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49 minute read
Building a heat pump business isn't just about technical expertise — it's about understanding the metrics that drive profitability, the systems that enable scale, and the strategic decisions that create long-term value. Mike Cappuccio did exactly that, growing Dominate Ductless to over $15 million with 72 employees before selling to private equity in 2021.
Most HVAC contractors start the same way: they're skilled technicians who see an opportunity to build something of their own. But as Mike Cappuccio learned over two decades, there's a massive difference between being good with your hands and building a scalable, profitable business that someone else wants to buy.
Today, Mike coaches contractors across the country on building heat pump-focused businesses. His perspective is unique because he's walked the entire journey — from being a technician to startup struggles to private equity exit — and he's willing to share the specific metrics and systems that made the difference.
Why Private Equity Was the Right Exit Strategy
For most contractors, getting into business is straightforward. Getting out profitably? That's where things get complicated.
"It's very easy to get into business as a contractor," Mike explains. "It's much harder to get out."
When Mike started exploring exit options, he discovered that not all buyers are created equal. Many acquisition companies wanted him to stay on for years, offering only 30% upfront with the remaining 70% contingent on hitting aggressive targets over the next three years.
"Believe me, you're going to break your hump for the next three years to earn that other 70% of that money, which you're probably never going to see," Mike says, reflecting on conversations with other contractors who took those deals.
Private equity offered something different: 95% of the purchase price upfront, with no extended earnout period. The trade-off? Once you sell, it's their company, their rules. "The house was white, they painted it orange. But it's their house, not mine anymore."
For contractors in their 30s and 40s looking to scale without the cash flow constraints of organic growth, Mike sees private equity as an attractive option.
But here's the key: private equity firms only want businesses that meet specific criteria. And most contractors have no idea what those criteria are.
The 6 Key Metrics Private Equity Firms Actually Care About
"I don't think most business owners under 25 employees truly even know what those KPIs are," Mike observes. These metrics separate viable acquisition targets from businesses that will never attract serious buyers.
1. Revenue Per Employee: The Make-or-Break Number
If your company generates less than $250,000 per employee annually, you're not even in the conversation. Mike's target range? $250,000 to $350,000 per employee — and that includes everyone: installers, office staff, warehouse workers, everyone.
The math is brutal but clear. A 10-person company doing $1 million in revenue ($100,000 per employee) is "a sinking ship," as Mike puts it. But 20 people generating $5-7 million? Now you're talking.
2. Overhead Costs and Gross Profit Per Work Hour
Private equity buyers want to see that you understand your true operating costs and can maintain consistent profitability. This means knowing exactly what it costs to run your business each day and how much gross profit each work hour generates. These metrics reveal whether your pricing structure can support the overhead required for a larger operation — and whether your business model is fundamentally sound.
3. Revenue Per Salesperson: Beyond the $1 Million Ceiling
A salesperson generating $1 million annually might sound impressive, but Mike calls it "horrible." At an average ticket price of $20,000-25,000, that's less than $100,000 per month — essentially one sale per week.
"That better be at least $300,000 per month," Mike says. "You got a $3 million guy, you're putting some numbers on the board."
4. Revenue Per Service Truck
Service vehicles should generate at least $200,000 annually. This metric reveals how efficiently you're deploying your mobile assets and whether your service operation contributes meaningfully to overall revenue.
5. Installation Revenue Metrics
Understanding the revenue generated by your installation teams helps buyers assess operational efficiency and growth potential.
6. Number of Maintenance Agreements: The Retention Gold Mine
This is where many contractors — including Mike — leave money on the table. Recurring revenue through maintenance agreements creates customer retention and predictable cash flow that private equity firms love.
"A retained customer over ten years will bring you $50,000," Mike explains. "And if that customer does not bring you the exact $50,000, but you know what they'll do? Refer you to other people."
Why Heat Pumps Create Better Business Fundamentals
After spending the first decade of his business focused on commercial work, Mike made a strategic pivot to residential heat pumps — and the business metrics immediately improved.
"Heat pumps make money. Heat pumps require the least amount of labor to install," Mike explains. "The material to labor ratio is sometimes 6 to 1, 5 to 1, 4 to 1. I've seen traditional jobs 2 to 1, 1 to . It's very hard to lose money on a heat pump job."
The operational advantages go beyond margins:
Simplified Inventory: Fewer parts and pieces mean less working capital tied up in stock and fewer logistical headaches.
Easier Training: Teaching technicians to install heat pumps is more straightforward than training them on the dozens of different heating and cooling systems they might encounter in traditional HVAC work.
Higher Average Tickets: Heat pump jobs typically fall into three categories — problem rooms, whole home solutions, and dual fuel systems — all of which command premium pricing.
Better Problem-Solving Positioning: Unlike replacement jobs where you're simply swapping like-for-like equipment, heat pumps let you solve actual comfort problems in homes, creating opportunities for consultative selling and higher margins.
Premium Product Positioning: "It's very easy to sell best with heat pumps because you're already at the highest tier anyway," Mike notes. When you're already selling premium technology, customers expect to pay premium prices.
The business model advantages compound over time. While traditional HVAC contractors often find themselves competing primarily on price, heat pump specialists can differentiate based on expertise, solution design, and long-term value.
The Four Essential Business Systems Every Heat Pump Contractor Needs
After interviewing dozens of successful contractors over the past year and personally coaching hundreds more, Mike identified four core systems that separate thriving heat pump businesses from struggling ones.
System #1: Marketing That Actually Works
"Contracting businesses are like a watch — for a watch to tell time, all the gears need to spin," Mike explains. Marketing is the first gear, but it has to be the right kind of marketing.
Mike built his business around "problem-solution" video marketing. The approach was simple: document real problems in real homes and show how heat pumps solved them. The videos weren't sales pitches — they were educational content that demonstrated expertise and built trust.
The power of this approach became clear years later when Mike ran into a golf course employee who had used Mike's YouTube videos to learn how to operate a Mitsubishi remote control. "That video had about a million hits," Mike recalls. "That's the power of video and marketing."
Today's contractors have even more powerful tools available. Video marketing has become more accessible, and new technologies can help contractors understand what messaging resonates with different types of buyers.
System #2: Speed-to-Lead That Captures Customers
"The speed to lead has to be two minutes in today's world. It's 50 times more likely you'll capture that customer if you respond within two minutes."
This is where many contractors fail despite having good marketing. They spend money driving traffic to their website, generating leads, and creating chat opportunities — then lose prospects because no one responds quickly enough.
Mike's rule is absolute: if you're going to invest in marketing, you better have the customer service infrastructure to capture the leads it generates. That means live people answering phones on weekends, immediate response to online inquiries, and systems that notify multiple team members when leads come in.
"HVAC is 24/7, 365," Mike emphasizes. "Don't do marketing if you have horrible speed-to-lead customer service."
System #3: A Defined Sales Process
Too many contractors hire salespeople and "just let them go out and sell." The million-dollar salespeople Mike sees struggling? "Most times your million-dollar guy has no sales process."
Heat pump sales are fundamentally different from replacement sales. With a furnace replacement, the equipment is broken and needs to be fixed — any technician can handle that conversation. Heat pumps require consultative selling: understanding the customer's goals, evaluating the home's characteristics, explaining different solution options, and designing integrated systems.
Mike's sales process includes a comprehensive "Home Comfort Survey" that takes 30-45 minutes. The goal isn't just to gather technical information — it's to understand what the customer is really trying to accomplish.
"Why am I here today? What type of system are you working with? What are we trying to accomplish?" These aren't casual questions. The answers determine whether you're selling a single-zone system or a $30,000+ whole-home solution.
