Pricing jobs for residential HVACR businesses can be a daunting task these days. Do you keep it old-school with a handwritten quote, or do you go with the modern laptop approach? I’ve seen both be effective in our industry. The handwritten template may be better received by older consumers. They may feel it is more genuine and less slick. On the other hand, the slick computer program may be more impressive to the savvy buyer. Let’s break it down from the buyer’s perspective first.
What Does the Consumer Want?
First and foremost, you would not be quoting the price for a new HVACR system for them if they did not need a new one. People don’t casually shop for a new heating and air system. It’s not like looking for new furniture or a new automobile. It is needs-driven. The customer would not be calling you if their system worked! Our job is to make it easy for them by solving the problem. Let’s dive into how we can achieve that!
Identify Your Customer and Their Needs
Ask the proper questions to your potential new customer and find out what they want and deliver it. The following questions can help you narrow down your specific customers’ needs.
- How long do they plan to be in this home? Are they planning on selling?
- What is their current level of comfort? Ask for specifics like; “hot and cold spots”, “humidity problems”, “reliability”, and “energy costs”.
- Do they have allergies?
- Are they concerned with energy costs?
- Have they added on to their home or plan to in the future?
Over time you can perfect your price book by deciding who your customer is. Also, just a tip – if you can determine quickly what personality type you are dealing with, this can have a huge impact on your closing ratio. DISC profiling is a unique way to identify how your potential new customer thinks and what presentation will most appeal to this type of customer.
Example: Homeowner “A” wants to be given options to choose from, and homeowner “B” may want to be led down the correct path with one defined option. DISC profiling or similar methods will help you identify the type of customer you are presenting to, and it will ultimately lead to better closing rates and higher sales! Send this information to all your sales and tech people and do regular sales and presentation role-playing at meetings. Eventually, if everyone is clear on who your customers are, and how to profile customers to increase sales, you should be able to refine and hopefully perfect your price book to align.
Pricing the Job
For the longest time, our industry treated each job as its own. What I mean is each job was engineered on every quote. You determined the size and efficiency, the materials needed, and the labor required to complete the job. These were added up and presented to the consumer, typically days after the first visit to the consumer’s home. There does not need to be a lag in close time or invoicing anymore, not with digital and mobile options. But whether you work with a handwritten proposal or a digital presentation, both options can have real value, depending on your customer. Still, you should close the deal when it’s most needs based. Remember my first statement, “The customer would not be calling you if their system worked!” Solve their issue expediently.
The Hand-Written Proposal
This method still has value in today’s high-tech world! I have witnessed very large HVACR contractors using this method with a high degree of success. The contractor knows their pricing by size and efficiency. They simply fill in the blanks on the proposal while at the consumer’s home. This method tends to work very well when heating and air companies let their service technicians sell. Certain types of more traditional, older homeowners identify with the service tech because they are more “honest” and “trustworthy” than the “polished” salesperson. The secret here is to KEEP IT SIMPLE!
Laptop or Mobile App Presentation
This type of presentation is becoming more of the norm in the HVACR industry today. It looks professional, can easily present options, and is easy to keep pricing up to date. These sales presentation programs and apps are visually appealing to the consumer’s eye. And they make it easy to close and see everything right there, with no excessive paperwork. Also, the digital presentation can make your company stand out compared to the competition.
Examples of sales presentation software include:
Advantages of Digital Presentation:
- Trust: You can build the system and price right in front of the homeowner. It can build trust with your buyer. Here’s what I mean: If they want to add an accessory or increase/decrease the efficiency of the system being proposed; it’s done right in front of them!
- Saves Time: Gone are the days of engineering every job!
- User Experience: It is easy to make changes to your proposal in a matter of seconds. Example: The consumer likes the idea of a variable speed indoor unit but doesn’t want to spend the extra money on the variable capacity outdoor unit. You can make the change on the fly!
- Access & Transparency: Today’s digital presentation software gives you the ability to email it to the customer, automatically saves your presentation, and keeps an accurate account of the customer information and materials needed for the job.
