Why HVAC Contractors Make Millions and Still Struggle to Pay the Bills

Good afternoon and welcome to the HVAC CEO podcast. I’m your host, Sarah Gonzales. This is where we sit down with industry leaders for the kind of frank conversations that help you grow your business, lead with confidence, and build the kind of team that you’ve always dreamed of. today I’m really excited to say hello to Austin Wendel. He is the founder of Accounting 4 Trades. So we are going to be talking about the money today, because that is where people’s business either flourishes or flounders. So Austin, welcome. It’s so nice to have you.

Great, awesome. Tell us a little bit about yourself. Tell us about o Accounting 4 Trades.

Uh-huh.

And I bet you hear that a lot, right?

Yeah.

Yeah. And so how did you how did you end up niching down? I mean, it’s obviously we are a niche digital marketing agency, so I understand the virtues of being really specialized, but how did you end up coming to HVAC plumbing and electrical as opposed to ice cream shops?

That’s amazing. That’s amazing. So you must see some pretty crazy horror stories when people come to you with their books and they say to you, I’m busy all day long in July, I’m working till two in the morning. Why can’t I pay my mortgage?

You can only be a tatter.

Course, of course. And you’re moving so fast. And the to tell you the truth, for most entrepreneurs, the money side they want the money on the back end, but managing the money is the boring part. Yeah.

Yeah, it’s so true. And so when you look at HVAC, when do you see that people need to have the financial management in place? When do they need to hire the bookkeeper and the accountant? And what cause everyone wants to do DIY as long as they can, right?

Right.

Yeah. And and this is this is where I see it at so often is that revenue looks good. Someone’s making you have a contractor, they’re making a million, two million a year, and they’re like, My God, it’s still hard to pay my people and every month it’s a scramble. And and and we see that more with you know, private equity is gobbling up HVAC companies and so people are spending more on marketing, Mar you know, their equipment costs are higher than ever.

There’s

just macroeconomic factors, inflation that’s making this harder and harder to get your hands around the numbers. So when you go into companies, what are the numbers that you want to see the owner knowing? Like on the tip of their finger, this is what you need to master.

Mm-hmm.

Yeah. Mm-hmm.

Yeah. So so just to simplify it, if I’m doing an install and it’s a ten thousand dollar install, how do I calculate my gross profit? What’s coming out of that ten thousand dollars that I’m looking to achieve fifty, sixty percent gross profit margin? I’m just trying to bottom line it for people to make it simple.

Mm-hmm.

Mm-hmm. Okay. And how do you compare your gross profit margin for installs, service, repairs?

Yeah.

Sure.

Yep, of course.

And and installs. Now, are you getting above 50% on because everyone wants the installs. Everyone, you know, all we want, you know, as a marketing agent, say everyone’s like, I don’t care about service and repairs, just send me a lot of installs. I’m like, well, building a business is a little more complicated than that.

But but but on a on a per unit basis, how are your gross profit margins for installs versus service?

Right. Yeah.

And and with the smaller shops, I mean everyone talks to me about, you know, equipment costs are going up, labor costs are going up. So how do people get squeezed? And then how do you talk to your clients about, you know, maybe you need to think about your pricing or something’s gotta give here, right?

Yeah.

Yeah, yeah. And and where where are the things that you see people are bleeding money on the most?

Where do I begin?

Yeah. Yeah. I always know I d I always know someone’s gonna be really successful when they when they come to us and they’re like two million dollars and their website is the worst and their

their vans have this little sticker that they bought on Amazon. I’m like, that is someone that hustled like hell to get where they were. They saved every penny, they put every penny back into the business, they didn’t try to front and be something they weren’t. They must go into that client and absolutely deliver an

A

plus experience and an incredible install. I’m like, the sky’s the limit for you, right? As opposed to the people who over-engineer from the start with the $75,000 van and they come to me and they’re like, Well, I spent $50,000 on a website. And I’m like, you don’t have $50,000 revenue.

Yeah.