System #4: Price Books, In-Home Quoting Tools and Margin Management
The final system is about turning expertise into profit. Mike sees contractors who can quote furnace replacements on the spot but struggle to price heat pump systems because the variables are more complex.
"You have to define your price book and your in-home quoting tool. What is that going to be? Whose software are you going to use? How are you going to put it together?"
This is where many contractors fail as they grow. They price based on their overhead when they had 5 employees, but they haven't adjusted as they've grown to 15 or 25 people. The new overhead structure requires different margins, but they're still pricing jobs the old way.
"I see so many guys that don't know the difference between margin and markup," Mike observes. "They don't know what the difference is between the two."
The result? Business owners working 60-70 hours per week, managing 20+ employees, and not paying themselves because the margins don't support the actual cost structure of their business.
Competing Against Low-Price Contractors
With heat pumps becoming more mainstream, competition has intensified. Solar contractors, electricians, and insulation companies are all entering the market, often with lower prices than established HVAC firms.
Mike's response? "Knowledge is power."
The low-price contractors typically fall into one of two categories: new entrants with low overhead (the "low barrier to entry guys") or established companies using heat pumps as a loss leader to support other profitable divisions.
Neither can compete with contractors who truly understand heat pump system design and customer education.
"The cheapest guy, I guarantee you, doesn't have a finance company. Can't finance the job. He might not even be able to get you the rebates either," Mike points out. More importantly, "I'll guarantee you that cheapest guy spent a half hour in the house, if that."
Mike's approach to premium pricing centers on demonstrating expertise through tools and process:
Ask Better Questions: A comprehensive discovery process reveals opportunities for higher-value solutions. "If you want to get the right price, you better ask the right questions."
Educate, Don't Just Quote: "If you want to get the highest price, you better be the most educated guy. You've got to know everything inside out and three times around."
Use Technology to Show Competence: LiDAR scanning, load calculations, and augmented reality system design demonstrate sophistication that builds confidence in your pricing.
Show, Don't Tell: Instead of explaining how a system will work, use visual tools to show customers exactly what they're getting. "You can't just tell them how things are going to get done. You've got to show them how things are going to get done."
The contractors who master this approach find that price becomes less of an issue. "The customer is going to look at you and say, 'We're going with you because you're the most educated. You knew more than this guy knew and we're willing to pay more for it.'"
The Technology Edge: New Tools for Better Sales
Mike is particularly excited about new technologies that can improve the sales process. He mentions LiDAR and Augmented Reality driven tools like Amply and AI-powered conversation analysis tools that help salespeople understand what they did well or poorly during customer interactions.
"I just want to know what type of buyer am I working with? What did I do wrong in the house? What can I do better in the house?" These tools can provide insights that help salespeople improve their approach and better serve customers.
The key is using technology to enhance the customer experience, not to replace human expertise. Load calculation software and augmented reality system design tools all serve the same purpose: demonstrating knowledge and helping customers visualize solutions.
Building Recurring Revenue Through Maintenance
One of Mike's biggest regrets was not focusing more on maintenance agreements during his ownership. "It was probably one of the biggest neglects that I had in my business at the time."
The business case for maintenance agreements is compelling:
- They create recurring revenue that potential buyers value
- They build customer loyalty and reduce churn
- They generate opportunities for additional sales and referrals
- They provide predictable cash flow for business planning
Mike recommends having dedicated inside sales people focused on selling maintenance agreements, and training customer service representatives to promote these programs during every customer interaction.
The retention value is significant: "A retained customer over ten years will bring you $50,000. That customer might not bring you the exact $50,000, but you know what they'll do? Refer you to other people and you're going to get a replacement system out of that at some point."
The Future of Heat Pump Contracting
Mike sees several trends shaping the industry:
Increased Competition: "There's a lot of guys that have seen that there's money to be made in it, and the ratios were very high."
Technology Integration: From load calculation software to AI-powered sales tools, technology is becoming essential for competitive differentiation.
Customer Education: As more contractors enter the market, customer education becomes increasingly important for premium positioning.
Changing Customer Behavior: "80% of your calls used to come in through the phone. That's changing. It's now 80/20, with 80% coming in through chat, website leads, e-commerce selling."
The contractors who adapt to these changes — by building deep heat pump-specific expertise, developing strong systems, leveraging technology, and maintaining high service standards — will capture the most valuable opportunities.
Key Takeaways for Building a Scalable Heat Pump Business
Mike's journey to $15+ million offers several critical lessons:
Understand Your Numbers: Revenue per employee, overhead costs, and margin management aren't just important for private equity — they're essential for running a profitable business at any size.
Build Systems Early: Marketing, speed-to-lead, sales process, and quoting systems become more important as you grow, not less important.
Focus on Heat Pumps: The operational and financial advantages of heat pump specialization compound over time.
Invest in Customer Education: Premium pricing requires demonstrating premium expertise.
Plan Your Exit Strategy: Whether you want to sell or not, building a business that could be sold creates options and usually means building a better business overall.
For contractors serious about building scalable, profitable heat pump businesses, Mike's experience provides a roadmap. The opportunity is significant, but it requires disciplined execution of the fundamentals: understanding your metrics, building proper systems, and consistently delivering value that customers are willing to pay for.
The heat pump market will continue growing, but not everyone will profit from that growth. The contractors who build real businesses — with real systems, real metrics, and real value — will be the ones who capture the opportunity.
Want to learn more about Mike's training programs? Visit dominateductless.com for upcoming courses and coaching opportunities.
Timestamps:
[00:00] - Why heat pump businesses are hard to lose money on
[04:15] - Mike’s journey: scaling and selling his HVAC business
[11:49] - Key KPIs Private Equity investors care about.
[17:18] - Revenue per employee and sales performance metrics
[20:24] - Importance of maintenance agreements
[23:25] - Heat pumps vs. traditional HVAC from a business lens
[28:00] - Four core systems every contractor must build
[32:47] - Why fast response time (speed-to-lead) matters
[38:54] - How to compete against low-price contractors
[42:53] - Educated selling: show, don’t tell
[49:22] - Final thoughts: don’t give away value
Connect with Mike Cappuccio:
Transcript
[00:00:00] Mike Cappuccio: 95% of these HVAC businesses are started by what type of a technician? Not accounting majors. They're not business majors. They're good technicians, they're good installers. They don't know about business. And look, I was in the same boat, but you're gonna start learning after about 25, 30 employees what's going on.'cause you're gonna start hitting the walls and everything else. And knowing that, you gotta start understanding what are my overhead costs? What's my gross profit per work hour per day? The big one, how many people do I have in my company and what's my revenue per employee? If it's not at least $250,000 revenue per employee to $350,000, there's a problem in that company and it's gonna be very hard to sell.
