HVACR BUSINESS MAY 2020 by HVACR Business

Doing Good in Light of a Bad Situation Pete Grasso 5

Boost Sales Fast with Zero Budget Melanie Rembrandt 9

The CARES Act and Your Business Brandon Jacob 11

5 Ways to Generate Cash Ruth King 15

Safeguard Your Wealth Keven Prather 18

HVACRBUSINESS.COM MAY 2020 / VOL.15 / NO.5

GET MAXIMUM VALUE FOR YOUR BUSINESS

page 6

PLUS: Should You Buy Another Company? pg 20

ALSO INSIDE Â» Guest Editorial: Prepare for Safe Refrigerant Transition ....................... 13 Business Insights ....................................................... 16 Product Focus ............................................................... 21 20 Questions with Mike Graessle General manager of Hetter Heating & Cooling .... 22

CONTENTS

MAY 2020 / VOL.15 / NO.5

F E AT U R E S

6 9

Get Maximum Value for Your Business Tried and true tips to help you prepare your business for sale — and leave you with no regrets. By Stuart Aust

D E PA R T M E N T S

Boost Sales Fast with Zero Budget

Public relations is your secret weapon to raising awareness and credibility without emptying your pockets. By Melanie Rembrandt

Editor’s Notebook We’re all in this together; so why not help each other and make the best of a bad situation? By Pete Grasso

The CARES Act: Federal Money with Good Intentions

Business Insights: Viega

A referendum on how the initial phase of the Paycheck Protection Program aimed to distribute $349 billion in just two weeks. By Brandon Jacob

Product Focus

20 Questions with Mike Graessle

Prepare for a Safe Refrigerant Transition If everyone does their jobs correctly, consumers should notice no difference in accessibility, safety or affordability. By Stephen Yurek and John Galyen

General Manager of Hetter Heating & Cooling in Columbus, Ohio

C O LU M N

15 5 Ways to Generate Cash Now

Many people are home, and want to get their systems ready for summer now. By Ruth King

To Safeguard Your Wealth, Avoid the Exploiters

Should You Buy Another Company?

Exploiters are professionals who recommend aggressive variations of financial solutions and strategies. By Keven Prather Be realistic about the amount of involvement this will require, on top of everything else in your business. By Scott Pearson

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THE HVACR MANAGEMENT MAGAZINE

BY PETE GRASSO 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 MIDWEST ERIC Hagerman Regional Sales Manager Tel 216-409-3246 Fax 440-731-8750 ehagerman@hvacrbusiness.com WEST COAST TERRY Tanker Publisher Tel 440-731-8600 Fax 440-731-8750 ttanker@hvacrbusiness.com

HVACR Business, founded January 1981, is a monthly national trade magazine serving contractors, mechanical engineers, manufacturers, manufacturer representatives, wholesalers, distributors, trade associations, and others in the heating, ventilating, air conditioning and refrigeration (HVACR) industry primarily in the U.S. The editorial focus and mission of HVACR Business is to provide business owners and managers with the very best business management concepts available. Critical topics covered include leadership, management, strategy, finance, sales, marketing, training, education, staffing, operations, human resources, legal issues, customer service and more. We are dedicated to helping contractors master these key management skills and provide them with the resources necessary to build strong, profitable companies. Every effort is made to provide accurate information, however, the publisher assumes no responsibility for accuracy of submitted advertising and editorial information. Copyright©2020 by JFT Properties LLC. No part of this publication may be reproduced or retransmitted in any form or by any means, including, but not limited to, electronic, mechanical, photocopying, recording or any information storage retrieval system, without the prior written permission of the publisher. Unauthorized copying may subject violators to criminal penalties as well as liabilities for substantial monetary damages up to $100,000 per infringement, costs and attorneys’ fees. This publication should not be utilized as a substitute for professional advice in specific situations. If legal, medical, accounting, financial, consulting, coaching or other professional advice is required, the services of the appropriate professional should be sought. Neither the authors nor the publisher may be held liable in any way for any interpretation or use of the information in this publication. The authors will make recommendations for solutions for you to explore. Any recommendation is always based on the authors’ research and experience. The information contained herein is accurate to the best of the publisher’s and authors’ knowledge; however, the publisher and authors can accept no responsibility for the accuracy or completeness of such information or for loss or damage caused by any use thereof. Subscription Rates: Free and controlled circulation to qualified subscribers. Non-qualified persons may subscribe at the following rates: U.S. and possessions: 1 year $48; 2 years $75; 3 years $96; Canadian and foreign, 1-year $108 U.S. funds only. Single copies $8. Subscriptions are prepaid, and check or money orders only. Subscriber Services: To order a subscription or change your address, write to HVACR Business, 31674 Center Ridge Road, Suite 104, North Ridgeville, OH 44039 or call (440) 731-8600; or visit our Web site at www.hvacrbusiness.com. For questions regarding your subscription, please contact bkerr@hvacrbusiness.com. HVACR Business (ISSN 2153-2877) Copyright ©2020 is published monthly by JFT Properties LLC,31674 Center Ridge Road, Suite 104, North Ridgeville, OH 44039, Phone: 440731-8600. Periodicals postage is paid at North Ridgeville, OH and additional mailing offices. (USPS 025-431) POSTMASTER: Send address changes to HVACR Business, 31674 Center Ridge Road, Suite 104, North Ridgeville, OH 44039.

31674 Center Ridge Road, Suite 104 North Ridgeville, OH 44039 Tel: (440) 731-8600 Fax: (440) 731-8750 Web site: www.hvacrbusiness.com (ISSN: 2153-2877)

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EDITOR’S NOTEBOOK

Doing Good in Light of a Bad Situation

ne of the hardest hit areas of COVID-19 cases has been New York City and the surrounding area. Carmine Galletta, owner of GallettAir Inc. in West Babylon on Long Island, has had to adjust to a new normal when it comes to doing business. Like many business owners, Galletta has had to cut back on the amount of people in his office — but he has not let anyone go and has not reduced anyone’s pay. He applied for a Paycheck Protection Program loan (pg. 11) but has yet to see any money. The office is down to a team of about four, all separated by cubicles and wearing masks, with many answering calls from home and working on laptops. Technicians are dispatched from their homes each day, coming in twice a week to restock their vehicles with parts. “We sanitize every day … we clean everything,” Galletta says. “I’m trying to keep the number of people reporting to the office at a minimum.” GallettAir has been proactive on its social media channels, communicating to its more than 20,000 service contract customers. The message is clear: GallettAir employees are healthy, they get their temperature taken every day and, if they feel even slightly sick, they don’t come in to work. “When customers call for service, we also ask if there’s been anyone sick in their homes,” Galletta says. “We make sure they know, when we come to their home, we wear masks, gloves and shoe covers … that’s the protocol now.” To limit exposure for his team, Galletta admits that they’ve been postponing many of the scheduled maintenance appointments this spring.

disinfectant to sanitize them for reuse, he decided to act. “I knew that couldn’t be good … it would definitely compromise the masks,” he says. “I did some research, went into my garage and built a sanitizing box with a UVC light.” Having used UVC lights in filtration systems for the last 25 years, Galletta was familiar with how they worked and how effective they would be for sanitizing PPE. He ordered 150 UVC lights from his supplier. “Initially, we made a small box to sit on a desk; which my son helped fabricate in his friend’s shop,” Galletta says. “Then we came up with the idea of using a two-drawer office file cabinet and outfitting it with the UVC lights, a GFI and threaded rods across each drawer.” Each UVC file cabinet box can hold about 16 N95 masks and takes about eight to 10 minutes to completely sanitize. In addition, Galletta says they designed the top drawer so that it can hold cell phones, wallets and other small items to be sanitized. Aside from the few he’s kept for GallettAir’s own use, Galletta has donated all of these units to local fire and police stations, townships and doctor’s offices. “At times you have to put yourself out there for the greater good of others,” Galletta says. “If every person who had an idea that could potentially help in extreme conditions such as we are in now abandoned it due to fear, then technology, inventions and cures would not exist. “This is about helping others, not about capitalizing on a bad situation. It’s the old-fashioned American way,” he continues. “Helping our fellow Americans conquer a common adversary. In this case, one we cannot see.” u

“We explain to our customers, if they have a problem with their system, we’ll come service it,” he says. “But, we’re not going to risk our guys to go out and simply do basic maintenance or change a filter. The less exposure we have, the better off we are for everyone.” Always one to look out for his community, Galletta decided to use his time and resources for good. Hearing about the shortage of PPE and N95 masks and seeing how some people were spraying HVACR BUSINESS MAY 2020

GET MAXIMUM VALUE FOR YOUR BUSINESS

Tried and true tips to help you prepare your business for sale — and leave you with no regrets. BY STUART AUST

fter years of running a successful business, making money and providing a great life for your family, you might think the time has come to retire and sell your company. Great! I don’t blame you. I sold my company years ago and I have absolutely no regrets. Of course, you want to get maximum value for your business. It can be tricky, especially if you’ve never sold a business before. Follow these tried-and true tips and you will get maximum value and head into retirement with no regrets. As the business owner, here’s what you need to do to prepare.

