The Contractor of the Future: What the Data Reveals

What separates today’s top HVAC contractors from the rest of the pack?

In this episode of HVAC Full Blast, hosts Mary Carter and Stephen Ross are joined by TJ O’Connor, President of Farmington Consulting Group, to explore insights from the Contractor of the Future Study—a nationwide research project surveying HVAC contractors across all sizes and markets.

Together, they break down:

• Why consumer financing significantly improves close rates and equipment mix
• How offering more proposal options leads to higher profitability
• The real impact of marketing investment on long‑term success
• Why pricing, job costing, and technology adoption matter more than ever
• How contractors can take practical, step‑by‑step actions to improve their business

This conversation goes beyond opinions and trends, grounding HVAC best practices in real data and real contractor behavior—offering a clear look at what’s working today and where the industry is headed next.

Interested in becoming a Trane dealer? Visit us at partners.trane.com to learn more about how you can partner with a leader in HVAC innovation. Explore opportunities to elevate your business and stay ahead in the market with Trane!

Creators and Guests

Host

Mary Carter

Mary Carter is a seasoned sales and marketing leader with over six years at Trane Technologies, currently serving as Regional Sales Manager. With a strong foundation in RHVAC, consumer finance, and strategic account management, Mary brings valuable insights and real-world experience to every conversation.

Host

Stephen Ross

Stephen Ross is a dynamic sales trainer and leadership coach with over nine years at Sandler Training. A former HVAC business owner, Stephen combines his technical knowledge with proven sales expertise, offering a unique perspective on what it takes to succeed in the RHVAC industry.

Producer

Jessica Blair

Jessica Blair is a Senior Learning Manager at Trane Technologies' Residential HVAC unit. With 20+ years of experience in learning and development, she designs and markets blended learning programs to enhance customer learning and align with business goals.

Editor

Kerianne O'Donnell

Kerianne O'Donnell is the Digital Learning Manager at Trane Technologies and serves as the editor of the HVAC Full Blast podcast. With a background in graphic design and a strong passion for developing digital learning experiences, Kerianne brings her creative expertise to the podcast, delivering engaging and impactful content to listeners.

Guest

TJ O'Connor

TJ O’Connor is the President of Farmington Consulting Group and one of the HVAC industry’s most trusted voices on contractor performance, market intelligence, and business best practices. For more than 17 years, he has led nationwide research across HVAC, plumbing, and electrical industries, including the widely respected Contractor of the Future Study. TJ works closely with contractors, distributors, and manufacturers to translate real‑world data into practical strategies that drive profitability, better customer experiences, and long‑term growth. A sought‑after speaker and industry advisor, he brings a rare combination of research expertise and deep field insight to every conversation.

What is HVAC Full Blast?

HVAC Full Blast is your bi-weekly dose of HVAC business growth, powered by Trane. Hosted by Mary Carter (Trane Technologies) and Stephen Ross (Sandler), this podcast is built for residential HVAC dealers who want to scale their business, sharpen their sales, and lead with confidence.

Tune in for expert interviews, dealer success stories, and practical tips on pricing, service agreements, workforce development, and more. Whether you're in the field or in the office, HVAC Full Blast helps you stay ahead in a competitive market.

Interested in becoming a Trane Dealer? Visit our website at https://partners.trane.com/

We'd love your feedback and suggestions on future episodes. Please email us at [e-mail].

This podcast channel is for general informational purposes only. The views and opinions expressed in these episodes are those of the panelists and do not necessarily reflect the official policy or position of Trane Technologies. Trane Technologies makes no warranty or guarantee concerning accuracy or completeness of the content presented in this webinar.

Trane does not provide tax, legal, or accounting advice. This material is for informational purposes only and it should not be relied on for tax, legal, or accounting advice. Tax law is subject to continual change. All decisions are your responsibility and you should consult your own tax, legal, and accounting advisors. Trane disclaims any responsibility for actions taken on the material presented.

All trademarks referenced are the trademarks of their respective owners. ©2025 Trane. All Rights Reserved.

In today's episode, we're
sitting down with TJ O'Connor,

president of Farmington
Consulting Group,

to unpack real data from the
Contractor of the Future study

and what it reveals about
the HVAC businesses that are

growing faster, selling
more premium solutions,

and improving profitability.

Let's get started.

Welcome back to another
episode of HVAC full last.

I'm gonna keep trying to
say that really, really,

really fun and enthusiastic.

Stephen, what do you think?

You're doing a great job.

That's why we have you kick off
the episode every time because

you're just you're really peppy.

Get excited.

I'm ready for it to start.

I'm so excited. I'm so excited.

I don't know what
to do with my hands.

Anyway, I'm Mary Carter.
He's Stephen Ross.

And today, we have
an amazing guest.

Stephen, why don't you
introduce our guest today?

Well, TJ, we thought we would
ask you to introduce yourself.

Here's I'm I'm excited
to have you on.

Mary's excited to have you on.

We know who you are,

but our listeners may
not know who you are.

And, you know,

here's a way this is I
think this is fascinating.

Here's what I think
is fascinating.

I don't know who
your competitors are.

And in any other
vertical within the HVAC

industry, off the
top of my head,

I can name three or four
companies in that space that

are all competitors.

And when I think about you
and what your company does,

I wouldn't even know
who else to call.

You're that unique within
the heating and air industry.

So with that said, why don't
you kinda introduce yourself?

Who are you?

Tell us a little bit about
Farmington Consulting and then

just how did you
even get into it?

But let's just start with who
are you and what do you guys do?

Yeah.

I appreciate the introduction, the
invite and being called unique.

That's certainly a good thing.

It'd be called a
lot worse thing.

So TJ O'Connor, President
Farmington Consulting Group,

as Stephen mentioned,

we've kind of carved out a
specific niche in the industry.