[00:00:34] Eric Fitz: Hey, everyone, this is Eric from amply. Before we start today's episode, I want your help with something that's really important. In fact, it's critical to our mission. We can't make heat pumps a no brainer for contractors and homeowners, unless we have really great people on our team to help us achieve it. We're looking for a senior IOS engineer, and we think there's a good chance the person we are looking for is somewhere in this collective network. Maybe it's you, maybe it's someone you know. Maybe it's someone who knows someone you know. Here's what makes this role special. So first AMPLY mission again is to accelerate the adoption of heat pumps and more importantly, to make sure that those heat pumps are perfectly sized and designed for each home. You might even say to make sure that those heat pumps are sized amply. So heat pumps are the key to residential decarbonization. And to make that possible, we need another software engineer who's ready to tackle this challenge. So if you love or you know someone who loves really hard problems in user experience design, spatial computing, building science, mechanical engineering and augmented reality, and they love working with a small but mighty team that makes fast decisions. Let's talk. So our product is really catching on with customers. We're getting fantastic feedback. And we keep hearing is that it's that our users want more. You know, it could be a totally new capability or a refinement of existing feature. Our customers are clear about what they need next. And we're we know exactly what we want to build. So you'd be joining at this perfect inflection point where product market fit is happening and there's this clear roadmap. So again, we're specifically looking for an iOS engineer with Swift and Swift UI experience, someone who ideally has built apps from concept to launch and who loves creating beautiful and intuitive experiences. So if you're listening, here's how you can help us. Um, first, the job spec is the very first link in our show notes, so check it out. Share it. Second, if you're on LinkedIn, I've pinned the job spec to my profile. It's also pinned to EDS. So feel free to share wherever your network hangs out. All right. Thank you for listening. Thank you for taking the time to give us a hand with this. Now, let's get on with today's episode
[00:01:34] Ed Smith: Hi and welcome to the Heat Pump podcast. I'm Ed Smith, co-founder of Amply, and today my guest is Mike Cappuccio. Mike, welcome back to the pod.
[00:03:50] Mike Cappuccio: Thanks for having me this morning, Ed. I always enjoy it.
[00:03:54] Ed Smith: So this is your second time on the pod. You were episode number two, which I very much appreciate you joining. When it wasn't clear if there were only going to be two episodes. But this is awesome. Now, on the first episode you did with this, you told like you told your story, which was awesome. So we're not going to do that today. If anyone wants to go back to episode two and check it out. But for folks who don't do that, Mike, just introduce yourself and tell folks about your experience so they understand who you are.
[00:04:22] Mike Cappuccio: Okay. All right. Good morning everybody. My name is Mike Cappuccio. For those of you that don't know me, I was the founder of N.E.T.R. Incorporated. We were based in North Andover for probably the last ten years. Previous to that, we were about 15, 17 years in Woburn, primarily first part of our business. We were a commercial contractor for probably the first ten years. I'm going to say the last 20 years of that. I flipped my business model to a heat pump business, and I grew that from. Starting out at probably $250,000 in heat pump sales to over 15 million in revenue. When I exited that stage, I had 72 employees, and I sold that to Private Equity, which was the club Morgan Stanley Group in 2021. And now I'm really working across the country training contractors pretty much how to focus on a heat pump business. And or if you don't even have any of that in your business model, to, hey, how do I get it implemented? How do I start? How did you start? Mike? So I do a lot of that, and I really focus a lot on trying to make contract is more profitable. At the end of the day, I want everyone to share the wealth and prosperity that I have shared in my life. What I did allowed me to do this. It's not something that I have to do, it's something I want to do and I truly enjoy doing every day.
[00:05:50] Ed Smith: That's awesome. Mike. You're also an advisor to amply, which you're deeply grateful for, and can speak from experience that you are a heck of a business coach. So thank you for that. And that is a bunch of what we want to get into today. Our last few episodes were very building, science focused, which we love, but we want to dig into some of the business side stuff with you today. Now, a major business topic in HVAC these days is private equity, which in private equity acquisitions and honestly, that has a mixed reputation. You gave some of the best perspective on that that I've heard before. So would you actually tell that part of your story? Like why was private equity the right exit option for you?
[00:06:35] Mike Cappuccio: That's a great question. Ed and I looked at that very closely. And I guess timing and timing is everything. When it comes to certain things and what's going on in life and what's really happening. But when you look at it, I always tell people a couple things here. It's very easy to get into business as a contractor. It's much harder to get out.
[00:07:01] Ed Smith: I was in your course a year ago when you said that line, and I'd never heard it before. And it's spectacular line.
[00:07:07] Mike Cappuccio: You can literally start a business in one day. In this industry, I call it the low barrier to entry in my training. Now, when you look at it, it's not that difficult for most guys. The first 90 days I'm going to call it. You're an enthusiastic beginner. You're out there, you're getting going, and now you've actually started to grow this thing into a business, and you're trying to figure out an exit strategy in a way to get out. The private equity groups are very focused on profitable businesses, and if you have a profitable business and your EBITDA is a very high and you have a good clean business. You can really reap the rewards of that. It's an easier exit strategy because frankly, I did multiple phone call interviews when I was selling my business, and there's a lot of not private equity groups I'm going to call them that are interested in buying your business, and they want you to stay on for a long period of time. They want to give you X amount of money upfront, probably 30% of it. The other 70% of it you have to earn out over three years. And believe me, you're going to break your hump for the next three years to reward the other 70% of that money, which you're probably never going to see. And I've heard that with some guys. So private equity was very attractive to me because it's, hey, you want to stay on? We'll stay on. You can stay on. You don't want to stay on.
[00:08:46] Mike Cappuccio: Don't stay on. We have people. They have. These private equity guys, the bigger guys have multiple people involved. Hundreds. Thousands of people involved that can come in and do what you do. So when you think that you're the owner of the company, and a lot of guys think like this. I'm the only one who can run this company. If this place is not going to be anything without me. Here I am four years later, and my company's grown by millions of dollars, so they know how to do it. Yeah. What was attractive to me was, look, you're going to get all your money up front. 95% of it comes up front. You'd have to be a complete fraud and a lot of trouble with the IRS or something like that, to not get the remainder of the 5% of your money in one year later on. That was what really made it attractive to me. I said, look, I've worked my entire life and worked extremely hard. I want to make sure that I get all my money. I'm not getting involved in one of those deals. And they were real. They were super good to me. They were like, you want to stay on for two years? I originally said want to stay on for two years. They said okay. I worked for a year and a half. I'm going to say it's different. It's definitely different. It wasn't. I don't own the company anymore. I always say this to my wife all the time.
[00:09:55] Mike Cappuccio: The house was white. They painted it orange. But it's their house. It's not mine anymore. It's theirs. And it's their money and it's their company. And they're going to do things the way that they want to do. And. Right. So it's this. But that's what made it attractive to me is what they're going to pay you what you deserve, and you're going to exit with your money. And if you want to stay on, you can stay on. I know guys that have stayed on for multiple years now, and they're enjoying it. And I could have bought back in. I could have stayed on. I could have reinvested. You have a lot of different strategies. I would highly recommend it for a younger guy that's in his 30s or 40s and looking to get out. He just can't grow the business anymore. He's cash strapped. He's this. He's that. God. If you want to make some good money, sell to private equity now and reinvest and work. If you can continue to work the way you're working, and you won't have to kill yourself as hard as you did doing things, because they're going to bring people in to help you do things. And you believe me, you could sell your business 3 or 4 times over the next 10 to 20 years. Who knows? I don't know, you might even end up buying it back. Who knows? But I don't know. But now, for my purpose though, it was what I really needed to do.
[00:11:04] Ed Smith: Because I recall you saying you told me before that you had asked your kids if they wanted in and they said, heck no.
[00:11:12] Mike Cappuccio: No. My youngest son did not want to be involved in this at all, and my oldest was just didn't have the drive to really do what I did. And that's okay. I'm all right with that. And they have kids, kids and they don't. When you own a business, you work a lot of hours. It's not Monday through Friday from 8 to 430. No, no. But if you want Monday through Friday from 8 to 430, then maybe go to work for someone. That's okay too. Yeah, but they did not want to do that. Yeah, that was okay. I accepted that, but makes sense.
[00:11:48] Ed Smith: Yeah. So we have a bunch of customers and we love talking to them about like their goals for their business. And some people say, I want to grow this and have my kids run it. And I've heard other folks say, I want to have a job for the next 10 or 20 years, and then I want to exit. And they're thinking about private equity and they're like, that's why I'm on service Titan. I'm on service Titan because service that's a requirement for many private equity companies. But in your training, you broke down the key metrics private equity firms look for. Oh, yeah. And when you did that, I saw the pencils going super fast for everyone in the audience because they don't know until they get involved in the conversation. They don't tell us about this.
