Facebook Twitter LinkedIn Google+


Growing Sales Takes More Than Adding Salespeople

Originally published: 04.01.07 by Jackie Rainwater


It takes a formula, a plan, and ongoing execution.

Most residential and light commercial hvac contractors are intent on growing a large and profitable replacement, add-on, accessory, and IAQ retail business. When first attempting to grow this business, many contractors believe it will be fairly easy and straightforward. “Why, I’ll just hire a salesman,” I have heard many of them say. It would be wonderful if it were that easy, but unfortunately it is not. A good analogy for growing a successful retail sales department is what is required to build a large service-agreement customer base. Growing and retaining a large service-agreement customer base and then leveraging that customer base for continuing revenues, profits, and referrals requires careful planning followed by the ongoing 100% commitment of everyone involved in the process to successfully execute the plan. Building a successful retail sales and production department requires these same elements if it is to be successful. Adding salespeople in hopes of their producing retail sales of $900,000 to $1.5 million a year simply won’t happen without it.

At Peachtree Heating and Air Conditioning, the Atlanta-based retail hvac company I operated from 1990 until 2002, we employed eight residential retail Comfort Consultants (salespeople). 

We had


a residential service-agreement customer base of over 18,500 and a staff of 65 residential service technicians. About 80% of the sales leads for our Comfort Consultants were generated by our technicians while they were performing maintenance and diagnostic-repair work in the homes of our customers. The balance of our sales leads came as a result of referrals and marketing.

We carefully monitored certain critical Key Performance Indicators (KPIs) related to the overall lead-generation and sales process and used this information to effectively manage the sales process and the co-workers involved. See the chart on the next page for KPIs we tracked and our average results during the period of 1990 through 2001. 

Peachtree’s focus was 100% residential and light-commercial “retail” during that period. Examining the residential KPIs we developed and carefully monitored during that period leads to the following conclusions:

1. In order to sell $1 million in residential retail, a qualified salesperson will need about 518 “raw” (i.e., unqualified) leads. (Assumes the salesperson actually makes calls to 75% of those leads and sells to 51% of those customers with an average sale of $5,047).

2. Installing $1 million of hvac replacement, add-on, accessories, and IAQ will require about 1 1/3 two-man installation crews. (Assumes a two-man crew can install about $750,000/year with each person working an average of 44 hours a week, including seven paid holidays, for 50 weeks a year).

3. On average, three to four technicians should produce 80% of the raw sales leads necessary to support one salesperson selling $1 million in retail business. (Assumes each tech performs 1,000 service calls/year and produces sales leads on 10% to 15% of those service calls).

4. Sufficient marketing and referral programs are necessary to produce the remaining 20% of the raw sales leads needed for the salesperson to achieve $1 million in retail sales.

Hiring a salesperson, no matter how ambitious and skilled they may be, with the expectation of his or her producing $1 million in retail sales without first having the lead generation and production processes in place is simply unrealistic.

Carefully evaluate your company in relation to the KPIs outlined above to determine where you are presently. Then, take the necessary steps to build a viable retail hvac and IAQ retail organization. Simply throwing your hard-earned money towards advertising without such an organization is destined to fail. 

KPIs

Percentage of service and maintenance calls resulting in a technician-generated sales leads 15%
Average number of sales leads issued to each Comfort Consultant (annual) 638
Percentage of sales leads resulting in an in-home sales appointment by a Comfort Consultant 75%
Average sales appointments made by Comfort Consultants (annual) 479
Overall average sales closed rate by Comfort Consultant 51%

*Note: Closed rate for service-agreement customers — 65%
Closed rate for existing non-service-agreement customers — 45%
Closed rate for first-time customers — 32%
*Note: About 68% of all Peachtree’s sales were to service-agreement customers.

Average number of sales closed by Comfort Consultant (annual) 245
Average sale closed by Comfort Consultant (expressed in 2006 dollars) $5,047
Average annual sales per Comfort Consultant (expressed 2006 dollars) $1,232,305


Jackie Rainwater is a 46-year veteran and former owner of Peachtree Heating and Air-Conditioning in Atlanta. He built his businesses on service agreements. 



Articles by Jackie Rainwater

Establish a Primary Service Area (PSPSA)

Experienced and successful entrepreneur, Jackie Rainwater, discusses why it's important to designate a primary service area and how to do it the right way.
View article.

 

Building a Winning Company Culture

Would you like to triple your customer referrals? Increase your sales closure rate 10%? Cut your installation warranty cost 75%? Add 1% to your installation profits? Reduce the turnover rate of your installation technicians to less than 5%? Boost the pride and morale of your co-workers and your company’s reputation?
View article.

 

Managing, Monitoring Sales For Success

By properly managing the sales force, you can be certain that all sales leads are carefully tracked, and promptly pursued— thus bringing more money to the bottom line.
View article.

 

Proven Ways To Generate Sales Leads

Weather-driven sales certainly are a nice windfall when they happen. However, depending on temperature extremes to grow a viable hvac retail business simply doesn’t work for the long haul. In order to grow and prosper, the business must generate sufficient valid sales leads on a year-round basis.
View article.

 

How To Boost Your HVAC Accessories Sales

By educating customers about additional accessories, your company can increase sales and profit margins.
View article.