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The Growth Plan for HVAC Companies Stuck Between $3-5M (and your biz, too)

Johnny Molson

As an HVAC company grows, it often slams into a ceiling someplace between $3-5 million.

In this episode, we discuss the ways we’ve helped stuck companies break through that barrier. Even if you’re not in the HAVC industry, you’ll find valuable information that will help your small business stand out, be the one people like the most, and think of first.

In today’s episode:

Johnny Molson

Ryan Chute

Gary Bernier

Kyle Caldwell

Transcript:

JOHNNY

At Wizard of Ads, we have many clients who are in the home services industry, specifically the heating and air industry. And we’ve noticed something pretty interesting that when these businesses get around the three to $5 million mark, they kind of hit a ceiling, they kind of plateau, and it’s hard to get over that hump. Now you may not be in the heating and air industry, but I think you’re going to find some useful stuff in here because what we’re going to talk about are the things that have to do with customer service and making sure that what you’re saying in your outward advertising matches what’s happening within your business, the experience that the customers are having. But with us today around the round table, we have three other wizard of ads partners. We start in Halifax, Nova Scotia with Ryan Chute. He is a sales and process expert in Atlanta, Georgia, one of our newer partners, Kyle Caldwell, a lot of experience in media buying. And also we in message creation. And in Toronto, Ontario is Gary Bernier. He handled a lot on the digital side, but the thing that all of us have in common at wizard of ads is we’re looking for, how do we, how do we get that connection between what the business is saying outwardly and what the experience is inwardly that the customer is having? So let’s start in Halifax, Nova Scotia with Ryan Chute talking about where do you start? You want to make this big move? Where does it really begin?

RYAN

You know, I, I, uh, I often go in and, and as a sales side of things and, and, and look at it, and these guys are selling what I like to call boxes. The, the salespeople are going up against price matches, unit for unit. There’s nothing else attached to the, to the deal. Um, and if anything, it’s going to be something marginal, uh, like a maintenance plan or a multi multi-year maintenance plan. When I start looking at it from the sales perspective, I’m looking at bundles. So I, I can insist that w that we really start focusing on, uh, bundles instead of boxes. And Costco is the, is the absolute masters of these, you know, when, when Costco, um, catch up, they don’t put out a bottle of ketchup that you can buy down at the grocery store. They, they package it up with three packages of catch-up and put it on for a great price as a bundle. And that’s the only way you can, you can buy it and that’s their differentiating value. Um, you know, it’s a value stack that’s, that’s, um, inflicted on you, but is famously successful being the highest per dollar square per square foot of any retailer, uh, in the marketplace today. So when you start looking at how we can leverage that, when we take it over to an HVAC company, the opportunity is extraordinary.

JOHNNY

So challenge number one is how are we different? Fair?

GARY

Yeah, definitely. Absolutely. Johnny. And the focus today is that three to 5 million. Once you crack that three, to five truck mark that’s, that’s when things start to get more interesting, because now you’ve got a business, um, a real business, and you’ve got a little bit of infrastructure there. Like Ryan’s talking about, you have people that their responsibilities sell, and you’ve got people whose responsibility is answering the phone. Um, you don’t necessarily, as the owner, you don’t necessarily bump into everybody every day. And so there’s just different challenges that the business spaces and in its growth from that three to 5 million Mark, and maybe what made them unique has gotten a little bit lost. It’s still, probably there. And, you know, that’s why we do the uncovery is a little bit lost, um, when they get into that phase, because they’re just scrambling to keep the business going. Um, and that’s why they’re looking for leads all the time.

KYLE

They, they have to be able to say, uh, you know, what their clear vision is, what is the commander’s intent for these, uh, for my customers in the home every day? You know, how does that translate from the people that answer the phones to the technician that shows up on your door? You have to, if you’re buried in every single kind of business issue, it’s very difficult to continuously be that shining light, that guide for your staff.

