Monthly Archives: November 2011

While some might think it a bit crass to say so, once an HVACR technician completes a repair in order to get  a piece of equipment back on line, the end result of that process is getting paid. Yes, getting paid is the last element of the service call process, so we should just accept it. It’s just the way things work. When somebody goes to a doctor for a health care issue, the doctor, in the end, gets paid. The same thing happens when we go to a restaurant for dinner. Once we finish eating, the restaurant gets paid. And, so it goes with the grocery store, phone company, etc…..

 Am I saying that the only reason somebody does any type of work or provides any type of service is that their only interest is making money? No, I’m not. I’m a firm believer in the concept that making money is really just a by-product of accomplishing a chosen mission within a chosen profession, whether it’s having groceries on hand for a customer to purchase, providing them with a meal, phone service, providing health care, or repairing HVACR equipment. We all do what we do because it provides us with the satisfaction of doing something for somebody else; something we do well…something that the person we’re doing it for either cannot, or chooses not to, do for themselves.

But, it still all comes down to getting paid….as long as you’re doing the right thing and providing value in exchange for the money you’re being paid. And, to provide value as an HVACR technician, getting to that final result requires three steps:

Step One: Know the fundamental things you need to know, such as the electrical, refrigeration, and air flow processes related to the proper operation of an HVACR system. What happens to the refrigerant as far as the change of state during the heat transfer process? How do the components of a refrigeration system work together to accomplish that change of state and maintain the necessary pressure differential in order for the system to work? How does current flow in an electrical circuit? What is the function of a switch and load? Why does a comfort cooling system require 400 CFM per ton in order to operate properly?

Step Two: Apply the fundamental things you know to the troubleshooting process when working on any particular type of equipment. If you know how to read a schematic diagram, you can apply that skill to accomplsh the general process of tracking down the source of the problem and isolating the failed component because you have an overall understanding of the sequence of operation of the equipment. If you understand what your refrigeration system operating pressures should be in the event that equipment is operating normally, you’ll recognize a problem when you see it. If you understand that a refrigeration system in any equipment can only operate properly when the air flow through both the indoor and outdoor coil is correct, you’ll understand the basic concept of balance, and you’ll recognize what effect an imbalance between the refrigeration and air flow systems on the operation of equipment.

Step Three: Know what to do when your general understanding of the fundamentals isn’t enough. If you’re trying to determine whether or not a printed circuit board is the reason behnd the failure of equipment to operate, know how to obtain specific troubleshooting information from the manufacturer, and know how to interpret that information so you can use it to effectively troubleshoot and replace the right component…..and not replace the wrong one. If you are evaluating the operation of a given refrigeration system, obtain the manufacturer’s charging charts, and know how to use them in order to tell whether or not the system is opertaing properly.

 And, once you’ve successfully completed the above steps to accomplish your chosen mission of reparing HVACR equipment, be prepared to accept the by-product of your effectively and professionally accomplishing your mission, and get paid.

Learn from yesterday….Live for today……Look forward to tomorrow.

Jim

Sears, in my opinion, is in trouble. Yes, that’s right. I’m talking about the major retailer that’s been part of the American business landscape for many decades. And the reason I think they’re in trouble is that I don’t believe that any company, no matter how large it is, can survive and flourish as a 25-percenter, and be profitable for their parent company, which, in this case, is K-Mart Corporation. Let me explain.

We recently decided to replace a gas range in a rental, and, like any savvy consumer does today, we did some research on line. What we found was a suitable item at Sears, and, having had experience with purchasing appliances from them in the past for rental units, we clicked, and it was done. The next step  was to go to the store to pick it up. On the way there, we decided we wanted clarification on the model we chose, so we decided to visit the appliance department just to make sure. When we showed up there, we were greeted by a salesperson, and I explained what we wanted to do and showed him the order information we had printed.

And, the first words out of his mouth once he understood what we were doing there were, “Well, we work on commission here.”