Right. No,

totally. I always tell, like, you know, if someone’s a good entrepreneur, if you look at the bottom of their shoes and it’s just totally scuffed. They have been hustling around to every business, right? Yeah.

And and so I am seeing a lot of people with private equity feel really, really pressed to spend a lot more.

Money on marketing. You know, you talk about like we we do have people who come to us and they’ve only been spending one or two percent and it’s really they built it because of relationships, or maybe they have a few good co clients on the like commercial side, and so they have a good blend there. But people feel so much pressure and they come in and they’re like, gosh, these guys down the street are spending a hundred thousand dollars a month on Google Ads. And and then it, you know, we

are are looking at this of course from the marketing side. And we try to see all of their business, but it’s really hard then to get them to think about how then it can create a company that is still profitable and differentiate themselves without trying to chase this sort of Sisopian effort to compete with, you know, a hundred million dollar Rollo.

Yeah. Yeah.

Yeah.

Totally. Totally.

Yeah.

That’s right, but you gotta get the you gotta get the install right for I mean you can’t like you’re not gonna be in a great business for very long if you do a crappy install every time. Like people are gonna figure it out eventually, right?

It

is so it is so true. And I think that we as a society and we as entrepreneurs have really gotten into this idea that every business is like Mark Zuckerberg and Facebook, and he was, you know, in his Harvard dorm room, and then six months later he was a fifty million dollar company, and then two years after that, he, you know, hit a billion dollars. I was like, guys, most of America and most of small businesses just doesn’t run like that. And so when people come,

With that the problem is in the home services is that people sometimes will come with that sort of fantasy, but then their their financing structure is not, you know, well, we have all these, you know, venture capital firms just funding us for a loss for years at a time. I’m like, no, you guys have to be profitable from day one. So you can’t like think that you’re gonna grow revenue, not profit, but revenue,

like the sky’s the limit, you know.

Yeah.

I know. I know people come to me with like a million dollars in E, but I’m like, that’s really good. I was like, a lot of these companies you’re writing about in the news wish they had that. They may have ten billion dollars in revenue, but they are losing money.

Exactly. So what’s what’s the saying is revenue is vanity, profit is sanity.

Yeah. So so I know you kind of have a model that you coach people on in terms of like the different stages of their business and how they can be thinking about what they need in bookkeeping and financial management at different stages.

Talk to me about like how you coach people when they come to you in those early stages and they have dreams of entrepreneurship in their eyes and they want to start their business and how you talk to them about what’s realistic and what they need really need to be thinking about. Because I bet you get a lot of the same questions we do from people who want to start their business. And it’s really about coaching them about is this the right time? Do you really know how hard this is going to be?

Yeah.

It is

not, it is not a weird one. And I I love that that’s part of your mentality because people do not think about this. And I will say, as an entrepreneur who has a very happy marriage and has been married for 19 years to a man who is so patient with me, like if I didn’t have that foundation, it it would be it would be so difficult. It would be such chaos. There would be so many moments when

How could I move forward as an entrepreneur if if the home life was not, yes, go work 16 hours a day. Yes, worry this month about whether we can pay our mortgage because we support you and we believe in you.

Yeah. Well and you know I think that it’s like in the moment you start a business, there’s this huge disconnect between us as entrepreneurs who are like inveterate optimists. We like to believe that we can do everything. And then the the hardcore reality that

Something is going to go wrong in this business and you’re going to need to have a little safety net. So, like people will come to me and they’re Yeah, I’m a technician, 20 years of experience. I’ve done everything from installs to service to sales. I got this covered. And and and you know, I have enough money. I have $10,000 in the bank. And so as long as we can be profitable within 30 days with your marketing fees and my Google ad spend included, then

I I’m totally fine. And I’m like, well, okay, so if if you get the flu or your kids are home from school for a day, or it snows in May, is this plan completely off? Right? Like if one thing goes wrong, then that probably is not a solid plan, you know?

Yeah.

And cheese.

Yeah.

Yeah.