JOHNNY

That’s kind of where a lot of businesses get stuck. I think all four of us have been in meetings where we say, you know, what, what makes you special? What do you stand for? And the response we often get is, well, we do great quality work. And, you know, we, we have trained our people and, you know, we’re, we wear booties when we go into the houses, um, all these things that are base level expectations, you know, I expect you to at least do that. I expect you to know what you’re doing, and I expect you not to trash my house. Um, so where does this now growing HVAC company start to look for the things that make them special.

GARY

I love when you look at a franchise like one hour that says on, or you don’t pay a dime, it sounds like a simple thing. And you wouldn’t say that’s what makes them unique, but how many companies that you call for service on anything, whether it’s a fridge or whatever, show up when they say they’re going to show up, um, and that’s important to the customer. So a lot of times people think that uniqueness is in how they deliver the pro, like how they actually put the air conditioner together and whatever else. And then the customer doesn’t care about that. What the customer wants is their life to be convenient. They want, if it’s HVAC, they want their, all the rooms to be the same level of cool. They want the same level of heat, all the rooms. That’s what the customer wants. They’re not into the fiddly little bits of how the stuff’s connected and whatever else. And I think the technician mindset that it gets lost on the perfect install versus what makes the customer happy.

JOHNNY

And that’s, and going back to what Kyle said, and, and you can address us a little bit, Kyle, if you want, um, you, you said something important there of the, the intent of the spirit of the owner. Talk a little bit more about that and why that’s, why that’s so important.

KYLE

Well, Gary and I were in a, in a discussion with a local business in his market, and you could tell that the woman we were talking to was right there and had a vision and, and was able to like elucidate several different things about her business that she wanted to see happen. She was able to look and say, I want to be at this level of sales. And I want, I want to transform my company in this way. And I got to thinking how much she would benefit from a retreat, uh, go rent an Airbnb in the mountains, or in the cool part of your town, or whatever, unplug your phone, start to write down these things that brought you to that $1 million place at $2 million place, you know, before you lose it to the insurance guy, who’s calling you and the sales guy who wants you to look at the new gadget that he wants your, you know, trucks to carry, et cetera, once a year, stop, take a breath and unplug and, and start writing down the spirit stuff.

The things that drive you to be in the business in the first place. And, and, you know, I think maybe we could flush that out some more in some, some blogs and things like that. But every one of these guys has a reason that they left the mothership company and started well, they have a reason. And so get back to that reason. And then that helps you at least have a, a place where you can start to project that into your technicians in the home, the CSRs, the service managers, the people who handle the billing, all of it’s soup to nuts begins with that, that, you know, kind of Feng Shui effort to write down the things that have brought you to where you are, why you’re doing this in the first place.

GARY

Yeah. That’s, that’s the seed, um, that Ryan grabs a hold of and loves to wrap the word culture around, right? Like, it’s that Genesis moment that you’re talking about, of how they see the world, um, and how they wanted to serve as customers and what they wanted to do for people. And so when Ryan starts talking about culture, culture has to show up or will show up whether you design it or not in around three to 5 million. And, and that’s, uh, another like Kyle, I love Kyle says, get the hell out, figure it out, write it down. Because I think Ryan will say that put you in the driver’s seat for having the culture you want, not the one that shows up

KYLE

Really matriculates right into the DNA of the business when it’s a stated goal that everyone in the business is enrolled in,

JOHNNY

and this is a good place to transition, I think because, okay, so now we’ve discovered I really liked the, I liked the phrasing of, you know, what, what is the spirit of the intent of, of the owner, because now you are starting into starting to get to something that is distinctive, you know, how did, how do you tell this company from that company? And so now you’ve started to tap into the stuff that makes your company distinctive. Uh, Ryan, what do we do with that then not now we’ve got this thing now we’ve identified it and pointed to it. What do we do with it?

