by Stan Butts
There's an old saying, "If you don't take care of your customers, someone else will." Taking care of your customers is the whole point behind facility solutions.
It's great to be a mechanical contractor, and in our profession we can take care of a specific set of our customers' needs. But just being a mechanical contractor, and limiting your customer service to one specific set of needs, is old school thinking.
If you want to keep your customers happy in the brave new world of the 21st Century (or, more importantly, keep your customers), you need to be come their total building consultant by implementing and coordinating multiple services to meet their multiple needs. The most important among these are HVAC, lighting, and trash management, but can include any service a building owner needs.
Before you turn the page and say, "Well, old Stan has gone off the deep end," consider the benefits of offering facility solutions:
- Your customers view you as irreplaceable
- You lock customers in for years
- You provide a package of services that no one else can offer, so there's no bidding
- Your profit margins are high
- You get paid promptly.
What You'll Need
There are few key points to keep in mind when you offer facility solutions.
You are going to guarantee specific results at a specific price to your customers. Be prepared to stand behind your services.
You'll need an excellent P.E. on staff, one who is also a certified energy manager (CEM). People with both qualifications can be hard to find, but you absolutely need both. If you have a strong P.E., consider training him or her as a CEM.
Carefully qualify any building owner candidates. Get a signed letter of intent from the customer before you move ahead.
When you sign a contract to provide services that are outside the scope of your expertise, you'll need partners. Be careful about the companies with whom you choose to partner.
I work with national trash collection and lighting companies, and I'd be happy to share their names with you if you contact me.
If you'd prefer to identify your own
partners, that's fine. In the case of lighting, call the largest electrical supply house in your area, and ask them who their biggest contractor customer is. Then, set up a meeting with that contractor.
Trash collection is fairly easy — all it really involves is replacing dumpsters with compactors. It's not the trash itself that costs a building owner, it's collecting it. If you can use a compactor to reduce visits from the trash hauler from four or five days a week to twice per week, your customer is going to save money.
The investments a customer makes in lighting and trash collection have much shorter payback periods than does the investment in HVAC equipment. This quicker payback allows you to incorporate your mechanical systems into the project and still get a payback period of 10 years or less.
Financing is Crucial
A crucial element in making facility solutions work is financing. You need to help your customers set up the funding they need to pay you.
For commercial building owners, options include acquiring a second mortgage, refinancing their properties, or setting up a current period operating lease. This last option is often attractive for building owners, as it allows them to pass the expense to the tenants. Tenants are already paying for utilities through their lease payments; this mechanism allows them to help finance the improvements that will ultimately reduce the building's (and their) utility bills.
For schools, municipal leases are the most common financing methods.
All of the work is negotiated. There's no bidding, and the customer must accept all of your services as a package. Don't break down the costs of services. Give the customer one bottom-line number to consider.That number includes the cost of the new equipment, plus your ongoing services, and it's often less then what the building owner is currently paying now, with old, outdated equipment.
In the process, you are no longer selling HVAC. You're selling a vehicle to improve a building's infrastructure. To the building owner, price becomes a non-issue.
Meanwhile, since you have structured the payments as a lease, you receive your payment immediately upon project completion. The customer writes a check every month, but he writes it to the lending institution that has already paid you.
If You Don't, Someone Else Will
Facility solutions may seem like a major leap for an HVAC contractor. It's not. It's a way to get the work you want (the mechanicals) while ensuring a payback period for a customer's investment that mechanical systems alone often can't deliver.
Show your customers a spreadsheet that illustrates the 7-, 10- and 15-year revenues and expenses they'll be looking at from working with you. The only expense will be the lease or other financing mechanism that's going to pay you. When building owners see that they can pay less for the same services they're receiving now, plus mechanical and lighting upgrades, do you think they'll ask, or even care, what your margin is?
My partners and I purchased Indoor Environmental Services three years ago. Back then it was a "traditional" commercial HVAC firm. With the addition of facility solutions, we've taken it from a $4 million company to a $20 million company in three years, and we've improved our gross margins.
If that's not reason enough to consider this opportunity, think about this: if you don't offer facility solutions, someone else eventually will. And the first part of that company's implementation process will be to kick the existing service company right out of the door. •
Stan Butts is vice president of Indoor Environmental Services, Sacramento, CA. He can be reached at 916/988-8808, or firstname.lastname@example.org.
Stan Butts was a speaker at the 14th Design/Build Seminar, which was held December 3-5, 2003 in Orlando, FL. The focus of the program was "Take Back the Process," and featured dozens of seminars, panel discussions and business opportunity sessions for Design/Build contractors. Articles from the seminar will appear throughout the year in Contracting Business magazine.
For more information about the 2004 Design/Build Seminar, which will be held in Orlando Nov 30- Dec. 3, 2004, contact Kelley Whetsell at 440/260-0311.