I was stunned. Did I hear that right? Did he really say that? Did I actually just walk into a store as a customer and wind up being bombarded by rhetoric that I don’t need (and should never, under any circumstances, hear about) from an employee of that store? Yes, that’s exactly what he said, but I recovered momentarily, and repled, “Yeah, I know that, but I just want get a look at the range we bought, just to make sure it’s the one we want.”

You see, over the last couple of years, we’ve purchased appliances for eight different remodel/rental projects, and the gas range we had purchased in the past for most of them was a certain model that was not bottom-of-the-line. (In one case, it was way up the line, rather than just the middle.) The bottom-of-the-line units are just not what we want. We prefer heavier grates, sealed burners, etc…and, since this particular purchase was a different price than we experienced in the past, we just wanted to clarify that we were’t going to wind up with something we didn’t want. As it turns out, the gas range line had been expanded to two “middle” models, and we didn’t know that.

Anyway, getting back to our far-less-than-professional, lousy-at-customer-service salesperson… Since my reaction was quite obvious, he did make a lame attempt at recovery from his incredibly horrible comment, and after a brief discussion, he made a hasty exit. Since there were no other customers in the area, I have to wonder just where he felt the need to disappear to, but that’s another story.

Enter salesperson number two….

The next thing that happened was that we noticed another model of gas range. It was one that we had purchased before, and, when we looked closer at it, we realized that there was no price listed on it. By this time, a second salesperson appeared, so we asked him about this particular range because we considered getting it instead. We explained that, adding that we had made an on-line purchase.

“You would have to cancel that on your own,” he said immediately with a brusque tone. “We don’t have anything at all to do with that here.”

I replied that we could handle that without a problem, and asked about the price of this particular model.

“It’s 20-percent off,” he said.

Really? Twenty-percent off of what? I showed him the blank tag and explained that there was no number to calculate 20-percent off from. So, he did a look-up and found a number, which, as it turned out was about $200 more than the model we had purchased on-line. That being the case, we decided to stay with what we had, and after telling him that, he launched into a brief tirade that made it clear that he considered our decision not to upgrade as quite stupid.

Enter salesman number three, in the bedding department….

As we were leaving the appliance department, we passed by the bedding department. Since we also had a need for a single bed for a grandson emerging who would soon be graduating from a crib,  we were interested in buying a single bed and box springs. The young salesman that greeted us there was personable and knowledgeable. There was a Sealy Posturepedic set that looked good, priced at $269.00, and we were easily convinced that it would do. We asked if there was a set in stock so we could just take it with us after making the purchase.

Well, no, that’s not how it works with mattresses at Sears. The young fellow explained that Sears doesn’t stock the mattresses, but instead they are shipped directly to the customer. Oh, OK, even better…let’s arrange for a delivery and get this show on the road….except, as it turns out, since we weren’t purchasing a mattress set priced over $500, delivery was an additional $70.

When we expressed the fact that we didn’t think that was quite fair (after all, we didn’t need a $400 mattress set, we wanted a single that was, just as a matter of fact, priced less than that), he said, “Would you like me to check with my manager and find out if we can deliver it free?”

Now, that’s the spirit. A customer service focused sales professional who is willing to go the extra mile. We told him that would be fine, and he got on the phone system loudspeaker and called for a manager. In a few minutes a lady appeared about 30 feet away, and the salesman asked, “Can we honor a free delivery on this mattress set here?”, while indicating the single set we wanted.

“No.” That was it. One terse word from across the expanse of the bedding department, and she abruptly turned and hurried off, disappearing as fast as she had appeared.

Our young salesman was disappointed. He apologized, and we bid him goodbye, picked up our gas range, and left.

And, yes, Sears did still wind up selling a gas range in this case….no sense in being stupid in the middle of accomplishing an objective…. but we have also used Lowes, Home Depot, Sam’s Club and Costco in the recent past for appliance purchases, and in the future, those are the places we’ll look to for our refrigerators, ranges, and laundry equipment. Sure, I’m only one customer, and I’m virtually unnoticable when it comes to Sears’ bottom line because we didn’t (and won’t) purchase a bed or any more appliances there, but my point is that if the only way a business can turn over merchandise is via a lower price than anybody else…..which is what it comes to when any organization isn’t focused on customer service like they should be…..then eventually, they”ll be in trouble.

