CONTRACTORS PROFIT MOTIVE
What would you do with extra profit? Maybe take your spouse
out to eat more, purchase those golf clubs you had been
following on eBay, or save for your kid’s college? This
article explains how to upsell to homeowners the value that
you provide as an expert in retrofitting homes that have
products needing special disposal, such as refrigerant and
mercury thermostats. Believe it or not, that “quick-silver”
gooey stuff that you used to play with in grade school can
actually make you money.
As contractors you are responsible for charging a fair price
for your services and in the United States, profitability is
the number one concern for small business owners such as
contractors. How will these businesses outlast the economy?
A simple solution is to look for innovative ways to do the
same installation services but add on services to sell to
the homeowner.
BLUE OCEAN STRATEGY
Harvard Business Review’s article I recently read called,
“Blue Ocean Strategy” had this very premise in it. All
business industries compete. Most use the “red ocean
strategy” where they compete in existing “bloody”
marketplaces and benchmark off of each other to the point
where businesses are all the same. In contrast, blue ocean
strategy states that “they make the competition irrelevant”
by creating stronger differentiators.
STATE LAW
As seasoned veterans of the HVAC/R industry know, many of
the waste routinely generated requires special handling.
We’re all familiar with state and federal requirements
dealing with refrigerant. But did you know that all mercury
thermostats removed from commercial structures need to be
recycled, and that more than 12 states now require ALL
mercury thermostats to be recycled? Even where it’s not
required it’s common sense as mercury thermostats contain at
least 1,000 times more mercury than a CFL bulb.
When you consider this, why not take a proactive approach
and earn some money while doing it? You can distinguish your
business from competitors through a new value-added service
with minimal cost to implement. This will require the
contracting business owner to train his/her staff on how to
evaluate a job that generates waste needing special
disposal, create a billable invoice line item, and be
transparent to the homeowner on the charge. How would a
contracting business do this?Story
continues below ↓
advertisement
| your ad here
RETURN ON
INVESTMENT (ROI) PERCENTAGE CALCULATION
The first step is to determine what to charge for the
service. ROI is an important tool for making decisions
regarding a job’s profitability. You want to invest in the
resources that provide the greatest return. This is no
different than selecting jobs you want to quote. The basic
ROI percentage calculation is:
ROI % = Net Profit (before taxes) / Investment * 100
Let’s say the job you are quoting has a mercury thermostat
and a condensing unit needing disposal and your net profit
is $1,000, whereas the total investment cost to do the job
equaled $10,000. Your ROI % on this particular job would be
10% or (($1,000/$10,000)*100).
But let’s say you were to charge $100 extra on the job as an
add-on to your quote because they had materials which
required your disposal expertise such as refrigerants, scrap
materials from the condensing unit or a mercury thermostat.
Your ROI % on this particular job would be 11% or
(($1100/$10,000)*100) with the extra $100 contributing
directly to your investment costs to perform the job. Seems
rational to me to ask for a little more to provide a value
to the customer.
Contractors charge add-ons for financing, extended labor
coverage, maintenance agreements, and current promotions
from the equipment provider. Here is your chance to build in
the opportunity for more profit.
WHY TRAIN SELLING RECYCLING?
Training your sales staff can provide an easy
differentiator, especially when you are competing against a
low-cost competitor. If the homeowner doesn’t want to pay
the fee then you have the choice to waive it. The fact that
you sell this service demonstrates your commitment to your
local community to do the right thing and you ease the
homeowner’s fear by proving your expertise HVAC systems and
protecting the environment.
RECYCLING IS PROFITABLE
Explicitly dealing with the disposal of special waste can
benefit your business’s reputation, credibility, and most
importantly profit. Recycling helps protects the environment
and business which means you have a positive public
reputation in the communities in which you serve. Wouldn’t
the contracting community all benefit if we can add another
reason for the consumer to choose you instead of the low
cost alternative?
Mercury thermostats and R-22 will eventually be a thing of
the past. But until they are all gone, make sure to help
your business earn more profit by charging for your service.
Next time you see a product on your job that requires
special disposal, don’t think how much this might be a waste
of your time, but think how much extra profit you will earn
on the job. What would you do if you could make $150 more on
every job that includes replacing a mercury thermostat? Your
golf bag will be grateful.
Ryan L Kiscaden is the Senior Account Executive for
Thermostat Recycling Corporation. He previously worked for a
wholesale distributor totaling six years of HVAC/R channel
experience and has an MBA in Business Administration from
Elizabethtown College along with a Bachelor’s degree from
the same institution. Ryan can be reached at
ryan.kiscaden@thermostat-recycle.org or 1-571-302-0877
with more information available at
thermostat-recycle.org.
### |
