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Ep.2: Dominating ductless heat pumps with Mike Cappuccio

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In this episode of the Heat Pump Podcast, Ed interviews Mike Cappuccio, founder and former CEO of N.E.T.R., one of New England's largest heat pump HVAC contractors, and owner of Dominate Ductless, a training and advisory business focused on educating the next generation of heat pump contractors to build profitable businesses. 

Mike describes his journey from employee to entrepreneur and from commercial trucking refrigeration to residential HVAC. In making that transition, Mike went from profitable to unprofitable, which caused him to look long and hard at his business to figure out what had changed and what was wrong. 

While squinting at his business, he found ductless heat pumps while at a Mitsubishi seminar, saw the beauty and profitability of a heat pump-focused operation, and set about revamping his entire business model. The success of that model is what led Mike to found Dominate Ductless -- so he could share those valuable learnings with other heat pump entrepreneurs. Mike shares some of his most important insights from his Dominate Ductless seminars, which are valuable to anyone trying to build a heat pump-focused business. 


Show notes



[00:00:00] Mike: So I buy it and you know a year or so into it now I've got a few more people working there and it's installing a lot of sheet metal, cutting a lot of holes, doing a lot of air conditioning work. End of the year comes and my accountant looks at my books and he's what happened? I said, what do you mean? He goes, you're not making any money. 

[00:00:24] Ed: Hi, and welcome to the Heat Pump Podcast. This podcast is about making sure the transition to heat pumps for heating and cooling throughout the country goes well for everyone. Homeowners, contractors, and the planet. I'm Ed Smith, co-founder of Amply Energy. My co-founder, Eric Fitz, is not with us today.

He's off building Amply's software product. But we've got a great episode and a great conversation with Mike Cappuccio, founder and former CEO of NETR. And now he runs Dominant Ductless, a training, coaching, advisory business focused on heat pump businesses. 

Mike tells the story of how he founded NETR. He started out in commercial refrigeration, and then got into residential HVAC over time. He shares the lessons he learned along the way, as well as some of his most common tips in his training courses. He talks about how to get leads, how to manage a labor force, how to price for profitability.

It's a fantastic set of learnings for anyone running a heat pump focused business. We hope you enjoy the conversation, and let us know what you think of it.

[00:01:26] Ed: Welcome to the Heat Pump Podcast, where we tell the stories of entrepreneurs who are building heat pump businesses. I'm Ed Smith, co-founder of Amply Energy, and I'm thrilled to welcome Mike Cappuccio to the podcast today.

Mike Cappuccio, founder and former CEO of NETR. Now runs Dominate Ductless. He's known as Mr. Ductless in the industry. Mike, we are absolutely thrilled to have you. Thanks for joining.

[00:01:53] Mike: Good morning, Ed. How are you?

[00:01:55] Ed: Really good. Really good. It's starting to get warm here in Boston.

[00:01:58] Mike: Glad to hear that. It's been warm in Florida all winter. So

[00:02:01] Ed: That's why you're down there.

[00:02:02] Mike: Yeah, I'm in trying to enjoy life a little bit, still working a little bit too. So still doing my thing. 

[00:02:08] Ed: Mike, a bunch of people know NETR, but before we get into the story of how you built NETR and where it was, are there any stats you'd be willing to share with folks to give them a sense of how big NETR was when you sold it? 

[00:02:24] Mike: Yeah, sure. When I sold the business, I had 72 employees.

We were doing a little over 15 million in revenue. About 12 million of that was just ductless Heat Pump business.

And When I, when we first started, it was probably 70 percent commercial, 30 percent residential. And then as time progressed, it just did a complete 360. The end. It was 88, I'm gonna say it was probably 80 20 at that point, 

[00:02:55] Ed: So that's, that story is exactly what we want to get into next. So let's go there. So tell us about, maybe even start briefly on how you got into HVAC. And then how you founded it in NETR and how NETR evolved over time.

[00:03:11] Mike: Yeah when I first got out of high school, I actually wanted to be an airline pilot and I went to college for a couple of years did my thing loved flying,

And. I really didn't like the school part of it, but I love the flying part of it. My dad said to me, he said, Mike, he said, we really love you going to school, but this is getting a little expensive and we don't see that you're probably going to be graduating at this any point in time.

And he said I think we need to stop going to school a little bit here for a little bit and rethink this. So I actually, at the time, my uncle had gotten me a job working for a it was a controlled environmental room company that actually built controlled temperature rooms. And I wasn't doing any of the mechanical side of it. 

I was more doing the panel side of it. And we were

[00:04:02] Ed: The electrical panel 

[00:04:03] Mike: No no the big heavy insulated panels that actually

[00:04:06] Ed: Oh, the insulated panels. 