So, there we have it. Of the four people we dealt with regarding customer service, one of them (25%) was professional, helpful, and wanted to do a good job. The other three (75%), well, obviously not so much. Which brings me to my answer to the question in the title, which is no, I don’t believe that any company can survive as a 25-percenter, even Sears.

Learn from yesterday….Live for today….Look forward to tomorrow.

Jim

NEWS UPDATE: DECEMBER 27th, 2011….

Sears, Kmart: Beginning of the end?

As a slide in sales continues, Sears Holdings announces the pending closures of more than 100 stores. And a year from now, the outlook might be just as grim.

By InvestorPlace on Tue, Dec 27, 2011 9:36

By Jeff Reeves

While many retailers remain on pins and needles about how their holiday receipts will stack up, there’s no mystery at Sears Holdings (SHLD -25.63%). The company that operates Sears and Kmart department stores has been losing customers and bleeding red ink forever, and the past few months were no exception.

So Sears wasted no time in announcing a huge cutback on its store count. Between 100 and 120 Sears and Kmart stores will be closed. The company says $140 million to $170 million will be made as inventory is shuffled out at fire-sale prices.

But more disturbing than the store closures is the context. Sears is losing money, and no profits are expected anytime soon. It makes you wonder if this really is just the beginning of the end for the once-iconic department store.

 How bad is it? Well, consumers should know firsthand just by visiting their local Kmart or Sears locations. Fallen flagship brands like Craftsman tools and Kenmore appliances used to be high-quality names for many Americans but have little currency with shoppers today.

 Even more damning is the tarnish on the stores themselves. Aging stores ideally could use a fresh design — and at the least need a good cleaning and some repairs.

 Hedge fund manager Edward Lampert and his cronies merged Sears with Kmart in 2005. Lampert began focusing on online boondoggles such as an online marketplace in the vein of eBay (EBAY +0.34%) rather than acknowledging the power of its legacy brands at physical stores. You can’t fault the logic, since online retail is crushing brick-and-mortar sales. But the result is online efforts have failed to bear fruit yet, and existing stores present customers with a rather disappointing experience.

 It’s a lose-lose situation that has cost Sears dearly.

 That’s just from a taste perspective, however. The harshest reality for the company is the poor sales numbers that have plagued Sears and Kmart for some time. Sears Holdings has lost money in five of the past six quarters. Even worse: November marked a stunning 19 straight quarters of sales declines.

 The icing on the cake is that Wall Street estimates for the company project consecutive quarterly losses in each period through all of fiscal 2013. That means if you’re being charitable, Sears will continue to lose money for the next year and a half.

 But let’s be honest: The reality is that forecasters aren’t looking any further than 2013, because that’s too far down the road. There’s a very good chance that a year from now the outlook might be just as grim.

 Sears has yet to determine which stores will be closed or how many jobs will be lost. Management is casting the store closures as an unfortunate event prompted by a bad economy, and that is indeed partly true. Many big retailers like Wal-Mart (WMT -0.42%) have struggled to find their way as consumers have cut back and are more savvy about getting the best deals. It might sound counterintuitive that the king of low-priced retail would be hurting, but Wal-Mart has suffered for a few years now as smaller discounters like Dollar General (DG +0.36%) connect with customers and sometimes even undercut pricing at the big guys.

 It is indeed challenging for retailers. But Sears is in a class of its own when it comes to losing customers and losing money (it’s worth noting that some retailers are booming).

 Sales at the company have dropped in every year since Lampert took over in 2005. No wonder shares are off almost 50% year to date in 2011 and almost 70% from the 2010 peak.

