HVAC Full Blast

Welcome to HVAC Full Blast, where you get industry inputs for real results. Today, we're discussing how to navigate changed tax credits and business growth. Mary Carter from Trane and Stephen Ross from Sandler are sharing insights you won't want to miss. Let's dive into the conversation.

Welcome back. Just two people with four first names talking about business practices. I'm Mary Carter. He's Stephen Ross. How are doing, Stephen?

I'm doing well. I'm doing How about you?

Amazing. We are full blast into the summer season right now, which I don't know about where you live, but where I live, the word we're using to describe it is soupy because it is just humid and gross, which is great for business, but not so great for hair.

Yeah. Yeah. It's I I I can empathize with the hair statement. Mine's been all out of whack recently for sure.

Yeah.

I think the word they've been using down south is oppressive. The humidity down here is oppressive. That's heard heard that. That must have gone out, like, in an email to all the weathermen because I've heard it multiple times.

So It's it's the new unprecedented.

Right? Of you know, everyone gets a buzzword. That's good news.

Absolutely.

Absolutely. Up to anything fun this summer? Any any fun plans?

Or Just just, hanging out with kids and and working.

So which has pretty much been the last twenty years of my life, twenty five. So there you go.

That's cool. That's cool. We personally, summertime means being on the water for us. We are out on the boats.

We are sailors, so definitely rely much on the wind and everything that it could go right or wrong on a sailboat to have fun out there. Curious if you have any sailboat experience yourself?

I had to take an elective in college, and, I had a couple electives. My two electives I took, one was ballroom dance and the other was sailing. So there you go.

Wow. A gentleman and a scholar. Wow.

Something like that. Something like that.

Oh, I love that. Well, okay. So you know then, you've got some experience in the sailing world. You know, one thing we're always talking about constantly and just to paint a picture here, my husband is a sailor, but he's more of the award winning, navigating tactician kind of sailing.

I'm more the leisurely bottle of rose kind of sailing. Gotcha. Nice. We meet in the middle, right?

And one thing we're always talking about is the wind and direction. And a quote that I come up against time and time and time again is, you know, I can't change the wind, but I can adjust the direction of my sails to get to my destination. And that's been, you know, said over the years. I think Jimmy Dean said it.

I think Jimmy Buffett said it. If you're a famous Jimmy, you probably said it some way. Nice.

Nice.

So one thing I love about that quote though is not only is it extremely applicable in the sailboat, but it seems to be something that we come across in business all the time too.

Cannot always change the factors that are around me, but I can adjust how I react to them and ultimately get to a destination. And wow, if this year hasn't been, we always try to say, we don't wanna be reactive or defensive, we wanna be proactive, but sometimes you're gonna have to change the direction of those sales.

And one topic where that really comes to mind is around tax credits and what's been going on with some changes in that realm.

Curious what you're seeing and what you're experiencing as you're having conversations out there yourself.

Yeah. So I think it's, news coming out this summer is that there's now an expiration date for the 25C tax credit, right? And so we thought it was going to go through two thousand thirty, and now it's going to end at the end of the year.

And so part of that is figuring out, okay, what does that mean in the long run? What does that mean in the short run? How do we tack our sales? Is that the right word? Is tack the right word there?

How do we do that?

Or should we, or do we just full steam ahead? Mean, maybe is the other option. I think it's been an interesting year. I had some really good conversations yesterday with two different dealers of various size, pretty large companies.

And so large companies tend to be a little bit more stable. They have fewer swings up and down, right? They've got pretty well established marketing budgets. They kind of know how much they need to spend on marketing to get the number of leads they need and so on.

And so those companies don't typically see some big swings. But in one case, one company, pretty large company, was down one thousand leads year over year.

And they were going, wow, our marketing is basically the same as it was last year, but the market has shifted. We didn't shift with it.

And we're seeing the result of that in that we have just much fewer leads. And then another pretty good sized company as well that, Hey, same number of leads, our closing ratio is down fifteen percent. Wow. And they drop from mid-50s to about forty percent closing ratio.

And some of that is maybe price increases and so on, but everybody's got price increases. It's not them, they're not arbitrarily raising their prices relative to the market.

So part of that is, is that indication of consumer confidence? Like, are people spending more on repairs, less on replacement? What's going on there?

So to your point about headwinds, Yeah.