[00:04:07] Mike: were built with. I'll never forget it. It's clear as day and I had a young guy used to work with his name was Bruce Pennell and we did a lot of jobs together.

We, we were in a lot of different schools and stuff like that where we will work in a lot of medical facilities and things like that. And one Friday Bruce and I got dragged into the office and they said, you guys are going to New Jersey. Next week, down at Johnson & Johnson for a couple of weeks, you got to take down 10 cold rooms, pack them up in a U Haul truck and bring them back up to Boston.

And we're going to reinstall them. I'm 18, 19 years old at the time, sounds good going on the road, whatever. And so we drove down there with a refrigeration technician, a pipe fitter, and Skip sat in, we drove in a van and Bruce was his name, they called him Skip. Skip sat in the passenger seat, I sat on a milk crate all the way from Boston to New Jersey, in the middle of this van. And we get to New Jersey, the pipe fitter comes in, he pumps down all the refrigeration, cuts all the lines, disconnects all the electrical, and he says, I'm out of here. You guys take all this stuff down and put it in the truck. This is the first time I ever saw this. And I said to Bruce, I said, what's his gig? He goes he's the pipe fitter. And I said how much money does he make? At the time he tells me he's making, this is probably 1980, 82, and he says he's making 30 an hour. Here we are making 10.

[00:05:43] Ed: Oh, wow. 

[00:05:44] Mike: I said how do you learn what he knows? I said, cause I want to do what he does. Cause it looks like his job's a lot easier than ours. We're humping, 50 pound panels around all day, breaking our backs.

He said you got to go to school for HVAC and refrigeration. I came home. I said to my dad, I said, dad, I want to go to school for HVAC. Can we look at this? So we looked at it. And we found a course that Wentworth actually had and Northeast Institute actually had at the same time. So I went to Northeast Institute on a one year program for HVAC, learned it really, I really enjoyed it. I was always a guy that played with my hands, liked to fix stuff, liked to take stuff apart.

I was always a car tinkerer, a motorcycle tinkerer. So I really enjoyed it. 

[00:06:36] Ed: By the way you look like an airline pilot right now with that, 

[00:06:39] Mike: With the helmet on. Yeah.

I always enjoyed the headset. I'm telling you, I still have buddies today that fly. I go up with them and we have a lot of fun. So Some of my guys actually went to college with actually graduated. But I later went and graduated. So I'll get into that story in a minute.

But anyway I go to the school. I graduate the school, and now it's time to find a job. So I start looking around, the school helped us find jobs, and I actually got a job working at Boston Thermo King, which was a truck and trailer refrigeration outfit. And we installed refrigeration units on trucks, we fixed units on trucks, we fixed units on trailers. 

And, really enjoyed the company that I worked for there. I worked for them for about eight or nine years, almost 10 years. Real great family that I worked with at the time.

They were real, real good guys. Two guys that kind of owned it and they had a nephew Whose father actually started they used to call him young jimmy. There was big jimmy and little jimmy that kind of worked there And young jimmy took a liking to me I took a liking to him and I really liked the job and I always saw that a lot of people there didn't really like their job and and I was always the guy that was moving up.

[00:07:57] Mike: I was always moving up I had gone from a shop mechanic to a road mechanic We actually got to get in the van and go down to those seaports and work on those containers and got us to go out To work go to people's sites I mean we used to do work Stop & Shop, Star Market those big companies used to go to those facilities work on their trailers and it was it was nice because you weren't in an atmosphere where you were in the shop all day long.

You were out on the road. You had your freedom. Really became a fun job. You're on call 24 hours a day, seven days a week, one week at a time. Got and at the time you're young and you're in your twenties and the overtime was unlimited. I bought my first house on overtime from that job. And It really worked out well.

So I made my way into becoming the shop foreman that kind of ran the whole shop. I had maybe 15 guys working under me at the time . And then from there, I actually became the service manager of that facility where young Jimmy was actually the service manager. He moved into sales.

I took over the shop and it really advanced. And then about, about two years, three years of being the manager, I had said to myself, I think. There is an opportunity to learn something else versus truck and trailer refrigeration. I said, I'm just, I'm getting bored now.

So I go back to school. I went back to school nights at Wentworth Institute. I started to learn more about HVAC. I started to learn more about design. I started to learn more about buildings. Because I had seen some of the guys that had worked there as technicians went into HVAC. They had left the truck and trailer business.

And so I started to learn more about HVAC. and Gone into HVAC but I said, you know, I got to go back, refresh my memory, and I need to get a license to do this.

So there was some electrical code courses I needed to take.

