In a tight economy where leads are scarce and every customer feels precious, most HVAC contractors chase everything that moves. Not Mitch Bailey.
The second-generation owner of Bailey's Air Heroes in California's Central Valley made a counterintuitive choice decades ago: turn down work that doesn't fit, downsize from 50 employees to 12, and build everything around one principle—test, don't guess.
"If you're not measuring, you're just guessing," Mitch explains. "Rule of thumb works probably about 50% of the time. I do a load calculation because I'm the one that's got to live with it. You're going to be calling me when it's not working right. I want to be able to sleep at night."
That philosophy just earned him the 2024 Jim Davis Technical Excellence Award from the National Comfort Institute. And it's created a business where Mitch actually enjoys showing up to work—no small feat after 48 years in the trade.
Mitch started young. At 15, his mom would drop him at job sites after school to run duct until sundown. By the 90s, Bailey's was doing 500-2,000 homes per year in new construction with up to 70 employees.
Then came builder Dave Florsheim, who wanted Mitch to come down $5 per house on a 40-house subdivision. Just five dollars. Mitch refused every offer—$75, $50, $25, even that final $5.
"I almost reached in my pocket and pulled out $200 to give to Dave. If you need the money that bad, here's 200 bucks. But I didn't, and I kept my mouth shut, and got the contract."
Florsheim eventually fired him for never budging on price. "When he fired me, I had to take the pager off my hip and look at it to make sure it was still working, because it wasn't going off. I realized at that point—I don't need all this grief that comes along with new construction."
After losing $300,000 to bankrupt builders in the Great Recession, Mitch switched from new construction to retail add-on replacement work in 2010. New construction margins: 3-6%. Retail work: 30%.
But the real advantage wasn't just margins—it was alignment. "I'm dealing with the person that actually makes the decisions, that's going to live in the house. They're motivated by comfort and whether it's going to cost them a fortune to run this system."
When Gallo Winery offered him a potential $3-4 million commercial contract, Mitch turned it down. "I don't want to get sideways with Ernest and Julio and not get paid. That would put the company under."
Most contractors would call that leaving money on the table. Mitch calls it protecting what he's built. His current setup? Twelve employees, $3M in revenue, and a database of 3,000 maintenance customers—some for 40 years.
Walk through a Mitch Bailey home assessment and you'll see performance-based contracting in action. Load calculations, blower door tests, duct leakage testing, static pressure measurements, thermal imaging—the works.
But his favorite tool? An insulation stake that costs about two bucks.
"I call that my high-tech selling tool," Mitch jokes. "I stick it in the attic insulation, and it shows three inches when code today requires R-38. Simple, quick money, but it makes the house warmer in winter, cooler in summer. It's a win-win for everybody."
California's QB2 program pays him $700 just to do this testing and provide a quote—whether he gets the job or not. "Does it close sales? It does. Every engineer's house I go to, they couldn't sign faster."
One engineer had eight quotes. Mitch wasn't the cheapest. The engineer had been told he needed a five-ton system. Mitch's load calc showed just over three tons. "We ended up putting in a three ton. One guy said, 'Call me when you're done because this is not going to work.' That's the problem with this industry. Too many guys don't know how to size equipment."
Mitch got forced into heat pumps by California's ultra-low NOx furnace requirements in 2019. "I hate them. They're junk. I wouldn't put one of those in my house."
But here's where it gets interesting: the economics have flipped in some California markets. "It used to be cheaper to run a heat pump than a gas furnace. In PG&E territory, that has flipped—unless the customer has solar. Then it's a no-brainer."
His solution? The "balance point COP" spreadsheet he presented at NCI Summit. It calculates exactly when it makes economic sense to switch from heat pump to backup heat based on local electricity rates, gas costs, and equipment efficiency.
For Modesto Irrigation District customers: as long as the heat pump stays above 2.30 COP, it's cheaper than a 96% efficient furnace. For PG&E customers? You need 6.0 COP—which basically doesn't exist.
