Tag Archives: tips

Are you different than your competitor?

This is what we all strive for in HVAC retail sales.

Why would Mr. & Mrs. Homeowner choose me when most likely they have at least 3 bids and they are most likely confused? I gave them a Good, Better, Best offer so they can choose which system fits best into their budget. But wait a minute, didn’t your competitor give them three options also? And the next company gave them 4 options. And on. Now they have 9 – 12 new system options. Whew!

With potentially 12 options sitting on the consumers dinner table, how do they choose the right one for them?

Let’s start with the System Solutions questionnaire. This means you must dig into the homeowners needs, wants and expectations. Hot spots, cold spots, allergies, the wood accents in the house drying and cracking, finishing the basement, want a quieter system, overall comfort level in the house, efficiency or carbon footprint desired, budget, etc. These are all important topics for the questions you must ask. But wait, asking is not the only vital part. The key to success is LISTENING! Then the key is successfully communicating your System Solutions for their needs, wants and expectations.

“I wake up in the morning with a bloody nose sometimes on a really cold winter morning.” “Wow, Mr. or Mrs. Homeowner that sounds serious and like something we need to address. Would you like me to include an option to take care of that in my System Solutions?” “Yes, absolutely.”

Now, almost every one of your competitors will put a humidifier on this system but do they quantify why they choose the humidifier they offer? Doubtful? Do they size it according to the structure needs? Doubtful. Do they explain why they have chosen a 2-stage furnace or a modulating furnace to get more run time to keep the humidity level more consistent? Doubtful.

The key is being a counselor, teacher, informant, etc. The key is digging the emotion out of each of the needs, wants and expectation. Your homeowner has most likely done some sort of research on a new heating and air conditioning system on their phone. The information they perceive to be accurate may or may not be. You must be patient in your questioning, listening and your delivery of the proposal of your System Solutions. Make sure to show them how you considered their budget with your System Solutions. You can get 14 SEER out of the 13 SEER Air Conditioner with the appropriate matched standard ECM motor in the 2-stage furnace, as one of the options. Now you not only provide them with the solution for a great furnace to help with a more consistent humidity level in the house but you also differentiate your company because you gave them a 14 SEER system using a 13 SEER A/C which costs them less money to install than the competitor who gave them a 14 SEER A/C and a standard PSC motor in a single stage furnace. Give them the relief of knowing you are the right person and company before you leave their house.

These are just a few ways to create differentiation from your competitor and win the trust of the homeowner. You earned their trust, took care of their needs, wants and expectations, as well as listened and communicated effectively.

Good Selling!

cfm Tech Tips – SSE (Simplicity Smart Equipment) Control Boards

York Commercial Equipment is currently manufactured with Simplicity SE controls. These controls are dynamic and versatile. An SSE Control Board can be programmed (in the Factory or the Field) for use in a Constant Volume unit, Variable Volume unit, Single Zone VAV unit, Fixed Variable (also known as Intelli-Speed), Reheat Unit, Split System Condensing Unit or Heat Pump. The control board comes with a Joystick, Enter Button, Cancel Button and Display Screen to facilitate programming in the field without a computer. This Tech Tip will help familiarize you with the programming steps for SSE Control Boards.

Factory Programming & Default Settings

New units are pre-programmed at the factory with default settings to accommodate unit operation as built. Every RTU is built with 3 sensors – Supply Air, Return Air and Outdoor Air. As shipped – any RTU can operate stand alone with the on-board sensors, or can operate from thermostat inputs. This results in flexibility when changing out a unit. Say you need to operate the unit immediately after the changeout and intend to operate from a thermostat, but the thermostat cable needs replacing and you need the unit to operate while pulling new thermostat wire. Simply set the unit to run on sensor operation. It will operate from its Return Air sensor until you connect the thermostat. Communication (BacNet, N2, Modbus, etc) is also available for BAS operation.

The Unit Control Board

The Unit Control Board communicates with the Economizer via the SA Bus, thus all programming is done through the Unit Control Board, making economizer setup very simple.

To program from the front of the board, use the joystick to scroll down to the desired menu option. With the cursor (>) in front of the desired option, press the enter button. Use the joystick to scroll to the next required option and again hit enter. Once you get to the desired setting, move the joystick sideways to change information while the display is flashing. Hit enter to save the information. The attached points lists are divided into sections for ease of finding information and navigating the control to make changes.

Example: Details > Control > Econ > Setup > Econ-MinPos

This shows the pathway in to change the economizer minimum position setting.

programming options

Use the example scenario & programming guide below as a reference while replacing a Unit Control Board.

A control board needs to be replaced in an existing unit.

