The Answer To The Question: “What Now?”
Home Performance Contracting is a buzz phrase that HVAC contractors have been hearing for several years now. Such as, “It’s the way of the industry.” “Homeowners want to go green.” “It will diversify your business.” “It will differentiate your business.” “There will be increased average sales.” The list goes on and on.
The list is long as to why a company would want to go into Home Performance Contracting and the reasons are compelling and true. When a business owner decides to take that plunge, there is plenty of readily accessible training to learn the technical side of Home Performance Contracting and becoming certified to do the work. The question then becomes, so now what?
That is the same question I asked myself when I decided to bring Home Performance Contracting to my business in 2008. I knew that getting into Home Performance was best for my business and picked the person to become certified. However, after completing the vigorous BPI training and becoming certified, I had no idea how to make it work and bring it to market. It was very scary. There weren’t many other contractors in our area delivering this product and we weren’t sure what to do. All the training we took was technical not how to go to market. I feel that is where many contractors are delivering home performance to their customers or why many contractors don’t explore Home Performance contracting. It seems like an overwhelming task to take on with no guidance. While Home Performance is not new, there aren’t many other businesses to look at and model yourself after or people to ask advice.
There are a few decisions you will need to make once you decide to diversify into this area. The first is what kind of Home Performance contractor will you be? There are 4 options:
- Deliver audits only to the consumer and the consumer find their own contractors to do the work
- Deliver audits only to the consumer and subcontract all the work out
- Deliver audits and perform some of the work yourself and subcontract some of the work.
- Deliver audits and perform all of the work yourself
There are disadvantages and advantages to each.
Being an audit only business will allow you to get into the home performance business without much risk. This is perhaps the easiest way to build your business model. You would need to create a company culture for all employees to understand and buy in on Home Performance, develop a marketing plan on how to obtain the leads for the audits, develop a process on how to handle the customers, and delivering the audit results. Therefore, as you can see, it is not hard to move forward with that business model once you put pen to paper and develop those ideas. You already have the certified technician. Go ahead and start doing those audits. Doesn’t seem too overwhelming, does it?
However you are potentially leaving money on the table by letting the consumer pay others to do the work which leads into model #2. Being an audit company that subcontracts out all the work involves doing all steps in model 1. You will need to develop a sales model as well as find competent subcontractors to deliver the finished product. For your sales model, you will need to determine whether your auditor also performs the audit, delivers the results, and closes the sale. Alternatively, perhaps, you want an auditor to do the audit and a salesperson to deliver the results and close the sale. Using subcontractors, you will need to make sure they sign a subcontractor agreement, agreeing to perform the quality of work you expect, and in the time you expect, while having the proper insurance. In addition, most importantly, DON’T FORGET TO MARK UP YOUR SUBCONTRACTOR. After all, you are in the business to make money. In this model, you become more of a full offering business, without the worries about scheduling, finding the skilled employees to do the work, and managing the work and supplies. Still not much risk in this model and it doesn’t sound like too much to do.
The third model includes all steps in model 1 and 2, in addition to completing the work using your expertise. I choose this model. My company’s expertise is in installation of high efficiency heating and air conditioning so why not do that myself. My expertise is not in air sealing or insulation. I did not have the equipment or employees to do that work. Therefore, I found a competent subcontractor and subcontracted that work out. This helped keep my employees busy, allowed me to diversify my business, while increasing revenue and net profit, without doing too much more than I was already doing. Doesn’t sound so scary either right? Why not do it?
The last model involves everything involved in all the above models, except for finding subcontractors. Instead, you will need to develop a business plan, find financing, employees, equipment, and supplies to go into a business area that you may not be in already. Delivering all the work yourself allows you to have full control over the project and make the net profit in doing so. It also makes you a full fledge home performance contractor. This model encompasses the most risk, since you are moving into new areas you may not fully understand. Therefore, while this is a great model, it should not be your first choice unless your company is already performing work in these areas, such as HVAC, plumbing and insulation. While my company does not do all the work ourselves, we have been moving in that direction over the years. For example, in doing home performance we were subcontracting out many water heater installations.
Realizing the potential for profit, we decided that plumbing would fit into our business model. Since our home performance was doing so well, it just made sense to add that department. In time, we may do the same for insulation.
The key is taking small steps at a time to build your home performance contracting business. Don’t be overwhelmed by looking at a company that does it all. Start small and start with what you know. You will be surprised how easy it is to move forward from there. Most important, build your company culture around the model you choose. Once you have employee buy-in you will find your business will soar!
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