So we work not only in the
heating and air industry,

but also in the plumbing
and electrical industries

conducting market research.

So we do all types of
research and surveys and

interviews of contractors,
of manufacturers,

just trying to provide the
industries that we work in with

some really good
intel and information.

Specific to HVAC, we
work with distributors,

we work with manufacturers.

I'm actually in San
Antonio right now,

just got done presenting a
customer satisfaction survey

results that we conducted for
a distributor down here in the

great state of Texas.

But we've been doing this study
in the HVAC industry with HVAC

contractors over the past six
years that we've titled the

Contractor of the Future Study.

And every fall we go out and
we pull HVAC contractors of

all different shapes and sizes,

trying to really get their
thoughts on what's changing in

the industry, how are they
adapting their business to fit

the needs of their customer,

and just what are they doing
from a forward looking best

practice standpoint to be
the most successful HVAC

contractor in their market.

And so as you guys well know,

it's a great
industry to work in.

My dad started our company back
in nineteen eighty two doing

like job costing for electrical
contractors in New England.

I came on board about seventeen
years ago and my task from my

dad was to broaden out
into the mechanical industries to become

an expert in plumbing and HVAC.

And so that's kind
of how I got started.

And like you said, don't
really have competition,

which is a good spot to be in.

But yeah, I have a lot of fun
working with different contractors,

distributors, manufacturers throughout
heating and air.

That's amazing.

I just have to fan girl
for a moment because

I first was introduced to the
contractor of the future study.

I want to say it was maybe
three years ago and a friend of

the show and listener, Mary
Beth Keim had sent me a portion

of the survey that was
relating to a program that I

was overseeing at the time
with consumer finance.

And the statistics were things
that we had been saying,

but they were real numbers for me to
back up behavior within the program.

And

I remember emailing Mary
Beth and just being like,

where did this come from?

And so she sent me a little bit
more about the full deck and

now, every year
when it comes out,

I get so excited because the
insights from this presentation

are incredibly
in-depth and extremely

relatable for

honestly heating and air,

but really home services
to your point and all the

verticals that you're serving.

Yeah, no, I appreciate that.

And yeah, we try to
present data as one thing,

but kind of the lie behind
it is another that we really try

to focus on.

And so glad to get feedback
that you've found value in the

work that we do.

I'm kind of in the same boat,

which is having been doing sales
training since two thousand eleven.

I'm getting old now.

The gray hair is
starting to show,

but it it is very validating
to when you've been saying the

same thing, like, we need
to kinda shift over here.

And then there's some
data that comes out.

And most of the data when I
started doing sales training in

two thousand eleven was
non industry specific.

So there was research out there
and data out there that you

could pull from and kinda
extrapolate out to say, okay.

Well, based on this research,

here's what we should be
doing to reach consumers.

But it's phenomenal to have
industry specific research that

that also backs that up.

So I very much appreciate it.

Can we just well,
just to clarify,

so you're in Texas right now.

A distributor hired you
to go out and survey their

clients who are mechanical
contractors so that their

distributor then could get take
the information and figure out

how to do a better job
servicing their customers.

Is that kind of that's one level
of the research that you do.

Is that right?

Yeah, that's a big
part of what we do.

We do a lot of research
for manufacturers.

Maybe they're coming out
with a new product or

an existing product that they
want to get feedback from the

channel on.

So yeah, any kind of
information intel,

I mean companies can
always ask themselves,

they could do it themselves but
a lot of people find value in

having a third party
that's, you know,

instilled in the industry

can be kind of that
objective partner

and provide some
feedback that way.

So yeah, that's
really what we do.

And then the second part of
that is what Mary was talking

about, which is you also
just survey nationwide

contractors to distill
down best practices to

say, hey, what is it that
these top tier contractors are

doing that differentiates them from
some of the rest of the industry?

Is that a good kind of summary?

Because that's what I think
we're gonna talk about today.

Is that?

Yeah.

So the industry wide project
that we've taken on kind

of pro bono for lack of
better terms to provide the

industry with insights.

I mean, our industry is moving
so rapidly and changing.

And I mean, you talk
about A2L and CR2

or the rebate changes,

private equity
succession planning.

I mean, it's just
moving so fast,

not to kind of beat down
on the plumbing industry,

but we also work in
the plumbing industry.

And the rate that that industry is
changing is like sales pace, right?

HVAC is just so
fascinating to me.

And so contractors that are
adapting and are looking

forward are the ones that are taking
share and are going to be successful.

And the ones that aren't
and are kind of like, well,

this is how we've
always done things.

This is how you know my dad did it
or whoever I took the business for.

Those situations,

those processes don't
necessarily work today in an

ever changing environment.

So you know the questions that
we ask on our survey every year

to contractors changes, the
feedback that we get changes.

There's obviously some
staples in there, but yeah,

it's really interesting
work for sure.

If you want to get an
instant eye roll out of me,

just say that's the way
we've always done things.

Without fail, I will just okay.

So peel back the onion, like,

how many contractors
did you survey

all over the country?

I mean, just give who's the
base that you're pulling?

Can you tell us a
little bit about that?

Who are you getting
the data from?

Yeah, yeah.

So, we completed our survey
this past fall and we

had completed surveys from
over a thousand different HVAC

contractors all
throughout the country,

all different shapes and sizes.

So, from

chucking the truck one man
operation to your large

commercial mechanical
contractor that has fifty

trucks and vehicles.

Ones that are focused
on the resi market,

ones that are focused
on commercial,

ones that have been in
business for a long time,

ones that are new startups,

and as you said throughout
the country and you know

representing a variety of
different manufacturers.

So it's very equally weighted
throughout the different parts

of industry.

Nice.

Well, Mary, where I think,

can I tell you what Mary
wants to talk about first?

Absolutely. Can we just
like consumer financing?

Can we start there?

