Do you want to improve your margins? According to an industry expert, the majority of HVAC professionals can increase profits by changing their approach to estimates. Getting the best value in equipment and vents is only the start of costing out a job. You also need to assign labor and overhead costs appropriately, know when to implement software and provide your customers with the right information.
Every HVAC estimate starts with Manual J calculations for load. Sometimes the whole building load is calculated, sometimes load is calculated by room or unit. Once the load is calculated, you move on to Manual S to choose equipment that can handle the building’s load. Then you move onto the Manual D design to determine duct size and layout.
Once the Manual J, S, and D processes are complete you can calculate the hard costs of equipment and fittings. These are easy to deal with as long as all of your calculations are correct, and you have consistent pricing from vendors.
Estimating labor cost and overhead can be a challenge, but a good organizational model will make all the difference. To develop a model that works for your company, review your recent jobs and organize your earnings and your costs by job type. Analyze how you use your staff by job type. Work out what percentage of each worker’s time is spent on each type of job.
As you work through these details, you may discover you’ve been making less than you thought on retrofits, or maybe your maintenance contracts need to be adjusted. Perhaps your top-paid worker is spending more of his time on complicated retrofits, and your estimates don’t account for his wages. With a few tweaks to your estimates, you can improve your bottom line.
Get a Second Opinion
It never hurts to have the input of someone with a business mind, and you probably already have someone at your disposal. Your accountant may be able to provide insight into how you might improve your margins. If you don’t already have one, consider working with an accountant who specializes with contractors. They will recognize patterns in your receivables and expenses and can often provide advice that you can put to work.
With the increasing complexity of building requirements and the range of equipment available today, many installers are turning to software for their estimates. If you spend a lot of time on calculations, this may be a good option for you.
When selecting software, look for a program that will be easy to use. You don’t want to spend all of your time learning how to use software that’s meant to save you time. A quick trick to assess software is to look at the support. If the software vendor offers free telephone support, you can safely assume it’s easy to use. If they bill for support time, the software may be complicated and tough to use.
Give Clients Value
Often contractors such as HVAC installers quote only to get the job, quoting prospects as low a price as they can get away with. Some of your customers want the lowest price, but you might be surprised by how many homeowners will pay more for higher quality. Offer clients three tiers of service. Quote to install equipment that covers the code requirements, quote top-of-the-line equipment with the best possible energy efficiency ratings, and quote something mid-range. Let your customers know what kind of certification they might expect with different tiers of installation.
Changing your approach to estimates requires an initial effort, but once you have a system in place, you’ll improve your margins and have more time to spend on other aspects of your business.