Option:
  1. Available if the board is powered and displaying information on the screen.(Best Option)
    1. Plug a flash drive into the USB Port on the front of the control board in the unit.
    2. Using the attached points list, navigate to Update > Backup, and hit Enter.
    3. The current setpoints will be saved to the Flash Drive.
    4. Install the new Control Board and power it up.
    5. After countdown is complete, insert the Flash Drive into the new Control Board.
    6. Navigate to Update > Restore, and hit Enter.
    7. The original settings will be uploaded to the new control including Model and Serial numbers.
  2. If a flash drive isn’t available when the control board is replaced.
    • Use the ‘Quick Points List’ making sure all points marked with an asterisk are set correctly for the unit.

Not every scenario can be listed in this article, but the method is the same for any programming requirement. Use these Additional Materials for ease of navigation.

Additional Materials:

Quick Points List – Partial list of program points, for use when replacing a board or commissioning a unit.

SSE Master Points List – Full list of program points, for use as needed.

Sensor and Fault information

SSECombo1HR.jpg

Replace a PSC direct drive blower motor

If you’re in need of a PSC direct drive blower motor or just looking for a simple guide on how to replace one, cfm has you covered! We’ll be using the Evergreen motor in this example, so the same process won’t apply for a belt drive blower. We broke the process down into three segments, with a handful of sub segments to keep it simple

Pre-Installation

Suitable Applications:

The Evergreen motor is designed as a replacement motor for use on the following types of HVAC systems.

  • PSC Direct Drive Blower Motors only (Not for use on Belt Drive Blowers)
    • 115 or 230 VAC
    • 1/5 HP thru 1 HP
    • Residential and Light Commercial
      • Split Systems and Packaged Units
    • Clock-wise (CW) or Counter Clock-wise (CCW) rotation

Before Installation:

  1. Make note of the current motor speed selections.
  2. If the Existing blower motor is operational –
    1. Record the Total External Static Pressure (TESP)
    2. Record the Temperature Difference across the unit in Heat Mode and/or Cool Mode

Installation of the Motor:

Motor Bracket and Mounting:

  • The Evergreen motor requires a belly band style mounting bracket.
  • The Evergreen motor is a NEMA 48 frame.
    • This is the most common frame size for indoor blower motors.
  • If the original motor has the same frame size, the original mounting bracket should work.
  • If not, a new motor mount may be required.
    • The belly band must fit the motor properly.
    • It should be tight enough to prevent the motor from shifting on start-up

  1. Remove the blower assembly from the unit.
  2. Loosen the blower set screw.
  3. Remove the motor mount from the blower housing.
  4. Remove the motor from the motor mounting bracket.
  5. Position the new motor into the mounting bracket.
    1. Do not cover any motor vents with the bracket.
  6. Reassemble the motor mount to the blower housing with the new motor in place and the electrical connections facing down.
    1. Position the electrical connections between 4 and 8 o’clock.
  7. Center the blower in the blower housing.
  8. Position the blower set screw on the flat portion of the shaft, tighten securely.
  9. Replace the blower into the equipment.

Electrical Connections:

  • Evergreen electrical connections consist of three sets of motor leads –
    High Voltage Power Leads
    • Connected directly to Line Power
    • Powered at all times the unit is powered.
    High Voltage Communication Signal Leads
    • Connected to the control terminals that previously operated the PSC Motor
    Low Voltage Communication Signal Leads
    • Connected to the thermostat terminals of the control
  • The motor comes with a yellow jumper installed in the electrical plug and a white jumper shipped with the motor.
  • These jumpers are used to select the voltage in which the motor will be used.
    • If the motor is being installed in a 230V application, leave the yellow jumper installed in the motor plug.
    • If the motor is being used in a 115V application, remove the yellow jumper and replace it with the white jumper.
High Voltage Power Wires:
  • A Black Lead and a White Lead.
  • Provide operating power to the motor.
  1. Connect the Black L1 wire of the Motor to Line Voltage
    1. L1 on 115VAC systems.
    2. L1 on 230VAC systems.
  2. Connect the White L2/N wire to L2 or N
    1. L2 on 230 VAC systems
    2. N on 115VAC systems
  3. Connect the Green w/Yellow stripe ground wire to any cabinet ground within reach.
High Voltage Signal Wires:
  • A Black Lead and a Red Lead.
  • These leads determine the Horse Power selection and give the motor a run command.
    • When high voltage appears on these signal leads, the motor will operate at its lowest speed at the predetermined Horse Power rating.
  • Connected as follows:
    Red only with Black taped off
    Lowest Horse Power rating
    Black only with Red taped off
    Mid Horse Power rating
    Black and Red together
    Highest Horse Power rating
  1. Connect the lead(s) in parallel to all of the motor outputs from the control.
    • IE, if the control wants the motor to operate for any reason – High Heat, Low Heat, High Cool, Low Cool, Fan Only, the signal lead(s) receive high voltage power.
  2. Identify the horse power rating of the original PSC motor.
  3. Use the chart in the installation instructions to determine which High Voltage communication connection(s) to use for the desired horsepower rating.
Low Voltage Communication Signal Wires:
These wires communicate to the motor that there is a call for Heat or Cool and the motor speed must be modified.
Yellow
High Speed
Orange
Medium High Speed – (Available for ‘Y’ connection – See Diagram Below)
Brown
Medium Low Speed
White
Low Speed – (Available for ‘Y’ connection – See Diagram Below)
Blue
Common (Low Voltage)
  • Evergreen motor speed is selected by the low voltage inputs powered directly from the system thermostat terminals.
  • The Low Voltage Communication Signal Wires are connected to the thermostat terminals on the control board.
  • Unused Motor Communication Signal Wires are taped off and not used.
  1. Connect the Low Voltage Signal COMMON wire to the common thermostat terminal.
  2. Connect the desired speed(s) – Low Voltage signal wire(s) – to the appropriate HVAC System thermostat connection(s).
  3. Select Low Voltage Communication wires for speeds that best suit operation of the equipment.
    • Select a heating speed that operates the equipment within the correct temperature rise for heating.
    • Select a cooling speed that gives approximately 400 cfm per ton of cooling.
  4. If the same motor speed is required for both Heating and Cooling operation, you must use the ‘Y’ connection provided with the motor.
    • Follow the installation instructions with the motor to apply it.
Important Note:
The ‘Y’ connection can only be used with the Orange or White Motor Leads