No, I know, I know. It and and sometimes I feel like it I’m such a Debbie Downer to people because they come and they’re so excited and they’re like, We’re gonna do this and they’re like, I wanna give you money. And I’m like, no, please take your money. Let’s let’s talk again in six months. You know, read our newsletter. I’ll send you a ton of content. Like get this in order. I don’t wanna take your money because this is not going to end well for you.

it really is, yeah.

Yeah. You must hate it. Like everyone comes to you with like their Netflix subscription and their business stuff all commingled and you’re like, no

Yeah.

Exactly. Yeah, I know that that that’s when you get into some real trouble. So, so when people get past that like first stage and they’re like, what, three, five hundred thousand in revenue? And they kind of like maybe are able to pay themselves at that point, like I at that point, what are the what should they be looking for? What’s the there’s a lot of real challenges at that point, but what are you seeing as the challenges when they kind of get to that second stage where they’re actually a real business?

Yeah.

Yeah.

Yeah.

You

are. You are. Yeah. And this you know, and this is so hard. I mean, we know what a shortage of labor there is in the HVAC industry. I mean, you know, every one of these big companies is building data centers now and they are freaking out because their existential crisis is they’re just not enough plumbers, electricians, and HVAC contractors to fuel the AI growth of our economy. So, like there is a real shortage. So

When you’re looking at the the smaller contractors that they’re making their first hire, how are you seeing them do that successfully and profitably? Are they doing subcontracting? What type of person are they looking for? An apprentice apprentice or or not that they can actually compete for these sometimes pretty h sky high salaries and expectations that a lot of people have when there is this disparity between labor supply and demand.

Yeah.

Yeah.

Yeah.

Mm-hmm.

Mm-hmm.

Yeah. Yeah. Yeah.

I mean that no, and it’s it it’s true. I mean, we we are not trying to inadvertently run nonprofit businesses, right? I mean you have to you you you have to have good people and you you have to have them delivering and then it’s not it’s not the easiest part of running a business. But I do feel like that first or second hire is so w whatever industry you’re in, but it it’s just so important because that’s gonna set the key for

having your culture and the kind of people that you can get later. because that’s that’s the big leap. It’s like, you know, building a job for yourself. Like, okay, it’s hard, but it’s doable. But then once you have that first hire, like real first hire, that’s when you have a business.

Yeah.

Yeah.

And what do you so one one of the big things we find is a challenge at this stage is the the answering the phones. And so here you are, you’re, you know, experienced technician, but you’re still there doing the sales, doing the installs, maybe even doing some service calls. And then all of a sudden you’re answering the phones yourself because you want to bring in the leads. and AI like

Let’s be honest, AI phone answering services like you know, at two in the morning people accept them, but you know, at four in the afternoon when they want to talk about you know, parting ways with seventeen thousand dollars for a new carrier system, they really want to talk to a human being. And so I actually find one of the biggest challenges is helping people think through who the heck do I have answering the phones, which in effect becomes my, you know, sales dispatch.

customer service person and do I do that person offshore? Do I have them in the office? Am I are they an hourly person? I I you know, I I’d be interested to hear how you work through that with your clients because I find that a very important hire that they often take three or four iterations to get right.

Yeah.

Agree. ’Cause they care. They

care about customer service and they care about your success in a way that anyone you can pay money to just doesn’t.

Yeah.

Yeah. This is this is where I feel like AI is really, really helpful. Cause actually one thing that we do for all of our clients is, you know, we run Google ads and Google local service ads and Yelp ads and and meta and and where the rubber hits the road is who’s answering the phone, how are they doing? How often are they following up with that person? Because people get busy and they don’t always respond to the estimate the first time you’d like them to, all of that, right? And we can listen to we listen to every single call for every single one of our clients. Cause I’m like,

You’re spend $80 or $110 on a lead from Google. Are you really gonna let it founder on the person who’s answering the phones? And PS, I could sit here and say, Well, it’s not my job. I’m a marketing agency, but you’re still gonna get mad at me if you don’t get more money in your bank account. So I

To it becomes my problem if this person is not delivering for you. So one of the most common conversations we’re having, and by the way, this is not just with the guys that like $500,000, $800,000 in the road. We’re still having this conversation with our clients at $10 million, where I’m like, let’s listen to some of these call recordings together. Like, do you feel that that person really ablely was an ambassador for your company when they got into an argument with someone on the phone or

Or if more common is just, well, they didn’t follow up with this person seven times until the end of that the earth for that $27,000 estimate you sent. Do you r wasn’t it worth like four more phone calls from that person to potentially close that deal? Because the person was just busy. They’re not ignoring you. They just got busy with their kids’ ballet lessons and making dinner and life, right? So fine.