So what I mean,

it's here's here's what's interesting
is and I I'm a sales trainer,

and then I wanna hear kinda
what Mary's thoughts are.

But, you know, when I go in to
talk to maybe a contractor that

doesn't offer financing
or doesn't offer it much,

you know, the thing that we hear,
as Mary mentioned, is, well, hey.

We've always done it this way.
That's kinda the first thing.

And then they say, hey. Our
customers don't need financing.

And so, you know, whether
it's me or it's Mary or it's

somebody from Wells
Fargo, we're like, Hey,

here's the pie
chart of consumers.

And when you say my customers
don't need financing,

what you're saying is, I only
want customers out of this

little sliver of the pie chart.

But give us the data, like
what's the data actually say?

Let me ask Mary. Mary,
can I start with Mary?

Because this is your world,
Mary. This is your passion.

Mean, have you seen?

Well, let me just
turn it over to you.

Yeah. So you're right.

The first thing we always hear is
my customers don't need financing.

And I was actually, if I
could tell you a story,

I never get to say that.

I was out in New York doing
some dealer recruitment

events last week and brought up
consumer financing and how we

have a wonderful partnership.

Right away, dealer
hand in the air.

Yeah, not for nothing, but
none of my customers need financing.

And I did a different tactic
than I've ever done before.

And I said, you did it.

Kind of like think like
Buddy the Elf in Elf.

And I was like, you did it.

You found all the
customers that have cash.

You found them all.

And you what? Congrats.

I mean, your customers are just
flushed with cash. You did it.

And he kind of looked at
me like, is she crazy?

And but but my exact
point was, no, sir.

You didn't do that.

And in fact, you're just losing out
on those customers who would have

considered you had you offered
a compelling monthly payment.

So that is definitely
the experience.

What we actually see is
that when customers are

offered a compelling
monthly payment,

they will consider you or at
least go forward with some sort

of an application.

And then the close rate of
customers who go through the

application process far
exceeds those who were never

offered a compelling multi
payment in the first place.

So I will let TJ speak
to the exact numbers,

but we see that time
and time and time again.

Yeah, I couldn't agree more.

And another thing to
piggyback on that is that

when most people think of
financing for consumers,

they only think of, well,

the consumer that doesn't
have cash to pay for it.

But I'll tell you what,

even your wealthier
homeowners let's say,

those people take advantage of
financing when it's offered to

them as much as the people that
don't have the cash on hand, right?

People who have the money,

and I say this to contractors
they say well I service a

wealthy area my customers don't
need that they just write me a

check and it's like well
some of the reasons why those

people are wealthy is because
they like to invest their

money, They like to spend what
they call other people's money.

So I haven't heard a reasonable

argument from any contractor
of why not to offer financing.

Is it for every single customer?

Maybe not, but I am a
strong believer that

consumer financing is the
most valuable tool that an

HVAC contractor has
at their tool belt.

Unfortunately, it's also the most
underutilized in a lot of cases.

So I'll share some
data with you.

I'll also share a quick story as
Mary did because I like stories too,

but sixty eight percent of HVAC

contractors nationally state that
they offer financing of

some sort, right?

But when you tear back
the onion a little bit,

the reality is only thirty
seven percent of heating and

air contractors offer
financing on every single job.

And that's really what they
should be doing because you

have a lot of contractors
say, well yeah,

it's in small print
on my website,

or I have one of my technicians
that has bought it and they

promote it but the other ones
are afraid to talk about it.

So really only a third of our
contractors in our industry

are really promoting it,
it's part of their culture,

They're leading with a
monthly payment and so on.

And to your point
Mary, you know,

I can talk about it till
I'm around the face.

You could do the same, but to
have some data to back it up.

Contractors who offer
financing always on every job,

not just sometimes when they
feel the customer might want

it, their close rates
increase substantially.

So our data shows from our
Contractor of the Future study

that contractors that only
offer financing some of the

time, their close rates on
average are thirty eight percent.

Contractors who always offer
financing every single job,

that goes up to
forty nine percent.

That's pretty
significant, right?

And that's not like
a major investment that contractors

have to make, yet they
have to train their staff,

get them comfortable
bringing it up.

But if you as a contractor
could go from a thirty eight

percent average close rate
up to almost fifty percent,

to me that's pretty
low hanging fruit.

Not only do the
close rates increase,

but the mix equipment wise
for the contractor improves.

It gets away from having
so much on that entry

level base equipment that so
many contractors sell so much

of and gets more into that
mid tier and higher tier

equipment, which obviously
contractors want to sell more,

distributors want to sell more,

manufacturers want to sell more.

And the thing that I hear from
so many HVAC contractors is,

well I don't offer financing
because my customer doesn't

need it, they don't want it,

but we all know if you don't
offer someone something,

an option, a payment
option in this case,

you're gonna have no
chance of selling it.

So even if a small portion
of your customer base takes

advantage of financing, that's
still raising your close rate,

your margins, raising your
equipment mix, selling add ons.

I mean there's so much
good that can come from it.

So you know we published in our
contract of the future report

like the top best
practices around financing.

They are partnering with
a private financing company,

you mentioned Wells Fargo,
there's a lot of good ones out

there integrating a
second look option.

So I hear from contractors you
know I can't get a lot of my

customers approved.

Well, do you have a second look option
that helps in that circumstance?

And a lot of companies that
do that As I mentioned,

always offering
financing on every job,

not just some of the time and
leading with a monthly payment

is so key.

Most contractors over three
quarters wait until the end

of their proposal or their
sales presentation to say, hey,

here's the cost of the total
system but if you want we could

try to get you approved
for financing and if that's the

case this is their
monthly payment, no.

When you or I go to buy or
lease a car they don't come out

and say, well the vehicle
costs fifty thousand.

If they're a good salesperson
they say well this could be you

know six seventy
dollars a month Mr.