RYAN

Well, to me, there’s three kind of main areas where distinctive shows up. Uh, the first area that is going to show up is the external message that you’re going to have to your, your customers. And that’s going to generate leads in one form or another. You can, you can take kind of the transactional road of talking about price like everyone else, or you can talk about the things that you believe in and, and, uh, put it out there to demonstrate your integrity, your trust, your worth, your competence and value. The second place that is going to show up is in sales. So ultimately, you know, our, our service techs, they’re all selling stuff every single day, the, the comfort advisors and technical advisors, uh, even the customer service representatives who are answering the phone calls or selling something, be at the appointment that they need to book straight through to the new unit that they’re going to deliver, whether they sell a box or they sell a bundle.  Really what it boils down to from there is though do those two things match up, right? Or what we’re telling our customers, um, actually match with what the experience is inside the company. And if it is a match, then you have consistency in that lends credibility and confidence of the consumer, which drives and leads towards the online presence and everything else that comes from that. The third place that it’s going to show up in my worlds particularly is in recruitment. So when we believe something and we can speak to what we believe and stand for, and frankly what we stand against, then we can talk about, uh, um, things that matter to the person and job ads. Aren’t about the job job ads are about the person doing the job, right? So when we match up the right people, what do we get? We get the right fit. And if we get a whole roster of, of rock stars, everyone’s winning, but it also attracts more rock stars, right? We want to be a part of a tribe that we feel really good about hanging our brand and attaching it to it?

JOHNNY

Is it, is it a top-down approach? Is, is it a horizontal approach, I guess by that I’m meaning, you know, where’s the chicken where’s the egg, um, it does. Does the culture determined the distinctiveness? Does the distinctiveness lead the culture? Uh, clarify a little bit of that.

KYLE

Yeah, I think it’s definitely top-down Johnny. I mean, I would say the, no question that if the leadership does not have a well stated vision for where they’re taking the company, then there’s no way it bubbles up from the ground floor up to the top suite, unless a miracle happens. And I bet you the best run. Most distinctive companies have strong leadership. The ones I know that are successful in HVAC, the, the $70 million companies have leaders that are very, very, uh, good in that role and, and very good at projecting those core values down the funnel,

RYAN

But it really does start at communication. And when we identify and lock in step number one, the leaders decide to make that conscious choice to do change the, the narratives of their business, or at least clarify the narrative of their business to move it to the next level. It first happens externally. We understand what it is. We want to speak to the, to the voice, into that, to the mind and the hearts of the customer. And if we’re an authentically bringing that inside, we then bring that internal communication. And from there, it really becomes developing and clearing up your selling system through leadership. And when you have a clean slate of, of your selling system directed and driven and defended by leadership, that’s, what’s going to support your culture.

JOHNNY

Yeah. And I think, you know, the, and the reason for the question of, is it top-down or is it, is it more linear? Is the situation where a, a leader is acting on his own values, but man, you’ve got a management staff barking in his ear saying we’re getting killed on price. We’ve got to, we got to do this. Hey, you know, let’s get, you know, and you start, you start to, you start to internalize all of that, and you drift away from your values and your purpose. Um, if you are in that situation and you have a management staff, uh, that just go in numbers, numbers, numbers, uh, and you’re trying to instill values and values and values. Um, is that the wrong manager?