You know.

yeah.

Yeah.

Yeah, that’s right. And why and I like it because it it helps people get a little competitive because we’ll be like, well, across all our clients, we can tell you that when it’s a repair and it’s a Google local service ads call, people are closing at 85% because their air conditioning is broken and it’s 96 degrees. Like there’s not much to close there. They need you to come, right? so your close rate is thirty-five percent. Let’s just sit on that for a second. What do you think the problem might be?

Right. Yeah. Yeah. I mean, but those are those are I mean, I’m sure you have these conversations, these are tough conversations to have with people because you know, you want to have them in the most non-judgmental way. We all have problems in our business. Got you know, I do, you do, everyone does. And so to have them in a non judgmental way where it’s like, let’s just problem solve through this together, but you know, maybe Aunt Matilda who’s answering the phones is not the person you need answering the phones, you know, six months from now.

Totally.

Totally. I mean and this is this is how I always think of like I think and this is, you know, we were talking about earlier with like when people start businesses and they have these stars in their eyes and they see these billion and trillion dollar companies that we have in the United States now it’s like they

They

see the exterior of a company like Apple and they think that company’s just perfection. And I’m like, no, no, every company is is just duct tape and hope pushed together. And we all have so many problems in the company. And you’re just trying to get better problems, just different problems, you know. And so it’s okay that your problem is sales right now, because you’ll have a new problem with sales or dispatch or whatever two years from now and two million dollars in revenue more. It’ll just be a little different.

Yeah.

Yeah. Yeah.

Yeah. Yeah.

Yeah.

So when w at what moments do you feel like you’re most therapist to your clients where you’re like, okay, I really need to talk about this part of your business in terms of the constraints?

Yeah.

Yeah.

Yeah. Yeah. Yeah.

Yeah,

that’s right. Yeah, now growth looks a little more interesting again.

Yeah, yeah. So I would be remiss if we didn’t, as entrepreneurs, have some court sort of conversation about AI. How do you feel like you talk about data? How do you feel like the ability to use AI has changed how you do business or how you can analyze data for your customers and give them better information and intelligence on their business?

So smart.

Mm-hmm.

Yeah.

Yeah.

gosh, what are we doing? so well on the financial side, I have my own little finance agent that I can just go into my Claude Visual Studio code and be like, Hey, who hasn’t paid yet this month? Or what invoices are outstanding or

Tell me what our three month trailing gross profit margin was, or you know, I could just ask little questions. whereas, you know, before I might have had to labor through actually the user interface of QuickBooks. So I I like it because I can just do these like dashboards on the fly, this data on the fly, so I can really get a little bit more of a moving picture of the business. But I mean

We are using AI in for our for our clients. And we do websites, we do search engine optimization, we do social media. We are using it in every single aspect of our agency. Like, so for example, when we onboard a new client now, we create a

a brain for them we call it like the client intelligence brain and so we’re asking them we do a two-hour structured interview where we’re asking them all about their business their pricing who works in the business what’s it like when someone calls you what’s the experience of like that from the first time they call you to you going out to the house to the moment you’re there making sure that your shoes are not muddying up their carpet when you’re going you know into the attic to to take a look at the furnace or what have you all

Those

questions were were and we record all of that so that we can truly hear their voice on the website, that we can really get into their brain. So, where I see the possibility of AI from a marketing standpoint is it gives the customer the opportunity to have an incredibly customized experience of shopping. In other words, like if it’s important to me.