O'Connor right?

And if you want to add on
service to that or you want to

add on this to that it's going
to raise it by ten bucks a

month and that's not that bad.

So our world works
under financing.

The HVAC industry unfortunately
is just slow to catch up to that,

but there absolutely are
contractors in each market that

are taking share from the non
progressive contractors that

have already bought in.

And also offering different
promotional financing,

There's financing options,
promotional options that work

for consumers of all different

types depending on their
financial situation.

And even though I use
the term financing,

know we let off with that
affordable payment option is

really the term that should be
utilized when a contractor is

is talking to their customer.

One of the things that we talk
about at Sandler is we use a

term that we call not okay.

And that is that you
don't ever wanna kinda backhandedly insult

your customer because that
obviously is gonna hurt.

Right?

And and that's what you see with
the contractors who are like, hey.

Here's the price of the system.

It's eighteen thousand three
hundred ninety six dollars.

But if you're broke as
crap, mister O'Connor,

we could offer you
some financing.

And that's how that if
you wait till the end,

that's that's how
that comes across.

It's insulting.

So it's you know,

we my niche of the heating
and air industry is really working

on the technique.

It's not just should
you offer financing,

but how you offer financing
matters enormously if

you're trying to get that full ten
percent bump in your closing ratio.

Yeah, I couldn't agree more.

With inflation continuing the
cost of an average system going

up, I mean, it's more
important now than ever.

And I would think for a lot
of, especially homeowners,

you're talking about the
residential contractor,

if you just lead with the
overall price of a new system,

they're gonna say, well,
just repair it, right?

Just repair it.

And we all know that, A, you
can only repair so long, B,

for a contractor to
be really successful,

you want to get more
into that replace, right?

In a new system.

And so I think to your point
you want to start off on more

of a positive and
something options something that that

consumer and customer can
can afford and they could see

themselves paying it rather
than like you said eighteen

thousand dollars system
when maybe they weren't even

expecting that they would
have to replace their system.

So you know the quick story
I want to share to piggyback on

Mary is so I present this
information in a lot of

different dealer meetings
throughout the year, right?

Manufacturer, distributor will have a dealer
meetings bring their top customers in,

they have me come in and talk
about contractor best practices

and where the industry is going.

I always talk about financing
because it's huge in our

industry and I did this in
a very rural area a couple

of years ago and they
didn't throw anything at me,

but the contractors in the
audience when I told them that

they had to get on board on
financing did not take kindly

to what I was saying and they
asked questions and picked

apart you you don't
understand these financing companies that

you know they're frauds and
we can't get our customers

approved our customers don't
need them all this stuff right.

So afterwards there was like
a cocktail hour and I'm standing

there and a rather
younger contractor,

well dressed guy came up to
me and he goes, You know,

when you were talking about
financing and how that is the

way our industry is going,

and I was listening to my
competitors disagree with you

and basically tell
you you're wrong.

I was just sitting there loving
it because those are the people

that I'm taking market share of.

And my close rates have
gone through the roof.

I'm selling more premium
equipment and I'm taking

business from my competitors
that don't offer it, right?

Because just the last thing
I'll say on it is people like

options no matter what it is.

Options on payment, options
on different types of

products, you name it.

And if you don't offer it,

you don't have the
chance to sell it.

So we need to get more contractors
bought on board with that.

I love it.

So there's two pathways
I want to go down

here from the
financing conversation,

And one you mentioned
is that the increase in

mix will occur with more
compelling monthly payment options.

And therefore, you know,
profitability has a chance to

rise as well.

Right?

And one of my big takeaways
from the survey this year was

the correlations between small
activities you can do in the

business and profitability,
whether that be marketing

budget, offering
financing options.

And so I was just wondering if
maybe you could speak to that

because I think there is a
little bit of a sentiment in

the market that, wow, these
manufacturers are getting away

with highway robbery.

Like the prices are going up
and consumers are feeling it.

And how do I stay profitable?

You know, how do I get
some of that, right?

So I'm very curious
to take, you know,

your take on what you're
seeing in the numbers from a

profitability standpoint.

Yeah, so a couple numbers and
then some color behind it.

Our study shows that the
average heat to get air

contractor across the country
has a net profit at the end of

the year of plus six percent.

You look at that
and you're like,

well they're making
money, right?

But our data experience
shows that really that

should be a ten percent
or higher in order for a

contractor to sustain growth
out of time invest in their

business, which not
enough contractors

do, profit should be
at ten percent or more.

How do you get there?

And financing is certainly
one way to do that,

investing in marketing.

Our study shows that
contractors that invest at

least twelve percent of their
annual revenue back into

marketing and advertising
to create more leads,

create a brand for
their business,

have a much higher net profit
at the end of the year than

those that do not.

So I think that
that is a huge one.

But on the pricing, so
many contractors complain

about price increase, price
increase, and I get it, right?

It does make things harder,
but that same consumer,

whether it's residential or
commercial that bought a system

at twelve thousand
five years ago,

that's the same person that's
going to buy a system now at

sixteen thousand dollars

and air is not the only
industry and part of life that

prices have increased it,

I don't know anything that
prices haven't gone up with.

And so everyone has become
accustomed to paying more for

something and as a
contractor to be successful

contractors need to focus a
lot more on the value that they

provide in their own brand
rather than just, well,

the price of equipment is this
and so I've gotta lower my cost

and I can only sell fourteen
SEER and all this stuff.

Those are just excuses and so,

there's so many things
that contractors can do to

differentiate themselves.

Financing is one offering
extended labor warranties as

part of their total job is
another one marketing themselves.

I'm sure you're going
to ask me down the road,

but I think this is a good
point to put in there about

proposals and how
contractors present

options and proposals to
their customers, right?

So, the good, better, best,
or however you term it,

and however you put it,

that has been like historically
thought of by the industry as

that's the best practice, right?