Yeah. But even just to catch you there, the the guy that's down on leads, that's not really indicative of repair replacement. That's not even indicative of refrigerant shortages and changes in the market. What consumer is like, I'm not calling air conditioning people right now because I know they're having a tough time getting canisters. Like that doesn't go into a homeowner's process when they reach out to you. So that really says like there's something else going on in the way that they're reaching out to those dealers. Very intriguing.

Yeah. And it's interesting because we actually had having a dinner with a group of dealers. And so it's interesting to hear that no two dealers were having the same issue. So it was hard to say, Oh, this is what the economy is doing across the country.

I think it felt a little bit like the ocean, go back to that, where some guys are riding the upswell and some guys are going down and trying to figure it all out. Interesting kind of time to own a heating and air company or be in sales in heating and air and trying to figure out which wave to ride.

Yeah.

So now the twenty five c tax credit, I think one way I'm just gonna have to remember that this is now ending December thirty first, twenty twenty five is, I mean, it's called 25C. In twenty twenty five, I get a C, I get a credit, right?

So that's going to be my little mnemonic for that.

But it's ending in December thirty first, twenty twenty five, which immediately to me, not even shopping necessarily for assist of myself, but it just incites the sense of, oh, I better get on this. If we were going to change out a system, the last chance for me to tap into the bucket of funds available to us is twenty twenty five, December thirty first.

And what I feel and maybe follow me on this path is that could solve both of those dealers' issues, even though they're separate issues, creating a sense of urgency so that you get more people reaching out to you and reminding customers that, hey, you better act now to get that close ratio out. That kind of two different issues, but then a lot of potential within this news break to see a positive.

Yeah, for sure. And I think as an industry, we've got some precedent there. And I got into the heating and air business in like two thousand and seven, kind of end of two thousand and seven, beginning of two thousand and eight. Two thousand and eight, we had an economic downturn, so that we had the housing crisis caused by the collapse of subprime mortgages, and that was a global recession. And then there were some tax credits, economic stimulus that came out. One was kind of a first time homebuyer tax credit to get people back buying houses. Then there was a heating and air tax credit as well.

And the interesting thing about that was we also were going through refrigerant change. So twenty ten is when we were going from R22 to 410A, and then there was a tax credit. And that tax credit was expiring at the end of twenty ten. And it later got renewed, but it got renewed for a much lower amount for twenty eleven and twenty twelve.

So it just was a flat fifteen hundred dollars tax credit. But we saw a pretty good surge in Q3 and Q4 that year as an industry. And then I personally saw it as well, just because people knew, hey, that tax credit's ending. So to some extent, it's great that that was out there for the next few years, but it didn't create any urgency.

Now from a marketing standpoint, if you're putting marketing out there, might wanna use that to create urgency on the sales standpoint. Now you've got that to say, Hey, that repair or replace conversation drastically changes if that tax credit goes away. So I think we've some precedent as an industry to say, probably going to have a pretty good Q4.

Right, right. Which manufacturers like to hear and distributors like to hear. So there's definitely a move right now to load up and make good on that.

And then as you're thinking about the kind of systems that qualify for what's going to hit into that credit, you know, there's there's a plethora of options out there, but obviously leveraging some of that heat pump technology and really looking at the brands that cover the widest breadth is going to only add to your advantage out there, know, when you're presenting solutions to homeowners. So lots to consider, but not necessarily all negatives.

Yeah. I specifically remember December twenty ten, I was supposed to go on vacation with my family. The last week or so of that year, I had blocked off from Christmas to New Year's.

And we had so many orders coming in, I canceled my vacation.

And I think I had like a three hundred thousand dollars month, which in twenty ten was amazing for me. So I remember specifically going, Holy crap, I'm going to ride this to the end the year because this is good money making opportunity.

Yeah, and hopefully your family understood and you guys got to go on vacation another time.

They were fine. They were fine. Yeah.

Yeah. They were like, wow, that's rich. Yeah.

Oh, that's crazy. Yeah. I mean, that's really good point. All of a sudden, you know, the heat is turned on literally and figuratively with what we're seeing with 25C.

Talk to me too about what you've seen with how dealers are stacking benefits. That's one thing I think that it's so easy to go down the tunnel of one benefit, but how have you seen tax credits be leveraged against other competitive ways of enticing homeowners to say yes?

Yeah. Well, I think one of the interesting things is just kind of looking at best practices. What are the dealers out there who are absolutely crushing it? What are some of the things that they do?

