Business Insider

The price of price increases


When it comes to pricing out any installation or repair job, most HVAC contractors stick to a simple formula to maintain their gross profit margin. But in recent years, the rising costs of parts, labor shortages, and costs associated with R22 replacements have made it difficult for these same contractors to maintain perspective.

Who Pays for What?

Rick Busby, an Atlanta-based HVAC business owner, reminds contractors to maintain common sense and keep things simple when managing frequent price changes. "Price changes are just part of doing business," he explains. "I have learned over many years in business that the price thing is more in our head than our customer's head. If you provide exceptional customer service and quality, you can charge whatever you need to."

Part of Busby's solution, and common industry practice, is to pass certain costs on to the customers. "We have to pass the increases to our customers to remain profitable enough to grow and continue to build our businesses," explains Busby.

The other part of Busby's strategy centers around providing financing options. This comes in handy when customers need more expensive repairs or installations. "We have offered financing for many years. It seems to me it is more important now than ever before," he explains. "Most people are buying a monthly payment for every large purchase they make. Offering an affordable monthly payment is the key to selling higher efficiency, multi-speed products."

Understanding Price Changes

Just like your customers, you may also be left scratching your head about certain price increases for certain brands. One way to not just help in adjusting your own profit margin but gain a full understanding of the price increases is to maintain direct communication with your distributor.

““Price increases are an unfortunate part of doing business,” says one contractor from Southern California. “Most reputable companies pass the increase on to the customer, and that leaves an already competitive company, still competitive. That’s why it’s important to sell on a company’s value and not just the not price.”

Meetings and training are effective strategies to gain insight into brand strategy or what’s happening in the global market. “Any time a change was made, the first thing I requested was training so we would be sure and deliver a premium product for our customers,” explains Busby. “It seems to me that all manufacturers have price increases due to the increase in raw materials. My philosophy has always been to create a relationship and partnership with a quality vendor and stay in it for the long haul.”

Remaining Competitive and Customer-Focused

Losing sight of your customer and their goals can be detrimental to both your business and your competitive edge. Busby reminds contractors to use tools and relationships to help keep the focus on the customer and help grow your business. "Over my 42 years doing [business], there have been times when changes were necessary," says Busby. "If we pour ourselves into our people and provide training, support and care, they will provide that to our customers, and price becomes a non-issue for most people at that point."