We get three options, we
give them a cheap option,

kind of a mid tier option,
then your high option, right?

And what data shows
is that people

usually will eliminate that
top option just off the board.

Not everyone, but a lot of consumers
will eliminate that top option.

So one of the questions we
asked on our survey HVAC

contractors is how do
you present proposals to your

customers and how many
options do you provide them?

Not just in efficiency of product
but also in payment options.

And even though not many
contractors have adopted this,

the contractors who offer
four or more options to their

customers when they
present a proposal,

their profitability is double
what the profitability is

of those that offer one,

two or even three options.

And so again, it sounds simple,

but the more options you provide
to your customers, the better.

And so that's a way I think
that contractors could

differentiate themselves and
lead to more profitability.

And again, to Stephen's point,

even if you're only going
to get five percent of your

customers to buy that fourth
option, that pie in the sky, right?

That's still a heck of a lot
more than you were doing before.

So leads to higher
premium equipment mix,

higher close rates when
you give more option,

higher profitability
for the contractor.

I feel like we're hitting
our love languages.

Like Mary's love language was
consumer financing and she got

all warm and fuzzy.

My love language is
blowing up best, better,

good and trying to get
contractors to do proposals a

little better way.

Now I'm feeling
all warm and fuzzy.

So I think we're on a good
roll. What do you think, Mary?

I couldn't agree more.

We have an episode called
Breaking Up With The Good,

Better, Best, and I
was feeling like, wow,

Stephen must feel so vindicated
because I think he's at somebody's But

one piece from the survey
was that only ten percent of

contractors are offering
four or more options.

So that means ninety percent of
our listeners out there need to

go back to that episode
and check that one out.

I would agree with that. Yeah.

And you know having
a proposal software,

not just writing it out by
hand and one that you can like

interact with and say, hey,

if you were to add
on this IAQ, right?

Or if we were to include
a service plan with this,

this is what it would cost.

And again, the way
our world works,

but absolutely having those
four or more options bump up

our close rates considerably
and bump up profitability.

And again from the survey,

those contractors that are
offering four or more options,

their premium equipment mix
rose from twenty six percent

to forty two percent.

And when I heard that piece of
data and then coupled with some

of the strategies that
Stephen has, you know,

sort of given us to think
about, it makes sense.

It makes total sense why the
conversation intentionally

puts a customer into what
they need, what they want,

and what's best in class for
what they're experiencing.

So I think, again, just having
a data to kind of back it up,

boy, you know, it feels good.

It feels good up here.

Yeah, that's good.

And I think a lot of
contractors similar to

financing have a lot of
preconceived notions.

They go into, let's say a
house and, you know, they say,

I'm not even going to bring up
a twenty SEER because they're

not going to buy it, right?

But if you don't talk about it,
don't offer it as an option,

you don't have a
chance to sell it.

And also from a
psychological standpoint,

maybe if you offer
that twenty SEER,

whatever your top you know
offering is to the contractor,

maybe they'll say, well, I'm
not going to go for that,

but I'll go for the
next best one, right?

Rather than if that next best
one is your that's your best

of that good, better, best.

So I'm with you, Stephen,

I think we need to find a way to
get rid of that in our industry,

because that is back to the
way we've always done things,

not necessarily the
way that we should.

Can I make a request?

And I don't know how
to survey for this.

So this may be impossible to do,

but I I've mentioned
a minute ago, like,

lot of our Sandler training
is nonindustry specific.

And so we're collecting
research that's that's done all

over the place,
applying it to sales.

But but to to some extent
there's a challenge of then

like saying, does this apply in
our niche of heating and air?

So here's

my request is I read
a couple of books.

This is probably
fifteen years ago.

One was called The
Paradox of Choice.

How many choices are too many?
How many choices are too few?

Good data there from a
lot of different sources.

The other book was called
The Myth of Fair Value

and talked a little
bit about pricing.

And one of the things that I
pulled out of both of those

books was the concept that the people
that spend more money with you.

In our industry, that would be
the people that buy the better,

the higher the product mix.

They're actually the ones
that give you your referrals.

And I thought, well, that's
that's really interesting.

So I went back and looked at
my own data and that I'm so old

that when I was selling our
base model was a thirteen SEER.

And so when I looked at
thirteen SEER equipment and

here's what I did.

I pulled all the referrals
that I sold in a year.

And then I went
back to see, well,

where did that
referral come from?

So if TJ was my referral
customer and I closed him,

I don't necessarily
care what TJ bought,

although that might
be interesting too.

But if Mary is the one
that referred me to TJ,

what I'm really interested
in is what did Mary buy?

Because whatever Mary bought
was good enough that she said

to TJ, hey, you
should call Stephen.

So when I went and just
looked at my own numbers,

I had to sell ten to fifteen,

thirteen SEER units
to get one referral.

And then as your
product mix moved up,

that ratio dropped to
the point where the

last year that I was
doing full time sales,

I think I had sixteen or
eighteen jobs that were over

thirty thousand dollars So I kinda
had it broken out by price wise.

And those eighteen jobs gave
me like fifty four referrals.

So instead of having to sell
ten jobs to get one referral,

these eighteen jobs, almost
three to one were generating

all my referrals.

So when I go talk
to contractors,

not only is the getting your product
mix up important for profitability,

not only is it important to
just maximize each opportunity

you get, but that's actually
your future referrals coming in.

TJ, is there any way to
validate that in our industry?

I mean, that just it's hard.

A contractor has to dig through
their own numbers to come to

that data, but I think
that's fascinating.

Yeah, I do too.

Yeah, don't have
data to back that up,

but I would definitely agree
with what you're saying and

that a customer,
if they go with a

product, a system, a solution
that they really think

is valuable, right?

And they've invested in
something that they trust.