"The biggest variable is natural gas prices. They're constantly changing while electricity rates stay relatively steady. That's one reason why heat pumps make more sense long-term."
Despite the economics, Mitch is all-in. "We're 95% straight heat pump here in the valley. Heat pumps have come a long way. Variable speed is a game-changer."
Mitch doesn't just run a business—he trains contractors across California through NCI and IHACI partnerships with utilities. He's teaching his methodology, sharing his processes, helping potential competitors.
Why? Mission.
"I believe we, as HVAC contractors, do a great disservice to our customers if we put technicians in the field without the best knowledge and skills. The only way we can avoid this is to train them."
California needs massive heat pump adoption. That requires contractors who know how to do it right. "If you want to continue electrification, we have to do it right. We have to size it correctly. We've got to make sure our ductwork is correct, and we got to make sure the house is correct. You have to fix other things in the home."
After the Great Recession, Mitch realized something crucial: "I was the guy 20, 30 years ago who thought I needed every job. Now I realize—sometimes the hardest decision any contractor has to make is to pass on work."
His approach works because every decision reinforces the others:
His final advice for contractors? "Load calculations. That's my biggest thing. If you're not doing a load calculation, you're just guessing. The next thing is start measuring. Simple as static pressures. Take a static on every system you're doing. If it's over an inch of static, you have a problem."
Test, don't guess. Know your customer. Build the business you want to run.
[00:00] - Introduction
[02:44] - Mitch’s Early HVAC Roots
[04:21] - Learning Through Experience & California’s Training Programs
[07:25] - Taking Over the Business & Embracing Technology
[19:49] - Transitioning from New Construction to Retrofit Work
[26:37] - Lessons from New Construction: Don’t Compete on Price
[33:47] - High-Performance Contracting in Practice
[44:13] - Economics of Heat Pumps vs Gas Furnaces
[55:45] - Advice for Contractors: Where to Start with Performance Work
Eric Fitz: https://www.linkedin.com/in/ehfitz/
Amply Energy Website: https://www.amply.energy/
Amply Energy YouTube: https://www.youtube.com/@amplyenergy
Amply Energy Facebook: https://www.facebook.com/amplyenergy
Amply Energy Instagram: https://www.instagram.com/amply_energy/
Hi and welcome to the Heat Pump podcast. I'm Ed Smith and I'm Eric Fitz. We are co-founders of Amply Energy. Today we are delighted to have Mitch Bailey of Baileys Air Heroes out in California with us. Welcome, Mitch. Well, thanks for having me. Mitch just won the much coveted Jim Davis Technical Excellence Award from the National Comfort Institute, which is much coveted because it was the first time they gave it.
Right. Mitch? Yes. Well, congratulations. It sounds like it was very well deserved. And we're looking forward to, like, digging into your technical expertise because you're a trainer, you're a business owner, and you're very involved in California's switch to all electric homes. And I think that's kind of that's the trifecta of who we like to talk to.
So we're excited to dig in with you here. First question, so you're a longtime. You sort of grew up in the trade, right? You started as an apprentice in your dad's company in 1976. If we just go back there, what was that like growing up in HVAC then as an apprentice and learning how the trade was at that time?
I was 15 at the time, so I couldn't even drive. In fact, my mom used to pick me up, and at the time my father had taken on a subdivision, and so a guy that he was using kind of flaked on him. So I was picked up after school, dropped off on the job site and ran, ducked till the sun went down and then was picked up. Rinse and repeat every day.
Did that for the whole school year. I also went on them with service calls in the summertime. I worked for them full time and then on weekends, of course, in after hours and just it wasn't back then it was expected for you to do that. You were the kid, you know, you're the son, so that's what you had to do. It wasn't like I was something I wanted to do.