[00:12:26] Mike Cappuccio: Again, it's easy to get in. It's super hard to get out. But there's going to be 4 or 5 key things in the first, not even an interview before. Four. And there's multiple ways to sell your business. Look. You can go through an advisory firm, which is a broker, I'm going to say. Or you can sell direct to private equity and have no broker involved. That's a possibility. You can do that too. But they're going to look at the key KPIs. And I don't think most business guys under 25 employees truly even know what those KPIs are. Like you said, you see the pencil stock going, yeah. And it's not that they're oblivious to it. It's just no one's ever told it to them. You know the old saying, you don't know what you don't know. So overhead costs. They don't truly know what their overhead costs are. When you start looking at these KPIs, they really want to know what are your overhead costs? What is your gross profit per workout per day? What are these numbers? And before I get into that, I want to roll the clock back just a little bit. When I told you it's easy to get in business, 95% of these HVAC businesses are started by who? What type of a technician, right? Yeah. Yeah. They're not accounting majors. They're not business majors. They're good technicians.
[00:13:47] Mike Cappuccio: They're good installers. They don't know about business. And look, I was in the same boat, but you're going to start learning after about 25, 30 employees. What's going on? Because you're going to start hitting the walls and everything else and knowing that you got to start understanding, what am I overhead costs? What's my gross profit per workout per day? The big one. How many people do I have in my company and what's my revenue per employee? If it's not at least $250,000 revenue per employee to $350,000, there's a problem in that company, and it's going to be very hard to sell. Okay. What do I mean by that? I've got ten people in the company. I'm doing $1 million in business. That's $100,000 per year revenue per employee. That is a sinking ship. No one's going to want to buy that. They can tell right away. They can just ask you, what's your revenue? How many people work there? Are we even interested in looking at this thing? Because for private equity, it takes the same amount of money for them to do a 30 person company deal or a 300 person company deal. The same due diligence, same thing. It takes a lot of money for them to buy that business. So revenue per employee is extremely important. 20 people doing $5 million to $7 million. Okay. See the difference now?
[00:15:11] Ed Smith: Yeah. So 250 to 350 per employee. And that's all in. That's back office install teams, salespeople.
[00:15:19] Mike Cappuccio: Warehouse manager, truck driver, everybody. How many people work here? What is it? How much revenue do all these people generate in the different tasks that they do? So you might think that, hey, I have a person who does billing or I have a dispatcher. What? At the end of the day, they're part of the revenue stream. They're the ones who get the call schedule, get the guys out there. They're part of the revenue stream. Salespeople. When you're into a 30 person company now, even a 20 person company, 15 is around when the owner is still doing the sales for 20. It's not to have 20 employees. There's too many sales for the owner to handle. So now they have to hire a retail sales person to go out and actually do selling and home selling. And or if it's a small commercial business, you have to have a project manager or whatever. But what are they doing? How much do they sell a month? The day and age of $1 million of a sales person and people thinking, that's great. That's horrible. $1 million a year? Yeah. Think about it. That's less than $100,000 a month. Yeah. What's an average ticket price for a job today? 20 to 25,000. It better be at least $300,000 per month. Three times 1236, 3.6 million. Yep. I'll give you the benefit of the doubt. They'd better be doing at least 3 million. You got a $3 million guy. You're putting some numbers on the board. But again, that's what's going to get you to that 5 to 7 million with those 20 people. What I'm saying. Yeah. And that's when you start looking at that number. Okay. I got a 20 person company. I got a full time sales guy. He's doing about 3 million. We're doing 250,000 to 300,000 per employee. We're doing good. $1 million a year. That sucks. That's unacceptable. That's terrible.
[00:17:01] Ed Smith: Yeah.
[00:17:01] Mike Cappuccio: Let's think about $80,000. That'd be an average of $80,000 a month. Average ticket price is 25 to 20 to 25,000. So I sell one job a week, maybe.
[00:17:11] Ed Smith: Yeah.
[00:17:12] Mike Cappuccio: Yeah, that's. I'm just looking at the close rate on that. That's extremely low. But anyway.
[00:17:16] Ed Smith: Totally. All right, so we got overhead costs. We got gross profit per work hour per day. We got revenue per employee and part of revenue per employees. Revenue per salesperson. Exactly. Good sense for that.
[00:17:27] Mike Cappuccio: Retail sales. I gotta know my revenue per service truck now. Okay. What's my revenue per service truck? Those trucks better be doing at least 2 to 300,000 a month. Those numbers got to come up in installation revenue. What's my installation revenue? What are those numbers? How much? What are those numbers? Monthly and maintenance agreements. Maintenance agreements is another big one. Private equity really likes to see recurring revenue, and it was probably one of the biggest neglects that I had in my business at the time, because I didn't have a lot of that. I had some, but I think it's something that really gets neglected, and I would highly recommend that to anyone who's listening to this. What you have customers, you need reoccurring revenue. You need maintenance plans. You need service plans. Service partner plans is, I guess is what the best word for them. And I'm going to tell you, I saw that got implemented in one year in my business and put a person on that as a key point that did that, and that revenue started to explode, gets neglected a lot.
[00:18:29] Ed Smith: So you put a person on it who is just a service tech or just selling service maintenance agreements.
[00:18:35] Mike Cappuccio: Not service tech. Inside sales. Inside sales and training your customer service people on how to sell. Yep. Service partner plans. It's very easy to do, and I could get into it, but we'd need an hour. I need an hour to explain to you how to do it in the past. But again, that's something that I do teach in trainings. There's parts and pieces to that and the customer service module, but you really have to know how to do that, because I think so many companies missed the boat on that, and that's what they really want to see. Good companies like this that have retained customers, you retain that customer for ten years. That's 50,000 in maintenance and replacement revenue. Yep. You want them to pick up the phone and call you? Yep. I had a phone call the other day with my marketing guy on Monday morning and he was saying, Mike, the phones are blowing up. He said, what I see, the biggest problem is, he said, especially on a hot weekend. There's no one that answers the phone. He said the one common thing I see is no one will leave a message. Oh, they go to the phone where someone answers it. Right. So the bottom line is this if you are the customer and you have the maintenance plan and you're tied into that company, you're more apt to leave a message with that company saying, hey, this is Ed Smith. I belong to your service partner plan. Bang, someone's going to call you back. An answering service would be better. A live person would even be better. I can also tell you to build those numbers. Have people that answer the phone on the weekends. Yeah. Figure it out. Stop not doing it and figure it out. Because it's pretty simple to. It's pretty simple to do. Yeah. For a Saturday into Sunday from 8:00 to 4:00, you can have live people answer the phone and watch what that does for your business. Yep. Watch what that does. Hvac is 24 over seven 365. That's all I'm going to say.
[00:20:24] Ed Smith: For maintenance agreements. Are they looking for a certain percentage of revenue or just a number of maintenance agreements, like what's the.
[00:20:31] Mike Cappuccio: Number of maintenance agreements, number of people that are locked in? There's not a big cost to the maintenance agreement. It's a loss leader. And I'm going to be honest with you right there. But the people they don't look they look at that as their people are tied into you. They're not going anywhere. They're staying with you for the ten year period. Whether they're paying three for $500 a year, whatever it is, they're your customer. And that's what they like to see. The reoccurring revenue of, hey, how many customers do you have? I have 10,000. How many am I on solid locked in maintenance agreements. When you go to the house two times a year? Well, 100, that's not good. I got 10,008 thousand of them are on maintenance agreements. That's huge. That will get you the ten x. That's where I failed. I'll be the first to tell you. If I had that in place, I probably could have gotten more money than what I got. So if it's one thing guys really want to build is build on that look. What are those KPIs? And hone in on them. Because if you've got all of those, believe me, you're going to be talking to more groups than you can imagine. I'll leave it at that.