And there was a I learned this from a dealer a few years ago. I don't necessarily come up with great ideas on my own, but wow, when I see a great idea, I've been able to execute on a few of them. This was one that a dealer that I knew in a state over from me shared with me, but they were always pretty slow in September every year. They would have this big rush through the summer, it would just completely drop off in September, and then it would pick back up a little bit in October. Then November, it got cold, hey, they'd be back in business. They were really trying to figure out how do we weather this trough that just we make all this money in the summer and then we have a month where we're in the red right after the end of the summer, and it just takes the wind out of our sails. What they did was they said, Hey, we're going to run a promotion, like our internal company promotion, five hundred bucks off or one thousand bucks off only during that month.

Then they would obviously stack that with, Hey, here's the manufacturer rebates that are coming during that period, and here's the tax credit that would come during that period. And so they're able to lump that up, and it gave their salespeople or inside sales if inside sales is following up on what the outside salespeople are doing. But it gave them some opportunity for some of those people who were on that repair or replace fence or they just decided to postpone the decision. They were able to go to those folks and say, Hey, maybe you don't want to buy a new system now, but you definitely are going to want to do it before the end of the year, and we're going to run a promotion during the month of September.

Because if they know, Hey, December, we're going get slammed no matter what. We're going to make a ton of money in December. That's not the problem. Problem is September.

They bundled all these promotions together. They took those people who maybe had even done a small repair earlier in the year, marketed to them, follow-up phone calls, so on. They had their September presold months in advance where they knew, Hey, we've got five installs a day the entire month of September, and they knew that by the end of June. It allowed them to order equipment ahead of time in bulk.

It allowed them to plan for install crews and so on. That concept of stacking, it's not just one guy sitting at the kitchen table saying that to the homeowner, it's a business concept where you go, man, can we use this to drive behavior and then really drive some margins for us and make sure we stay out of the red in a month. So it's a great strategy to use, especially in those months where you're slow.

I love that. That's so smart, incredibly sophisticated. I'm also thinking about any kind of link customers or smart connected home customers, right? Where you've got the capability right now at your fingertips to see what kind of issues could be coming up, right? Those systems are really good at anticipating what is about to go wrong.

And what if you could proactively with a little bit of stacking a little bit of pre work and then like you said, build it up into promotional months where you know you're not gonna be slammed anyway.

That just seems like a really great opportunity. I know it's busy in the moment right now, but just a little bit of time on what that could look like in like a September or October, that to me feels like something I'd be doing right away.

Yeah. I think the disappointing phone calls or the sad phone calls are when somebody picks up the phone and calls me and they're like, hey, we don't have any appointments today or we're having a really bad month. What do we do? And the answer is, well, I mean, there's things you can do, but probably none of them are going to dig you out of the hole you're in immediately.

There's a great Chinese proverb, the best time to plant a tree was twenty years ago. The second best time to plant a tree is right now.

So, I mean, when somebody calls and says, hey. We're slow. What can we do? There's things you could do right now, but a lot of times the payoff is down the road. And this is one of those things where if you're sitting here going, hey. I probably am gonna have a slow month coming up in the next three or four months.

Just a little bit of proactivity right now to preplan for that slow month, boy, that can really pay off. I mean, I I think the old adage when I first got in the business was, you know, you're lose money four months out of the year. You're going to make money four months out of the year. You're to break even four months out of the year.

You just hope at the end of the year that you made more than you lost. I think if you can take those months where you're losing money and just go, Hey, we're not going to lose. We're going to break even. We're not gonna make a lot of money, but we'll break even.

Well, then all of a sudden, the months that you make money, now you can bank it. Now you can use that money for growth and reinvest it and put it into advertising and so on. So half the game is taking advantage of when it's hot and cold and we can really sell. The other half of the game is shoring up your slow months to make sure you're not bleeding out everything that you fought hard to gain.

Yeah. That's the key to success. Right? Otherwise, you're really just kind of gambling with house money all the time. Right? Yeah. That's not comfortable.

Yeah. 25C is gonna still be a game changer for the dealers to take advantage of it. I mean, I think that's the reality of it. Through the end of the year, it's going to become more and more important. It's going to drive there's going be more and more people that'll get out there and hear about it.

I'll give you some examples.

I worked for a really small heating and air company when I first got into heating and air, and we didn't have a big marketing budget. And I had just signed up for Sandler Training as a client. And so I had a sales coach mentoring me, and he was hitting me hard on prospecting. He's like, Well, you got get out there and drum up business.

You can't just sit around and say, I don't have any leads, you got to go create leads. And I was like, Well, it's really hard to predict who's going to need a new air conditioner this week, Right? I don't know. How do you prospect?