HVACR BUSINESS MAY 2020

Purchasers don’t want to buy a declining business. Acquirers want to purchase a growing company that is headed in the right direction. SELL RECURRING BUSINESS Sell as much recurring business as possible. Purchasers will pay a higher multiple for companies when there is a higher percent of recurring business. Conversely, purchasers will pay less money for a business with a lower percent of recurring business. Recurring residential and commercial business is defined as those clients that are on routine preventative maintenance programs and have scheduled service

visits. Annual renewals for inspections that generate yearly revenue would count as recurring business as well. Recurring business is key for reducing risk to purchasers and confirming that future revenue streams are stable.

INDUSTRY STANDARD PRICING Make sure that your pricing for your service is in line with industry standards/ competitors. Pricing below industry

standards will come back to hurt you when you go to sell your company. If you’re not sure about what your pricing should be, check out your competitors’ websites for price listings, attend your state association/industry events so you can benchmark with your colleagues, and speak with an industry consultant. Strategic purchasers have a dollar per hour range for production that they expect from their acquisitions and they will often compare with their existing operations in that service area.

UPWARD REVENUE, YEARLY INCREASE Ensure your revenue is trending upwards and that your company is not

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declining in revenue. Three consecutive years of increasing revenue is ideal. Purchasers don’t want to buy a declining business. Acquirers want to purchase a growing company that is headed in the right direction. Increase your prices on a yearly basis. If you are offering a good quality service this shouldn’t be an issue as far as attrition. While you may lose a few accounts, the gain or increase in revenue should far outweigh any loss.

RECORD CASH PAYMENTS Record all cash payments received from customers and deposit them into your bank account. You may think that you have received a short-term gain, but you will get lower offers because buyers don’t often consider the value of unreported cash when valuing your business.

PROFITABILITY Profitability is another extremely important item to purchasers. You will hear the term EBITDA mentioned in M&A and corporate finance circles. Earnings

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We recommend reducing staff by efficient restructuring 12 months before you bring your company to the market, if not earlier. This will affect your EBITDA (profitability) and you will increase the value of your company.

Run a lean and mean operation without sacrificing quality service. Excess or unnecessary employees in any department will lower the net worth. Before Interest Tax Depreciation & Amortization is the measure of a company’s overall financial performance and cash flow. This refers to your true net income after subtracting all direct (COGS) and indirect costs (excluding tax and D&A categories) from your revenue. As a metric, selling companies with an EBITDA range from 15-20 percent or higher is desirable to purchasers since it shows them that the company is well run and can generate future cash flows needed to secure their investment in the business. Be prepared to present completed tax returns from the last three years. This is one of the first things potential purchasers request and review in more detail during due diligence.

ROUTE DENSITY, FLEET MAINTENANCE Build route density in your service area by keeping your customer base tight within geographic areas. Windshield time or driving long distance from client to client can erode profitability. Keep your fleet of vehicles up to date with service, bodywork (all dents removed) and have your vehicle signage looking good. Appearance is an important factor and impacts how your brand is perceived by purchasers.

LEAN AND MEAN Run a lean and mean operation without sacrificing quality service. Excess or unnecessary employees in any department will lower the net worth of your company.

We’re not suggesting letting employees go unnecessarily, only poor performers or employees in obsolete positions or positions whose tasks can be redistributed to other employees. However, make sure your team can still do all that work that is required in the timeframe needed.

HUMAN RESOURCES, LEGAL Perform background checks, random drug screening of your employees, and also have non-compete agreements in place for your employees. Non-compete agreements are highly desirable by purchasers since it shows that employees won’t take customers during the transitional period, which is significant especially if there is a Earn-Out agreed upon with the purchaser. continued on page 8

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Note, you should consult with your attorney regarding a non-compete that can be assigned to a potential purchaser. Each state has different laws and regulations regarding the topic of non-compete. Have your employees use up their personal/sick/vacation time each year. Avoid rolling it over to the following year since the purchaser most likely won’t assume

A lot goes into getting optimum value for your company when you sell. Spend the time now to check off all the boxes to create a competitive atmosphere. accrued vacation days and it’s often the responsibility of the selling company. It is recommended that you check with your HR department before making any changes in this area. Also, handle any lawsuits/insurance claims before you go to market or have a plan in place for taking care of any unresolved claims. This will communicate to a purchaser that your business is healthy and you are making every effort to remedy the situation.

OPERATIONS Operate your business from an industry related operating software/CRM and keep up with technology trends in your industry. Having the latest technology in place such as hand-held devices, GPS tracking in your service vehicles, and smart phones and tablets will help improve daily efficiency and decrease the amount of money a purchaser will have to spend to update the infrastructure of your business.

SUCCESSION PLANNING Succession planning is a critical step if you as the owner plan to leave shortly thereafter the sale is finalized. Buyers don’t always have a bench of leaders to step in and take your place.

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Hiring a Mergers & Acquisitions advisory firm is highly recommended to obtain maximum value for your company and protect your interests. The firm also prepares a presentation of your company called a Confidential Information Memorandum (CIM), coordinates management meetings between buyer and seller, negotiates higher offers and more favorable terms, and guides sellers through the due diligence process.

Empower your employees and delegate more so that the business can be streamlined to run as if you weren’t present. Otherwise, a buyer might fear that the performance of the business will be in jeopardy if the owner is planning to leave shortly after the sale.

Remember, as Donald Rumsfeld once said, “You don’t know what you don’t know.” Most purchasers are sophisticated and utilize formulas to gauge how much recurring business you have, evaluate your pricing per service, measure your EBITDA/ profitability and many of these tips mentioned above. A lot goes into getting optimum value for your company when you sell. Spend the time now to check off all the boxes to create a competitive atmosphere as you follow these tried-and-true tips. Don’t believe the myth that all companies of equal revenue are worth the same. Some selling companies are extremely valuable and others sell for a fraction of the going rate because they fail to follow many of these important tips. As you prepare to sell your company, even if it’s in a few years, make every effort to grow and be as profitable as you can. Remember, you’re used to getting things right. And since you only get one chance to sell your business, do it right. u

Stuart Aust is the principal/founder of The Aust Group, a mergers and acquisitions advisory/ consulting firm that specializes in guiding shareholders through the deal process and facilitating successful transactions in various service industries. Stuart can be reached at 772-299-8534 or stuart@theaustgroup.com.

800-245-5858

HVACR BUSINESS MAY 2020

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BOOST SALES FAST WITH ZERO BUDGET

Public relations is your secret weapon to raising awareness and credibility without emptying your pockets. BY MELANIE REMBRANDT

ou need more marketing to improve sales, but you need more sales to pay for marketing. It can be frustrating. Well, before you yell out your favorite four-letter word, turn to the bottle or curl up in the fetal position and cry, there is a secret weapon that can help end this vicious cycle. And the good news is, it won’t cost you a dime. Sound too good to be true? It’s not. I’m talking about public relations (PR), which refers to any kind of communications you have with potential customers, clients, the media and more. When you send the right message to the right people at the right time, you can boost sales, awareness and credibility within minutes. Now, PR may be a foreign activity to you, but the truth is that anyone can do it. In fact, you can get better results than hiring someone to do it for you.

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If you can’t think of anything, don’t worry. Just create something newsworthy.