I actually wanted to be either a scientist or an architect. One of the two. That's what I was aiming for. But I ended up in this business instead. So that's been a good business. I really like it. And the stuff that the science portion of it, because I was really heavy on science. If anybody's getting in the HVAC business, it's a really heavy science profession.
You just don't realize it because, you know, it looks like it's a hands on kind of tool trade kind of thing, like, you know, get your hands dirty, you know, micro, dirty jobs kind of thing. And it is, but it's also very heavy on science. And so that I think that gives me a good basis for me to do this is overall.
But when I got a truck when I was 16, when I turned 16, my dad gave me a truck. It wasn't because I turned 16 so I could get to the job site. That's amazing.
00:04:57.910 — 00:21:24.779
And tell us a little bit more, you know, from there. You said you were working for your dad. Can you give us a little more of that arc of your background? So he went to school for this. This is the thing. So he went to school for it. I didn't I kind of learned by osmosis, you know, working with guys and working with him and going on things, jobs.
The biggest difference was when I got thrown out into the mix of it, and I started doing service calls and stuff, it was I'd run into a problem and I'd come back to him and I said, dad, I can't fix this. I don't know what's going on. And he'd say, well, here, hang on, I'll help you. You reach behind him, he'd grab the book of the day, which was Dolan's Bible, and he'd say, here, read the book.
I had to, so I'd study on it that night. Then I'd go out and fix the unit, and that's how I learned to do it. Now, that changed later on because we're very fortunate in California. Here we have a PG and E. They take a little bit to call a public surcharge out of everybody's bill to go for rebates, incentives, weatherization and training.
They decided to take a lot of that money and put it in training. They built a facility in Stockton off of Universal and West Lane that actually had a house, and they would do BPI and ingot training in that house. They also trained, did training. They were free classes to contractors, techs, anybody that wanted to take the classes and it was all in HVAC stuff.
This is that's where I learned about rights off is there? That's where I learned a lot of the other stuff, because we also were doing PGD homes as the years progressed. And to get the incentive, you had to do a duct test and you had to do certain other things that the system had to have so that it would, you know, qualify for the incentives for the PGD incentives.
So did a lot of training that way. I did plethora of classes. I don't know if you know, Rick Chitwood. Never heard of Rick Chitwood. Oh gosh. He was a he's a home performance guru. In fact, you guys should probably look him up and see if he went on to be on the podcast because the classes he gave, he was building 4000 square foot houses that ran on a heat pump back.
This is back in the 80s that in the 90s, early 90s that were like a one and a half ton system. And he was they were he was building houses. Rick Chitwood really good. He was a huge performance kind of guy. You guys have entered their waters, right? Yeah, we just did. Yeah. So he worked with Rick for a little bit too.
I believe he did some stuff with him. So yeah. But he was he used to be, he was a he was a great interviewer. But his thing was building a house that you could build a house that was, you know, 3 or 4000ft² and run it off a one and a half ton air conditioner. And this was up and ready and it gets hot. I mean, an average summer day up there was like 110.
So and he'd run it off a one and a half ton air conditioner. He'd just build a very tight home. He'd fix all that stuff and then just do his ducks and everything, right? Correctly. And he was very big on the science end of it. So that's cool. And you took over the business in 93, 92. 1992 actually, I purchased it for my dad.
I purchased the company for my dad. Yeah. Let's get a little bit more into your current business, Air Heroes. You know, you've got a real focus on home performance and measuring results. What kind of got you moving in that direction, and when did you kind of make that switch? Or have you always kind of been doing it, doing it that way?
Let me take a step back in the my dad was really having a refrigerator because he went to school for this. He was he did 20 years in the plus in the military, retired in 67, went to school for HVAC. Then he worked for other. He had opened his own company in Texas. This was back in the 60s, early 70s or late 60s. We then moved back.
