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The Trends

There are many common threads apparent in these benchmarking companies, too many to go into full detail in this paper, but I will hit a few highlights.

Here are a few of the interesting trends:

• Billed in excess: the top contractors in the U.S. do an excellent job of “staying ahead of the billing curve,” in that they bill ahead of their costs coming in. The benchmarked group bills an average of 40% of their monthly revenue ahead of incoming costs. This is an excellent way to produce healthy cash flow trends.

• Collections: the top contractors do an outstanding job of collecting money due to them. On average, these outstanding contractors have only 10.9% of their total A/R aged over 90 days. A percentage such as this is very good considering the economic headwinds we are all facing. This achievement is a testament to their excellent efforts in the credit/collections arena as well as a testament to the quality of their client base.

• Product line diversity: the more the better. The benchmarked group had an average of nearly 11 different service offerings for their clients. The more services you can sell your clients, the more they need you — and the less likely they'll be to turn to a competitor.

• Specialized sales efforts: 91% of the benchmarking group had a specialized sales force, meaning that they had separate project sales personnel and contract sales personnel. Nearly 100% of these companies have significant maintenance contract bases. The best and fastest way to get there is to focus with specialized sales.

• Focusing “on” the business instead of “in” the business: The leaders of the top HVAC contractors in the country spend a significant amount of time focused on strategically improving their business. They don't get wrapped up in the details of day-to-day issues. In fact, on average, the leaders of the benchmarked group spent more than 30% of their time working “on” their business.

Attention to Training

The top contractors sent nearly one-third of their technicians each year to receive training provided by product manufacturers. This number surprised me, considering the cost of this training. In retrospect, however, it's great to see so much effort and expense being put into training.

Many of you have heard of this exchange:

Q: “What if you spend all that money on training an HVAC technician, and then they leave?”

A: “What if you don't spend all that money on training and they stay?” Which is worse? I leave you to decide.

• Marketing: within the benchmarked group, 55% have a professional PR firm on retainer to produce and distribute press releases. This number was surprising to me, and it shows the level of marketing sophistication of our industry has increased significantly in the last 25 years. We're no longer the purely “face to face” sales business we used to be.

• Technology usage: 91% of the top contractors surveyed indicated they were on the “leading edge” or even “bleeding edge” of technology. The use of technology whether it is in the field or in the office is now a requirement of business. Those that don't embrace it will be left behind.

• Website presence: in light of the technology statistics mentioned above, it's surprising that only 45% of the top contractors have a website that's updated a minimum of every 60 days. Statistics have shown that only websites that are updated frequently are the most effective.

This relatively low percentage would indicate that perhaps the visibility and usage of websites isn't as important today in our industry as it is in others. My guess would be that this number will go up over time.

These trends and surprises from my benchmarking survey are just a few of the insightful nuggets of information that emerged from this study. For other commercial contractors, I suggest that the best way to get the most out of this study is to participate in the survey yourself.

Alan Barnes, Jr. is president of Mechanical Insight Consulting, Inc., Atlanta, GA. Barnes began his career with Aircond Corporation, his family's commercial HVAC service contracting business. He was later named chief operating officer of Aircond. When Aircond became part of the EMCOR Group in 2002, Barnes continued as president, and later as executive vice president in charge of acquisitions for the mechanical systems division. He has more than 20 years of experience in HVAC business management. Visit www.mechinsight.com for details on how to take the benchmarking survey, and receive the Mechanical Insight newsletter.

This presentation is based on “Key Characteristics of Leading Mechanical Contractors,” which Alan Barnes, Jr. presented during the ContractingBusiness.com Commercial HVAC Symposium, Sept. 24-25, in Nashville. Visit www.cgbconference.com for information on this year's symposium, Sept. 22-25, Baltimore, MD.