As a leader within your business, you offer credibility with firsthand knowledge of your products and services and industry expertise. This is because most people would rather hear directly from you than a publicity person. As a leader within your business, you offer credibility with firsthand knowledge of your products and services and industry expertise. Many businesses don’t really understand what PR is, so they don’t use it effectively. If they do, they probably outsource it to an outside firm. That’s because it takes a lot of time and effort to get good results. But, if you need to boost sales fast with zero budget, it can be your secret weapon for success.

Hold an employee event like a chili cook-off, take-your-child-to-work day, pet contest or something else.

WHERE TO BEGIN Like other business activities, start with an action plan so you know your goals and how you are going to accomplish them. Let’s say your goal is to boost sales by 20 percent in the next month. Ask yourself these questions: What is newsworthy about your business? Think about the unique benefits of your products and services, upcoming events, charitable activities, employee hobbies, and more. What would your potential customers want to hear about that make you stand out from the competition?

You can also partner with another business or organization and do a joint event that helps others in the local community. Another idea is to invent a special award, tip sheet or contest. Use your imagination and have your team think of different ideas. Have fun with it, and you may be surprised at what develops. Who needs to hear your news? Once you have your news ready to promote, make a list of the people who need to hear about it. Begin with venues that cover local, industry and regional news. Conduct online research to find contact continued on page 10

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information for the media members you want to reach. Then, create a simple database and add the names, emails, websites, phone numbers, mailing addresses, and other pertinent information to it. Also develop a list of your current customers, sponsors/investors, potential clients, and more who will receive information about your news. How do you share your news? When you finish your lists, decide how you will share the information. Create some talking points for the media that focus on the benefits your news offers. To create a press release, look at samples online, those from businesses you admire, and the official releases published at PRNewswire. Then, use these as a guide. You can email your final press release to the media members on your list. But a better option is to call each person individually and tell them your news,

HVACR BUSINESS MAY 2020

If you provide value and something interesting, people are more likely to share your news with family and friends … online and off. invite them to your event or let them know you’d be happy to comment on a story as an industry expert now and in the future. For other contacts who will receive your news, develop the appropriate email campaigns, landing pages, social media posts, etc. Make it easy for them to respond, share the news and get more information. Also, include tracking mechanisms for each message so you can see what is working and what’s not (and if you are on the way to reaching your goals.)

DO THE WORK, SALES WILL FOLLOW When you have your contacts and messaging ready, press the “go” button and share your news. This is when the magic happens. From

your PR activities, you may: Get a media mention in a top news venue that your target market sees. This is free advertising that provides third-party credibility you can’t get any other way. Build buzz. If you provide value and something interesting, people are more likely to share your news with family and friends… online and off. Boost sales. Many people who see your news will want to learn more about your products and services or make purchases right away. You can also send your news clippings to potential customers and use them in future sales processes. Crush the competition. If potential customers read about your news in a credible media source, and your

competition is nowhere to be found, guess who they are going to contact first? Plus, if you offer something unique in your news that others can’t provide, you gain a competitive edge. Your secret weapon is waiting. Are you ready to use it? These are just a few of the benefits good PR can provide. Yes, it’s a lot of work, but if you take the time to craft a unique and newsworthy message and send it to the right people at the right time, you can significantly boost sales, awareness and credibility fast. And the best part is, it doesn’t need to cost you a cent. u

Melanie Rembrandt is one of the country’s top small business, public relations’ experts and the founder of Rembrandt Communications and The Small Business PR Academy. She is an experienced, SEO content strategist, an awardwinning writer and author. For additional information, visit rembrandtwrites.com.

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THE CARES ACT: FEDERAL MONEY WITH GOOD INTENTIONS A referendum on how the initial phase of the Paycheck Protection Program aimed to distribute $349 billion in just two weeks. BY BRANDON JACOB

n March 30, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act allocated $349 billon to help small businesses keep workers employed amid the coronavirus pandemic and economic downturn. Known as the Payroll Protection Program (PPP), the goal was to rapidly provide 100 percent Federally guaranteed loans to small businesses within all industries — guaranteed by the U.S. Small Business Administration (SBA). To ensure that the money was distributed as quickly as possible, the loans were to be administered and disbursed by existing SBA (7A) lenders or Federally insured institutions electing to participate in the PPP. As of April 15, approximately $300 of the $349 billion had been approved for funding by the SBA while thousands of applicants continued to stand by to hear from their bank regarding their loan status.

DISBURSEMENT PROBLEMS Disbursing 349 billion of anything is not easy, especially when one considers the SBA traditionally approves just under $30 billion in small business loans ANNUALLY. The PPP $349 billion would be almost 12x the normal annual

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years before the date of the application.

The intention of the Payroll Protection Program is for borrowers to maintain existing payroll and head count during the eight weeks subsequent to receiving funds.

LOAN FORGIVENESS

amount and as we now see, will be applied for and approved in just 12 days!

• An individual who operates as a sole proprietor

Even before the approval of the CARES Act, information on the still-changing details of the PPP were sweeping the internet. Many financial planners with good expectations took to blogs and YouTube videos to be the first with the scoop.

• An individual who operates as an independent contractor

The problem was that the details of the PPP would change multiple times throughout the week of March 30, resulting in outdated information and some confusion amongst business owners. It was not until April 2 and just hours before banks were to begin accepting applications, that the final details of the PPP were locked in place. Small businesses with less than 500 employees and who were in operation as of February 15, 2020 were eligible to participate as long as that business met SBA size standards. In addition, the following businesses and individuals qualified: • A 501(c)(3) with fewer than 500 employees

• An individual who is self-employed who regularly carries on any trade or business • A Tribal business concern that meets the SBA size standard • A 501(c)(19) Veterans Organization that meets the SBA size standard Many businesses with less than 500 employees did fail to meet the SBA size standards and on April 10, 2020 a revision to the CARES Act provided an “alternate size standard” for determining whether a PPP applicant qualified. Under the alternative size standard, a business qualified for a PPP loan if as of March 27, 2020, it (1) had a maximum tangible net worth of not more than $15 million and (2) had an average net income after Federal income taxes (excluding any carry-over losses) of not more than $5 million for the last two fiscal

Borrowers who spend the money they receive under the guidelines of the program will have their loans forgiven. Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. The intention of the PPP is for borrowers to maintain existing payroll and head count during the eight weeks subsequent to receiving the PPP funds. Borrowers spending the money on at least 75 percent payroll and 25 percent on rent and utilities, the entire loan is to be forgiven. Over the course of the last several weeks, I have spoken to hundreds of service contractors with questions regarding the PPP and have always qualified my reply with the following; the money is intended to be used to as a direct incentive for small businesses to keep their workers on the payroll for the eight weeks subsequent to the money being received. If an employer has reduced his payroll prior to receiving the funds, those employees should now be brought back to levels of compensation before the pandemic. To determine how the PPP works, the simple formula of 2.5 X One Month continued on page 12

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Average Payroll Cost was used to determine the amount that any one business could borrow (with a $10 million per business limit). Average Monthly Payroll x 2.5 = PPP Loan

WHAT IT MEANS TO YOU Let’s consider the example: XYZ Heating and Cooling, Inc. has an average monthly payroll of $300,000, the total amount the company is eligible for is $750,000 (2.5 x $300,000). Of which $562,500 or more must be used for payroll and $187,500 for other (to be forgiven). To be forgiven, XYZ must spend the money within eight weeks of funding. If XYZ incurs an average $300,000 a month on payroll (payroll costs based on 12-month average prior to the pandemic), within the next eight weeks XYZ must pay employees $562,000 (approximately 94 percent of the estimated $300,000 monthly payroll). The requirement is to pay-out $562,500 in payroll costs whether employees are productive or not. We are fortunate, service contractors have been able to keep technicians relatively productive during the pandemic. In industries such as restaurants, bars and other nonessential businesses, the employees may actually be totally unproductive. The bonus is in the $187,500 of which XYZ may use for expenses such as rent and utilities.