Labeling & Data Entry:

  1. Install the System ID Label on the HVAC system near the existing wiring diagram.
  2. Enter the Evergreen data.
  3. Record the Horse Power of the motor and the Date of Installation for future reference if needed.

Post-Installation of the Motor:

  1. Confirm airflow is matched to the systems performance requirements.
  2. Measure airflow with industry accepted instruments.
  3. Confirm the temperature rise on all fossil fuel heating systems to meet the OEM data plate specifications.
  4. Adjust the speed selections to achieve the design CFM per ton of cooling.

If you’d like to see an install guide for replacing a belt drive blower motor, leave us a comment below with some details of your project. You can also find Evergreen replacement motors & additional details via the cfm eStorefront.

Download the original service letter:
Evergreen-motor_Tech-Tips-TT-01-17_April-2017.pdf (129 downloads)

Energy Analysis Case Study – Unit Heaters vs Tube Heaters – Part II

Earlier this spring we wrote a blog post discussing why you might choose unit heaters or tube heaters for your heating only project. The article detailed how each type of system worked, which applications were ideal for each style, and which applications were not ideal. But it was missing something. Where was the real world example? How do we actually determine which heater style is best not just in theory, but with numbers to back it up? Great questions! Let’s look at a real world example now.

A couple weeks ago we received a call from one of our really good customers who asked for some product selection assistance on a project he was working on; a 96′ by 78′ workshop with a multi-tiered roof line. We were asked to do a load calculation and help the contractor select the best type of system to heat the space based on the customer needs. Here’s how it all went down.

We met with the customer on the first cold morning of the year. It was about 40 degrees outside with a 20 MPH north wind, and the day before was 77. The regret for not meeting 24 hours earlier was sky high, but since you really don’t care we will keep moving on.

This is a large, 3 section barn under construction with most of the steel frame still exposed.

This barn will be the project site for our energy analysis.

The owner was not on site when we arrived, so we started to assess the half constructed building so we could get an idea on heat load. The structure was a butler style building with a metal shell, and the walls and ceiling had R-13 plastic wrapped insulation. The long side walls were 10′ tall, and as you moved to the center there was a pair of 18′ peaks, and then a 26′ peak in the center. The long north wall had six 10′ x 10′ overhead doors, and the east and west side each had one 15′ x 12′ and two 12′ x 10′ overhead doors.

The owner finally arrived as we started to put on our thinking caps. After doing hundreds of load calcs similar to this building, we estimated 45 btuh per square foot which came out to about 335,000 btuh of heat load. But before coming up with a solution, we better ask the owner what he wants. After all, it’s his building. Who cares what I think he should do.

cfm: “So what are you looking to do with your space?”
Owner: “Just want to keep it from freezing. We might have a gathering in here every once in a while, but we aren’t that particular on keeping it really warm”
cfm: “What temperature do you want to maintain on the coldest day of the year?”
Owner: (after a long drawn out story about all the examples he might run into) “There might be times we would like it to be 60 degrees”
cfm: What type of power do you have?
Owner: “We don’t have natural gas. We are bringing electricity over here next week”
cfm: “Would you be interested in using propane? It will save you a ton of money on utilities”
Owner: “Yes”

The conversation continued, and we got into what type of equipment he wanted. The owner had done some research and he was interested in tube heaters, although he wasn’t totally convinced yet. We all agreed with tube heaters (for now) and came up with a good product selection based on the 335,000 btuh load, and then mentioned it was subject to running the numbers. We of course checked our clearances based on the tables in the installation manual to make sure we weren’t going to be too close to any combustibles. We also discussed how the heat distribution patterns would work, with most of the heat coming from the burner boxes and then a decreasing intensity the further away you went. So far the owner liked what he was hearing.