I think that they've had a
better experience and they are

more likely to

refer, right?

Rather than if they just went
with the cheapest option maybe

that was the only thing
off or don't you say,

the system it's gonna
do the job, know,

but it's not what you could get.

You know and you made another
good point Stephen that put a

light bulb off in my head
is that I think so many

contractors just
chase volume, right?

And I'm going to do as
many jobs as I want.

It doesn't matter
how profitable,

what the level of
equipment is or whatever.

And that contractors should be
more strategic and what kind of

jobs they're targeting,
what they take on.

Because like you said,

you could do fewer jobs but if
they're higher profitability,

you're going to be
better off in the future.

I'm not a heating and air
conditioner contractor but I

wouldn't think that it takes
all that much longer to install

a high efficient piece of
equipment than it does your base.

It's not like you're taking
all that much more time.

So it's a more
profitable sale, right?

Another thing that I think
contractors really struggle

with and we have data to back
this up is with job costing.

And so many contractors
undersell themselves,

they don't understand how
to properly cost a job.

So we collected some data
on our contractor of the future

study this past fall on
how contractors are pricing

install jobs versus
service jobs.

What we found is a lot
of contractors are using

the multiplier, which is fine.

It's an easy way to price
both jobs and service,

but it really is not the
most effective because it does not

include all of the
operational and overhead

costs, especially labor.

So what we recommend
to contractors,

what our Contractor of the
Future study comes back with is

a divisor for install
jobs is one of the best

options because it includes
all those overhead costs.

It takes into account what your
labor cost is as a contractor.

And then on service,
you can use the divisor,

but flat rate pricing is a
huge benefit that not enough

contractors utilize.

Really helps the contractor
get to profitability and get to

a point where they are
charging their customer for their value,

for their experience,
for their expertise,

and not just for
that individual job.

So, you know,

I encourage contractors really
take a look at their job

costing, how they're
pricing for jobs,

what methodologies they're
using, and to get to a more

profitable state because that is
a huge challenge in our industry.

And too many contractors undersell
and underprice themselves.

Again, just assuming that a
customer won't pay a certain amount.

I think that's true.

And one thing that I
really took away from listening to

your survey results was
there are so many tools now

at a contractor's disposal to help
them with this proposal piece.

They can these tools can take
into account flat rate pricing

for service versus a different
kind of pricing for installs.

And that was something
that I, again,

I think it's sometimes when
I speak about the difficulty of

things, I refer to
different levels,

but it's kind of
like a level two,

but it's really something
that you you'd be well worth

investing time to master in
because again it's going to

lead to higher mix
and premium equipment,

more profitability and I think
in the survey you mentioned

something about margins as well.

Oh yeah absolutely, increased
margins as well yeah pricing

can certainly help with that.

I know one of the episodes that
you guys did that I watched and

really enjoyed was with Tommy Q
from JB Warranties who's a good

friend of mine and know,

JB Warranties and that's
another way to increase margins

is value adds and
offerings like extended

labor warranties.

But you mentioned, Mary,

about so many tools now that
contractors have at their

disposal and
whether it's a field

service management software or
an individual separate proposal

software, flat rate pricing,

there are so many good
providers for that.

We need to get more contractors
that get on board with one of

those, but even more
so when they do,

when they sign up for one of
these technological tools,

softwares, is
fully utilizing it.

I can't tell you how many
contractors I talk to that have

a field service management
software that have no idea that

flat rate pricing is
available through it,

or have no idea that they could
do all their proposals in it.

Basically they're paying all
this money and utilizing it as

a glorified QuickBooks, right?

They invoice out of it,
maybe they schedule,

but you know there's a lot
of these offerings that have

marketing in it, that
have purchasing, that have

sales proposals,
flat rate pricing.

So I think, you know, to me,

the product and technical side
of the heating and air industry

is fascinating to me, but double
so is the business side of it.

Contractors really
need to look at how can

I manage my business better,
how can I be more efficient,

more profitable so that I
can invest back into my business?

Know, I talked about earlier
that contractors that

invest back in their business
at least twelve percent of

their sales revenue,

annual sales revenue to
marketing and advertising lead

towards more of that plus ten
at the end of the year net

profit, whereas the industry
average is plus six, right?

So being able to take
that money and say, hey,

we're gonna go out and put more
into our brand so that we can

not only get referrals through
the great jobs that we're

doing, but also get
people calling us.

And there's a lot of different ways
to do that and track that as well.

I got a question. Mary, this
is for you. Are you ready?

Oh, okay.

So I'm gonna take
everything TJ just said.

And let's pretend I mean,
TJ's results are, hey,

what are the best
contractors doing?

Let's assume I'm not one
of the best contractors.

I'm a I'm a mediocre contractor.

I'm middle of the pack. Right?

So let's say my average ticket on
an install is ten thousand dollars.

My product mix is pretty low,

meaning most of what I sell is fourteen
SEER single stage type equipment.

And as the TJ says,

my average net profit in
the year is six percent.

And so if I take everything
TJ just said, which is, hey,

you should bump your marketing
up from the five percent you're

selling now to twelve percent.

He's saying, hey,

you should get some proposal
software to make sure you're

given good estimates that look
good and you're given four options.

You should roll in your
consumer financing of which the

dealer fee is gonna range
on average five, ten,

fifteen percent.

And you should sign up for
some field service management,

which I know I spent
probably sixty grand

on the last year that
I was a business owner.

So there's a
substantial increase.

And so now instead of having
a ten thousand dollars

ticket to build all that
in as a business owner,

I'm gonna have a
fifteen thousand ticket,

which makes it harder to sell.

But what TJ just said is your
closing ratio is gonna go up, right?

From thirty eight percent
to about forty nine percent.

And instead of you're
making six percent,

you're actually gonna make
more like ten percent.

So here's the question,
Mary, how does that work?

That sounds like magic.