PPP LOAN As already specified, if the borrower uses the funds in accordance to the loan, the loan will be forgiven. If the funds are not used within the guidance of the PPP, the amount that is not forgiven will be converted to a two-year loan to be paid back by the borrower. The SBA will offer a very low interest rate of one percent and defer principle and interest for the first six months. Borrowers should take this into consideration and use funds appropriately as in uncertain times, a short-term loan, even with a low interest rate of one percent, can create future cashflow issues. Details of the PPP loan are as follows: • One percent interest rate • Maturity of two years (meaning the

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Borrowers who spend the money they receive under the guidelines of the program will have their loans forgiven. full amount of non-forgiven principal and any interest is due in two years) • Six-month deferment (you don’t have to start paying back the loan for six months—however, interest still accrues during this period) • 100 percent guarantee by the SBA • No collateral is required • No borrower or lender fees need to be paid to the SBA • No personal guarantees

MORE CONFUSION Banks began accepting applications at midnight on April 3, and many business owners fearing that the funds would run dry quickly, lined up to be first in line. Many applicants found confusion as lending institutions of all sizes had little time to get up to speed on processing not only the manual applications but also the SBA’s e-tran approval process. With so many applicants the time between application to approval during the first four days was extremely slow. Several leading lending institutions denied non-existing customer applications or established certain guidelines that prevented existing customers without lines of credit the ability to apply. At least one well known bank threw in the towel on the PPP after accepting $10 billion in applications. Despite the initial onslaught, business owners who stuck through the process and relied upon existing banking relations or sought out institutions willing to take applicants successfully navigated though the process. As we moved toward Easter weekend, the process within the lending banks sped up as both the banks and the SBA became better efficient at processing the millions of applicants submitted. Despite increased efficiency, many service contractors who had successfully submitted applications earlier in the week remained uncertain whether or not their loans were approved. As of Friday April 9, the SBA had processed 587,000 loan applications for a

total $152 billion approved. Many lenders worked through Easter weekend to process applicants and by the end of Easter Sunday, more than $205 billion had been approved.

CONCLUSION Now that the dust has settled, what does this mean to you if you were one of the many businesses that received PPP money? Employee headcount and compensation levels must be maintained. This means that the majority of your loan must be used to keep your staff employed if you want your loan to be forgiven. Ideally, this loan forgiveness plan will help keep unemployment rates down and help individuals keep their jobs and support their families. The following are ways that you will have your loan forgiveness reduced: • If you decrease the number of full-time employees you have • If you decrease salaries or wages by more than 25 percent for any employees that made less than $100,000 in 2019 Many businesses laid off employees at the on-set of the pandemic, that being the case, a business can rehire those employees to restore any staff reductions that might have been made and meet the PPP loan forgiveness requirements. Take-aways and points that should be noted regarding the PPP are: Relationship. Banking has gotten somewhat impersonal. Service contractors that maintained a good relationship with their local lenders found in many cases that submitting a PPP request went relatively painless. This is not an absolute, I have been contacted by many service contractors that are still waiting for news that their application has been approved. Do not neglect the SBA. The Coronavirus pandemic will eventually end and life will get back to normal. Consider investing the time getting to know an SBA lender that understands service contracting. The SBA 7(A) loan program will

continue and uses of borrowed SBA guaranteed money can be used to help grow your business. Understand what you agreed to. The SBA Form 2483 (the form you completed if you received a PPP loan) was fairly straightforward. However, the form contained 8 questions that you were required to answer “yes” or “no”. In addition, there were 8 representations that you were required to acknowledge with your initials. Take a minute to understand what you agreed to. Gather a full understanding on the forgiveness. Space within this article makes it impossible to fully cover on exactly how the process will work for your lending institution to determine whether or not all or a portion of your PPP loan is forgiven. IF you were successful in receiving money, fully understand the intended uses of the money and obtain an understanding how you can protect yourself from having to pay all or part of it back. By the time you read this article, the $349 billion will be gone. Whether or not the CARES Act will be revised to allocate additional funds to the PPP is uncertain (although it has been discussed). If additional dollars are allocated, the funds will go quickly as lending banks and the SBA are up to speed on the process. If you missed out on the $349 billion, take time to be ready with your information should the PPP continue with new dollars. Equally as important, be ready to service your customers as temperatures rise, as horrible of a situation the coronavirus pandemic is, we should be grateful we operate in an essential industry and our busy season is right around the corner. u

Brandon Jacob’s career as a CPA for 30 years includes extensive experience in business valuations, exit strategies and business transactions. Brandon currently operates Contractors Financial Opportunity, LLC (contractorscfo.com), a financial consulting firm specializing in businesses valuations, exit strategies and transactions for contracting businesses of all sizes. In addition, Brandon services as the Industry Expert to the Live Oak Bank Service Contractor lending vertical. Email Brandon at brandon@contractorscfo.com.

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PREPARE FOR A SAFE REFRIGERANT TRANSITION BY STEPHEN YUREK AND JOHN GALYEN

or the past 10 years, the HVACR industry in the United States has advocated for a global structure to phase down the use of high-global warming potential refrigerants, chief among them hydrofluorocarbons (HFCs). That effort culminated in 2016 with the Kigali Amendment to the Montreal Protocol. The phase down initiative was undertaken in part to bring order to what was a country-by-country, region-by-region approach to a refrigerant transition that had the potential to cause disruption in the global HVACR marketplace, raising manufacturing and distribution costs, causing confusion among consumers and stymying the ability of manufacturers, distributors and contractors to properly plan for the future. More than 90 nations having ratified the Amendment and it is now in effect around the world. The fact that the United States has not ratified the agreement, however, has created a policy vacuum that is being filled state-by-state, creating a domestic version of the very situation industry had tried to avoid with the global agreement. In the absence of a federal framework, a handful of states are pursuing their own HFC regulations, following SNAP Rules

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This state-by-state patchwork of regulations with various implementation timelines is creating challenges for equipment manufacturers that supply products not to individual states, but to a national market. 20 and 21, the EPA refrigerant regulations that were vacated by the DC Circuit Court of Appeals in Mexichem Fluor v. EPA on the grounds that EPA did not have Congressional authority to regulate non-ozone depleting refrigerants. This state-by-state patchwork of regulations with various implementation timelines is creating challenges for equipment manufacturers that supply products not to individual states, but to a national market. And given that many of the most promising new low-GWP refrigerants, compared to their HFC predecessors, have different flammability characteristics and require updated building codes, this transition must be managed in an orderly manner to prevent serious consequences for the manufacture-distribution-installation-consumer chain.

CALIFORNIA’S PROPOSED REGULATIONS The California Air Resources Board (CARB) is charged with developing

regulations to reduce HFC emissions 40 percent by 2030 compared to a 2013 baseline (SB 1383). Thus, California is writing HFC phasedown rules that go beyond those laid out in SNAP Rules 20 and 21 and at a pace even ahead of the Kigali phasedown schedule. In terms of the residential and light commercial AC market, CARB is currently proposing the following: • A ban on AC systems using refrigerant with GWP greater than 750 GWP by January 1, 2023. • A ban on servicing existing equipment with refrigerant with a GWP greater than 1,500 by January 1, 2022. o Potential exemptions for reclaimed refrigerants and R-410A remain an option. Bearing in mind that these are, at present, just proposals, for most stationary cooling applications, this may require the use of A2L (lower flammability) or A3 refrigerants (higher flammability).

FLAMMABLE REFRIGERANTS Flammable refrigerants are new to the U.S. air conditioning market — but not to the world. As categorized by ASHRAE, A2Ls are the class of low-GWP refrigerants expected to replace HFCs in many applications and while new to the U.S. market, A2Ls have been used safely in other parts of the world for years. Today, more than 8 million mini-split systems around the world are using the A2L refrigerant R-32 and 80 percent of new cars sold in the U.S. use A2Ls in their air conditioners. A3 refrigerants, such as R-290 (propane), on the other hand, are highly flammable and restrictions on their use are already included in U.S. and global safety standards. Some of the restrictions include: no more than 150g per refrigerant loop, no nearby sources of ignition and no use near points of egress. Some manufacturers of refrigerant equipment and small-charge room air conditioners have redesigned their products to safely use flammables by reducing refrigerant charge sizes and the potential for leaks. One manufacturer reports that 6,000 commercial propane ice machines are operating with no problems. A2Ls and A3s are new to the United continued on page 14

HVACR BUSINESS MAY 2020

continued from page 13

States and these replacement refrigerants have different flammability characteristics requiring updates in safety, training and building codes.

The industry, through its trade associations, have been actively engaged in this issue since the Kigali Amendment was agreed to in October 2016.