Load Calculation & Energy Analysis Results

So here is the really fun part- now that we have all the information, what is the best solution for this customer? Infrared like he asked for? Or are unit heaters a better option? We certainly don’t want to try to “sell him” unit heaters when he asked for tube heaters, but one or two of you (being a little facetious here) may have an experience in the past with an owner “wanting” something, but then changing their mind once they see the price. So how do we quantify the right solution? We run a cost analysis showing payback and return on investment (ROI).

Here are screen shots from the load calculation and the energy analysis we ran. You might notice that the load ended up being about 315,000 btuh, close enough to the estimated 335,000 load from earlier that we did not make any selection changes.

Load calculation assumptions and building sensible loads:

Image showing the results of a load calculation for determining heat load.

Load calculation assumptions and building sensible loads.

Load calculation net loads:

This is a chart showing the load calculation net loads for the case study site.

Load Calculation Net Loads

Energy payback analysis:

This is a visual comparison between the two heating options and their cost of ownership.

*The price of propane we used was $1.75 per gallon
**Owner equipment cost is estimated and does NOT include installation labor, gas or flue piping, electrical, thermostat wire or hanging hardware for the unit heaters.

Analysis Results:

The tricky part about running an energy analysis on infrared is there are no published efficiencies. So what do we use? Well, we know the flue gases don’t condense, so our combustion efficiency can be no more than about 82 or 83%. But one thing we do know is infrared keeps the heat down low to the floor, which will reduce the heat load on the roof (our delta T between the ceiling and ambient air will be far less with tube heaters which will reduce overall load). And our air changes will also be reduced, especially since the ceiling is 26’ tall in the center. With forced air, the ceiling air will be warmer and it will want to leave the building much faster than the radiant solution. So to account for both of these factors, we reduced the roof load and the air changes per hour to come up with an effective “radiant heat” heat load of 270,000 btuhs.

Chart showing the energy analysis results for payback and ROI.

In this particular case, based on our results we can see that installing tube heaters would be the best option.

The moral of the story will be different for every job. But for this project, it probably makes sense for the owner to proceed with tube heaters. A 3.7 year payback is pretty good, and it’s hard to argue with a 26.7% ROI. You won’t find that kind of return in the stock market, unless your name is Warren Buffett. And in that case you’re probably not reading this article.

What has been your experience with tube heaters and their energy efficiency compared to 80% unit heaters? Do you have any jobs that we can help you look at? Just ask us in the comments below, or give us a call toll-free @ 1-800-322-9675

Blue image with text which reads the title of the blog article

Tube Heaters or Unit Heaters? Let the Debate Begin

This is one of the most common questions we get during the fall and winter seasons. Owners want to know what type of heating equipment they should use for their commercial warehouses and buildings, especially in their heating only applications. And for good reason; it is a tricky question. Before we get started, keep in mind that tube heaters and unit heaters aren’t the ONLY solutions. The application might be better served with makeup air units, air rotation units, packaged rooftop units, etc. But the majority of the owners are deciding between these two solutions, so for now let’s focus here. So, should you install tube heaters or unit heaters in your space? Well…? It depends.

The short answer is, if you have a lot of air infiltration from dock doors, or have a partially outdoor space (like we do at the cfm Distributors dock), tube heaters are typically a much better solution. Why? It is all in how the tube heater is engineered to deliver heat to the space. Infrared tube heaters consist of two main sections, the burner box and, typically, 4″ round metal tubes that are anywhere from roughly 20′-80′ long with polished reflectors. The burner box delivers hot gas to the tubes, making the tubes extremely hot, and the heat radiates from the tubes to the space. That radiation heat warms everything in the space, except the air. It heats the floor, it heats the walls, it heats the people and everything else in the space. So even if you have a rush of cold air coming in, it still feels warm with the radiation hitting you.

We experience this same exact radiation every day from the sun. Imagine it is a brisk 45 degrees outside, which would normally feel chilly, but if the sun is out and shinning on you, you might actually be warm. Or, when you are driving in your car and it is cold outside. You probably have a jacket on and the heater turned up; but, if the sun is out, you would start to get hot after a while. These are both examples of how infrared tube heaters work.