RYAN

I don’t think it’s a, I don’t think it’s mutually exclusive. When you look at the selling system within an home service business, you have six constituent components. You have the communication, which is broken up into external communication and internal communication. External you’ll have offline and online digital and mass media, as a word, as an example, then you have your internal, you’re defining what it is that you believe once you’ve done that we need to get some of those clean things, cleaned up compensation and recruitment so that we are able to accommodate growth. But then we go into pricing and selection, and that has to be a unified front to pricing is a language, right? We talk about as wizard of ads and the wizard Academy of the 12 languages and math being one of those languages. Well, pricing is one of those languages and it’s very, very, um, psychological in the way that you can approach it. But there’s no way to beat a P and L right? If your gross profit is 55 points in your fixed ops is 45 points. You’ve got a net, a net income of 10 points, right? There’s no way to win that war, right? We’d have to adjust other things within the selling system, like getting your sales guys to close more on an, on a per call basis, uh, increased average sale increase, gross profits, those types of things, right? That being said, we drive down to pricing and selection. Now we have the language to the customer of accommodation, and that all has to match. If that doesn’t match, then leaders, aren’t going to be able to do anything to improve the culture. They’re just going to be budding up against these roadblocks. Like our prices are too low, or we need big, cheaper prices, higher prices, more selection, less selection, we need to change our comp plan because no one’s willing to work for us at this price or, or for a a hundred percent commission or whatever the case might be. Ultimately, I think what this all boils down to is that culture is the strategy. Now it’s, we’ve often heard that culture eats strategy for lunch or breakfast, or maybe maybe three miles. Yeah. But really what it comes down to is that that culture has to be the strategy. And when we do that in the confines and context of a settling system, we have the ability to move. Then, excuse me, move the needle.

JOHNNY

And this brings us full circle, really, to the concept of marketing with a capital M you know, not, not just the ads that you put out in the words you say, and, and those kinds of things vitally important, but just an understanding that marketing touches every department and really touches it, touches everything. So not only how we’re behaving out in the field, how we’re answering the phones, what we’re saying to the salespeople, how they behave, what what’s on the website, what’s it, you know, um, all of these things have to be in what we refer to as channel alignment. Um, otherwise you’re really missing a big opportunity. Um, and so it’s, it can’t just stay in the Monday morning meeting where we inspire everybody and say, you know, we have these certain value. It, it has to exist in every single corner, uh, and in the glove compartments of the trucks and in the minds of the techs. I mean, it really does have to be that, um, uh, that permeated in order for it to work, you know, and I think you have to have a plan for that, right?

KYLE

You go on your retreat, you kind of figure out what your goals are for that year. You have to then enroll the leadership in your business and then count on them to continuously reinforce and enroll the people that they manage. And, you know, there’s 14 different managers at a typical, uh, large 40 plus million dollar HVAC company has, you know, managers all over the place that are, you know, expressly there to lead and guide the pods of, of their, of their team that, uh, that are going to be so crucial. Um, without this alignment, it’s like, uh, uh, a wheel like an old wagon wheel with the spokes that are out of it. The, the, the wheel gets out of alignment before, you know, it, the whole thing comes apart because it’s not vibrating in the, in the right way.

JOHNNY

I live in a city where about four or five years ago, uh, we received a coveted Chik-Fil-A, uh, and it was a, it was a, it was a big deal. I mean, the press was out there and it frustrated businesses who said, um, you know, they’re, they’re getting all this free marketing. And I said, no, no, they’re not. Uh, they, they may be getting free advertising from, from their PR, but it, that is a well-oiled marketing machine from top down of how they behave. Uh, it’s not a mistake that when you say thank you, they say, it’s my pleasure to serve you. Uh, that is a, that is a part of the DNA of how they live. And that is an expensive proposition to do that kind of, well-oiled truly capital M marketing, uh, that goes throughout, throughout the business. And that’s the kind of thing that we’re talking about. And when you get that, right, when you, when you tap into that, it becomes almost unstoppable. So Ryan, I’m a business owner and I say, do you, what? I want it now give it I’m, you know, I’m, I’m, Verruca Salt and Willy Wonka, give it to me now. And, uh, what, what do you, what do you say to them? It’s I want to win today.