[00:21:44] Ed Smith: All right. And just the recap. Overhead costs, gross profit per work hour per day. Revenue per employee. Revenue per salesperson. Total retail sales revenue per service. Vehicle installation. Revenue and number of maintenance agreements.
[00:21:59] Mike Cappuccio: Number of maintenance agreements. Because you got to remember a retain customer over ten years on average. We'll bring you $50,000. Awesome. And that customer might not bring you the exact 50. But you know what they'll do? Refer you to other people and you're going to get a replacement system out of that at some point, maybe one, maybe two, depending on how many. Most homes nowadays have two systems in them, so you're going to get something in private equity is also going to come in. If it's just HVAC they're going to do the bolt ons to it. Just be prepared. You're going to get electrical, you're going to get plumbing, you're going to get drain cleaning. Because and if you're that customer, like I said, with that maintenance agreement that's going to bring that additional revenue to that revenue stream in there. But if you're not locked in, people don't think of you all the time. They think of just who's going to answer the phone. I'm in crisis mode right now. Yep. Kevin, the mechanic down the street that works on your car. You bring your car there, he knows you. He's going to fix it. You bring your car there. He doesn't know you. Well, where are you going? I got ten of the cars to fix on my regular customers right now. Called the regular customer reoccurring.
[00:23:06] Ed Smith: Yeah. Love it. All right, so with these metrics top of mind, and honestly, they're good for folks who think they want to sell and folks who think they want to they don't necessarily think they want to sell because it's nice to have the option. These are also just great metrics to build a good business, which is what everyone wants to do. So now layering on top of that, one of the things you coach people on is the heat pump business case. So when you're doing a training or coaching somebody and they ask, why should I focus on heat pumps rather than sort of everything in HVAC or more traditional? What makes heat pump such a compelling opportunity for HVAC contractors?
[00:23:47] Mike Cappuccio: Oh, that's a real great question. Heat pumps make money. It's heat pumps require the least amount of labor to install. That is changing a little bit. Ed, now, because we do have hybrid systems. We have ducted systems, we have ductless systems. But it's a marketplace that makes money. Number one, the ratio aspects of labor to material is so different. It's you have to be set up to do it. But once you get really good at it, the Labor Day margin is sometimes 6 to 1, 5 to 1, 4 to 1. I've seen traditional jobs 2 to 1, 1 to 1, -1 to 1. It's like some of it's it's very hard to lose money on a heat pump job. I'll be honest with you. And there's not as many moving pieces to it either. There's not as many parts and pieces. There's not as much inventory. It's just easier to train on. It's just it makes your business run a lot smoother. And it's for me personally, it was easier to teach guys how to sell heat pumps in ductless systems, in homes that didn't have any air conditioning, or they were looking to convert to a dual fuel because the replacement market, it's broke, doesn't work. I need to install a new one. Pretty simple. A monkey could sell it, if you ask me. It's a model number. It's a serial number. I got a three time. I replace it with a three ton bang. Okay, add in some extras here and there. Heat pump is a little different, but it has a lot of it's easier to give better solutions, I think, to homeowners, along with bigger ticket prices.
[00:25:26] Mike Cappuccio: When you look at the heat pump market, you have three different types of bot, not buyers, but problems. I'm going to say not even problems, but types of solutions that you're solving. One is the problem room. We all have a problem room in our house, so we might have a few problem rooms in our home, but we solve problems with heat pumps. We don't really solve problems with the replacement system. Interesting. We solve problems with the heat pump so we have the problem room. Then we have the whole home solution that could be ductless ducted hybrid whatever. And then we have the dual fuel. Those are the types of installations that we're doing. And they're not low ticket price jobs. All high sear is selling. I see replacement guys. They want to always they tend to focus to the cheapest price and sell or sell in the middle. Maybe good better best get the better one. They don't really like selling the best one. It's very easy to sell best with heat pump because you're already at the highest tier anyway. Yeah, and why do I want to sell a lower sear piece of equipment that has lower costs with lower markup? When I can move to a heat pump, that's it costs me more money. So I mark up more money and I make more money. High sear makes money. It's just that's what it does. It's just the heat pump business really is. I always hear guys say it when I'm doing trainings.
[00:26:46] Mike Cappuccio: I always hear him saying, I just want to be a heat pump contractor. And I say, why? They say, because it's much easier in my business to do. There aren't as many moving pieces. I don't have as many callbacks. I don't have as many water leaks. I don't have guys falling through ceilings. I don't have I don't have this, that. And the other thing, it's harder to teach wiring. I have all these different thermostats. I have all these different pieces and all these moving pieces that gotta tie together. And then they get involved in hydraulic coils and wet systems and warm systems and boilers just are to me. It's just very complex. Yeah, when I used to have people laugh at me about it, I would go to ACC and New England meetings and people would be like, oh, you guys are just a heat pump. Can't you guys just do those ductless units on the walls? You don't know anything. You just hang plastic boxes on the walls all day. And I would just be like, yeah, okay, that's good. I'll do that all day long. I don't mind that. And then a lot of them started figuring out how much money was involved in it and the time involved in it to do it. And on all honesty, one guy can do it in 4 to 5 hours, and you could do two of those a day and you were like, whoa, wait a minute, what's carpaccio doing over here? What's he building? What's the this guy's not as dumb as he looks.
[00:27:57] Ed Smith: Love it. All right. Makes a ton of sense. Yeah. Mike, you've got this incredible training that I was lucky enough to sit through. Your distributors, manufacturers. They're bringing you around the country. You're doing your own. You've got 3 to 5 core systems that you recommend every heat pump contractor should have in place. Tell us about those to give a high level so folks can be going through their head as they think about hitting those KPIs if they want to. What are the levers you coach people on pulling to build that successful heat pump business?
[00:28:29] Mike Cappuccio: The essential business systems. It's pretty much four things. And it's funny because as we touch on this right now, I went back to all of the podcasts that I did with the contract is that I did in the last year, probably even longer. I probably had maybe 20 of them, probably not as many as you have, but I had about 20 contractors that I interviewed, and I started to analyze those conversations, and I started to see what really was helping the contractors. It boiled down to four things, and I know what the four things are, but the four things I wanted to make sure that the four things that I was teaching were the four things that were working. And look, in the beginning. When a technician starts a business doesn't really have to do a lot of marketing. Marketing is number one. I always tell people contracting businesses like a watch for a watch to tell time. All the gears need to spin. If it's not digital and I have to be able to do marketing and again, they're not marketing specialist people. Gotta have a good marketing company or a good marketing person. And marketing is funny is I always say this to guys in the trainings too. Is that look, if you have a cold and you don't feel too good today, you got an earache.
[00:29:43] Mike Cappuccio: You go see a general practitioner person or maybe a nurse practitioner. I've had a heart attack and I need a new heart or a heart valve. I'm not going to the general practitioner. It's the same thing with marketing. You have specialists as people that do certain things. Some. And I learned this again, some failures of this is some of the guys are really good at doing some things, but they say they can do everything and they're not so good at it. But the core essentials marketing, how do I do it? And boy, I could go on and on about marketing. Next, I could talk to you about marketing for two and three hours and the power of video and what it can do in the case studies and how to put it together, and what really, I built the core focus of what I built my company around with marketing was problem solution. What was the problem and how did we solve it? Because there's 100 other houses in that neighborhood that all have that same problem. We go into it in depth in the training. It's a core thing marketing.