Shop Reznor Unit & Tube Heaters now on the cfm eStorefront @ cfmkc.com/goreznor

Shop Reznor Tube & Unit Heaters now on the cfm eStorefront @ cfmkc.com/goreznor

Tube Heater Layout Design

This is a lot easier than you might think. There are just a few things to keep in mind when designing a tube heater job. Let’s say the application you are working on is a 10,000 sq/ft warehouse, with 20 dock doors. This process of designing a tube heater job can be broken down into two steps:

  1. Load Calculation
  2. The first thing to do is a load calculation; which, if you need help with this, please call your territory manager for assistance. We would love to help! Remember too, it is important to know when you are running your load calculation if you have decided on tube heaters or unit heaters. Why? Because with tube heaters you can maintain a lower space temperature, and the “feels like” temperature will be the same as forced air. For example, with forced air equipment you might need the space to be at 70 degrees to be comfortable. But, if you are using tube heaters, a very conservative space design temp might be 65 (or a couple of degrees less). Since your space temperature design is lower, you now have a smaller delta T with the outside; therefore, your heat load is lower.
  3. Tube Heater Placement
  4. So after running your heat load you come up with 480,000 btuh required. Now we need to find the efficiency of the tube heater you are using and divide the capacity (btuhs) required by that number. For example- if the tube heater is 80% AFUE, you take 480,000 divided by 0.80 and you get 600,000 btuhs of input required. Now it is time to design the layout. How many tube heaters will you need? And where do you install them? In most cases, as long as you get the btuh’s to the space, and the heaters are evenly spaced, you will not have any issues. But here are a few things to consider when designing the layout:
    • Most of the heat comes out near the burner box.
    • The best way to visualize the heat distribution map of a tube heater with a straight tube, is to picture a Christmas tree laying on its side, and assuming the base of the tree is the burner box. You get a lot of heat at one end, and you slowly lose heat by the end of the tubes. Use this to your advantage by placing burner box ends near dock doors, outside walls, or the largest infiltration areas. If you need a more even distribution throughout the length of the tube, most manufactures have “U-Bends” that you can install. Adding a U bend will make the tube section into the shape of a U, and can even out your heat distribution.
    • Watch out for clearances
    • Check the installation manual for these distances before quoting your project. In certain capacities and tube lengths you might need 7-8′ of clearance to combustibles. Sometimes tilting the tube heater can reduce this clearance by a few feet, but double check the manual first!
    • Mounting height is critical
    • Since tube heat is radiative heat, it follows the inverse square law. When you double the height, you get 1/4 of the heat. So mounting height becomes a delicate balance between maintaining minimum clearances and being cognizant of losing effective heat when mounted too high.

But enough about tube heaters. When should you use forced air unit heaters?

When to Use Forced Air Unit Heaters

  • Minimal air infiltration applications
  • If your space will not have a lot of air infiltration, and you are looking for a more comfortable, even temperature distribution for creature comfort, unit heaters may be the best way to go. Since hot air rises, if you have really tall ceilings and you decide to go with unit heaters, consider adding some ceiling fans to keep the hot air near the floor.
  • Larger and more capacity options
  • You can also find unit heaters in much bigger sizes. Typically, the biggest tube heater you can find is 200,000 btuhs input, while standard unit heaters are available up to 400,000 btuh input. So on a 400,000 btuh application, there is a chance you could use one forced air unit heater, as opposed to two tube heaters. This will cut down on installation cost- less electrical, gas piping, roof penetrations etc.
  • Lower upfront cost
  • Upfront cost is another reason you might choose unit heaters over tube heaters. Unit heaters on average can give you up to DOUBLE the heat per dollar you spend on the equipment. So if the owner is on a very tight (upfront) budget, unit heaters will typically cost less to install. However, keep in mind that if the space is better suited for tube heaters, the unit heater option will more than likely cost more in utilities, and the owner might have to spend time warding off comfort complaints.

When it comes time to choose between tube heaters and unit heaters, the answer may not be as easy as you think. But that is why we are here, to help you make these challenging application decisions. Are you working on a project that we can help with today? Give us at cfm a call @ 1-800-322-9675, post a comment below, or message us on Facebook or Twitter @cfmdistributors. We’re always happy to assist our customers in project planning.

A person with two paths to choose from, and one side has more money than the other.

Include Profit, You’re Worth It! | HVAC Pricing Series Part 6

Profit is not a four letter word, but loss is, and no one wants to lose money. That is why when you set the right price for almost any job it should include profit. Profit is the amount of money that you decide you want to make on a job. Profit is why you went into business in the first place: to make money to support your family and to be able to live the lifestyle you want to have. However, many HVAC dealers are afraid to set Right Prices in order to charge enough to make the profit they want to make and need to make.