CODE UNCERTAINTIES RISK SAFE TRANSITION The Uniform Mechanical Code (UMC), which is the building code predominately relied upon in California, did not adopt the necessary safety standards (ASHRAE 15 and UL-60335-2-40 standards, which would have enabled the safe use of A2Ls). So, to meet its phase down targets, the state will need to adopt these standards directly into state building codes rather than through the adoption of the model code.

While all that has been going on, AHRI also established, with the U.N. Environment Program, a “Refrigerant Driving License” program to train technicians around the world in the safe handling of flammable refrigerants. Following pilot programs in several countries, the RDL initiative is poised to launch around the world and many of its aspects will be applicable to a U.S.based training program being developed by ACCA, AHRI, HARDI, NATE and PHCC, as well as other industry training organizations and by individual manufacturers for their specific products.

Time is of the essence here, for the following reasons: AC original equipment manufacturers (OEMs) require certainty that the building codes are in their final form at least three years before a regulatory implementation date. They need to know exactly what will be required in the building code and be able to use those requirements to engineer new equipment, test its efficacy and safety and certify that equipment with third-party testing labs under the AHRI Certification Program. This is an expensive and time-consuming process that must be completed before equipment can be commercialized. In addition, supply chains must be filled with parts used in equipment and equipment must be stocked in warehouses to be prepared for the transition. If by the end of 2020 the industry has certainty that the codes will allow the use of A2Ls, OEMs could still meet CARB’s proposed January 1, 2023 implementation date.

CONCLUSION

trained — especially if the codes deviate from the standards as written — and the opportunity to further field-test equipment may be lost.

WHAT THIS MEANS TO YOU

If equipment manufacturers are not able to design, test and manufacture products that comply with CARB’s mandate because of delinquent adoption of updated building codes, they may not have equipment that is legal to sell in California on January 1, 2023.

This uncertainty is putting the safe refrigerant transition in serious jeopardy. Equipment using alternative refrigerants must be thoroughly tested and all those who handle it must be properly trained.

Under these circumstances, the OEMs and their suppliers simply could not meet the schedule, which means that California businesses and residents would be unable to purchase new, legal AC equipment.

If the building codes are not updated very soon to incorporate ASHRAE 15 and UL-60335-2-40 as they are currently written and CARB enforces a January 1, 2023 implementation date, OEMs and the rest of the supply chain will have difficulty complying.

Thus, consumers’ only option should their AC units fail would be repair. Should repairs be too expensive or impossible, they simply would not have air conditioning.

Suppliers may not have sufficient parts available, technicians may not be fully

HVACR BUSINESS MAY 2020

In addition, AHRI staff and members have taken the lead in securing passage of legislation that would put in place a national phase down structure designed to bring some measure of certainty to the process. Such legislation has been introduced in the House (H.R. 5544) and in the Senate (S. 2754) on a bipartisan basis and there is reason for hope that a national plan can pass this year.

WHAT INDUSTRY LEADERS ARE DOING The

industry,

through

its

trade

associations — Air-Conditioning, Heating & Refrigeration Institute (AHRI), Heating Air-Conditioning & Refrigeration Distributors International (HARDI), Plumbing-Heating-Cooling Contractors Association (PHCC) and Air Conditioning Contractors of America (ACCA) — have been actively engaged in this issue since the Kigali Amendment was agreed to in October 2016. AHRI established a Safe Refrigerant Transition Task Force — which includes participation from virtually all industry stakeholders — whose job it is to manage the process so that the transition benefits all and is not unduly burdensome on any entity. Thus, staff and members of all the mentioned associations have been working diligently with California on code issues, while simultaneously working with the national building code developers, the national, state and local fire service organizations and entities in other states to accomplish this goal.

Understanding the state, federal and global regulations impacting the HVACR industry is incredibly challenging, especially considering the pace of change. Ironically, though, this multi-layered fabric of regulations is providing some clarity to an industry that was thrown into a bit of chaos when the federal courts struck down SNAP Rules 20 and 21, which the industry had believed would be the mechanism of the U.S. phase down. After an incredible amount of work on the part of all involved, the industry is beginning to understand this timeline and is making the proper preparations. If all those preparations — code changes, legislation, technician training — result in a predictable and manageable path forward, this transition can be as orderly as previous transitions have been. If all parties involved do their jobs correctly, consumers should notice no difference in accessibility, comfort, safety or affordability. This should be the goal of all of us as we move forward. u Stephen Yurek is president and CEO of the AirConditioning, Heating & Refrigeration Institute (AHRI). John Galyen is chairman of AHRI and president of Danfoss North America. For additional information, visit ahrinet.org.

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FINANCE

BY RUTH KING

5 Ways to Generate Cash Now EDITOR’S NOTE: Due to the unprecedented situation we find ourselves in with COVID-19, Ruth King is suspending the Rules of Wealth series and writing about actions that can help you survive these times and prepare for the future. Once this pandemic is over, she will resume the Rules of Wealth.

payments owed, are just as important.

Many people are home and want to get their systems prepared for summer now.

This ratio should be steady or increasing. If it is under one, you are in trouble because you will not be able to pay your bills. You need to generate profitable work and collect the payments for that work, to steadily increase this ratio. without profitable work.

he old saying was “Cash is King.” Now, in this era of quarantines and stay-at-home orders, cash is even more important. Cash is now emperor!

INVENTORY IS A BET

Here are five ways you can generate and watch your cash now.

Watch your inventory purchases. If at all possible, use the parts in your shop and on your trucks to complete service calls and jobs. Purchase additional materials only when you need them for a job or a service call. These purchases are not inventory. They go directly into cost of goods sold.

This is especially true, especially in these times. You are using your precious cash to purchase items that you may not sell quickly.

REVISIT TICKLER FILES Thankfully, HVACR is deemed an essential business and will become more essential as it gets hotter. You can work. Just do it safely! There should be a list of work that customers said at the end of last year, “I think I will wait until next summer before I make those repairs.” That is your tickler file. Contact those people by phone, text or email (many are responding more to texts than in the past) and find out whether they want the work done now. Many people are home and want to get their systems prepared for summer now. There are others who are requesting that you move your maintenance to later this summer. Until you contact them, you don’t know into which category they fall. In addition, customers have declined repairs. A quick phone call to let them know you care is important. You can gently remind your customer that the last time your technician was at their home, he mentioned additional work on the HVACR system. Your technician is available to perform that work safely and without contact if they want to go ahead with it.

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PROPOSAL FILES AND QUOTES Unfortunately, many salespeople give a customer a proposal/quote and either never follow up or only follow up once. Many times, the customer has not bought from anyone. They’re waiting to hear back from a salesperson. One of my clients laid off his salesperson and started going through his files. He made many telephone calls and within a day uncovered $80,000 of work the customer said yes to … Many people told him “we never heard back from anyone.” Follow up — even if the proposal/quote is old. From a commercial perspective, many customers wanted the work done now when no people were in the building. It caused the least amount of disruption of their otherwise normal business.

WATCH YOUR CASH Log on to your bank account every day. Make sure there is nothing you don’t

recognize. Look at deposits, checks and ACH withdrawals. Do they make sense? If not, start digging. The bookkeeper for one of my clients noticed two deposits, each less than $1. He assumed the owner was setting up a new account and didn’t think to ask him about it. The next day the bank called and asked whether they had authorized a $50,000 withdrawal from their account! Obviously, they shut down the account immediately. If something doesn’t look right, question it immediately.

NEW RATIO Use this new ratio to watch your cash on a weekly basis:

Your inventory days should be less than 30 days (Inventory days are 365 divided by inventory turns. Inventory turns are Annualized cost of goods sold divided by inventory). Your shelves should be bare at the end of this pandemic! Cash is no longer king — it is emperor. Watch it closely. 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.

