The new EME5625MD louver from Ruskin, a 5-inch vertical stationary louver, is engineered to provide added protection to buildings during hurricane conditions. In compliance with MiamiDade standards, the EME5625MD is constructed of extruded aluminum, is low maintenance and offers high resistance to corrosion.

Siemens is introducing the new Sinamics G120X drive, a simple, seamless and easy-to-use drive, designed for use in pump, fan and compressor applications in industries such as water/wastewater, HVAC/R, irrigation/agriculture and in industrial environments.

The commercial fire tube boiler features an industry leading 15:1 turndown ratio, 91.7 percent thermal efficiency, BACnet or LonWorks to BMS communication capability and top and bottom water piping connections. navieninc.com

The new T10 Pro Smart Thermostat features wireless RedLINK sensors with a range of up to 200 feet, helping provide whole-home comfort. The new sensors monitor temperature, humidity, and motion; helping balance hot and cold spots in a home, and offers other advanced features. customer.resideo.com

The EME5625MD is designed to meet a wind load of 160 psf. Its 1.25inch vertical blade spacing prevents penetration of wind-driven rain, earning a Class A efficiency rating at 50 mph. ruskin.com

It has an integral DC choke which improves harmonics and EMC performance. Sinamics G120X meets all the latest and upcoming UL, NEMA and EN/IEC standards for 2019 and beyond and offers up to 100 kA shortcircuit current rating (SCCR) ensuring enhanced product safety and energy efficiency. siemens.com

www.hvacrbusiness.com

HVACR BUSINESS MARCH 2019

20QUESTIONS

>> with BRIAN STACK

We sat down with Brian Stack, president of Stack Heating, Cooling & Electric in Avon, Ohio. Stack, who grew up in the industry and took over the business from his father, discussed reinventing the company and growing organically, working with family and the benefits of training the industry. 1. How did you get your start in this business? Being a family business I basically started in the sixth grade working weekends and summers and then through high school. After high school, I went to Ohio University for a year for mechanical engineering, then decided to switch to architecture and attended Ohio State. And then decided I didn’t like any of that stuff and came back home to work in the business. 2. How has the company evolved? My dad, Andy, started Stack Heating in 1976, and in 1988 he started a second company that specialized in steam and hot water heat. By 1990, he sold off the forced air company and we did strictly steam and hot water heat and radiant flooring until 2008. 3. What happened in 2008? The hydronic business kind of plateaued in sales. To gain more customers, my brother Kevin and I decided to get back into the forced air business. 4. What was it like to make that transition? It wasn’t difficult because we got calls all the time for it and we would refer those customers to other companies. So when we made the switch, we simply started telling them we could do everything. 5. Was it challenging? The economy dip in 2008 didn’t affect us. We continued to grow during that time because we diversified what we were doing and adding the forced-air side of the business just helped us keep moving forward. So while some companies were laying people off, we were hiring and able to grow. 6. How did your marketing change? We changed it around a little, but we’ve never done a lot of heavy marketing. Our marketing budget is very small. We’ve got a couple of billboards around town, but mostly we rely on our fleet of trucks and the word of mouth of our customers. 7. How has the business grown since then? We’ve grown from just under $2 million to $7 million last year, and went from 10 employees at that time to 45 now. It’s been slow and managed. We haven’t been really crazy aggressive with it ... we just let it happen organically. 8. What’s your current business mix? About 60 percent residential, 35 percent commercial and 5 percent electrical. We started an electrical division three years ago so that we’re slowly growing also. We looked at electrical as a natural complement to what we were doing.

HVACR BUSINESS MARCH 2019

9. How many family members work in the business? My brother Kevin and I have ownership, along with my dad. My brother Jeff was an installer and is now our purchasing agent, and my sister Mary runs the office. 10. How do you separate business and family? Luckily we all get along really well so even while we’re here working together we joke around, we have a good time, we can talk about family here and work without a problem. Everything mixes well together and everybody knows their roles. Outside of business, family parties and stuff, we talk about both ... we talk about kids, the family and still talk about work a little bit at a party but not a lot. We’re able to separate it and get along great. 11. When did you take on that leadership role? Probably in 2005 or 2006, I started helping out doing more of the management stuff. Our dad never really wanted to grow the business; he was the taciturn business owner. He liked working in the field — and still does. He’ll be 69 this year but he still likes going out there, working and putting in equipment. He told us if we wanted to grow the business that’s fine, he just didn’t want to have to deal with the day-to-day stuff. 12. What’s your management style? Low key. I do not micromanage. I try and talk with and help the managers out and manage their departments. Not necessarily tell them what to do, but talk with them about the situations and what their options are and let them do their own thing. 13. How do you motivate your people? Motivation comes from positive reinforcement of things that they’re doing. Besides the normal stuff of the bonuses and SPIFFs and getting them excited about what they’re doing, we’ll do a

lot of company gatherings or little things in the morning. Just being friendly with them every day is motivating 14. How important is it to make them feel appreciated? Everyone knows the purpose or what the direction of the company is with the core values. Everyone’s here for a career, they know that, not just a job to collect a paycheck. We make sure that we tell them we care about their families and want to help them with their education. 15. How do you do that? We have a training center where we send them for classes. Just this year we hired a part time trainer who teaches classes every Tuesday and Thursday evening. We’re building a curriculum and, hopefully, by next January he’ll be full time. 16. What other plans do you have for training? We’re working on a new training center and we’ll have a curriculum set up for a beginner technician, installation tech, service tech and electrician, and build that up through four or five levels of technician training. 17. How has that helped with recruitment? Our employees talk to other people and tell them what we have, tell them that we do offer training. You’re not just coming here and getting thrown out on the job to learn on the job all the time but you actually have a structured program where you can learn and develop your skills faster. 18. How do you combat the labor shortage? We all say there are not enough people out there to hire, yet we’ve been able to grow. So there are people out there, I just don’t think that they’re given enough time to try and learn. As we’ve grown it’s become easier because I can hire two or three apprentices and train them 19. What’s an unexpected benefit to training? Even if we build that apprenticeship program, if a couple of those guys don’t make it here hopefully they’re trained good enough to work with somebody else. I don’t have a problem with that at all. I have never looked at any of our competitors as a rival. There’s so much work out there. 20. What do you like to do when you’re not here doing this? Boating. I bought a 1965 Lyman softtop sleeper, it’s a wooden boat taking up a lot of my time trying to restore it. That’s my winter project. I hope to have it ready and out on Lake Erie by May 1.

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PROUD SPONSOR OF



Goodman is a proud sponsor of Lifetime Channel’s television series Military Makeover® that helps create better homes for our American veterans. Goodman donates high-efficiency HVAC products for these veterans and their families. Local Goodman® brand dealers also donate their time to install these upgraded systems providing support to veterans in their local community. This TV series salutes those that have risked their lives, offering hope and a helping hand right here on the home front.

www.goodmanmfg.com

OH S#@% SUDDENLY GOT THE FEELING IT’S TIME FOR A CHANGE? In business, “stuff” happens. Mistakes, delays, broken promises, and more. But if your current HVAC manufacturer seems to be consistently delivering more excuses than solutions, perhaps it’s time you talk to Fujitsu General. Our award-winning support programs, industry-leading training and full line of innovative products can make all the difference. Fujitsu…a breath of fresh, infinitely comfortable air.

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