So, how much profit is enough? Interestingly, the average profit for HVAC dealers in the $500,000 to $1,000,000 range is about 2.3% based on data provided by the banking institutes. Therefore, on a $4000 job the entire amount of profit comes to about $92; and, for a $600,000 HVAC business, the average yearly profit is only $13,800.  That is just the average, 50% of the businesses out there make LESS than that. These statistics are the main reason that HVAC dealers go out of business. If you look at all the literature published by the HVAC trade associations, magazines, consultants, and if you read the books published by successful HVAC owners you will find that most of these folks recommend that an HVAC business should strive for at least 10% profit, and preferably 15% profit.

Aren’t you worth at least a 15% profit? Absolutely! HVAC dealers are one of the few businesses that actually still come out to the home to perform their work. You show up in a valuable vehicle filled with thousands of dollars of parts and tools. You have the extensive training that is required to be able to perform your jobs. You are required to be in compliance with a multitude of governmental regulations. You are responsible for the comfort and health of the customers you serve. More importantly, you are responsible for the safety of your customers. After all, you install and service equipment that can potentially kill people in multitudes of ways. You tame fire, you harness gas, you deal with high pressure gases, you vent carbon monoxide, you harness water and you route electricity in lots of voltages and amperages. Then why do most HVAC dealers think they are not worth enough to enjoy a decent profit.

From the practical side, a 15% profit also allows the HVAC dealer to run a good, responsible business. By having enough profit, you can pay your employees a decent salary with decent benefits. You can offer health insurance, vacation, and sick leave. You can afford to train your employees better so they are more efficient, and so they can do a better job for your customers. Most importantly, a decent profit allows you to stay in business for years to come; thereby, providing your customers the long term value and commitment they deserve.  The great bonus is you get to have a decent income to provide for your families and to retire with a reasonable nest egg.

Now that you know you are worth 15%, let’s do the same math we did above but with this proper profit percentage. Now, if you do a $4000 job your profit will be $600. And if you have a $600,000 company, your profit for the year at 15% will be $90,000. You will finally be making the kind of profit necessary to have a responsible business with good salaries, benefits, and where your customers will feel your long term commitment to them.

In the next article, I’ll dive deeper into some tips on how to include profit, and how seasons can affect a profitable pricing structure. If you have any questions about how to include profits to your right price, let me know in the comments below. You can also contact cfm directly @cfmdistributors on Facebook and Twitter, or call us toll-free @ 1-800-322-9675.

A person with two paths to choose from, and one side has more money than the other.

Overhead Costs | HVAC Pricing Series Part 4

There are two kinds of costs in any company: direct costs and overhead costs. In our last article, Direct Costs | HVAC Pricing Series Part 3, we covered some of the more common types of direct costs you have because you get a job. In Part 4 of this Finding the Right Price HVAC Series, we turn our focus towards overhead costs — which are the costs you have whether you get a job or not.

Overhead costs are all the costs you have in your company that are not specifically related to a job. These costs are varied and in a few cases they are difficult to identify and determine. But most of these costs are pretty straightforward and here are some examples: rent or mortgage payments on your shop, utilities, employee benefits, advertising, insurance, shop furniture and equipment, office supplies, some types of taxes, office salaries and FICA taxes, vehicles, gas and vehicle maintenance, training, travel and entertainment expenses, governmental compliance expenses, legal and accounting expenses, communications expenses, computer and software expenses including ongoing support/training, consumer financing expenses (points paid). These overhead costs are easy to determine because they have invoices, bills and paychecks associated with each of them.

The Top Four Hardest to Determine Overhead Costs:

Cell Phone Expenses:

Cell phone expense has grown into one of the biggest expenses in a service based HVAC company. Your employees use their cell phones in an amazing variety of ways to help themselves and your company, everything from driving instructions to tech support on the job to receiving their next service call. It is important to continually update to the latest phones and phone service to be able to take advantage of the latest technology. However, it is just as important to be diligent in watching these expense to be sure they are paying for themselves in increased production and to be sure that you are getting the best service and coverage for the lowest price. It is up to you to monitor the cell phone service providers to be sure you are getting the most for your money.

Owner Salary Expenses:

When the owner of the business actually works in the field on specific installation jobs or when he runs service calls, the dollars he earns for that work are considered direct costs and need to be shown as part of those direct costs when setting the right price for a job. However, as the business grows the owner usually is less active in actual jobs and spends more time “working in the office.” Therefore, it is usually appropriate to split an owner’s salary into both direct costs and overhead costs based on the estimated percentage of both office work and field work.