So we put together a game plan, and one of the pieces of that prospecting game plan was focused around tax credits. And I did a few lunch and learns at CPA firms just to say, Hey, I know you guys know all this stuff in terms of the tax credit, but let me just share with you the heating and air side. Here's the difference between a piece of equipment that doesn't get the tax credit and the piece of equipment that does get the tax credit. So what's the difference from a heating and air side?

Well, the ones that get the tax credit, they're more energy efficient, they're quieter, they circulate air better, they remove more humidity. So just a little bit of lunch and learn, not expecting any of the CPAs to turn around and buy anything, but they're in a position to say to their high net worth clients who are tax planning before the end of the year, Hey, if you need a new heating and air system in the next two or three years, buy it now.

And that was a huge payoff for me. I think I probably spent seventy five bucks buying some sandwiches, bringing them in, small CPA firm. I did that three or four times. So maybe I had three hundred dollars out of pocket invested in that.

I'll bet you I sold one hundred thousand dollars just off leads from CPAs. Just small little things that you could do between now and the end of the year to really drive home, Hey, this is going away. Your clients want to know about it because it could be a big difference.

I love that idea. And what an interesting lunch and learn to attend. And I've got some friends that are in the CPA world and like the real estate world, like who doesn't know a real estate agent, right? Like everybody's got a friend that's a financial planner, but you could drum up a good little contact list of people that you could just, you know, go into. And I don't know, that might actually hold some attention, right? Like to say, Hey, I know I'm a heating and air guy, but I got some information that touches your world too. Think that's really cool.

Yeah, and it's, every now and then it's a little intimidating because sometimes you get a question where they're like, well, you know and and and I was very very capable of playing dumb where I go, look, guys. I don't know. I mean, you know, you're you're the CPAs. I'm just the heating and air guy. If the question's about heating and air, I can tell you how it works. If the question's related to tax credits Sometimes somebody in the room would ask a question, I would say, I don't know, and then somebody else in the room would pipe up and answer it.

It really was a good conversation for sure.

And it wasn't bad that I didn't know the answers. I mean, if they're CPAs and they don't know the answers, how can they expect me to know? So really, I got a thick skin, but it helped me toughen up too a little bit, just being comfortable saying, I don't know, I'm a heating and air guy.

Yeah, yeah. Oh, think that's a, it pays just like doing some of that pre work to get the payoffs in later months, being a little bit more creative and thinking of a different way about going to people. And at the end of the day, you say maybe the CPA isn't necessarily buying a system, but they're homeowners too, right? Or living somewhere.

So you never know. You never know who you're going be in the room with and you can pull a lead from that experience. I mean, that's a really different approach and a different audience that I didn't even think of to maybe explore a little bit about this learning with. And what better time than now, right?

You know, just get on in there and burn a little lunch, like you said, like seventy five, one hundred bucks and you get a whole new book of referrals, right?

Yeah. And we were involved in the chamber of commerce and so on. So I wasn't just cold calling CPA firms. I mean, these were CPA firms that were in the Chamber of Commerce with me, or maybe I knew somebody that was there.

And it's a great time of year to do a lunch and learn. I mean, obviously, in April, they're so busy doing people's taxes and so on. They're not coming to a lunch and learn. But Q3, beginning of Q4 before they get real busy, they're absolutely gonna show up. So if you have twenty CPAs in a firm, maybe ten or fifteen of them will come to the lunch and you just show up in the break room and five minute talk and then sit around and eat lunch with them. I mean, it wasn't a big in-depth presentation. It was pretty easy.

Yeah. And incredible value in the community. Well, don't wanna really just hammer a nail too hard here.

Big picture is 25C has an earlier shortened timeline than, you know, we anticipated and going away December thirty first twenty twenty five. We gotta just keep that in mind and turn that into something that we can use, build urgency, create some stacking, whether that be in your proposals at the kitchen table or whether it be something you're doing promotionally to build up some business in the fall and shoulder season.

Also think of some creative ways to maybe get out in the community and spread that message so that you get that lift.

Just different ways that you can react and change the direction of your sales, turn this one into a positive. So unless you have any other thoughts, Steven, I think that's 25C.

Yeah, I think we got six months, ride it hard, make some good money, and then we'll figure out, we'll tack our sales for twenty twenty six a little differently. But for this year, I think we gotta stay the course.

Yeah. All right. Well, until next time.

Until next time.