 To be clear, bankruptcy might not be an immediate concern. Sears doesn’t have the crippling debt load that drives companies directly into bankruptcy. But it’s certainly on its way. Unless Sears can streamline its operations and find a good way to use funds from this inventory liquidation, it’s likely we will see only more store closures in the future and a race to the bottom for this once-storied retail brand.

 Not everyone is bearish on Sears. Jonathan Berr thinks a new focus on licensing deals — such as a Sears partnership with the Kardashians — can help the company.

 But it’s going to take more than star power to right this sinking ship.

 


Jeff Reeves is the editor of InvestorPlace.com. Write him at editor@investorplace​​.com, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook. Jeff Reeves holds a position in Alcoa, but no other publicly traded stocks.

 

 

 

 

 

 

 

 

 

Implementing a flat rate pricing program into your HVACR business won’t always be a smooth process. You need to consider that if your current method of operation is time and materials, then implmenting a flat rate system is something new. And new is always uncomfortable. That’s just part of the human condition. We are always uncomfortable with change.

As I mentioned in part one of this series, one of the situations you’ll have to deal with is the technician who performs the repair. (If this is you and only you because you operate a one-person outfit, then, of course, you’re the technician.) Regardless of your situation, the bottom line challenge is every person in your organization being capable of understanding the value of the service you provide. If the way you set your price for service is to look around and find out who in your area is the highest price, and then who in your area is the lowest price, then setting your rate somewhere in the middle, then you have to face a fact…. which is that your rates are not based on your cost of doing business, but instead what your guess is as to the going rate in your service area. And if your service rates are based on the unscientific approach I mentioned, there’s a very good chance that you’re not charging enough for what you do. All of which means that your first challenge is realizing that your rates are likely to go up.

The best way I can explain the right approach to that situation is this: Build a bridge and get over it.

You and everyone in your organization needs to understand that what you should be providing to your customers is the best value for their money spent. And that doesn’t mean that it will be the lowest price. The bottom line on this is something that I’ve said many times before, which is that we need to understand that there is a difference between a customer and a shopper. A shopper shops for price. A customer shops for value. And your mission in operating a successful service business is to concentrate on providing the best possible service you can provide for your customers. And, if somebody calls, and they are first and foremost, and all the way through their inquiries about having their equipment repaired, concentrating on price, then they’re not a potential customer. They’re a shopper. Does this mean that every inquiry you’ll field will result in a scheduled service call? No, likely not, but if you’re working on nothing but the lowest price possible and a razor thin margin that can go South on you with the slightest complication, where’s the sense in taking that job on?

Once you’ve built your bridge and committed to excellence based on value for your customer, and not just the price itself, the next issue to consider is a specific plan of implementing a flat rate labor pricing system. One element of this is to prepare, and stick by no matter what, a given script that will be used when somebody calls and asks the magic question….”How much…..?”

Your script answer to any price question is this: “Our service call and diagnostic fee is $______. Once the technician has determined the problem with your equipment, he (or she) will be able to tell you what your total repair cost will be.”

Of course, there will be times that a customer won’t “get it” when you explain this simple and direct system of doing business (we, as human beings, always want to make things more complicated than they need to be), and when this happens, be prepared to repeat what you said word for word, prefaced by a “Yes Maam” or “Yes Sir”, “….what I’m explaining to you  is that we use a flat rate pricing system for specific repairs, and that…..our service call and diagnostic fee is…..”.

Once the customer does have a complete understanding of what you’ve explained to them, they either will or won’t schedule a service call. The odds of them following through with scheduling with you because you are approaching the service they need in a professional manner are in your favor. Again, is there any guarantee that you’ll get every person who calls will schedule their repair with you. No, there’s no guarantee, but think about it this way. Those who aren’t willing to have you come out based on what you tell them on the phone may not be someone you want to be performing service for in the first place.

Once the service call is scheduled, the next step in the process is up to the technician who will be making the diagnosis and accomplishing the repair, while explaining and advising the customer on the service they need.

Until next week.

Learn from yesterday…..Live for today….Look forward to tomorrow.