Warranty Expenses:

Most new HVAC companies neglect to accrue dollars into a warranty expense account. However, in any service business, especially HVAC businesses, warranty expenses are real and reoccurring expenses. In fact, most HVAC companies actually offer their own warranty for most of their work, usually a one year parts and labor warranty on most jobs performed. But, techs don’t always fix things correctly or install equipment properly, equipment will break down occasionally, service parts don’t always work. It costs you money to send someone back to a job, so a smart business owner will accrue dollars into a warranty expense account to cover those future expenses. Oftentimes that accrual will be as high as 2% of the company’s total sales (revenue).

Unapplied Labor Expenses:

This is one of the largest overhead costs in most service companies, and one that is almost always overlooked. Unapplied labor expense happens when you pay your employees that normally work on specific jobs for work that is not specific to any job. This is most common for installation or service techs. Examples of unapplied labor include paying your techs to come into the shop every morning to get their daily assignments, drive time to and between jobs, time to pick up parts at a supply house, training, and employee meetings. Many of these expenses are good and necessary, but these expenses add up fast and need to be watched carefully. Every business owner should be diligent about reducing unapplied labor. Every business owner should track unapplied labor and include those expenses into their overhead costs. The best tip I can give a business owner is to NOT have techs come into the shop except when absolutely necessary: route your employees to their first jobs by text or email or computer communication from their homes.

Overhead costs are accumulated and calculated into a multitude of different categories, many of which were discussed above. Those categories are then added together to get the final overhead cost for a company. That final overhead cost is then used specifically in the calculation of the right price for any job. That final overhead cost is generally shown as a percentage of company’s total sales.

The right price you set for any job must cover the entire amount of the direct costs you have for that specific job. And, it must cover its share of the overhead costs. No one job will cover all the overhead costs for the company for the entire year, so each job must cover its fair share of the overhead costs. Therefore, all the combined jobs you get during the year will cover the entire amount of overhead costs the company will have for that year.

Now that we’ve established a general understanding of the types of costs, the next article in the series will help you look at your options to consider when trying to change your costs. I recommend using our free direct costs worksheet, download link provided below, to assist you in determining what some of your costs are. If you have any questions or comments over direct or overhead costs, or any general pricing or HVAC topic, let us know in the comment section below or give us a call toll-free at 1-800-322-9675.

A person with two paths to choose from, and one side has more money than the other.

Direct Costs | HVAC Pricing Series Part 3

Part 1 & 2 of the series covered Pricing Awareness and What is the Right Price. Part 3 will start to take a deeper look into how we can begin thinking about where your bottom line is before you can find the right price point for your products and services. To do this, there are two kinds of costs in any company: Direct Costs and Overhead Costs. Direct costs are the costs you have because you get a job, while overhead costs are the costs you have whether you get a job or not.

Direct costs happen because you actually get a job and you have to buy things to perform that job. These kinds of costs would include most, if not all of the following tasks. Each of these items should be written down and have a cost assigned to it so that there is a record of the materials used on the job. Writing down these amounts makes sure that you don’t forget anything and they act as a permanent record of what you estimated was needed on the job. Having that record helps you do a better estimation for the next job.

The six most common Direct Costs:

Materials:

For a typical HVAC company examples of these items could be furnace, coil, condenser, line set, thermostat, pad, whip, disconnect, wiring supplies, fluing supplies, brazing supplies, gas piping supplies, sheet metal supplies, grills and registers, drain supplies, repair parts, cleaning supplies. Freight costs to deliver these materials to your company or the job site are also included. The costs for each of these items are easily found from your invoices or receipts. Usually you have a very knowledgeable idea what the specific material costs for a specific job will be before the job is performed.

Subcontractors:

These costs are incurred when you hire another contractor to do part of the job. Examples of subcontractors are electricians, chimney sweeps, plumbers, cranes, core cutters and others. You will know before you set your price exactly what the cost will be for these subcontractors because they have bid the job and given you a price (or you can reasonably estimate their prices because of your experience.)

Permits:

These are the state, federal or local permits needed to perform the job legally and to code.

Labor:

These costs are the actual costs of the labor to perform the job. These costs are probably the hardest costs to estimate to be able to come up with the Right Price as they have the largest elements of the unknown. How long will it really take to do a specific job? Who will perform the labor on the job, the fast guy or the slow guy? Do we need a helper on the job? Will we run into unexpected problems such as rain, heat, breakdowns, illness, and customer issues? Most experienced HVAC professionals have a pretty good idea how to estimate the labor for any job based on the prior performance of their techs (or themselves) on similar jobs. So, based on experience determine the number of hours of labor to complete a job for each tech and multiply those hours times the labor rate of each tech. That labor rate should include the fringe benefits you pay such as taxes, FICA, health insurance, vacation, sick leave, etc. So if you pay a tech $10 per hour base rate and he also gets $5 per hour in benefits, that tech has a labor rate of $15 per hour. If it will take 20 hours to perform the job, then multiply 20 hours times $15 per hour to get a total labor cost of $300. When in doubt add a few hours to the job.