To hire a train dealer, or if it’s important to me to hire someone who understands how my you know house that was built in 1830 and still has an aging boiler, how that works, then I can find someone who does that, provided that that company has explained on their website and in their marketing materials exactly how we deal with every single kind of customer, what makes us special.

What it’s going to be like to work with us, what that experience

is going to be like financially, emotionally, in terms of trust signals, how it’s going to span not just a day, but many years potentially. Right. So that all starts with capturing that particularity from the client and then instantiating that through their website, their social media, their email marketing, everything. So it’s like what I find so satisfying about it is that you know you still see all these.

HVAC websites that are like our trusted, Nate certified technicians are the best in Tacoma, Washington. And that’s fine, but it doesn’t really tell you anything about what it’s going to be like to work with these people, how much it’s going to cost me to get a system. So the ability to get inside the owner’s brain and really telegraph their values, their culture, their systems, their processes in everything. To me, that is the

beauty of AI. And and then there’s no mistakes. We don’t ever wonder like, do they do duct cleaning or do they absolutely hate duct cleaning? Or how do they feel about mini splits? We know, we’ve asked them and that’s throughout their marketing materials, you know.

Yeah. I mean, I think it’s it’s a really an so we all used to shop for things like what are the best running shoes?

What is the best exercise regime for a 50-year-old mother of two? Whatever, right? So it was all best of. What’s the best HVAC contractor in Washington, DC? Well, what best means this is like an sort of like a an epistemological shift of like

What does best mean? What does it mean to be the top-rated? What does it mean to be the number one? Like, what are the best shoes for running? Well, that kind of depends on whether I run 60 miles a week or whether I’m a first-time runner who’s just trying to lose 20 pounds, right? So,

so what is the best HVAC contractor in Washington, DC? Becomes a question of how do I, Sarah Gonzalez, find the best company for my particular needs in this particular moment.

And so it’s more like like a a [match.com](http://match.com/). That

that you know what I mean? It’s like, you know, my perfect spouse, you know, my husband is the perfect person for me, but he wouldn’t be the perfect person for everyone. So I think that what we can say for HVAC contractors is like be the perfect person for the person that you can most satisfy their needs and then make your marketing all about

Who you are and who you can serve with perfection, because it’s not just about, well, this company has 832 five-star reviews and you only have 830, so they’re better than you. No, it’s like it’s become an apples to oranges comparison because each one of us now can distinguish exactly what we need. Not just from by the way, what I do and what we do as a marketing agency, but also from all the reviews out there. So

You have a contractor, and all their reviews say, well, Sean was so reliable, and he came to the house on 4th of July, even though it was so hot and he helped my family, and then we had a great conversation and he stayed for our picnic. Like that’s a review, it tells you a lot about that company, right? And that’s just sitting there on Google or Reddit or Facebook or wherever that person’s put the review, but it’s telling a story about the company that then I, as the consumer, can say.

Who is that the story that appeals to me?

Exactly. Exactly. Yeah. Yeah.

There

is a strategy, and let me tell you what the best strategy is. And PS, this is the most low-tech, low fidelity strategy, and this is what’s work will work because you will see there are a hundred software companies and probably a thousand now, thanks to Claude, that are like, we’ll help you get reviews. So, how many times have you been to the dentist and then you get a text message afterwards? And it’s like, Dr. Jones, enjoyed seeing you for your checkup. Please give a five-star review.

And how many times, you know, maybe you love Dr. Jones, but like.

The time you forget and you don’t give the review, so right. And so in my in my view, I tell people, I’m like, Yeah, yeah, have the software, it’s fine. You’ll get like three percent response rate, and it’s like a little de minimis, nice thing to have. I was like, but if you want to get reviews, this is what you do. You have your technicians at the end of the first of you do an excellent service, period. End of debate. I don’t want to hear any excuses about that. That is the base standard. Also, don’t track mud into their house. Also,

Be nice to their dogs, say hi to their kids. Like, do all that. That’s the base level. Okay, we’ve gotten there. Now what do you do at the end? You have the technician, you coach your technicians to do this, you practice with them, you role play. They say, Mrs. Jones, it’s been a real pleasure to serve you today. I just want you to know, ABCHVAC, we are a locally owned company. our owners were born and raised in Washington, D.C., went to local schools here. We’re not like these big companies.

where we spend a ton of money on marketing, the way we grow and the way we’re able to deliver you an excellent and affordable service is through reviews from wonderful people like you. So if you could give us a review today, I would be so honored to, you know, provide you as a thank you for your time. You’re not paying for the review. As a thank you for your time, I would be glad to give you $20 off your service call today. And then the key is they just shut up and wait. And then the person’s like, yes, I’ll do that.