Jim

 

 

 

 

 

 

 

Once an HVACR contractor has decided that flat rate pricing is the best way for them to serve their customers, provide a reasonable salary and benefits to the technicians they employ, and allow for their company to generate the profit they deserve, the next step is to figure out how to either design a flat rate program in-house, or  decide to purchase a system.

If your plan is to purchase a program, plan on spending up to $4,000.00 for a small company (more if you have more than a few technicians), plus a monthly fee for updates. The reason many systems are priced in this range is that it takes a good deal of research to design a program and determine what a given repair should cost based on a national average, and keep track of the changing price of parts costs. The advanatage of purchasing a flat rate management program is that it doesn’t take a Herculean effort to implement it into your company, and the updates keep you current on parts costs so you can maintain your goal of achieving a reasonable profit at the end of the quarter/year. Some programs may be available for less, and you need to do due diligence and research what is best for your individual situation.

In some cases, the specific label for such a program will vary. For example, if you are in a franchise system, it may be referred to as a “Menu” pricing system rather than a flat rate price guide, but the objective is the same. It’s pre-prepared for you, you plug it into your operation, and it is regularly updated to ensure the profitability of your company.

If you decide to creae your own flat rate pricing system, there are different ways you can approach the project. With the right computer skills and a familiarity with a program such as Excel, you could employ the spreadsheet system to list specific repair jobs and their relative labor price for accomplishing them, along with a price listing. Or, you could decide that your listings will be for labor only, allowing the technician to price the parts at the time the total repair cost is determined. An advantage of Excel, of course, is that you could plug in a rate that allows the program to calculate and list the cost of a given repair once you’ve assigned a time or other code to it. With this arbitrary number plugged in, your printed copy would show the repairs and their individual pricing according to that number. You can also implement a keystroke command into the system that allows you to plug a different number in, thereby changing all the prices to the new amount based on that number. You could also input a zone system that determines one price for a service call and repair at a given distance from your base, and a different zone price for  a repair at a distance further away from your location.

Another approach to designing your own flat rate pricing system involves categorizing the repairs you accomplish. In this type of a system, the higher the category number, the more difficult the repair. A category one repair, for example, would be the simplest part replacement you could accomplish on a given piece of equipment, such as a contactor on a condensing unit. A more complex repair, such as replacing a blower motor, would be a higher category number. And, an even more difficult repair would be a higher category number yet. In most cases, a service company could come up with a category listing of 1 through 6 and cover most of the repairs they do, up to and including sealed system repairs.

Designing your own flat rate pricing system requires a lot of knowledge and will take a lot of work. You will need to be vary familiar with the type of equipment you work on, and create an individual listing in various categories for each of them. For example, if you service gas furnaces, you’ll need to create a listing page for that equipment type for all the category one repairs you do, then create a second page for the cateory two repairs, and so on. (Separate pages will make your listing print in a less complicating manner.) And, if you service heat pumps, the page creation system is again accomplished, likewise for walk-in coolers and freezers, ice machines, etc….

You’ll also need to come up with an hourly rate (even though you’re not charging by the hour) so you can decide what you need to charge labor-wise for a category one repair, category two, etc… (Like I said, this will take a lot of work.) To come up with the hourly rate that you’ll plug into the given category of repair, you’ll need to have a good understanding of your cost of doing business. For this information, you may have to seek advice from an accountant, or do whatever it takes to list and understand all of your costs, then determine what your labor repair rate has to be to cover those costs and provide for a reasonable percentage of profit for you.

The advantage of designing your own flat rate price guide, whether you go with a spreadsheet system or use a word processing program such as Word, is that what you’ll have in the end is something that is custom designed for your business without any program elements that you don’t need or want.

Once you’ve either purchased or designed your own flat rate pricing system, the next process to consider is implementing it into your business, which is a subject I’ll discuss in the next segment of this series.

Learn from yesterday….Live for today…..Look forward to tomorrow.

Jim

 

 

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