Specialty Equipment/Tool Rental or Purchase:

These items could include scissor lifts, fork trucks, unloading equipment, jack hammer rental, lifting devices and others. Oftentimes, an owner will include a portion of the replacement costs of the specialty equipment/tools if the company actually owns the items.

Sales Commission:

This is the money that is paid to your salespeople once the sale is made. It is only paid if there is a sale so it is considered a direct cost.

Once you have written down all your direct costs, add them all together to come up with a final dollar amount. Knowing your actual (or professionally estimated) direct costs is a key number in the mathematical formula used to determine the Right Price for your job. Obviously, the right price must cover the direct costs incurred to perform the job or you will lose money on the job.

Download cfm”s Direct Cost Worksheet to make figuring out your direct costs a little easier. In the next article, Overhead Costs | HVAC Pricing Series Part 4, I will cover overhead costs in more detail, and help you to better understand the complexity that they too add to your price planning. If you have any questions or comments about direct costs, let us know in the comment section below or contact us directly at 1-800-322-9675.

A person with two paths to choose from, and one side has more money than the other.

What Is The Right Price? | HVAC Pricing Series Part 2

In the previous article, “Pricing Awareness,” we discussed how difficult it is to know what price to set for any job you sell.  Will you get the job at that price?  Will you make a profit at that price?  Will you have any profit at that price?  Will you lose money at that price?  Did you forget any costs when setting that price?  The pricing fears go on and on. 

But in actuality, setting the Right Price for any job is really not that hard if you use some basic logic and knowledge to set that price.  So let’s look at the five basic factors that are required for setting the Right Price.

The Right Price is not necessarily the price that gets the job.  Huh?  That doesn’t make sense: if the price you set doesn’t get the job, was it really the Right Price?  This will make more sense when we look at the other factors that go into setting the Right Price for a job.  So, we will come back to this after we look at a few of those other factors.

The Right Price must satisfy the financial constraints of your company.  This is really the important factor for any business if it wants to be profitable.  So what are the financial constraints of your company?  First and foremost, you must recover your costs.  The Right Price must be high enough to cover both your direct costs and your overhead costs.  (We will further define both of those costs in a different article.)  Secondly, the Right Price must allow for some profit for your company.  Profit allows you to fund your future growth and it allows your company to be a great place to work for you, your employees and your customers.  So, the Right Price must be high enough to cover your profit as well as you costs.  The key to setting the Right Price is knowing exactly what the financial constraints of YOUR company really are. 

The Right Price is always determined using simple math.  This simple math can be easily taught and easily learned.  It can be repeated over and over so you will always come up with the Right Price for any job you do. 

There is only ONE Right Price for any job.  That Right Price will cover the financial constraints of your company including what you feel is the appropriate amount of profit at that given time.  And since it uses a simple mathematical formula based on those financial constraints, then there is only ONE right Price for YOUR JOB!

But here’s the rub: your financial constraints are not the financial constraints of your competitor(s), the other folks that are trying to get the same job.  Your competitor’s costs may be lower or higher.  He may not need or want as much profit as you.  He may not even know what his costs are on a job.  He may not even know if he is making money or losing money.  So, his price will NOT be your Right Price.  Therefore, the only rational, prudent way to set your Right Price is to base that Right Price on your company’s needs, costs and profit.

Which takes us back to the first basic factor in setting the Right Price: the Right Price is not necessarily the price that gets the job for your company.  Your competitor will get his fair share of the jobs, even if his prices are exactly the same as yours (or if they are higher or lower than yours.)  That is because people make choices based on lots of factors, with price being merely one of them.  The Right Price for your company must cover all your costs and your profit.  But that Right Price may not be the one that gets the job. 

Finally, the Right Price may change depending on the time of the year or the needs of your company.  First, your Right Price should always cover the costs of the job.  But, at different times of the year the needs of your company will change.  For instance, it is difficult to even find a job to bid on in the cold months of January and February.  Your company may consider bidding a job with a lower profit level in those months compared to the hot summer months when your techs are very busy.  In fact, you may decide to set your Right Price with no profit at all just to be able to keep your techs working.  Conversely, in the hot summer months your Right Price may increase because all your techs and all your competitors’ techs have plenty of work and the market will allow you to make more profit.  The point is that your Right Price can change based on the needs of your company, but it is YOU that is determining what that Right Price should be at any given time.

The important thing to remember is that the Right Price should always cover your costs and the Right Price should always be calculated using the same mathematical formula. 

In Part 3 of the series, “Direct Costs,” I will begin discussing the different types of costs and their affect on finding the right price.   If you have any questions or comments about finding the right price, leave them in comment section below or contact cfm directly at 1-800-322-9675.