There were some design courses I needed to take. So I went back to school nights, started taking courses four nights a week, um, did that for three years, uh, grad, Three years. yeah, graduated

[00:09:52] Ed: Were you married at this point, 

[00:09:53] Mike: I was married at the point. Yeah, I was married at the point and didn't, did not have any children at the time.

No, was trying to have children, did not have any children at the time. But the school worked out really well. credentials that I needed to take my license to do all that stuff. And I went back to young Jimmy at the time.

And I said to him, I said, I said, we have all this truck and trailer refrigeration business, and all these people have buildings. I said, we could start another business with all the customers we have. And we could really do well with this. They kind of looked at me like I was like half ass crazy. I got to be honest with you 

[00:10:32] Ed: Oh, really? That seems like a great 

[00:10:33] Mike: Yeah, but this young kids looking at us saying, we're gonna go start another business. We're happy with our business, Mike. We're good. And I said I said, guys, I think I'm gonna go do this on my own. No hard feelings. I said, but I'm going to go do this on my own. So actually not at that point. I started it. I had started a corporation, but I actually went to work for another company that did it. I said, I'm going to do this for a year. I said, I'm going to work for a company for a year, but on the weekends, on weekends, I have my own LLC and I'm going to do business, not with their customers, the people that I was working for was those other customers that I knew because I was a service manager at that company.

I knew all those businesses and those people and who they were. So I started to venture out on my own after that, about a year. And at that point in time, my wife was pregnant and it was January of 1991 where I said, you know what, I'm gonna start this full time. I'd started it in 89. I'd done it for two years. I said, I'm going to really, I'm going to, I'm going to try this thing full time. Here we are, we've got a baby due and, 

[00:11:46] Ed: I was gonna say, 

[00:11:47] Mike: than, less than a couple of weeks. Less than a couple of weeks ended up happened January 3rd. My, my son was born, but this business, we full time this thing January one.

And it was like, here I am starting up, starting a business full time quit my job. My wife had just quit her job or was out on maternity leave. 

And, but what I had found out Ed was I was making more money in two days of working Saturdays and Sundays. And I had more work that I could handle. On Monday and Tuesday, I was calling in sick sometimes to go make more money than what I was making doing the other stuff. 

So I said, I know we're going to do this. So I just rolled right into this thing full time. 

And I had a cousin that was in the produce business in Boston, and he knew a lot of people in the produce business. My cousin, Brian, he really helped me out immensely with getting customers and doing what we were doing.

So I really wasn't interfering with the business that, that Boston Thermo King had or anything like that. But then what happened was those people all had trucks too, and they were we don't want to deal with them. Can you just do it with, can you just do it for me? So I had, it became, I started doing more truck stuff because I needed You know, I was probably 80 / 20 with the trucks and the buildings and that's what all happened is just we started doing trucks and buildings and in the first five years, that thing starts exploding.

It's just, it's, it's really just me. And I had another guy working for me at the time who worked. Basically, he worked at Star Market at night was a good friend of mine. We all work. We worked together Boston Thermal King. He had left there, went to work for Star Market at night. He was working on their trailers at nighttime, and then he would work 11 to 7. Then he'd come to work for me at eight, and he'd work from 8 to 4. He'd go home and sleep. And, he was young. He had two kids. He was in the same boat as me. He just wanted to make money. We were hustling. We were hustling and 

[00:13:37] Ed: I was gonna say you're hustlers. 

[00:13:38] Mike: Yeah. And we had also decided at that time to, we saw this ability for refrigerated rental trailers because people in that produce business always needed rental trailers to back up to the dock. So we went out, we bought a bunch of trailers, we started a rental business, him and I. My company did the repairs, we billed back, we had intercompany billing going on.

And we, we now we have two companies. It was like, wow, it's, this got sophisticated within five, six years, this thing starts really rolling and we're doing, three, four million dollars worth of business now between rentals and two guys and we're, we're, hustling, we're working.

Many hours, but we, we paved the way for our future is what we did with that.

And, about 10 years into that, I decided, you know what, I really don't want to be doing this truck stuff anymore. I had more building stuff than I had truck stuff. And I said to John look, let's, split off the rental company. Why don't you take the rental company? I'll sell you my half you can take that you go do what you want to do with it And he said, okay, I understand, we're still great friends today. And it was a great opportunity for him too. He wanted his own business. He wanted to do his own thing. I wanted to do my thing. So I now have this refrigeration company. I start growing it and growing it. And it was really a lot of service work, a lot of service work, a lot of fixing stuff.

And at that point in time, I had done a few refrigeration installations now some actual walk in box installations and stuff, and I started to see the money that was involved when you sold equipment, you start selling equipment and marking up prices on boxes and things. Really don't know a lot about business just yet though. Know a lot about installing things, a lot of fixing things, really good at that, and at that point in time, I had a gentleman that I worked with at that company that I went and worked for doing the commercial building stuff for a year or two, he had said to me, I'm in the residential HVAC business and my partner is leaving me and I really don't want to own this business anymore.