Well, okay, here’s the QR code. And they have the sticker on the back of their phone. Let me give you the QR code. So I’ll just because then the person’s gonna be like, yeah, yeah, sure, I’ll pay. And then later tonight after dinner, I’m gonna give you the review. There’s none of that.

None of that. This is this transaction’s happening right now. and so you say, Well, thank you. And then they get a click on their phone. the review’s gone through. Great. Well, let me here’s the invoice, and you see the $20 off. Thank you so much.

So it’s like sincerity, it’s we’re local, we’re doing this because we’re not like those big guys. We’re here to look you in the eye and give you a great service for an affordable price. That slays. If you can get and so few people execute on this well, PS, because they don’t roleplay with their

tax, their tax feel icky doing it. I don’t know. but the people who do that, they role play with their tax and

then there’s a twenty dollar Amazon gift card or twenty dollar ice cream, local ice cream shop, whatever gift card, waiting for that tech when they come back to the office. Thank you for getting this review. So, you know, there’s a little marginal cost to this. That works really well.

Totally.

Yeah, totally. And don’t be a cheapskate. Give them twenty dollars. It’s no big deal. And the techs will be happy about it. And you’re good. You know, guess what? A great tech can make an extra four hundred dollars a month that way with very little work. And it gets them thinking, this is the culture we have. Our culture is one of service and excellence and accountability and commitment to every customer. So it it’s it’s money well spent in terms of building an excellent, excellent culture.

Yeah. Yeah.

Exactly. We always we talk to our clients, we’re like, you have to give them the Disneyland experience. Like, you know, when you go to Six Flags, it’s like, it’s okay, it’s a nice day, it’s fun. We have some popcorn, we go on some rides, and then there’s Disneyland, which is like the whole family plans for it for years. We save, it’s amazing, it’s immersive, there’s stories, every single person there is incredibly nice to you. It’s just it’s a lifetime memory, right?

It’s like I want to give people the Disneyland experience, not the Six Lags experience, because they’ll gladly pay you more for the honor of having that level of experience.

Totally. Exactly. Yeah,

that’s the idea. And then you say to them, and by the way, your system is gonna last fifteen years. And don’t you want the contractor who was here fifteen years ago and is gonna be here fifteen years from now, rather than that, you know, guy who has one truck and not even sure if he has a license and you know, maybe gone next year when your system has some problems.

Yeah, possibly. Yeah. Yeah. Yeah.

No. So we you know, I it’s like and this is what

I say, it’s like you gotta be the therapist for your clients, right?

Well,

I’m glad I could leave you with something today too. So

so final thoughts. what would you tell our listeners, our HVAC contractors who are looking to grow? What do they need to be focused on when it comes to the money?

Yeah.

Mm.

Yeah.

And the more you know it, the less boring it is, I’ve found. It’s only

boring when you’re scared of it.

That’s right.

Exactly, exactly. Austin, thank you so much for joining us today. It’s been so much fun talking to you. I am going to share this video with all of our clients who always need a little financial boot camp, whether they are starting out or they are $10 million, because this is an area for improvement for all of us. And so thank you so much. And Austin has some great resources to share that I’m going to share in the transcript, in the notes for people at every stage of their business and really good checklists for what you need to be thinking about at every stage.

So take a look at those because they are I read them, I enjoyed them, and they are an invaluable thing.

Yeah.

It’s not an MBA course, people.

Well, thank you, Austin, so much. Thank you to everyone. It’s really a pleasure to talk to you.