The fables HVAC residential contracting business guru, Freon McCharge is interviewed by the legendary Matt Michel on the industry, the economy, and the government.
Recently, I ran into Freon McCharge at an HVAC trade show and he agreed to answer a few questions about the state of the industry. If you don’t know Freon, you’re missing out. Just ask him. He’ll tell you. He sure told me. Yet, for all of his gas, Freon is a pretty cool customer with some valuable insight. Here’s what we talked about:
Should contractors be worried in 2013?
“What, me worry?” answered Freon, who coincidentally looks a lot like Alfred E. Newman, but with less fashion sense. He continued, “Most of the things contractors worry about, never happen. Yet, the act of worrying freezes many into inaction, which is a cause for worry. I say, pay less attention to the news and more attention to your business.”
What do you think of performance contracting?
“It’s a lot less complicated than people make it out. Test the envelope and ducts. Fix them. Design the right comfort system for the structure and occupants. Test everything when you’re done. How hard it that? Of course, it can bankrupt you if you aren’t careful. Too many contractors lack an understanding of the impact of overhead that results from labor.
Performance contracting is labor rich, so you better make sure you charge enough to cover the additional overhead or you’ll be a non-performing performance contractor.”
Is America anti-business?
“Absolutely. So what? What are contractors going to do, get a government job? They would go insane.
“Look, few legal occupations enjoy more freedom than contracting. And, as bad as the regulatory environment seems, we’re far better than most of the world. Can you imagine starting a business in France? Yet, somehow people manage to do it and prosper. It’s much better in the good ol’ U-S-of-A.
“Besides, it’s not like being anti-business is new. America’s been anti-business since the Roosevelt administration. At least the top marginal tax rate isn’t 90% like it was in the 40s and 50s.
What if I want a place to invest money?
Where can you get an unreasonable rate of return? “About the only place is in your own company. Invest with anyone else and you’re making a bet. Personally, I would much rather bet on myself and bet on a company where I’ve got the ability to influence the outcome.”
How are you going to pay for Obamacare? "
I’m not. My customers are. Ultimately, the consumer pays for everything. If my costs go up, so do my prices. The alternative is to subsidize the customer. If I hold the margins the same, I’ll drop more dollars to be bottom line. Be grateful we work in an essential industry. For example, an Alabama fan will live without football before he lives without air conditioning. Well, maybe an Auburn fan.”
I reminded Freon that he wasn’t a “Bamer”. He came back, “Yeah, but they’re the most fanatical. Who am I supposed to use, Texas “Aggies?” You’ve lived without football most of your life. Well, decent football.”
What will be the biggest problem most contractors face?
“Besides the six inches between their ears? Most contractors will say it’s getting the phone to ring. I say, it’s putting forth the effort and investment to make the phone ring. Right now, when most of the competition is running scared and trying to save their way to prosperity, it’s the perfect time to increase marketing. People still need air conditioning. If my competitors aren’t marketing and I am, I’ll take a fair share of their existing customers and more than my share of the prospects-at-large.”
What’s the next biggest problem?
"Again, there’s the problem and there’s the complaint. Most contractors will say finding technicians is a problem. I say it’s paying them well enough, giving them good enough benefits, and treating them well enough, that the good ones are trying to find you.
"Remember, hire slow, fire fast. And just like you married above yourself, hire above yourself.”
What should most contractors do that they aren’t doing?
“Make themselves unnecessary and find a way to get rid of the business down the road. Remember, if your company can’t function without you, you don’t own a business, you own a job — a job with lousy hours and an egotist for a boss.
“Every contractor who doesn’t want to die with a set of gauges in his hands should be working on an exit strategy. Give it to the kids. Transfer it to the employees. Sell it to a third party. Ultimately, it’s the only way your business will pay off as an investment. Otherwise, it’s a lifestyle business. You can probably have a better lifestyle working for someone else.”
Thanks to Freon McCool for sharing this advice.
Matt Michel is CEO of the Service Roundtable (ServiceRoundtable.com). The Service Roundtable is an organization founded to help contractors improve their sales, marketing, operations, and profitability. Call toll free: 877/262-3341 for more information about how to join.