I was gonna say it's a little
Mickey Mouse thing called magic.

Seriously,

first of all, how is
that going to work?

Well, it's going take a little
bit of time and that's maybe

even too light.

It's going to take a lot of
time and a lot of investment.

And I'm going to say something

that's very controversial.

It might take time outside of
the hours of eight to five.

I mean, that's just how it is.

And any sales rep worth
their salt is working

at this craft out of the
hours of eight to five.

And that's just learning up
on products and learning how your

products work, doing more
trainings on your FSM.

I know a lot of
webinars are offered during office hours.

Guess what? They
all get recorded.

You can watch all them at a
later time when the phone isn't

ringing and when you can take
a little bit more of that

information in.

So you're going to have
to put in some time.

You might have to
hire some resources,

which I know maybe some people
are thinking like, great, Mary,

that's another expense.

Yeah, it it might be.

But you know what is a
great use of resources,

especially if you're looking
for maybe affordable resources,

internships,

friends and family who are
looking for some experience.

There's so many people out
there who given, you know,

a little bit of direction could
likely help you out in your

business to achieve
some of these goals.

So I would say, how
is it going to happen?

Well, it's going to
happen with some time.

It's going to happen
with some investment

and maybe even more
philosophical than that.

You have to believe
that it's going to work.

You have to buy in and say,

I'm doing these things for a
reason and I want it to be better.

I want, I want to grow. I
want to make more money.

I want to be able to,
you know, buy, buy, well,

I was just going to
say buy a cool car,

but on our SBA episode,

we talked about how
that could be dangerous.

So,

but you get what I'm saying.

Yeah. Yeah. Do you agree?

Yeah. It's it is hard.

I I think it's hard to
wrap your mind around.

I mean, I think the other
comment that sometimes I'll

hear is, hey, I've got
this cheaper brand of equipment.

If I sell that, then
my price is lower,

which makes it more affordable
for homeowners versus selling a

premium brand of equipment like
Trane where now the price to

the homeowner is
gonna be higher.

And so sometimes the
dealer will say to me,

I don't I don't understand
how that makes sense.

You're gonna it it's now going
to make me more expensive.

And I say, yeah. Guess why I
did it as a business owner?

I did it to make more money.

I'm not gonna make less money
selling a premium product.

I'm gonna make more money
selling a premium product.

And that is the challenge is
I think I like what you said.

I like your answer, Mary.

I didn't know what you're gonna
say, but like it takes time.

You can't do it all at once.

I mean, it but it's you're
you're improving your business.

Does the price go up? Yes.

Does the value to the
homeowner go up though?

Yes.

And I think that's the
that's the mental leap is if

we as contractors think that
the only value we provide to

homeowners is sticking a piece
of equipment in their house.

If that's the only place
your value comes from,

well then you can't
raise your price at all.

But if your value comes
from amazing customer service and

making sure people are happy
they can afford what you're

selling and you're not breaking
the bank and not taking every

single penny out of their
savings account and like all

those types of things.

And you're training your
employees so that people that

show up know what
they're doing and so on.

That's a better value
to the homeowner.

So therefore, homeowners
are willing to spend

more money on it.

A belief system change and it
takes a while to implement.

I like what you said.

TJ, what have we not asked you
about that we should have asked

you about just forgot?

Wow, that's a loaded question.

But before I get to that,
had a couple of thoughts.

Thought with Mary, I liked
Mary's answer equally as much,

but a couple of things
popped in my mind.

One is service, I think
is often overlooked,

but can be really helpful
in improving profitability,

is when you're selling these
replacement or new installs is

to get the service after it,
because that's repeat business.

And another thing is
diversifying your business.

And I'm not talking about
going from HVAC to roofing or

electrical or
anything like that,

but if you're a contractor that
has always only done residential,

why not try your hand in a little
bit of light commercial, right?

That could be a very
profitable business as well.

And I'm not talking about going
and doing major rooftop units

on hospitals or
something like that,

but you go throughout your
community and restaurants that

you eat at, the church that
you go to, small retail shops,

all of those places have
heating and air too, right?

And it's not that much of a
step up from the residential

work that you're doing.

There might be a little
less competition.

It could be very
profitable as well.

So I I've I've seen a lot
of contractors that have

had success in branching out a
little bit as well and I know

I kind of put down plumbing
beforehand but I'm seeing a lot

of HVAC contractors that
are branching out into other

verticals even if it's as
simple as getting into water

heaters, you know, as
a homeowner consumer,

a lot of those customers,

they want to deal with
fewer contractors,

home service people.

So if you can provide multiple
service other than just heating

and air, which is
great, but if you can,

you're gonna provide that
much more value and have

opportunities as well.

So what didn't you ask me?

There's a lot of different
directions I could go in.

I would go back to
education that contractors

need to really take
that seriously,

network themselves
with other contractors.

Mary said about it's going to
take time is find a contractor

that you don't directly compete
against that you want to

become, right?

And try to find out how did
they get there because I

guarantee you they didn't just
snap their fingers one day and

they went from a small
or as you say, Stephen,

an average contractor to
that high performing plus ten

percent at the end of the year,

being able to invest in
their business network,

but also educate
yourself and your people.

And I think so many
contractors get bogged down in

the product and technical
side part of our business,

which is important.

We have to know about
installation, troubleshooting,

A2L, all that stuff for sure.

But there's another part of
being a contractor and that is

managing people,

hiring, creating
and understanding

financial statements.

We talked about job costing, we
talked about financing, warranties.

There's so many things that
contractors can do from a

business management standpoint that's
going to make them more

efficient, more profitable,
add value to their customers

that in the end will
help them grow as well.

So the study that we keep
referencing today is the

Contractor of the Future study,

which when you say that to me,

like an image of Rosie the robot
from the Jetsons pops in my head.

