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Paths to Profitability

Posted on: Nov 03, 2020 by Angela Chapoy
 Paths to Profitability

For today’s enterprises, profitable growth is an imperative, not an option. It takes deep insight, smart decisions, and practical confidence to catalyze sustainable growth. The explosion of customer and market data creates enormous opportunities for organizations of all types. A search for the words ‘business growth’ in the books section of amazon.com generated over 50,000 results.

Success is less about new uniquely “growth oriented” management techniques, and more about disciplined commitment to activities already proven to bring success in the long run. We can all agree that there are three paths to growth:

  1. Get new customers
  2. Sell more stuff - increase your volume
  3. Sell better stuff - higher sales prices result in higher volume

Easy to do, right? Let's take a look.

New customers – do we need them and are they easy to get? First, accept that attrition is real. People go out of business, leave the industry, and sell their businesses. In fact, HARDI says distributors will experience an average of 10% attrition each year. That’s one in five HVAC dealers going out of business annually. Let’s face it, this business is tough. For every five dealers you know today, one will no longer be in business this time next year. That’s a very high churn rate! To add to that, one in five will switch brands in the next 12 months too. That really gets scary. Attrition is real and this makes the need for a steady flow of new customers critical. Is this a reality you readily embrace and address today?

Sell more stuff – of the customers that stay with you to stay in business you must be talking about growing your existing customers. Get them to buy more stuff from you. In order to grow your existing dealer base, you must understand the reality of what they do to sell your products.

According to the American Home Comfort Study, most dealers only offered the homeowner one home comfort solution. One choice. The survey reveals that homeowners in our space are being underserved. Most of them aren’t being offered a good, better, and best option. What homeowner puts their trust in a limited amount of options? 

Of the homeowners surveyed, less than half said they received a written proposal. This means that less than 10% of dealers use a professional kitchen selling sales tool like Allied’s HVAC Pro2Go proposal app. HVAC sales are not typically welcomed by most homeowners. They’re expensive, they’re disruptive and they are complex purchases to make. All the more reason to offer your customers sales training. This skill is critical to develop among your key dealers. Imagine close rates if we tackled a few key areas of improvement that could change the experience for homeowners of the dealers you have today. What if they could close just 10% more jobs? How would that impact your business?

Sell better stuff – the third path to profitable growth is to sell better stuff to the dealers buying from you today. We know there are surprisingly so many dealers that are still reluctant to offer financing. It’s a code we have to crack as a service to all homeowners seeking comfort from their new systems. Make it simple to offer financing and teach dealers how to do it on every job. You have the power to change their world with this one skill alone. Focus your financing training on building their comfort and confidence in the finance company you’re partnered with.

Another approach to sell better stuff is to break the old behaviors of the dealers in this industry who are conditioned to offer entry level products. Statistics show this each year. Dealers must break this cycle for their customers. When their competition offers better than a base system, who will the homeowner choose? Who would you choose to buy from?

So what can you do about this? We know customers leave and we experience attrition, we know improving close rates or selling higher end products seems like Mount Everest to most dealers. But, should we accept that? Just choosing to be a cork on the ocean, bobbing with the current or do you chose to do something about it for your dealers now? Many distributors are already tackling these opportunities but let’s go deep here and really test our assumptions and commitment to profitable growth.