Accounts receivable + cash Accounts payable + credit cards My old ratio, accounts receivable divided by accounts payable, is not as valid in these times. Now the amount of cash that you have and the amount of credit card

HVACR BUSINESS MAY 2020

BUSINESS INSIGHTS »

CONNECTIONS

Safer. Faster. Cleaner. Save 60-90 percent on labor and stay on schedule with MegaPressG® fast, flameless connections

istorically, best practices when it comes to joining pipe above two inches has been to weld everything. But with the new MegaPressG® from Viega®, contractors have a new, safer option to help them save time on jobsites. “Welding certainly has its place and its strengths,” says William Dutcher, product manager for Viega. “Contractors should rethink how they can join carbon steel pipe for gas up to four inches these days.” MegaPressG — available in ½- to 4-inch sizes — is going to allow your labor force to make an impact, no matter the skill lever of the workers on the job site. Viega has done the engineering behind these fittings to ensure confidence in their performance. “The biggest advantage, aside from time savings, is just the predictability,” Dutcher says. “These fittings have been engineered with such strict tolerances that users understand what they can expect.” Contractors can reduce the amount of call backs on a job site and can eliminate failures because of Viega’s Smart Connect® technology, which helps identify unpressed connections. Smart Connect ensures the user all of the connections have been made when they pressure test, thus eliminating a lot of the variability you get with welding. HVACR Business spoke with Dutcher about advantages of MegaPressG versus traditional pipe-joining methods.

How does MegaPressG save job time? The standard procedure for installing a MegaPressG fitting is easy. First, you ream and deburr the pipe, then mark your insertion depth to make sure that the fitting is seated all the way in for full grip. Then, it’s as easy as pulling the trigger on a power drill. It’s a seven second press. For the larger sizes, we do require the use of a booster, so that takes only a couple of extra seconds, because it’s a two-cycle press. When you compare it against traditional weld methods —preparing for the welds, you’re putting down tack welds, filling it, taking the slag off and then painting or finishing — it’s an 80 percent time-savings.

HVACR BUSINESS MAY 2020

WILLIAM DUTCHER Product Manager Viega 800-976-9819 viega.us

FOLLOW UP:

Looking to save time and money on jobsites? Learn about how Viega’s MegaPressG is the safer, faster, cleaner way to connect gas pipe. Visit viega.us/megapressG.

BUSINESS INSIGHTS: CONNECTIONS is brought to you by Viega

How safe is it to use MegaPressG? Viega typically engineers a five-time safety factor for all fittings. For example, when we state our operating parameters are 200 PSI, these fittings have been tested to well beyond that. So just from a fitting perspective, the safety factor is quite large.

MegaPressG doesn’t have the consumables these other methods do, which naturally leads to a cleaner job site. It allows crews to get off of the job site faster and on to the next job.

Do technicians require less equipment?

When you go into the reliability of our connections, you don’t have the variability between skilled labor … your apprentice can make the same quality connection that your journeyman pipe fitter has made over the years. Whereas welding, the new guy on the job can’t necessarily create the same quality weld that an experienced journeyman pipe fitter can.

Yes. In fact, one guy can carry both tool boxes in their hands, whereas a welder needs the following equipment onsite: tanks, welding equipment, safety equipment, any sort of welding blankets to cover nearby walls or things you need to protect and so on. It can be a multiple-trip job if you’re trying to do something on the 10th floor with no elevator or with a primitive kind of construction elevator.

And since there is no welding, there’s no exposure to harmful gases, chemicals or cutting oils.

Not only is it less equipment — and easier to use — it’s a huge time savings just in the fact that you can walk these tools up the stairs versus some of the traditional methods, such as getting a threading machine or welding machines into position. u

Is that why this is considered a cleaner installation? Yes, it’s a much cleaner procedure because, aside from the bags that the fittings would come in, there’s really not the jobsite debris that you would have with other systems. There are no messy cutting oils versus a thread system. You’re not going through cutting dyes and shaving metal everywhere. As far as the comparison to weld, you don’t have to bring all these welding rods onsite either. From my experience, I’ve seen welders weld down to a certain distance on the welding rod and then simply chuck it into the metal bucket as sort of a scrap pile.

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Pros use Viega ProPress®

viega.us/pro

The most durable, dependable, innovative pipe connector on the market. If you take your reputation seriously, you don’t trust your pipe fitting to any old technology. Unlike soldering, only the Viega ProPress system connects in seven seconds or less. And with Smart Connect® technology, you can easily identify unpressed connections.

Connected in quality.

ESTATE TAXES

PROVIDED BY KEVEN PRATHER, CFBS

To Safeguard Your Wealth, Avoid the Exploiters

ack in the inaugural issue of the VFO Inner Circle Special Report, we showed you how to steer clear of two types of financial advisors who could erode your hard-earned wealth—or even destroy it.

1. Expertise. Pretenders have limited expertise but are often unaware of that fact. Also, Pretenders’ expertise is a function of the subject matter. A financial advisor can be very capable when it comes to money management, for example, but is not necessarily proficient at tax planning (although he or she doesn’t fully realize this).

• Exploiters are professionals who recommend aggressive variations of financial solutions and strategies that are legal — for now — but likely to blow up on you down the road.

1. Pretenders are advisors who do not serve their clients well due to incompetence, or who have good intentions but limited expertise. They may want to do a sensational job for their clients, but they are just not capable.

Predators may or may not be experts on a subject. They are pitching a very appealing and intriguing story—and that, many times, is enough.

• Anytime you’re presented with a financial strategy that seems overly aggressive or promises you the moon and stars, hit the brakes and dig deeper — you could be dealing with an Exploiter.

2. Predators engage in illegal behavior to cheat and swindle people. A whole range of Predators look to manipulate other people—particularly accomplished, affluent individuals and their families—by breaking the law.

In contrast, Exploiters tend to be very technically competent. They will regularly hang their legally untested solutions on nuances in the law. Often their grasp of the subject matter is exactly what they use to confound clients and even other professionals they work with.

• Be wary of excessively large fees associated with financial strategies — especially if the provider can’t break down the reasons behind those fees.

But there’s a third type of “professional” who is likely to be devastating to your personal wealth and emotional well-being: They are the Exploiters. The goal of Exploiters is to behave dishonorably, but not illegally, for their own satisfaction and gain. Unlike Predators, Exploiters do not break the law; their actions are technically within the bounds of current laws. But the aggressive solutions they advocate have a good chance of exploding down the road or generally not working out as promoted — and the

Exploiters are fully aware of that fact. Based on our experience, many of the top successful business owners know to be on the lookout for advisors seeking to exploit them in these ways — they know the warning signs, and they know to seek out a second opinion whenever those signs start flashing.

Here’s what these top entrepreneurs can teach you about avoiding the Exploiters.

FOUR KEY TRAITS OF PROFESSIONAL EXPLOITERS Let’s take a closer look at four ways Exploiters are different from Pretenders and Predators (see Exhibit 2).

2. Integrity. Pretenders intend to do what is best for their clients, but are in over their heads. Predators are criminals with no concern for clients, whom they view as marks and suckers. Exploiters have very little integrity and only some—but not much—concern for their clients. They are not willing to engage in illegal activities, but this is usually due to fearing the consequences and not because of any sense

EXHIBIT 2

HOW TO SPOT PRETENDERS, PREDATORS AND EXPLOITERS CHARACTERISTICS

PRETENDERS

PREDATORS

EXPLOITERS

Expertise

Limited

Across the spectrum

Often high

Integrity and concern for clients

Usually high

Nonexistent

Very low

Interpersonal skills

Across the spectrum

High

Across the spectrum

Legitimate solutions

To the very best of their knowledge

In the gray area, aggressive, pushing the envelope, or excessive

HVACR BUSINESS MAY 2020

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of responsibility. A bad outcome for an Exploiter is a financial hit, but rarely jail. 3. Interpersonal skills. The ability of Pretenders to build rapport with clients ranges extensively. Some are exceptional, while others are poor. Most fall in the middle. In contrast, the interpersonal skills of Predators and many Exploiters tend to be high. Exploiters are excellent at impressing others with intellect and/ or charm. Their charisma, charm and personal appeal are often part of their ability to manipulate clients. That said, some Exploiters might have limited interpersonal skills. In these scenarios, their ability to overwhelm clients and other professionals with evidence of their brilliance drives their success. 4. Legitimate solutions. To the best of their knowledge Pretenders offer only lawful financial products and legal strategies. Unfortunately, they really don’t know that much—leaving them susceptible to promoting questionable products and services. Predators, of course, lie from the start. They, by design, do not offer legitimate solutions. Exploiters offer legitimate solutions— at that moment in time. To be clear, they are not Predators. The products and strategies (or the variations of them) they advocate are currently legal, often because they have not been adequately tested in the courts or have not drawn IRS scrutiny. Their solutions are regularly considered to be aggressive and “pushing the envelope.” Sometimes the results will indeed match up to everyone’s expectations—but a great many stars have to align for that to happen!