- Follow-up: Today’s software allows for timed or automatic follow-up.
- Financing: Most programs today, include a financial component, which immediately presents the financing option to the consumer.
This leads us right into one of the most important pieces of a residential HVACR presentation today……FINANCING!*
Offer Financing
As you perfect your price book, you will want to look at the option of adding financing. I often ask contractors today. How many jobs are you financing? You would think the number would be substantially high, but in all reality, many say, “10-15% of our jobs.” That number always shocks me. We live in a society where monthly payments are the norm, yet much of our industry underutilizes residential financing! I hear companies say, “We don’t get asked about financing very often.” The rule of thumb in the residential retail business is to offer it upfront. Derrek Hofrichter, a coach and trainer for Service Business Evolution, an organization dedicated to helping contractors succeed in business, offers the following advice on financing.
We don’t have a set KPI specifically for this, but historically contractors that are struggling with selling systems and having the margins be where they need to be, are financing below 30% or even much less like 15% to not at all. The largest, most successful contractors we work with are almost always over 65%.
Consumers today live on monthly installments or financing. Ask yourself, what looks less threatening to a homeowner who just had their heating system condemned with a cracked heat exchanger? $12000.00 for a new HVACR system or $289/month?
Let’s look at the benefits of offering financing:
- Historically offers a higher closing percentage
- Higher ticket values
- Higher efficiency systems sold
- More accessories sold
- More extended warranties sold
The lesson here – everyone wins, the heating and air contractor closes more jobs, and the consumer gets higher value and comfort from their new system.
The Low Price Rarely Wins
The roots of our industry stem from residential new construction or RNC. How do you win these jobs? Offering the lowest price is not always the best long-term solution for success in the Add-On Replacement or AOR business. Consumers are looking for value. The average homeowner purchases HVACR two and a half times in their life, so the purchase of a new heating and air system is few and far between. The consumer doesn’t know what it costs today. Most are shocked by the amount of the investment. Consumers want to make their purchase count. Let’s face it, replacing your home’s heating and cooling is one of the most expensive investments for homeowners. But how does the lowest price look to a consumer – psychologically? It looks like that’s not the best product or value.
Let’s look at this from the consumer’s eyes, you are Mr. and Mrs. Homeowner X, and your system is down and needs to be replaced. You decide to contact three different local contractors.
Contractor A: System price of $15000
Contractor B: System price of $12000
Contractor C: System price of $8000
All three are quoting similar products with similar efficiencies.
What has been taught to many consumers? The general rule for most is to get three estimates. Do research. Now, those estimates can be delivered, in most cases, in minutes, with the immediacy of online quotes. However, you are perfecting your price book, not begging for the job. So, let’s look at the average customer’s shopping behavior. What do most people do? They look at three estimates and then go with the one in the middle. The thought here is that the consumer perceives the low-price contractor as having left something of value out of the job, or they are desperate. How can the higher-priced contractor be almost double?
Take the Time to Sharpen Your Tools
Today’s consumer is very savvy. Take time to sharpen your presentation skills, upgraded your invoicing and tools – maybe add digital options if not eliminate paper proposals, and know your customers. And to help you do that, in addition to the presentation links above,I’ve added various software links for services that offer differ functionality and may also be peripherally helpful when perfecting your price book. Bonus – I’ve cut down on your research time and divided them into categories.
Management/chat software options include:
Job management software for tracking jobs, materials, labor, and costs which may also help when refining and perfecting your price book. See the following links:
Management coaching, consulting, and training to drive profit and growth:
And finally, a call tracking service for dynamic insertion call tracking:
Remember: as it pertains to presentation and proposals, first identify figure what type of customer you are presenting to, determine their needs, and deliver the proposal quickly. It will help you close more jobs at higher ticket values. Over time, if you follow all these best practices, you will have the perfect price book for your business.
Check out our article in the January 2023 issue of HVACR Business
Sincerely,
Will Merritt