Would you be interested in buying it? So I really had given it a little bit of thought And even before that I had bought a little small business from a guy in watertown that just had a couple of trucks and a couple guys too that I added into it. Didn't pay a 

[00:16:10] Ed: you'd done an acquisition 

[00:16:11] Mike: I had done one small acquisition with a couple people in it and this one had about four or five people that worked there. Was a little bit more advanced on what we had done before, and I really hadn't dabbled in the residential business at all at that time.

This company installed a lot of central air conditioning and homes and, did a lot of remove and replace, fixed a lot of air conditioning. I was a refrigeration guy, fixed a lot of air conditioning though. So I buy it and you know a year or so into it now I've got a few more people working there and it's installing a lot of sheet metal, cutting a lot of holes, doing a lot of air conditioning work. End of the year comes and my accountant looks at my books and he's what happened? I said, what do you mean? He goes, you're not making any money. He said, you were making a lot of money prior to this. You had profit. He said, you don't have any profit this year. So it hit the, it hit the wall.

And I said, something's going on. And I was watching some of these jobs and what we were doing. And I knew that we probably weren't making money, but really didn't know if we were making money or not.

And I, at that point in time, I said, you know what, I've really got to start costing some of these jobs and seeing what's going on.

And I found out real quick that this was not a profitable business model. 

[00:17:22] Ed: The residential 

[00:17:23] Mike: residential AC was not a profitable business model installing central AC in people's houses. The labor that it took to do and the callbacks and the time, there were things that we thought would take two days were taken four days and, you know, you're falling through people's ceilings and, having a paved plaster is to go fix things and you got water leaks and attics and all this other stuff.

And. At that point in time, Ron Newman from Mitsubishi Electric had given me a call because they were, so Mitsubishi was just hunting down contractors to get into the Diamond Contractor Program. Wasn't even called the Diamond Contractor Program at that

[00:17:57] Ed: So around what year is this you say? 

[00:17:59] Mike: This is probably, this is around 1999 right now.

[00:18:06] Ed: Okay, so still pre 2000. I 

[00:18:07] Mike: Yeah, this is about pre 2000 right now.

And I look at this product, I looked at I listened to it really didn't do much with it, put in a couple of ductless jobs. Okay, great. Really didn't think too much of it was all right. But now they get invited to this pricing for profit seminar that Mitsubishi was putting on. I'm, listening to the hours to install a ductless unit versus a central air system. And I'm listening and I'm listening and I'm honed in and I'm focused on this meeting. And I'm saying, that's me. That's me. That's me. Everyone in this room's in the same boat, but no one's going to admit it. I admit it. I said, you know what? I'm going to get into the heat pump business. And I think that there is a market. To sell the, I said, if we can sell central air to people, we can sell ductless wall mount units to people.

I said, because I started looking at all these wall mount units of people's homes to how they were air conditioning homes. Sometimes, your dad would cut a big hole in the side of your house and put a wall shaker in there and everything. And I said, we can sell these. I said, we can do this. we can do this.

I said, we just need to develop a plan to do it. At that point in time, I hire a business coach to help me do this.

[00:19:16] Ed: Okay.

[00:19:17] Mike: And, I knew nothing about marketing. He said, if you're going to sell something, you have to market it. And I started to do marketing and my first marketing effort was a half page ad in the Boston Globe on Sunday. Every single Sunday.

[00:19:31] Ed: Oh, wow.

[00:19:31] Mike: First year, I sold a million dollars worth of Mitsubishi, ductless jobs.

[00:19:35] Ed: Due to that ad. 

[00:19:36] Mike: due to that one ad. It was that simple. It was that simple. And then from there, and then from there I just said, okay, no more duck work. We're not doing this anymore. We stopped. I said, I'm not doing this type of work anymore.

I said, if 

[00:19:49] Ed: stops duct 

[00:19:49] Mike: Just stop, we're not doing this. I said, we had enough Mitsubishi work almost every single day to do. At that point in time. And then from there, 

[00:20:00] Ed: amazing, because it felt like, at that time frame, I wasn't seeing very many wall mounted heat pumps.

[00:20:05] Mike: Nobody. Nobody was, We were the only ones in Boston doing it. I used to go to ACCA meetings. I'd go to business conferences and they always used to laugh at me and say, Oh, you guys are the company that hang those plastic boxes on the wall. You don't know how to do anything else. And, I used to just go, okay.