RYAN

Absolutely. And listen, every business owner once wants to win today. They don’t want to wait to build the relationship, you know, and this, and they really want the relationship today, right? I mean, if we think about going out on a, in our younger years to on Saturday night to the bar and, and trolling around for things, most of the time, we’re not trolling around to find our future wife, right? We’re, we’re looking for that instant gratification. Um, and those relationships aren’t traditionally forged in fire and going to be long lasting relationships with meaningful results. Now they might bear fruit so to speak. But what I am saying is that, that that’s not going to be a lifetime journey with a customer, right? And this is the difference in the two things that the difference in the two things is that we’re not going out. I’m looking for love in all the wrong places. We’re looking, connecting with customers and developing a relationship. And that probably means you’re not kissing on the first date. I think, I think that lends us to precisely what customers want. So if we’re looking for a quick down and dirty oversimplification of what it is that you need to do, vast selection, the lowest price for the value, fast, personalized delivery are going to be things that just don’t change over time. The customer is seeking first warmth, right? The, the, the belief that you’re not going to murder them in their sleep, you know, and, and take advantage of them or Rob them of their home. Um, when you come in there and then competence, if you tick those two boxes, you’re positioned to sell something that’s not guaranteed, but that’s your minimum standard. So when we know the sequence of events, we can deliver delight. Now there is a secret sauce to delight, but first and foremost, we have to make sure that the customer feels that they’re getting the choice and the selection that they, that they want, and that they don’t need to go shopping somewhere else.  I go to your competitors to get the thing that solves their problem to the lowest price for value can be translated in a number of different ways from the cheapest box you sell straight through to the best solution you sell at a fair price, and then fast personalized delivery. My home, uh, my HVAC systems is different than my next door neighbor’s HVAC system. I wanted, um, within reason within a respectable reason to my needs so that I’m not making the wrong choice. And that’s the biggest fear of any relational customer, but we still have to do it fast, easy, safe, comfortable by demonstrating warmth and competence to build that trust before the sale is made.

JOHNNY

So final question, who is this not right for what businesses should not be doing? What we are suggesting or who will this frustrate?

RYAN

Uh, the, the, the first one is the company, uh, business owner who wants to have a lifestyle business. They want to have a couple of trucks and a little bit of, of, uh, overhead at most, like keeping it simple and not really growing, but sustaining a good margin business. That’s just not for them because this will blow their socks off, right? The second person that that is not going to be a good fit for as the person who really doesn’t have any aspirations for exponential growth, right? It’s easy to get a 10 to 15% gain on your growth every single year. Heck if you just raised your prices by 10% in conjunction, because it’s a basis of percentage you’re going to grow your business. If you maintain so exponential growth, that’s growth by multiples two, four, six, 10 times, your business size, a thousand times, your business size. That’s what we do. And then those are the two big ones that, that would not be a good fit for this business. And then the third one is that the inauthentic, the ones who just truly, um, say one thing and then do another, are out to gouge and take advantage of and everything else, they’re just, they’re going to get caught, right? They’re going to get a kind get called out for being inconsistent with the message that they put out and what they deliver.

GARY

Yeah, Johnny, this, this is for the person that believes growth is great, but understands growth sucks because growth brings new problems. And what they want to do is solve those new problems every day. That’s, that’s the type of guys that want to go through that exponential growth that, that Ryan talks about. It’s you have to understand that once again, what worked yesterday, doesn’t work today. Cause it broke because of growth and you gotta be ready to put a bandaid on it and then put in the permanent solution and move to the next link in the chain that broke and fix that one. That it’s the person, the business owner that wants to go through that and wants to embrace that as, as part of their, uh, core DNA that that’s, that’s the type of guy that can, can work with us. Um, and like Kyle said, and it it’s a choice and there’s nothing wrong with the other choices. Um, but, but Ryan’s right. They won’t work for us. It’s just, we’re going to blow you up and, uh, you gotta be ready to go along for the ride. It’s wild and it’s crazy. And it’s wonderful if you decide you like that. And if you don’t, it’s not the right, uh, it’s not the right vehicle to climb into.

JOHNNY

So the key takeaway today is getting all these things in alignment. What you’re saying online matches what you’re saying on a billboard or matches what you’re seeing on a TV ad or a YouTube ad. And that’s all in alignment with how your salespeople are behaving or how your service people are behaving. When you link all those two things together, everybody’s rowing in the same direction and it becomes really, really hard to stop. And that’s the exciting part. If you’d like to get in touch with any of us, here are our email addresses, or you can leave a comment in the box below if you have any questions.

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