[00:30:39] Ed Smith: The sheer volume of videos that are still on the net website of you talking about people.
[00:30:46] Mike Cappuccio: Those videos, I sold those videos.
[00:30:48] Ed Smith: Yeah you did, but there's unbelievable numbers of them. Oh yeah, a ton of those.
[00:30:54] Mike Cappuccio: I built video like no tomorrow. Video marketing. The power of video today is tremendous. What's funny? Let's tell a quick story and I'll get back to marketing because I feel this is important. I went to play golf the other day, and the guy who takes the bags out of the car says to me. Hey, Mike, he said, I gotta tell you somethin. And I said, what's that? Bob? He says, I just had one of those Mitsubishi systems installed in my house. I said, did my old company do it? He goes, no, they didn't do it. He goes, I had John Kearney did the installation. John Kearney is a good friend of mine. I said, oh, Bob, I said, I know John, he's a great guy and everything. He says, you know what? He goes, but I wasn't home. He says, I was working Friday and my wife was working and they finished up Friday, he said. And then Saturday morning I was trying to turn the system on, and I didn't know how to turn it on, and I didn't know. I didn't know what anything was. He goes, I had this remote control in my hand. He goes, and I went on YouTube. He listened. You were talking.
[00:31:48] Mike Cappuccio: And I said, yeah, Bob, it's got about a million hits. Yeah. I said, that video was tremendous. I said, and again, it was a problem solution video it. But going back to that is that's the power of video and marketing. And again, I wasn't selling anything. I'm just marketing to get people to. Branding. There's branding and then there's marketing. Gotta have that in your company. And marketing is all good. Okay, it's really good. But I'm going to make this point real clear. And I'm going to talk loud when I say this point. Okay. Don't do marketing. If you have a horrible speed to lead customer service people okay. One of the biggest problems. All right guys develop websites, they develop chat boxes. They develop Facebook campaigns where people can talk to people. People talk differently today. Okay. And, you know, respond. I've been reading a case study. I'm working on a new training I'm putting together right now, Ed. And it's really focused on speed to lead and ways to fix things, because as owners of companies, and I'll be the first to say it, you think it's getting done, but people don't want to talk to people. People won't even know you in an hour after they left something there. The speed to lead has to be two minutes in today's world. And it's 50 times more likely you'll capture that customer if you're doing marketing. So the speed to lead process good customer service people.
[00:33:18] Mike Cappuccio: It's a key essential business part of your business, and you can't do it if you're the technician out there working and you've got 5 or 6 guys working for you. How are you going to respond to all that stuff? You can't you think again, they're going to go to the person that's answering the phone. Good sales processes. I see a lot of companies hire salespeople and they just let them go out and sell. How do they do it? Yeah, that's $1 million guy. Most times your million dollar guy has no sales process. Yeah. And you know as well as I do, we've worked on it together. Seven step sales process. You got to be good at it. You got to have a good process of what? How can you truly go into a home? Heat pumps are different. Heat pumps that like a replacement system. Replacement system? Yeah. That's easy. That's why tech sell them all day long. And they're the best at selling it because it's broken. They believe what needs to be fixed and they just replace it. Think about it. Selling a replacement system is just selling another part. It's a big part. It's an air handler and a condenser and a furnace and and a coil. It's three big parts they just sold. It's not that difficult. They're not using the tools that we use that we've shown and going through all those things. They're really heat pumps.
[00:34:34] Mike Cappuccio: You got to have a good sales process. You got to find out what's going on in the home. What are you really trying to accomplish at you're trying to accomplish problem solving. Are we looking for green technology? We're looking for dual fuel. We're looking to save money with a fossil fuel versus this versus that. Do we want different temperatures? What types of controls do we want to integrate the system? People think heat pumps are easy to sell. They are if you have a good process Understanding the products you sell that you're going to use in your sales process. Have a good one. And then last but not least on that. The core essential business the four things. Marketing speed to lead, sales process and make money. Define your in-home selling tool. Define your margins. Define what they need to be and be able to quote at the table. I see so many contractors that can't leave a price before they leave a house. Yeah, I'm going to still say probably 50%. I know it's gotten a lot better across the United States. Yeah, but there's still many. They can quote the replacement. Why? That's easy to put the price book together, right? Good. Better. Best. One and a half ton or one ton to five ton. Pretty simple. I can put the price book together in an hour. I can steal somebody's price book and do that in ten minutes. That's usually what happens.
[00:35:55] Mike Cappuccio: The guy leaves, the company, steals the price book he's got ready to go for replacement. Correct. But he pump is a little bit different. You have to define your in-home quoting tool. What is that going to be? Whose software are you going to use? How are you going to put it together? Maintain your margins. I see so many guys that don't know the difference between margin and markup. They don't know what the difference is between the two. I teach that in a class, and I see him staring at the board and they're like 1.35. I thought that was 35%. And they're looking again. And then I gotta go in and show them in layman's terms, that's not 35%. Let me show you. We got to back in and show you how to go through the process of the margin and the markup, because that's what's going to determine your profit. Yeah, that's what's going to determine if you're not making money, go to work for someone. Yeah. Go to work for someone. I coach a few guys every now and then. I have a few good guys I coach, but I've taken some guys on. I look at the numbers and I'm like, oh, this poor guy hasn't paid himself in six months as the owner. He's got 4 or 5 guys working for him. He owes everybody money. He's got no money, and he's killing himself, working 60, 70 hours a week, running around fixing all the stuff that the guys did prior to that.
[00:37:11] Mike Cappuccio: And I'm looking at it going. The first thing I know, it's very easy. The first thing to dive into is the margin. He's not making any money. He doesn't have the right markups. He doesn't have the. He doesn't know what that is. I can't afford that. He got to have a business. Essential business as that grows. Marketing. Good customer service. Great sales process. Not a good sales process. A great sales process with a great in-home quoting tool and great margins that will allow you to pay yourself and make money. Yeah. And that's where as the companies grow, they start to fail. They start to stay in the old pricing metric of one, two, three, four, five guys. Now there are were 10 to 15 person company in the margins, right? I'm working with a guy right now in the Carolinas, and he's just gotten to 25 people, and he knows he's still pricing on ten all of his. The first thing that we talked about in this pod was the overhead. Yeah. All those people bring more overhead. So what do I need to do? People think HVAC is expensive. It is. Everything is expensive today. I don't know of anyone that comes to your house for less than 3 to $500 today. Who comes to your house for $100? You can't put a guy in a truck for $100 anymore.
[00:38:29] Ed Smith: On this pricing question, we were on with one of our favorite customers yesterday who is a super high quality, really a whole home performance contractor. They'll do insulation, they'll do HVAC, they do a lot. And the thing he complained about the most right now is that there's a ton of people getting heat pump quotes, and the heat pump quotes are super low. So what are you hearing about competition in the market, and how do you differentiate so that if you're pricing appropriately, how do you beat the person who's got that super low quote?
[00:39:04] Mike Cappuccio: Knowledge is power. I have seen and I've heard. First off, there's a lot going on in the heat pump. I guess first I have to probably say, as I'm glad I'm not in it anymore because of the competition, because there is a lot of competition now might not be the right thing to say, but.
[00:39:22] Ed Smith: Your honesty and candor is one of my favorite.
