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Author: Jeff Revlett | January 6th, 2023

Tips for Territory Managers – Key Points for Dealer Growth

As a Territory Manager (TM), sometimes it is easy to identify when your customer is struggling financially. Many of those signals include being late on payments, high levels of warranty returns not being processed in a timely manner, poor credit scores and a general lack of understanding of accounting and measuring profitability. This should not really come as a surprise, given the origin of many contractors. The majority of HVAC contractors got their start as technicians working in the field and, although they can be very knowledgeable when it comes to troubleshooting HVAC systems, most have had no formal training in running a business. This fact becomes even more complicated as the business grows. Many TMs ask me, “Should I really be concerned about this when the business is small and the owner does everything?” My answer is absolutely “yes!” — especially if they want to grow. Because even though the business may be small with a small staff, you should encourage your dealer to set up a structure that they can grow into that will save a lot of pain later on.

Here are a few strategies that I recommend for TMs to discuss with dealers.

1. Create a Vision for the Company

    • This seems like a simple task for someone starting a business. However, many contractor-owners get so busy from day one when they start the business, they get overwhelmed with the day-to-day operations and don’t devote time to think about long-term strategy. This does not take a lot of time and can be done by answering one simple question:

    • What does this company want to be seen as, both in the marketplace and internally with the employees?

      • An example of this could be “ABC Heating and Air is the premier service provider in our market.” (Notice how this is written in present tense as if we are already there.)

        • The vision needs to be created by all the employees in the company. If this is only done by the owner, it only belongs to him or her, and not the rest of the team.

        • The vision needs to be written, displayed and discussed on a regular basis. I also recommend this goes on the company website and written materials so that everyone is fully committed to it.

        • There has to be a plan of what all the steps and processes are that need to be put in place to achieve and maintain this vision. In this example, it must be determined what defines a “premier service provider”.

2. Create an Organizational Chart

How many of you have ever heard your dealer complain by saying something like, “I have to do everything; I sell, run service, install, dispatch, deal with customer complaints, and the list goes on”? Clearly, this is not a sustainable business model and will lend itself to frustration and burn-out. I am sure you have also heard the comment, “I don’t want to keep doing everything myself forever.” The solution to this problem is to start looking at the company structure down the road rather than the here and now. Here are some thoughts on how to create that type of organizational chart:

    • Put titles in the boxes of where the company will be during the next growth stage.

      • For example, if the company is at a half million in revenue now, what are the positions that need to be added on at million, then two million and so on?

      • Keep in mind that positions such as sales manager, service manager, customer service manager, etc., may not currently exist, but it is important to go ahead and label the boxes with titles. In a smaller company, it may be the same person under all those titles, but it is important to have it listed so that, as the company grows, that individual moves out of that box and someone else steps in.

    • Create detailed job descriptions.

      • As the titles go into the organizational chart, it is vital that all the responsibilities, duties and expectations are documented. This point is critical because, as the company grows and new people step into new roles, there is no guesswork about the work that has to be performed. Unfortunately, many contractors approach this from a standpoint of getting a person hired or promoted and then figuring it out as they go. This approach will create frustration for both the person going into the position as well as the hiring manager, due to not having clear expectations.

      • Create a defined training plan for each position/title in the organizational chart.

        • An example of this would be an owner stepping out of a role he/she is currently doing as a service manager and promoting a technician to that position. Even though the technician may have the technical skills, they must also learn the skills to deal with people and communicate with other technicians, as well reporting functions and overall department management skills required for this new role. I always advise contractor owners this very important rule, “Do not set up the promotion to be a failure.” This is an owner or hiring manager’s responsibility. Otherwise, you may lose a good employee and the owner goes right back into the service manager box.

3. Create an Exit Strategy

There are many reasons why an individual gets into HVAC contracting business ownership. Often, they just want to do their own thing. Perhaps they had a falling out with their previous owner. Other motivations may be simply thinking they can run the business better than where they are, or feeling like they can make more money on their own. There’s no right or wrong answer as to why people get started in the HVAC business. However, what is wrong is that so many people start a business without the end in mind. Things get busy early and then they just go, go, go on daily operations and putting out fires. This cycle continues for years and they then get to a point of, “I don’t want to do this anymore!” What happens then? Sadly, I have consulted with many contractors that get in this position only to realize they have no plan to get out. This is not a pleasant conversation. More than once I have talked to a husband/wife team that have struggled for many years only to find out they cannot sell the business for what they think it is worth. Again, this is not a difficult concept, but it does require time to think about the future. One of the best things a TM can do for a new dealer business is to advise them to not even start without knowing how it ends.

Here are a few questions that you can ask to help advise your dealers in this area:

    • Will there be family members that will carry on the business?

    • Do you want to have an employee(s) buy out?

    • Do you want to sell to a private equity firm?

    • Are you interested in selling to a larger company or consolidator?

There are no right or wrong answers to this question. The key is to have the questions answered before starting.

Once the dealer has an exit strategy, and a decision is made to sell at some point, it is important to understand what the most attractive features are for a potential buyer.

As a TM, here are some critical factors you can discuss with your dealer regarding how to create value:

    • Accurate and timely financial reporting

      • Profit and loss

      • Balance sheet

      • Cash flow forecast

      • Reporting no later than the 5th of the following month

    • Departmentalization

      • Each area of the company has its own P&L

      • For example, service, replacement, commercial, new construction are all reported independently and rolled up to a total company P&L.

    • Quality of earnings

      • What is the revenue and profit mix by department?

      • Typically, companies with a higher percentage of add-on replacement and service revenue is more attractive due to the fact it is more repeatable, normally has higher margins and does not have receivables.

    • Repeatable revenue

      • Maintenance contracts are without a doubt the holy grail in this area

      • Contracts are repeatable, sustainable and create a guaranteed revenue stream

These are some examples of where TMs can have very meaningful conversations with dealers that can change their businesses and ultimately change their lives. For that, you will create a customer for life.

Please refer to numerous articles in the Contracting University Library for more information and details around these topics.