Yeah. And I, but I started looking at the profit Ed and the man hours to install these. Yeah. And it was a very extremely profitable business, my business model. I turned my business around in two years with that turned it right around. My accountant came in. He said, boy, we're doing good now. Let's roll. And then from there, I started I hired a salesperson. I created a marketing plan. I moved into a bigger shop. I moved from Melrose to Woburn. And, at that point in time now, I've probably got, 15 people working for me and it was all heat pump from there. It just every year just kept growing, set goals, set, marketing, strategic plans, and it just went.

And then I told you as the business shifted, it just changed. It went from 20 to 80, it went from 80 to 20, now we're in the heat pump business, fast, fast forward that to the year 2010, five, six years later. And it's, we're doing two or three jobs a day now, it just, and then everyone started looking and, Mitsubishi and all these other manufacturers at that point were like, look what Mike's doing.

Look what Mike's doing. Everyone started rolling the model around what I was doing. And people started saying, okay, yeah, we can do this. And heat pumps started to become more, they really didn't heat a hundred percent at the low temperatures. Then when the low temperature heat pumps came out, then everything started to change even more. As to what was happening, it was more of a hybrid system back then. It was more being used for air conditioning. Now it's more being used for heating, I think, in the Northeast. But I was on my business model. Everything changed, all shifted like that. And it just took off from there. That's my story.

[00:21:50] Ed: mean that's remarkable. I got a bunch of questions, but Not everyone would sit in the seminar,

[00:21:55] Mike: No,

[00:21:56] Ed: the hour difference, the hours difference between installing regular AC and a heat pump and say, that's a better way to do it. And just pivot, like what led you to take that risk in that jump?

[00:22:09] Mike: not making any money. I said, not going to I said, I'm not going to get it. I said, I might as well stay home and watch cartoons.

Versus going to work. And I really learned what I learned from my business coach. I told you, I didn't know a lot about business, so I hired someone. I always had a motto, hire someone to hire someone that's smarter than you.

Always surround yourself with people that are smarter than you because you learn a lot from them and a lot of people don't like to listen, they like to always think they're the smartest person in the room. I like to be the dumbest person in the room and learn from those people. And I started to see on paper how much money these jobs were bringing versus what they weren't bringing.

And then Mitsubishi comes to me and says, how are you doing this? What are you doing? Would you be willing to share this with people around the country? And, that's really how I created Dominate Ductless. And, I did that part time for Mitsubishi for about 10 years. I've now revolved into that full time, but after selling my business, but like you said, a lot of people don't listen in the room.

[00:23:03] Ed: One of my favorite lines ever is strategy is what you say no to, which I was at so many companies where it felt like strategy was like, let's add more stuff. Let's hang more ornaments on the Christmas tree. But the beauty of a good business model and the profitable business model is honing, saying no to stuff and getting focused.

And it sounds like that's what you're exceptional at NETR.

[00:23:21] Mike: Focus what you're good on and do what you know best and execute. Don't start, corn stalks grow straight up, flowers grow out.

[00:23:36] Ed: Yeah.

[00:23:37] Mike: I want to grow straight. Stay straight line. Do what we're good at. Do what we're good at. Do what we've built this business around and how we make money doing it. And it becomes very natural and easy at that point because you've made all the mistakes at that point. You know what to fix. When you're doing a thousand different things, you've got a thousand different mistakes to fix.

[00:23:58] Ed: Totally.

[00:23:59] Mike: crazy.

[00:24:00] Ed: Yeah. So I had the one question I wrote down was how did you find the right business coach? Because I hear consistently for the folks who are really running profitable, successful businesses, they all have business coaches.

Where did you go to find yours?

[00:24:15] Mike: I was on LinkedIn and this one woman had hit me up, Lisa Levesque and focal point business coaching. She was out of, she was out of Foxborough and I got to tell you, I love Lisa. She used to come in and keep me focused and straight and I had someone I needed to answer to, and it was always, teaching me a lot about. Not in business, but how to deal with people a lot. Understanding personalities.

Hiring a lot of people, you have to understand people have, type A, type B, type C personalities. And, I just knew she was the one to help me and she was the most honest person in the world, and she never had a problem telling you if there was something you were doing wrong with some people would shy away from it and she always compliment when you were doing things right.

And I still talk to her today. She really wanted to see this business succeed. 

[00:25:06] Ed: That's so great to find. And so rare. 

All right. Great story on NETR. My next question, I think you've given me the answer to already. When you're out doing one of your Dominate Ductless trainings. You encourage folks to do one of two things. At least they should add ductless to their arsenal of stuff that they sell and install.

But you often tell people to focus on ductless and heat pumps in particular. When you're telling someone to do that what's the reason? 