[00:39:24] Mike Cappuccio: Things. There's a lot of guys have seen that there's money to be made in it, and the ratios were very high. Yeah. So think about it. If you're out of 5 to 1 to labor to material, I can drop that down to 3 to 1 and still be profitable depending on the size of the company. So for the bigger guys, it's going to be very hard for them to work on 3 to 1. Okay. More overhead. Right. So let's break it down. The lower guy is probably going to be the low barrier to entry. Guy who was doing that type of sale. Right. He's just out there selling maybe 3 or 4 guys working in a company, doing the job, maybe just started installing heat pumps a year ago. I'm thinking of one in mind right now that I'm not going to mention any names on the pod or anything, guys that have left companies and said, hey, it's easy to start a heat pump company. It's very easy to undercut everyone. When I got a bunch of subs working for me, or I got a guy installing it and I just sell the equipment and I just need to make money to feed my family today. Yeah, it's not a business. Yeah. And it's never going to sustain long term growth. Yeah. Because you have no money to grow that business.
[00:40:30] Mike Cappuccio: So maybe they're educated. I don't know, but the low barrier guy is going to be one. The middleman is going to be the other, which is maybe going to be working at a 4 to 1 five, maybe 5 to 1 possibly. But to get that higher number, I feel, and we did it all the time. You have to spend the time with the customer, and I'm going to go back to the sales process again. The right tools going into the home and truly finding out why am I here today? What type of system are you working with today? What do you have? What are we trying to accomplish now? I've developed. You told me I was nuts the other day. You said you don't work anymore. I'm Mike and you're sitting at home and you're developing things for training, which I am. I just developed a whole new in-home comfort survey that I spent, probably. I would say I got 100 hours of time into that darn thing. Yeah. Because I feel it's important for guys to ask the if you want to get the right price, you better ask the right questions. I'll leave it at. I'm going to peg on that. Why am I here? What are you trying to accomplish? What do you know about all of these rebates and stuff like that? You have to educate the consumer.
[00:41:46] Mike Cappuccio: Consumer education is huge. Where are we trying to go? What's available to you? What type of financing do you have? Let's roll the clock back. The cheapest guy, I guarantee you, doesn't have a finance company. Can't finance the job. He might not even be able to get you the rebates either, because he might not be involved with the utilities and the ways that they need to be involved in utilities and rebates have gotten so harder in today's world, when you start looking at all these different things of what's actually happening today is you got a lot going on when you're in that home. And to get that number, I'm just I want to bring up something because I really want to talk to this for a second. So you gotta give me one second, because knowing what you need to do in there is super important. Understanding a few things. And I'm going to touch on six topics. A lot of guys don't understand the risk that they're involved in and they go out there. It's a lot of risk that these contractors take. And to make money, you need. You got to have that. But going back to the pricing thing. Let's roll back to the price thing. You have to be educated. You've got to be able to go in today's world. And I think a lot of these cheap guys don't take this into consideration.
[00:43:05] Mike Cappuccio: The home complexity, technology, what type of good technology do I have? I don't really even think a lot of them understand what the customer's expectation is truly of what they're trying to do, and getting all of these things and adapting around the environmental things and stuff like this. How do I integrate controls, having a real educated conversation? I'll guarantee you that cheapest guy spent a half hour in the house, if that probably never even might not. I'm going to say 50% of them don't even go to the house, said a lot of it's done right online now, today through e-commerce, selling and going back to that is the cheapest guy truly doesn't understand everything. If you're doing this and you want to get the highest price, you better be the most educated guy. You gotta again. Why am I here? What type of system do we have? Where are we trying to go? What do I got for budgets, rebates, tax credits? Everything I need to know inside out in three times around. Then I got to get involved in the complexity of the home. I've got to be able to use the lidar technology. I've got to use amply when I'm in the home. I've got to show this customer that I'm the best. I'm the most educated guy that you're ever going to deal with in this.
[00:44:25] Mike Cappuccio: You have to be cocky about it. Show that you're educated and show them. And tell them why you're doing these things to benefit them. Hey, they might take your price and shop it around, but now I got to get into designing a complex system for you. I'm going to do that. I'm going to design a very complex system for you right now, and I need to be able to show them the distribution. How is this going to work? You got to show them and not you can't just tell them how things are going to get done. Yeah. Show them how things are going to get done. Because this is a big change in somebody's home. And it's look, this is a DIY people. And that's a different group of people. I'm not dealing with that group of people. This is a different group of people, and we want to show them how it's going to be done. We take the tools that we have in our toolbox. We use the 3D models in the software. We use the design tool. We physically go through the Home Comfort survey, my Home Comfort survey. You'll spend a minimum 30 to 45 minutes of just talking to a customer. All right. And looking at that artificial intelligence plays a big role in this today, too.
[00:45:46] Ed Smith: That's a buzzword. Say more about that.
[00:45:48] Mike Cappuccio: I've got little devices that I just I would wear on my lapel or wear as a model or wear as a watch. It's called a plot device. Look, you can spend $500 a month for real or whatever, 1500 a month with real or whatever. Great tool. Got the dashboard. Got all the bells and whistles. Look. I just want to know what type of buyer am I working with? What did I do wrong in the house? What can I do better in the house? This tool will summarize for you for $150 and $12 a month. What you need to know. Well, I'm going into depth, in depth in trainings and screenshots and what it will actually do. Yeah, but it allows you to get better to make the sale better for the customer. Yeah. What did I not do that I should have done for that customer that I need to either go back and do or do right now. And having all of this stuff available to you when you're in the home with these tools. God, I wish they had that stuff when I was selling. Yeah. And then being able to present the solution, defining your tools to do this. I think if you go through that whole system and someone is serious about spending money and doing this in their home, you're going to be selling high end jobs, not low end jobs. Let the bottom feeders take the low end jobs. Do you even want those jobs? I don't want that job. I'm going to tell you right now, the customer is going to look at you and say, you're the we're going with you because you're the most educated. You knew more than this guy knew and were willing to pay more for it. And who's the company? How long have they been around? Are they going to be here for me? Oh, and do they provide maintenance contracts? Because I want to be back in that house twice a year. Yeah. Have any other things that we can do in your home to why we're here?
[00:47:37] Ed Smith: So that's great.
[00:47:38] Mike Cappuccio: I really didn't worry about price too much. There are a lot of guys. Look. You got electricians getting into heat pumps, you got solar guys getting into heat pumps, you got insulation guys getting into heat pumps. Why are they all doing it? They see this margin to be made in it. And I think a lot of them don't understand there's more margin to be made. Why wouldn't you just keep your price up?
[00:48:00] Mike Cappuccio: Why is everybody gotta.Lower all the prices? Why is everybody going to lower all the prices? I would think everyone would want to increase the prices. And you're going to see they're going to do that. We've talked about some companies in the past that have done certain things that now all of a sudden they're almost out of business. Why? Why are they almost out of business today? Those companies that you're talking about, those low ball companies, what equipment are they using? That's another thing too. What type of equipment are they using? Look, there's a lot of heat pumps out there. Yeah, a lot of heat pumps out there. There's a lot of good ones. There's a lot of bad ones. There's a lot. Yeah, there's a lot of high brand, high end, low end. Just like anything else with air conditioning, you can buy a $200 used car, or you could buy a $200,000 brand new car. Yeah. What am I getting here?
[00:48:45] Ed Smith: So, Mike, this has been awesome. We started out talking about why you exited. We went through some of those critical metrics that just show a good business, but also would let someone have a conversation with private equity. Without those metrics, they wouldn't be able to. And then we talked about a bunch of the stuff that is going to let you build that business marketing speed to lead awesome sales process in the home, to differentiate yourself from the competition, and then understanding your margin and how you make money and pricing appropriately.
[00:49:20] Ed Smith: Is there anything we didn't touch on that you want to comment on at the end here?