And I'm like, is the contractor
of the future a robot?

But one thing that seems to
go hand in hand with future

conversations is AI.

And we're hearing a lot
about how you can use AI

in your business.

And I'll say even for
myself as a salesperson,

I've kind of struggled on when
to go to AI and what to use

AI for.

More and more use cases come
up every single day and I'm

starting to see more benefits
but even that for me has been a

little bit of a slow on ramp.

Any insights on AI with
contractors that you're seeing now?

Yeah, so adoption
levels are pretty slow.

So according to our study,

a third of contractors have adopted
some form of AI into their business.

I think for a lot of
contractors they want to get

started but don't know where and
it's kind of scary for them, right?

Because it's new.

And so there's a lot of
different ways that contractors

can implement AI
into their business,

whether it's in inbound phone
answering or it's technician

summaries or it's
customer right to review

on Google and an automated
response to that review, right?

Lead follow-up, chatbots
internally, externally,

vehicle routing and dispatching.

There's so many different
ways automation and

AI wise that contractors can
implement into their business.

I think for contractors it's
finding out what in their

business do they want to make
more efficient and automate,

where are they spending a lot
of unnecessary time that is

taking away from them being
able to go out and sell or

market themselves and
finding out where there is.

But I think another challenge
with AI is there's you talk

about change every day it seems like
there's a new provider that comes out.

So weeding through
what's real, what's not,

what's good for my
business, what's not,

that could be a challenge.

I think that's where it
comes back to networking,

talking to other contractors
and what they've done.

But there are a
lot of non majorly

expensive, you know,

not sixty thousand dollars
like Stephen said for the SFM

software that you can implement
in your business to utilize

AI and to automate
several processes.

Nice. Nice.

I the idea that you would
maybe hack, you know,

which process I want to improve
first before implementing just

straight AI.

I think that's a really,

really good pro tip, not
just for AI evaluation,

but maybe any evaluation.

Yeah, was gonna say, you know,

I could see a
contractor who maybe

isn't on that contractor of the
future level that I'm talking

about listening to this or
maybe some of your other

podcasts and being like,
I'm so far away from that,

I'm never going to get to.

But like with anything, it's
taking bite sizes out, right?

So maybe this
quarter or this year,

you're going to attack the
financing and you're going say,

I'm going to get my people
energized and talking about

financing and we're going to
offer financing on every job.

And then maybe once you
get that accomplished,

maybe then it's getting into
AI or looking at your pricing

strategies or marketing, you
know, whatever it may be.

I don't think that any
contractor is going to be able

to accomplish all this at once.

That's why it's called
Contractor of the Future, right?

It's not just, you
know, right now,

but our industry will
continue to adapt and change.

There will be other things that will
hit us that will be challenging.

And so, contractors
need to adapt,

need to be forward thinking,

they need to be investing
in their business.

I have maybe a weird question,

but when contractors are
answering your survey,

how truthful are they?

Well that's a good
question, yeah.

So for the most part,

I don't think that they would
have any reason to lie other

than when it comes to maybe
the financial metrics.

Now it is anonymous.

So, I mean, me and my team are the
only ones that see it because we're

not doing it for anyone.

It's like I said, partner with
a contractor association on it,

but even they don't see
the individual responses.

So really, there's no reason for
the contractors to lie on it.

But yeah, I could see a
contractor saying, well,

I only made five percent,

but I'm going say I made seven
percent just to make it look good.

But I will tell you this,

when I saw that the net
profit reported by the average

contractor was at plus six.

I could believe that based on
other data that we've said and

industry research
that we've done.

It should be higher.

I hope that maybe five years from
now it will be higher, it better be.

Yeah, that would be my
best way to answer that.

No, that's super fair.
That's kind of a tough one.

There's so many great pieces
of information from the survey and

I don't want to give
them all away here,

but there were a couple that
even made me kind of scratch my

head and I wonder if
that's really real, it,

but what's my total bias on
that is that there's other

pieces of information that
I'm like, that's so real.

I've been saying that for
years. I I'm my own worst.

I'm my own worst critic on that.

Let's say if somebody's
listening TJ and they're like I

want to get my hands
on that survey,

what's the best way
for them to do it?

Yeah absolutely, so they
can reach out to me,

they can go to our website
farmingtonconsulting dot net

get our contact information
reach out and be happy

to pass that along.

Like I said, I present
a lot of different industry conferences,

events, distributor
and manufacturer

meetings as well
this information.

But yeah, I'd be happy to
pass that along for sure.

Nice.

I think maybe one of the best
feelings that I get from my job

is when I see somebody
make the changes in a

positive way on the notes
that we've been talking about,

And I see it impact their
business in a positive way.

Maybe they're able to add two
more trucks to the fleet and

they're all wrapped
and they look great.

They did that.

They were able to afford that
because they sold more jobs

because maybe they did
a more promotional,

attractive promotion
and financing.

Whenever I see those little
pieces start to kind of

come into, like, you know,
roll into the bigger snowball,

I just get so excited because
it is one step at a time.

It would be such a bear to
take all of this advice tomorrow and

go implement all of it.

But one positive piece
leads to the next.

And I can't thank you enough
for putting together all of

this information.

And I really do feel like
you're kind of a celebrity.

So this was so fun.

Well thank you, I
appreciate that.

I'm unique and I'm a celebrity.
I'll take that for sure.

Yeah,

hard to replace.

Good deal.

Stephen,

anything else on your end?

That's it for me. Great,
great episode, TJ.

Thanks for joining us.

Yeah. Thank you. I
appreciate the opportunity.

Amazing.

Well, if you have any questions
for TJ that you'd like to

follow-up, rewind, get his
contact info or shoot us

an email at HVAC
underscore full underscore

blast at training technologies
dot com and we will get

those over to him.

Thank you so much for joining us and
we will catch you on the next one.