[00:25:38] Mike: The number one reason is it's a, it's an extremely profitable business model if you start to 

[00:25:46] Ed: what I thought. 

[00:25:47] Ed: were going to say. 

[00:25:48] Mike: That's it's a profitable business model when you streamline it. And I know that anyone in that room that I'm talking to that is doing the type of work that I did, we're all in the same boat.

And I, the pricing structures where they would need to be with the other types of jobs that they're doing, they won't be able to sell them at that price. Some do, but you're not going to sell every job at that price.

And then when you start to sell the ductless jobs, the heat pump jobs and you have one of those jobs that you maybe should have said no to, and you really start to show them that it's costing them $200 and $300 an hour to go to that job today.

What they're losing when it's costing them to go to that job today, because they've taken the profit. The profit potential is what you're giving up over the other job.

And they start to see that. And they start to see that. And. It does wake them up a little bit that, they start thinking about it, but some of them are dabbling in it.

Most of the dealers that you see dabble in it. Sometimes I get dealers that are in the class that are already very advanced in it that are just looking at ways to fine tune some different ways to, maybe create more leads and things like that. But it's usually the ones that aren't doing a lot of it that start to say, Hmm. I think I could make more money doing this.

[00:27:14] Ed: So what is it? Let's just go one step deeper. What is it structurally about a regular AC job or a furnace job versus a heat pump job that makes the heat pump job consistently more profitable than the other one? Oh,

[00:27:34] Mike: remove and replace job. And most of these, contractors do remove and replace. And a lot of them are very good at remove and replace. And remove and replace makes a nice profit. That's a good profitable business. I always tell people I'm not here to change that part of your business, but that's a real good part of the business.

But however, 60 to 70 percent of homes have uncomfortable areas in them, bad duct work in them hot and cold spots, I'm going to call it. Let's look at how we can add a heat pump to a replacement job and take that job from 10, 000 to 17, 000 and get it done in one day and make a ton of money. That's one business model that is really profitable for these guys. The other one is that is the whole heat pump business, and when you look at that from the installing air conditioning into a home, you have to look at the box prices, the material prices and the labor prices. When you start to look at material and labor on a job, if your material job, let's say it's $5,000 in cost, and your labor cost is $5,000, you're even at that point. That's gonna be very hard for that job to make money because you have a lot of labor dollars that are gonna take a lot of hours. On day one, you only made money on the boxes the first day. First day you've made you made your markup on the boxes the next four or five days that you're gonna be working in there for that one week. You're only selling labor. You're not selling any material You have to be able to sell material and labor in this business to make money

[00:29:06] Ed: interesting.

[00:29:07] Mike: It's very hard and when you look at it, look at a heat pump job on day one, right? I got $3,000 worth of material and $500 worth of labor.

Well, that's 

[00:29:19] Ed: that much easier. 

[00:29:20] Mike: that's six, that's six to one.

It's the ducting. It's the very intense, it's the very intense ducting part of the job that doesn't get sold for the right amount of money. For you to do that, you would have to sell that labor. at $5,000 - $6,000 a day, where they're selling it for $1,000 a day. You see what I'm saying at the $5,000?

[00:29:44] Ed: Yeah. 

[00:29:45] Mike: Doesn't make any sense because you don't have anything to sell the next day.

When you're in the heat pump business, and I've got, let's say, five heat pump jobs to do this week, and my, I have $3,000 and $500. I'm gonna go do those for five days. Every five days, I've got something to sell at more money

[00:30:00] Ed: Super interesting.

[00:30:02] Mike: got, I've got I've got my ratio and when your ratio start to creep up, when your labor becomes more cost and your material goes the opposite way, Oh my God, you're losing a ton of, you're losing a ton of money. You're losing a ton of money.

That's why I'm saying on the push and pull business on the remove and replace.

All right. I've got, $3,000 in boxes and I got $1,000 in labor to go do the job today. It's a it's a 3:1 ratio. It's going to make money. Okay. If it goes to the next day or the day after that, now it becomes a three day job. The next two days, I have nothing to sell except labor. You do not make money on labor in this business. You need, we have two things to sell boxes and labor. The boxes don't talk back. They don't have personalities. They show up on Monday. They make a margin on them when you start to put the labor side into it with the personalities. There's a lot of variables with that. Now, you see what I'm saying? If you're not coached, right? You don't know how to handle personalities. It costs you money. Monday morning, what happens when the labor doesn't show up, but the boxes are there?

Not good. 

[00:31:12] Ed: And a question. Why does so many jobs slip to another day? Not for ductless, but for other types of work. What is it that leads often people to think this is going to be a two day job and ends up being a four day job?