[00:49:27] Mike Cappuccio: Let's start with marketing. When you look at most contractors, I can't tell you how many of them waste money on ineffective marketing systems. Yeah. And with today's technology that's out there. I'm blown away at what some of the stuff can do. I'm just blown away at it. Video marketing is so powerful today. And what you can do with it and what you can get out of it. I was talking to my marketing guy the other day and saying, we went into this home. We filmed the four hour while we were at the customer's home for four hours that bought the system, had a problem home, and went through the whole thing. We had the device on when he was in there and.
[00:50:08] Mike Cappuccio: Just recording The customer talking. That conversation is extremely valuable to you as a contractor, and you're probably thinking, what the heck are you talking about, Mike? You can do so much with artificial intelligence today to find out, really, why did this customer buy this system? What problem did they truly have? And then what kind of marketing programs can I build around this? It's so good. If you're a heat pump contract to think of the three things. All right. First, don't I guess in closing, is marketing speed to lead sales process. Good. Make money. That's what's going to drive those numbers to the private equity guys that's going to do that. But to do that as you grow, you're only going to have so many leads. If you don't have sales, you don't have business effective marketing. Spend money the right way. That's going to make the phone ring. Oh, you got three types of jobs problem rooms, whole home solutions, and dual fuel. Those what's being sold today. Look, there's a hundred variations of those types of jobs. Let people know what you did. Show them how you did it again, like we were just talking about it. Don't tell them how you did it. Show them how you're going to do it. Show them what you did. And what's even better is when you showed them how you were going to do it, and then it got done that way. And it looks the same way as what you showed me in the drawing, the speed to lead side of it. You got to really hone in on it, really hone in on it. You as an owner, you think it's getting done. But don't take it for granted, because sometimes if you're not, you're the owner and you say, if I don't do it, no one else is going to do it.
[00:51:48] Mike Cappuccio: You know what? There is some truth to that. Sometimes in today's world, if you're spending money. Look, I got the 8020 rule in HVAC. 80% of your calls come in through the phone. That's changing. It's now 80, 20, 20% come in through chat, website leads, e-commerce selling. However, that is, as technology increases, you're going to see that probably go from 70 to 30, 40 to 60, 50 to 50. If you don't have a good speed to lead process in place to capture all of that. I'm not talking just an inbound lead on a website form. I'm talking about now. You got to take all those other things in consideration that you're marketing on those platforms, and you don't respond. That comes down to a YouTube response. Someone responding on a video who monitors this stuff by the minute, who's talking to people? Because some people, they won't pick up the phone, they won't do this. This is old school shit. People don't do this anymore. I don't do that, I want something. What do I do? I go to Amazon and I buy it and they deliver it to my doorstep. They make it easy. Contract is sometimes don't make things easy for people. Yeah they don't. It's got to stop making stuff easy. The speed to lead process. You really got to get into that. The sales process, once you sell it, what's it look like in your company? How do you hand it off? Because you got the marketing, you got the sales, and now you got production. What's production look like? God, we could have a whole podcast just on production. It.
[00:53:20] Mike Cappuccio: Because that's a whole nother part. That's a whole nother part of your business is the logistics part of it and all of that of what happens. But it's really just staying on top of things staying. But I really like the question about the lower end price entry point guys that are getting into it. That's I call it low barrier to entry guy who is starting out. And that might just be a company that could be a division of a company that's starting out. They do insulation. That's their big bulk of things. But now they're going to do heat pumps. So it's a little segment of the business. So they're making their margin over here. Now they can lower this margin over here. But then they're going to find out they need to hire more guys, buy more trucks, buy more material, have more logistics, have warehouse people, have all these other things to put the process into place to get all the logistics done, and that's going to cost money. So when I got to raise my price, just keep your price up in the beginning. Yeah. I mean a lot easier wouldn't it. Yeah. I'll leave it at I'll leave the closing point at that I love it. Don't. Why you gotta give stuff away when you don't have to?
[00:54:21] Ed Smith: Totally.
[00:54:22] Mike Cappuccio: You don't have.
[00:54:22] Ed Smith: To. Don't negotiate against yourself, editor. Which is good advice.
[00:54:26] Mike Cappuccio: You really don't. You don't have to. I'm going to tell you this. There's more good jobs out there than bad jobs. And people want good jobs. They don't want bad jobs. And there's nothing worse than going out to a home to look at a bad job that people spent 4 or $5000 on, and now they're looking at they gotta fix it. I could tell you stories. I've actually been thinking about writing a book. I could tell you stories that could go on and on about bad jobs and cheap prices. And now I gotta do it over for 10 or $15,000. Yeah. And I have to tell the homeowner this. Okay. And did they really save money.
[00:55:14] Ed Smith: On that scenario?
[00:55:15] Mike Cappuccio: No. And there's a lot of that goes on. I'm going to tell you right now, I hear about it all the time. I think homeowner education can really take that price and throw it out the window, because I could pick that price a pot with you can pick it apart very nicely to you need to go ham on the other guy or anything. You need to say anything bad about it. You said it earlier and we talk about it all the time. Show don't tell. Show them the good stuff. Show them the bad stuff. I have one photograph in my training. And you've seen it. Photograph I'm talking about, right?
[00:55:49] Ed Smith: Oh, yeah. All the line sets all over the place.
[00:55:51] Mike Cappuccio: All the line sets everywhere. And this and that. And I'm looking at this job, and I'm saying to myself, how did. I'll guarantee you someone probably gave that contract to 30 or $40,000. And you're looking at it going, how could they even have walked away from this home?
[00:56:05] Ed Smith: Honestly, it's one of the worst things I've ever seen.
[00:56:07] Mike Cappuccio: And I've seen jobs like that, Ed, all the time. Yeah, all the time. People don't know what they don't know. And that's why I keep going back to the sales, having a good sales process and really honing in on what the expectation is going to be, how we're going to do this. As you grow up. Take them to a job. Let them go see a job. Let them talk to your customers. That's where. Case study. Part of this works extremely well. Video case study. And we could talk for hours.
[00:56:35] Ed Smith: We do, in fact, often talk for hours. But, Mike, this has been awesome. Thank you. Folks should head to.
[00:56:43] Mike Cappuccio: Always enjoy talking.
[00:56:45] Ed Smith: Always. And if folks are intrigued, they should head to dominate Ductless comm to check out your trainings. When the next one is, it's you go ten times deeper in those trainings than you did here, so it's great.
[00:56:58] Mike Cappuccio: I'd love to get deep in it with you. It's just we would have each sessions just the sales training alone. I've tried to get it down to two hours and I can't do it. Yeah, it's going to be a half day course because there's so much that you have to know in today's world to sell heat pumps. Everybody thinks it's easy, but it's not easy, man. It's not easy when you start getting involved in true heat pump jobs with dual fuels and integrated controls and all these things that people want today. All these manufacturers just keep changing things, so stay on the horizon. That's all I'm saying, because things are going to change fast.
[00:57:35] Ed Smith: So knowledge is power.
[00:57:37] Mike Cappuccio: Knowledge is power.
[00:57:38] Ed Smith: Mike Cappuccio, thank you so much for joining us on the podcast.
[00:57:42] Mike Cappuccio: I enjoyed it. Thank you so much.
[00:57:44] Ed Smith: Always talk soon.
[00:57:46] Mike Cappuccio: See you pal.
[00:57:50] Eric Fitz:Thanks for listening to the Heat pump podcast. It is a production of Amply Energy, and just a reminder that 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 on your favorite podcast platform. We'd love to hear from you, so feel free to reach out! You can reach us once again at hello@amply.energy thanks a lot.