Keven Prather specializes in serving the complex needs of business owners through Financial Planning and Business Transition/ Exit Planning. Using a Total Wealth Planning approach, Keven’s objective is to turn complex problems into actionable, understandable and manageable steps, by collaborating with business owners, their family, and strategic partners.” Keven can be reached at (216) 592-7314 or kprather@financialguide.com. www.TransitioNextAdvisors.com.

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You should be given specific reasons — maybe your situation is more complex than is typical, and involves setting up certain trusts.

By having “another pair of eyes” do a thorough review, you can avoid potentially becoming the victim of an overly aggressive strategy that could blow up in your face months or years down the road—and derail your financial security. Indeed, the recommendations of Exploiters (and Predators) have a certain “too good to be true” quality.

RED FLAGS TO WATCH OUT FOR Exploiter red flags, part 1: aggressive-sounding solutions lacking in detail. Often, Exploiters will withhold information to muddy the waters to get business owners to make decisions that are not in their best interests. Anytime someone approaches you with a way to purchase life insurance with pretax dollars outside of a qualified retirement plan, for example, there is the good possibility that strategy is aggressive and in a gray area in terms of its long-term effectiveness. While not illegal today, it could easily become a problem in the future. Exploiter red flags, part 2: playing the blame game if something goes wrong. From the world of confidence artists, there’s the concept of the “blow off.” This is when the confidence artist constructs the situation so that the mark (the victim) goes away and does not cause trouble. Exploiters apply this concept expertly. Sometimes it is a matter of shaming the victim. Sometimes it is a matter of

Securities and investment advisory services offered through qualified registered representatives of MML Investors Services, LLC. Member SIPC. www.SIPC.org. TransitioNext AdvisorsTM is not a subsidiary or affiliate of MML Investors Services, LLC, or its affiliated companies. Supervisory Office: 2012 West 25th Street, Suite 900 Cleveland, OH 44113. 216.621.5680. This report is intended to be used for

If you are given reasons for the fees, and the logic behind them makes sense to you, great. But if the answers are vague or you’re told “that’s just what we charge,” don’t simply smile and nod. Of course, this applies to all the fees you’re being charged.

directing the blame to the victim or the client’s other professionals. Exploiter red flags, part 3: toogood-to-be-true assumptions and promises. If you’re promised the moon, be wary. For example, Exploiters may promote premium financed life insurance as cost-free life insurance. Always slow down if you’re promised that something is free, as it could be a sign the strategy is pushing the envelope. The assumptions underlying the projections seem somewhat magical, but the client and his or her other advisors are so impressed or confused that they end up enamored. While the strategy will likely falter, it can be many years — more than a decade — before it truly collapses. By that time, the financial advisors are long out of the picture. Likewise, any guarantees of future performance results should not simply be accepted at face value.

THE SMART MOVE: GET A SECOND OPINION If you’re ever presented with a financial product, solution or strategy that promises the moon and seems too good to be true, or that is presented to you as an aggressive way to use the strategy, listen to your instincts. Don’t immediately move forward with that plan and that financial advisor (or other professional). Instead, seek out a second opinion about the proposed solution from another financial advisor with the knowledge and capabilities needed to accurately assess the solution. By having “another pair of eyes” do a thorough review, you can avoid potentially becoming the victim of an overly aggressive strategy that could blow up in your face months or years down the road — and derail your financial security. Of course, a second opinion review might reveal that the proposed solution is acceptable, valid and right for your situation.

Exploiter red flags, part 4: large fees that aren’t explained well. Another example is lawyers who charge egregious fees to do work for which most lawyers would charge much less. If you’re given a fee, ask the lawyer to spell out exactly why you’re being charged that fee.

The point is to know one way or the other so you’re not separated from your hard-earned wealth by someone who doesn’t have your best interests in mind. u

informational purposes only. Neither MML Investors Services nor any of its employees or agents are authorized to give legal or tax advice. Consult your own personal attorney legal or tax counsel for advice on specific legal and tax matters. CEG Worldwide, LLC. is not a subsidiary or affiliates of MML Investors Services, LLC or its affiliated companies.

VFO Inner Circle Special Report By Russ Alan Prince and John J. Bowen Jr.

This report is reprinted with permission from VFO Inner Circle. Unless otherwise noted, the source for all data cited regarding financial advisors in this report is CEG Worldwide, LLC. The source for all data cited regarding business owners and other professionals is AES Nation, LLC.

HVACR BUSINESS MAY 2020

STRATEGY

BY SCOTT PEARSON

Should You Buy Another Company?

re you considering an acquisition? Ninety-five percent of all owners who buy or sell a company do so only once

in their lifetimes. Most of us don’t go through the process enough times to get good at it. So, before you take the leap, make sure you consider the following.

LIV LI VE

ONLINE

PROCTORED EXAMS NATE exams now available online! NATE now offers remote Live Online Proctored Exams for the EPA 608 Exams, HVAC Support Technician Certificate exam, and the NATE Certification exams. Live Online Proctored Exams give technicians the opportunity to take their exam from the comfort of their own home or office, at a time that fits their schedule. This live online proctoring option will not replace our in-person proctored paper and pencil and online exams that you can take with one of NATE’s Testing Organizations. For more information or to register for an exam visit:

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HVACR BUSINESS MAY 2020

Buying another company can be the easiest and fastest way to grow your company, but your company must be in firstrate shape, both financially and operationally, before you even entertain the thought of purchasing another.

and able to be the in-charge person for the buy-out?

If your company is not in the finest form at the time of acquisition, your problems will only multiply, instead of diminishing, no matter how good the other company looks.

BEST DEALS ARE WIN-WIN-WIN

You need to define goals for yourself and your company. Look at your person-

Be realistic about the amount of involvement this will require of you, on top of everything else in your business. You and the other owner get what you need and want, and all the employees benefit from a strengthened company and increased opportunities to make more money and move forward in their careers.

Be realistic about the amount of involvement this will require of you, on top of everything else in your business. al and business goals. How will buying a company enhance your life and take you toward your goals and dreams? You’ll need to assemble a team of experts. You alone can’t possibly know all there is about the financial, legal, and cultural elements in buying a company. Remember, you are the one who should ultimately be comfortable with the outcome of the deal. Understand that cultural issues have an enormous impact on your company. The numbers aren’t the only thing that should be solid — the culture of your company needs to be healthy for an acquisition to work.

Remember, if you go through the process of preparing to purchase a company and decide not to go through with it, it’s no problem. You can’t lose by taking the steps to prepare for an acquisition — everything you do in the process will strengthen your company. u

Scott Pearson is the director of coaching at Nexstar Network. For additional information, visit nexstarnetwork.com, call 888-240-7827 or email membership@nexstarnetwork.com.

You need good soil to grow good crops. There are many questions you should be able to answer when getting ready for an acquisition and going through the process, but before you move ahead with anything, you must be able to answer The Big Question: Am I ready to take on this job for the next 4-6 months? Am I willing

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PRODUCT FOCUS »

DYNATEMP

FABRICAIR

RECTORSEAL

Dynatemp has began a transition to producing and distributing its own R421A product. It contains a different lubricant the company believes works even better than the previously distributed Choice R421A product with a lubricant additive.

FabricAir has introduced the VarioDuct, a highly engineered solution for most commercial building applications that provides both uniform heating and cooling out of the same ceiling-hung fabric duct.

The LG MultiSITE Remote Controller is an easy-to-use, flexible controller featuring a customizable home screen with a highly intuitive user interface that allows you to tailor functions and appearance to meet the needs of your building.

RectorSeal has expanded its HVACR Coil Cleaners product line with six new additions. The expansion includes CoilCure, one of the industry’s few EPAregistered evaporator coil cleaners.

Dynatemp is excited to bring its new Dynatemp R421A product to market now that it has more visibility and control over our supply chain. Not only will this reduce its costs and improve product time-to-market, but it will enhance the product quality and performance for which Dynatemp is known.

VarioDuct’s unique design overcomes the natural convection characteristics of heated air to provide uniform cooling and heating temperature gradients from the same straight run of duct. Numerous efficiency studies have proven uniform air dispersion results in reduced mechanical equipment runtimes.

In addition to the flexibility of the user interface, the LG MultiSITE Remote Controller allows integration into a Building Management System via its onboard BACnet MS/TP connectivity.

