I know that for many supply houses around North America, HVAC equipment sales are just a small part of your total sales picture. And for some, I realize that having an equipment line is viewed as more of a responsibility than a privilege. However, the whole scene of HVACR-supply sales is changing. A lot of big manufacturers are buying out the smaller manufacturers, and these larger manufacturers are in the process of taking on your business in a head-to-head battle for over-the-counter sales of both parts and equipment. In other words, if you don't change your tactics, you may find your company sales and profits in a downward spiral.
What have equipment sales to do with all this? First, the reason why so many smaller manufacturers are being gobbled up is because their sales volumes aren't high enough to help them survive or to resist takeovers. Believe me, industry consolidation isn't in your - or anyone else's - best interests. So for this trend to be stopped, smaller manufacturers and lesser-known brands have to market more aggressively to survive, which may in turn result in these companies seeking out more assertive supply houses than yours. Second, to take away what little equipment sales you now have, many of the big wholesalers and manufacturers have created their own lines and brands of over-the-counter condensing units, furnaces, etc. "Today the equipment; tomorrow the parts," is their motto.
I know that for some of you equipment sales aren't very profitable and are often a nuisance. But remember this: If you increase your portion of that market, it will become more profitable. And since equipment is usually a higher-dollar item, these sales can become a significant contributor to your company's bottom line. What's more, if you ever intend to sell that portion of your company, it will look far more attractive to potential buyers if your sales volume is higher even if you aren't as profitable. Why? Because sales volume is a good indicator of business potential, while low profitability is viewed by investors as the result of your personal lack of business expertise - something that can be overcome once you're gone. So go for the big-ticket sales.
To do this, you must have people out in the field promoting sales of your lines. You must also try to build a strong network of dealers who proudly advertise your line and actively promote its sales. Yes, you have to get out of the over-the-counter type sales business where service techs only buy from you when they're moonlighting and contractors only buy from you when they can't get the product somewhere else.
Now I've mentioned this before in other articles and I will mention it again, because I believe it with all my heart: You have to know the advantages of your product line because you can never grow its sales unless you and your salespeople truly believe that you have something that is better than what others are offering. You think all HVAC equipment is the same? I used to travel the country visiting manufacturers, looking at their products and interviewing their marketing people and engineers. And I can tell you for a sure fact that the brand you're selling has some unique features or niches. If you're trying to sell your brand without a story to tell, you're just going to have to offer it at the lowest price.
Target the dealers you would like to have in each market, then go after their business. Talk to them. Find out why they're selling the brand or brands they do and what they don't like about the brands and their suppliers. Then determine what it would take to get a portion of their business.
Buying a contracting companyYes, it may sound crazy, but buying an HVACR contracting company is a viable option. After all, everyone else seems to be doing it. A conflict of interests? Possibly, but not necessarily. It depends on the markets that the company is selling in and if you actually intend to wage unfair competition with your customers.
One of the advantages of buying a contracting firm is promoting your brand of equipment, of course. What's more, a good servicing-installing company can be a profitable investment without selling your brand. However, when such a company also promotes your brand, it's a win/win situation.
Be careful when making such a purchase, however. Many companies larger than yours, such as utilities and consolidators, recently have done this and failed. First of all, don't pay too much. Contracting companies usually have little more to offer than a small stock, some trucks, some employees and some customer goodwill. Too often the stock of parts they list is unusable or unpaid-for, the trucks are in bad shape, the employees may quit and the customer goodwill may be based on the owner's personal contacts or it may be nonexistent. A medium-sized company with middle managers, a good reputation and a sizable list of current service agreements are some of the pluses to look for.
In order to sell the idea of buying a competitor to your current customers, let them know up front what you plan to do. Don't let them hear it through the grapevine or from competing suppliers. Help them to understand that this means there will be more money spent on advertising and promotion, which they will share in. Explain why it would be foolish for you to try to undersell them by offering discounts to your subsidiary company and that you will back out of any deal where they are also offering a price.
The next step involves finding the right people to manage the contracting company. You must do a better job of promoting and selling the firm's services and your products than the former owner. Of course, choosing the right manager(s) seems to be the main hurdle that the utilities and consolidators are having so much trouble with. I suggest that you forget education and degrees; this is the contracting business. Pick the most aggressive and creative person you know, then give him or her goals and strong financial incentives for meeting them - and even stronger incentives for exceeding them. Beware of nice guys and those who aren't strongly motivated to succeed.
Here are some realistic goals:
- Year 1 - Stabilize the company (plan to lose money).
- Year 2 - Position the company for growth (plan to lose money).
- Year 3 and after - Grow and make money (a lot of it).
Yes, it all comes down to taking chances and spending money. You do it when you invest in stocks and whenever you make a major purchase such as a car or a home, and you did it when you went into business. However, as with all the above, when it is wisely done, the risks are minimal and the rewards are worth all the stress and worry. Go for it!