Planning Ahead for 2016: 3 Strategic Steps For Contractors
If you’re the kind of person who makes New Year’s resolutions, you probably start thinking about them in late December. Whether it’s to exercise more or to get more organized, most of us wait to pledge ourselves to self-improvement until New Year’s Eve or even New Year’s Day itself.
However, when it comes to running your contracting business, it’s already time to start planning for next year. In fact, the contractors we spoke with get their New Year game plans underway in October. As a presidential election year, 2016 is shaping up to be an important one for business owners in general. In addition, for air conditioning contractors in particular, the HVAC industry regional standards for air conditioners go into full effect in July.
A strong financial plan is essential to a strategic plan, but there are other components to consider before you set your budget. Three key areas to evaluate for a strong year are technology, marketing, and preparation for variables.
In order to make a plan for moving forward, the first step is to take a look back with an annual review. Several weeks before their annual two-day planning meeting in October, managers of Capstone Mechanical in Waco, TX, work on detailed reports of how their departments have been doing over the past year. Capstone’s president Rick Tullis said these reports form the framework for the meeting that, “Lays out the blueprint for the next year.”
In terms of technology, the HVAC industry regional standards are “a bit of a non-event” for Capstone. Tullis said that because of the climate in Central Texas, the equipment his company services and engineers is already meeting or exceeding those standards.
As part of its year-end review, Capstone will examine its use of iPads in the field. “We have had them deployed in the field for three or four years,” he explained. “It’s time for us to see how much more life we can get out of them.”
Darrick Philp, general manager of Bel Red Energy Solutions, in Mukilteo, WA, also said the regional industry standards deadline is not affecting his business. “Our equipment is already above those standards,” he said.
A big part of the Bel Red’s yearly review process this fall will concern its beta testing of a field-based field communication system. “It’s something our technicians have wanted for a long time,” Philp said of the cloud-based system, which he hopes to have in full use by the end of 2015. “Everything will be processed out in the field,” he said. “In addition to the invoices, our technicians will have pictures and videos (of products) to show to customers.”
This year’s review will also reveal what Philp called “a big shift to ductless systems” among his customers. “People here are interested [in ductless] because of a raised awareness, and because of the nationwide interest in it,” he said. “And our temperatures here in the Northwest are perfect for that application.”
“Listening to clients” is a big part of goal setting at Bel Red, and it caused the company to make some significant changes this year. “We have expanded our product line to offer a value-based line,” Philp said, adding, “Many potential customers simply did not even come to the table in recent years because we were only offering higher-end lines.”
In an interview in late May, Philp said the expanded product line has already resulted in a “huge increase in air conditioning sales over last year. Our schedule has been full for several months. We haven’t seen this kind of consistency in the past five years.”
The HVAC industry standards also have not had much effect on Welsch Heating & Cooling Co. in St. Louis, MO, according to Butch Welsch, owner. “We are using that standard or higher anyway,” said Welsch. “We have always been a company that plays by the book. If that’s the rule, that’s what we are going to do.”
St. Louis is not experiencing the same economic recovery felt in other parts of the nation, and as a result, Welsch Heating & Cooling, which was founded in 1895 by Welsch’s grandfather, has had to focus more on service and replacement than on sales in recent years.
“I am someone who is always thinking ahead, always worrying about the year ahead,” Welsch said. “But as we look to next year, we think that this may be the new norm. There is just not a lot of new industry or new jobs coming to the St. Louis area…There just is not going to be a knight in shining armor coming through. What we can focus on is going out there and getting a bigger share of whatever business is out there.”
For Welsch “going out there” involves a revised marketing plan for 2016. He hired a new advertising agency this year, and has committed to a series of five-second spots on morning television news programs through September.
At the time of a recent interview, Welsch said that he already had “countless people tell us they have heard our name on TV. I have never had anyone tell me they had seen our print ads.”
“The idea is to keep our name out there,” Welsch continued, stressing that he hopes to attract a wider, and hopefully younger customer base with the commercials. “We’re not a low-baller who’s going to throw a low-priced special out there and then raise the price on you.”
Philp sees a website overhaul as one of his marketing goals for Bel Red Energy Solutions. “It’s been two to three years since we last made big changes,” he said. “We have neglected it. We need to modernize it to reflect the way we do business now.”
Philp also mentioned that his company will review all online advertising, possibly eliminating certain efforts. An early spring Facebook product promotion got great results, he commented. Philp also sees his company returning to direct mail campaigns next year. “We have improved our efforts in these areas, and we have gotten positive feedback,” he said.
Since Capstone sold the residential portion of its business several years ago, Tullis said his company has changed its marketing approach to focus on relationships. In 2016, he said his team will look for ways to hire more salespeople and “to support activities that help them find those relationships.”
Although he says a good website is essential to his business as “the modern brochure,” Tullis commented, “I’ve learned that spending a bunch of money on SEO is not important for us. For us, it is calling on our clients, servicing our customers. That is the key to growing our revenue streams.”
Capstone will continue to host events such as the free training sessions it offers to local maintenance workers. Workers from schools and other community organizations are invited to learn tips on equipment maintenance, along with receiving a free meal in these sessions. “Not only are these sessions a great pipeline for future team members, but we also see helping the schools as a good way to help the community,” Tullis says.
Preparing For Variables
It was poet Robert Burns who once wrote, “The best-laid plans of mice and men often go awry.” HVAC contractors know that despite an organized review and planning process, there are certain variables that are out of their hands. “The biggest driver in the service and replacement market is, of course, the weather,” said Welsch, who in late May was disappointed that St. Louis had yet to have a heat wave.
In addition to staying on top of weather forecasts, he strives to keep informed on trends in the home market so he can act upon them. “The geothermal market is becoming a big part of our new construction business,” he noted as an example. “Although we have been [installing] them for more than 10 years, we have really seen a growth in the past three of four years. In high-end homes, the higher cost doesn’t seem to discourage people because they know they will see lower operating costs.”
Although you cannot completely predict the economy, especially during an election year, contractors can plan for the unknown in their strategies. Philp says his company’s annual plan includes time to take stock as needed. “We have an ongoing review process,” he said. “We plan for potential losses and for potential hires.” All three contractors agreed that their people are their most important resource. “A big part of our planning is to make sure we do not waste manpower,” noted Philp.
Welsch said his company focuses on customer service and that it treats its employees like family. “We train our employees in people skills,” he said. He adds that he is proud of the fact that his company is big enough to be on call 24/7, and yet a customer can always reach a “live person” to answer questions or to schedule service. “People have gotten so accustomed to a lack of service that they really appreciate service when they get it,” he said, adding, “Someone can be a fabulous technician, but if he can’t also handle people, we don’t want him.”
Tullis said his company has learned to let lean technology, doing more with less, drive its plans for the future. “Over the next five years, if current market conditions are in place, we should see 10 to 20 percent growth. That is driving our larger thinking,” he said. ”Are we training people up fast enough? Do we have the right tools in place to be more efficient with our manpower? At the end of the day, that’s what will limit us, our manpower. So we always want to find ways we can get more efficient and yet still consistently improve.”
When you are a busy contractor, it is easy to get caught up in the day-to-day details of running a business. As the last few months of 2015 approach, take the time to look back at what you have accomplished and set clear goals (and opportunities to tweak those goals if needed) for 2016. As for those personal resolutions for exercise, well, you can probably put those off until New Year’s Eve.
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