[00:31:24] Mike: poor labor management, poor planning. Don't not having the right material on the job. No, a lot of times happens in smaller companies too, is that the sales force manages the labor force very carefully. common pitfall in

[00:31:44] Ed: Say, say more about that. 

[00:31:46] Mike: The sales force manages the labor force. Okay, so sales, so What that means is the comfort consultant sells the job and he manages the people that put it in. Comfort consultants like to sell. They don't like to manage jobs. The people in the field should manage the job, should be the lead foreman on the job. You know what? That's a free for all.

That's no man. That's no total mismanagement. No installation manager. No field manager. And how do you do a company consultants out with four four leads today to go sell four jobs? But he's managing two crews, installing.

That's a complete shit show. That's a complete shit show that is gonna lose money and go to the next that and it's gonna, and it's gonna be that the installers, sometimes they're gonna say I can't believe the sales guy sold that. You get a, you get an install team that doesn't like a sales guy. That job's going two days just because they don't like the sales guy. It's no one's managing the personalities and the material and the time they don't even know these installers when they're going out there what's expected of them to get done in one day. No one has set the expectation for them.

They set the expectation for themselves. Guaranteed, you're going to lose money on the job like on a company like that you'll be and that's when they start hitting those walls of growing when they have one comfort consultant and maybe two crews. Now they get another comfort consultant that sells more jobs and now they got three or four crews and the comfort consultants manage.

No, no good. No good. You need a field manager or an installation manager at that point as you start growing or sometimes the owner starts to manage those people, which is great. I did that a lot, which was, I need to manage my labor force. It is your biggest cost in your business.

You're managing everything else. Why don't you manage your labor force? Cause that's where you're going to lose money very fast very fast and quickly. And I teach those steps in my course. I really try to show how does sales handoff to production and is that a smooth handoff? And how does that get done for maximum profitability on the job?

And then we show them when it goes from one day to two days to three days, how much money you're losing.

[00:33:58] Ed: That's incredible. Any, I don't expect you to give the whole answer away, but any tidbits on how to make that go well.

[00:34:07] Mike: Have to, 

[00:34:09] Ed: from sales 

[00:34:10] Mike: processes have to have SOPs on that. And everybody needs to buy into the SOP everybody does. I learned through business coaching, you got to hold people accountable to the SOP. Lisa was very good at helping me create processes and holding people accountable for them.

That's what management does. 

[00:34:27] Ed: That's great. All right. Any other key takeaways you try to land with someone who is looking to start their own heat pump business? If you were going to give them like your top three pieces of advice, what would they be?

[00:34:47] Mike: a great question. 

The first thing is, If you're going to create a business, what they first need is leads. They need jobs to make money.

So they need to be able to market their business somehow.

They need to understand basic marketing techniques, but you need cash to do that. You need cash to do that. I've seen, I can't tell you how many guys I've seen start their own business that have either worked for me or I've known and I've seen some succeed and I've seen some not succeed.

And I've seen, I actually have one guy that work came back to work for me, left and came back three times was starting his own business. And every time it was cash and not managing labor properly. They don't know how to manage a workforce. They hire a few people. The second thing is they don't have cash to run it. The second thing is they don't know how to price jobs

[00:35:39] Ed: Yeah. 

[00:35:39] Mike: profit, for profitability.

They don't know how to price a job for profitability and they don't know how to manage labor resources. They don't know how to manage people. They're trying to find people to work in a business like that and the type of clientele you're going to find to work in a smaller business like that.

I was very lucky to hire, to have John with me when I first started. We both knew what we were doing. We were A techs. Very hard to find that today. You're having to teach too. So now you're becoming a teacher You know, to manage the labor sources.

And it's just, it's very hard for them to, get off. It's extremely hard to do that. The other thing is they don't have the tools. They're trying to quote jobs and they don't have the tools to quote a job. Everything is there. They're more estimators. They go out to a home. They look at a home and they can't give a quote why they're there. They have to go back. They have to do their homework. They, by that time, these more sophisticated companies, they have the tools to do that.

Then they have a force to do it and that's going to be more of a consumer that's looking for the cheapest price I've obviously I just told you in the beginning the guy that did that three times He's not there for you. A year later, when the job, something happens to the job, he's gone.

Yeah. You got the best price, but did you really get the best price when you got to pay the next time to fix it again?

When if you actually stayed with the company that you paid a little more money for and actually had a warranty that was an established heat pump company that could come back and fix it?

That's why I always tell people, it's reputation and how long you've been doing this because those companies, they're going to be in business for a year. And all of those mistakes I just told you, They're not gonna be there in a year. They, they don't have the cash to sustain it and they have a, they're used to making, x amount of money per week to pay their bills and think about if you only have one job a week That's barely gonna pay your bills You better be working for someone else like I did in the beginning working seven days a week And not many people want to work seven days a week today.