>> dynatempintl.com

>> fabricair.com

The ability of LG MultiSITE Remote Controllers to seamlessly integrate into a building management system provides flexibility and ease.

The clearly outlined label design helps service techs quickly choose the appropriate cleaner for the application based on the coil-type, cleaning strength, foaming capabilities, rinsing requirements and whether it’s acidic or alkaline. >> rectroseal.com

>> lghvac.com

SAMSUNG

SPX COOLING TECHNOLOGIES

TACO

VIEGA

Samsung’s exclusive Wind-Free cooling technology provides end-users with a cool indoor climate and optimal energy efficiency without the discomfort of direct cold airflow.

SPX Cooling Technologies’ Marley MD Everest Cooling Tower is designed to address today’s demands for large HVAC systems and is suitable for a wide range of applications, delivering almost three times more cooling capacity compared with other preassembled counterflow towers.

Taco Comfort Solutions’ Near-Boiler Trim Kit provides a quick and convenient way to purchase all the accessories needed for near-boiler piping.

Viega LLC is proud to announce that 3-Piece Ball Valves are now available for its MegaPress carbon and stainless steel pipe pressing systems.

The Near-Boiler Trim Kit comes in premium, advanced and select configurations, and is available in 1-inch and 1-1/4-inch sizes so installers can select the kit that fits their needs. All versions of the kit include air separators, boiler feed and backflow preventer, 4.5-gallon expansion tanks, and all fittings and connections.

The newest component of Viega’s MegaPress system is approved for all MegaPress applications, excluding natural gas. It is available in multiple materials for specific applications. The carbon steel valve is available with EPDM and FKM sealing elements. The 304 stainless steel valve has an FKM sealing element, while the 316 stainless steel valve has an EPDM sealing element. Repair kits and replacement handles also are available.

Wind-Free 2.0 residential models are Wi-Fi enabled allowing voice control with Bixby 2.0 and monitoring from anywhere with an internet connection through Samsung’s SmartThings app. Users can remotely regulate temperature, adjust settings, automate unit functions, receive real time updates about operation and daily energy usage, as well as troubleshoot solutions when a repair is needed. >> samsunghvac.com

At 3790 tons, the MD Everest Cooling Tower is an ideal one-to-one match for large chiller systems. The tower can be adapted to varying water quality using a range of fill types. The MD Everest Tower achieves a low drift rate, down to 0.0005 percent of circulating water flow, so less water escapes the tower. >> spxcooling.com

www.hvacrbusiness.com

The trim kits are designed for easy installation and are ASSE listed. >> tacocomfort.com

>> viega.us

HVACR BUSINESS MAY 2020

20QUESTIONS >>

with MIKE GRAESSLE

We sat down with Mike Graessle, general manager of Hetter Heating & Cooling in Columbus, Ohio. Graessle discussed recruiting retirees, checking financials every day and being thankful. 1. Can you tell us a little about your background?

I worked 11 years in sales & marketing at Columbia Gas — a local utility company in Columbus. I then worked 11 years as a sales manager for three home builders in Columbus. I’ve served as the general manager at Hetter Heating & Cooling for the past 12 years.

2. How did you get started in this industry?

A good friend, who knew Hetter well, suggested I call John Hetterscheidt because he was looking for a GM to help grow the company.

3. What is your management style?

It’s very grassroots … I try to keep my finger on the pulse of this company throughout the day. I’m a huge “numbers guy” and I believe numbers don’t lie. I watch all of the numbers every day.

4. How do you motivate your people?

I try to stay in touch with them. I want to know how they’re doing. I want to know how their spouses or children are doing. We want our employees to know we care, we’re in this together and we are a “family in business.” I tell people when they do well and thank them. We distribute gift cards, we celebrate anniversaries and birthdays and we try to enhance our benefits package in some way each year.

5. What’s recruitment like in your area? Recruitment is tough. This is a competitive market. We always have our eyes and ears open. We have a great reputation and constantly stay in touch with our local HVACR schools.

6. Where’s someplace new to look for technicians?

I believe there is potential in hiring retired service technicians to assist with maintenance. I would take it a step further and say retirees outside the industry can be trained, certified and can assist in our maintenance strategy — 70 is the new 60. I’ve felt this way about sales for quite some time as well.

7. What challenges have you faced?

Aside from this current pandemic, our biggest challenge is finding that means of staying constantly busy during the shoulder months. We researched getting into duct cleaning but have not pulled the trigger.

8. What is your business mix?

We are 100 percent residential retrofit and service.

9. What do you view as the most important aspect of your job?

It’s important to monitor daily cash flow. Our financials

HVACR BUSINESS MAY 2020

must be accurate, our accounts receivable must be managed and our lead generation needs to keep feeding the system.

10. What’s the biggest misconception about the current workforce?

Many employers seem frustrated with young people because “they’re not as committed to the job” or “wanting more while giving less.” I believe all employees want to be a part of a successful team. They want to enjoy coming to work. They want structure and a sense of knowing the company is growing and improving and they want to be a part of it. We’ve seen 19-year-old employees and 60-yearold employees committed to the cause.

11. What challenges do you see in the next few years? To maintain a solid, dedicated and trained workforce. The technology continues to improve and training is crucial. This industry will always be competitive so you have to let the client know what differentiates you from the rest and why your company is the one with which they should partner.

12. Where do you see the most significant growth in this industry?

I do believe that the largest opportunity for growth is coming with different applications for mini-split equipment. Ductless products will continue to provide opportunities for us.

13. What do you find most rewarding about your job?

Seeing friendships here grow over the years while revenues continue to move towards what we envisioned as our potential. We have 250 years of experience working just at Hetter amongst our 24 employees.

14. Who’s been your biggest role model?

My father, by far. He passed away of lung cancer when I was 19. He was my best friend at the time. He taught me the value of faith, family and hard work. He taught me the valuable lesson

of thanking God for every day and being thankful for the people in your life.

15. What’s the best advice you’ve ever received? The best advice is 1 Thessalonians 5:16-18: “Rejoice always, pray constantly, give thanks in all circumstances; for this is the will of God in Christ Jesus for you.” The best business advice is from Barry Burnett, co-founder of Business Development Resources: “What Gets Measured Improves.”

16. How do you ensure your company isn’t getting too big?

We’ve grown steadily over the past 12 years. Some would argue not enough, but it has been manageable growth. We have built a solid foundation for the 24 families who represent us. John has invested back into his staff over time and not all people do this. When employees are happy the client feels this. Retaining employees and clients are key today and for always.

17. How important is a company culture?

Company culture is crucial and something that needs worked on every day. You can’t simply create a mission statement and post it on the wall. You have to live it and breathe it and promote it constantly.

18. How do you ensure you’re getting the quality you expect from your team?

We still value customer feedback and peer evaluations. We ask for referrals. We ask for Google reviews. We want to know where we can improve. We ask employees how they’re doing and even ask how teammates are doing out there on the jobs. Feedback is a great measuring stick. We demand that Quality Installation Forms are received with each installation and we require temperature readings and pressure gauge readings on our invoices. Everyone knows we have a reputation to uphold.

19. What innovations impress you the most?

The new phone apps really impress me. The information we have at our fingertips and the abilities we have to communicate and get instant feedback is incredible.

20. How do you manage profitability?

This is my No. 1 job responsibility. I track cash flow daily. We track payables, receivables, income projections, checking accounts, warranty reserves, payroll and maintenance totals weekly. Most Importantly, I track our top 10 indicators monthly. These range from leads, sales and service revenue to install revenue and accessory sales. We compare this each month to our 5-year previous YTD actuals.

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COMING SOON! NEXT MONTH, WE UNVEIL THE WINNERS OF OUR TOPS IN TRUCKS FLEET DESIGN CONTEST.

FLE T S ET DE E SIGN CONT

hvacrbusiness.com/topsintrucks

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HVACR BUSINESS MAY 2020

Articles inside

20 Questions with Mike Graessle

Prepare for a Safe Refrigerant Transition

Should You Buy Another Company?

To Safeguard Your Wealth, Avoid the Exploiters

Business Insights: Viega

The CARES Act: Federal Money with Good Intentions

Boost Sales Fast with Zero Budget

Get Maximum Value for Your Business

Editor’s Notebook