[00:37:35] Ed: That is some level of hustle. That's incredible.

[00:37:37] Mike: Gotta hustle when you first start out man.

You gotta it's like I say it's you know It's like taking my boat out. I gotta push all the throttles down to get that thing up on plane. And you want to, but you want your business up on plane, you got to push the throttles down and no one's going to give it to you. You got to work at it.

You got to work it. You got to work hard at it. 

[00:37:53] Ed: One of my questions was, tactical recommendations for folks who are thinking about working to build their own heat pump or HVAC business. You've given a ton, but Anything specific, like a, like books or things to read or some of these common, like marketing, I don't know if you had a specific here's what you should go do to learn this piece that people often overlook, what would you recommend them?

[00:38:15] Mike: I'd say go take my, one hour e learning course on marketing on Dominate Ductless first and then, uh, then I would take the second one on just labor management and things like that, or come to my cours

[00:38:28] Ed: Yeah. You're investing in this. 

[00:38:30] Mike: I'm investing in really trying to help. Contractors do this, to really grow because I, like I said they don't know marketing tactics. They usually build a seven page website. They have, they usually hire someone to do SEO that they're giving $500 a month to that is doing absolutely nothing for them. You might as well give me the $500 to be able to give you, give it to you or whoever, give it to some homeless guy, because you're not getting much for $500 a month for SEO.

We all know that. Um, 

[00:38:59] Ed: SEO search engine optimization.

[00:39:01] Mike: Don't make those common mistakes like that, just hiring people that don't, you don't know what they're actually doing and you're giving them money, you know, but having tools when they go out into people's homes is, you need the right tools to do the right job.

That could be anything from a flaring tool to an estimating tool and everything else in between as far as an extension cord.

[00:39:26] Ed: Totally. All right. Last question, Mike, what's something that has you excited about people building heat pump focused businesses right now? 

[00:39:39] Mike: I just see so much opportunity for contractors. I want everyone to live what I've lived, be able to, I want them to be able to build a business.

[00:39:45] Ed: Yeah. 

[00:39:46] Mike: the rules, hire a coach, get smart, really learn about business, along with having some fun along the way. I always ask people, why did you get in business? And it's very easy to get in business, but when you gotta get out, it's even harder. It's harder to get out than it was to get in. 

[00:40:04] Ed: I’ve never heard anyone say that.

[00:40:05] Mike: No, it's harder. It's harder to get out than when you know it takes you, it really takes you one day to get in. There's one day you get frustrated and you say, you know what?

I got an idea. I'm gonna do this. It's, it's hard work. You're working, doing all of that, but now you've built this multimillion dollar business and when I was sitting there thinking to myself, okay how my kids don't really want to do this. No, my son really doesn't want to do this. He's off doing his own thing. And I said, here I am. I'm 58, 59 years old. What am I going to do? I said, you know what? I watched my dad die at 59 years old. I said, I'm not going to be that guy. I said I want to enjoy at least the I break down life into quarters Ed First quarter second quarter third quarter. That's 20 years average life expect me if a male's 80 I'm in the fourth i'm in the fourth quarter now, buddy. 

[00:40:55] Ed: I'm in my third. 

[00:40:56] Mike: Me and my buddy Paul used to say it all the time. He's fourth quarter this is you know, it's not a dress rehearsal Go enjoy life because you don't know what's going to happen get excited get in the heat pump business make some money They're very profitable businesses that people want to buy You Very profitable businesses that people will buy. To sell something.

It's got to be profitable and I'm telling you I just I couldn't find anything else in the hvac business that made as much money as the heat pump business Get excited about it. I mean there's money to be had in this thing and reinvest in your business. That's one thing I can tell these guys don't take the money look at you know When you buy a stock you reinvest this, you're investing in a company if you're making money in your company, reinvest it in your company, because it's your company, you're buying your own stock, reinvest in yourself and your business and your company and watch what happens.

Oh, boy you'll do very well. 

[00:41:48] Ed: That is unbelievable. What a great, that's your enthusiasm for what you're helping people build is a perfect place to end, Mike. Thank you so much for joining us.

[00:42:00] Mike: Thank you for having me. I love, I have a passion for it. I love talking about it. I love teaching people and like I said, it's more, there's nothing more rewarding than when you can actually see that you help somebody with their financial success throughout their life.

[00:42:15] Ed: I love that. Thank you, Mike.

​Thanks so much for listening to the Heat Pump podcast. It's a production of Amply Energy. And just as a reminder, the opinions voiced were those of our guests or us, depending on who was talking. If you like what you've heard and haven't subscribed, please subscribe in your favorite podcast platform. We'd love to hear from you.

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