We moved to California because that was he was a Dust Bowl and Dust Bowl kid and went to the military from here. And so he moved back here where there was, you could swing a dead cat in this town and hit a Bailey back then. So it was all his relatives. He had, like 12 brothers and sisters. And so we moved back here.
He worked for other companies. Then he owned his own company in 1976. And when he did that, he was heavy into refrigeration because he the company he worked for beforehand, he built the company from a one man. It was Cox's Refrigeration. He built it from one man to six guys, and the owner decided to hire a guy out of college to be the service manager.
And my dad said, I guess you don't need me. And he left. All those customers migrated to my dad, and my dad didn't solicit one of them. They all just came to him because they'd find out he wasn't working for Cox's anymore. And then they looked him up on the yellow Pages. Back then was the thing, and there was his company.
So they brought him in and he brought all those people in. So we were really having refrigeration. We used to do all the Denny's, all the Taco Bell's, all the quick stops, all the mom and pop stores, all the Burger Kings, you know, Taco Bell's. You named it. We did it back in the day, so I kind of cut my teeth on that stuff.
The new construction phase of his company, though, took off, and for years we were doing 500 to 2000 homes a year, depending on the year. In some instances we had, you know, 60, 70 people working for the company. I was just an employee. But then in about 84, 85, I ended up taking over, becoming the new construction slash sheet metal department manager managed it from then.
And I'm also kind of an early adopter I like I wanted to switch to computers and other things, and my dad was kind of dead set against it. So after work I would do title 24 for contractors in the area, and I bought a computer 1086 computer at the time that had a 20 megabyte hard drive, which was considered huge, and it used it real floppy drives.
It had floppy disks. I was DOS based. I did micro paths and I learned that's where I learned a little bit more about the building science and stuff. Because microprocessor, you had to, you know, had to really learn what you were doing and how are you doing it? The computers were a lot slower today back then.
If you would hit the button to do the calculation and you'd go to lunch, you could take an hour. Sometimes you do the calculation and then if it made a mistake, it would tell you you have to go back and fix it, and then hit the button again and wait another hour. Years later, about 20 years later, we ended up starting doing title 20 fours again for customers, for the builders.
When they did that, the computer now with the calculator is so fast. By the time he'd done pushing the button, it was done so and so. I learned all that science stuff back then. But we did a heat pumps also back in the day. So I want to I'm just going to I'm kind of going to jump out there on this one. When I first a lot of the homes When I first started, they were doing heat pumps.
Heat pumps was the what architects, engineers specked in homes. And so we were doing a lot of heat pumps, probably half of the homes. We were doing heat pumps problems here in the valley, we have a tule fog that develops. We have an inversion layer that comes in. We have cold air below, warm air aloft, and it just kind of like a lid on a pot.
Just holds it in there. And we at the time, we still have a lot of moisture. So we get this fog that would never end. It was always cold, cold temperatures very moist. The units were 100% on. They would go into defrost, had to put heat strips in all the units and people just hated them. They hated heat pumps because their bills were high.
They were uncomfortable because they were always going to defrost. This was such a 84. They built LensCrafters here in Modesto, and we did the LensCrafters. They had three five ton heat pumps on the roof. The mechanical engineer was a lady out of Southern California, and I called her and I said, hey, I said, I, you don't have any heat strips in these heat pumps.
She goes, you don't need them here in climate zone. I said, no, you don't understand, lady. We get this totally fog and I go, it's they're going to be in defrost. They need heat strips. She insisted we didn't do them. Well, summer rolls around, everything worked fine. And then winter came along and the manager said, hey, we can't get the building above 55 degrees.
Well, they were all in defrost and no heat strips, so we ended up putting heat strips in all of them. The biggest problem with that was the heat strips we put in those units. They didn't have power coming to the building, so it ended up costing them a fortune to run power into the building to service the heat strips alone, because we were putting 20 kW on those five times.
The today, if I was to change those heat pumps out, I wouldn't put heat strips in any of them. We don't need them for two reasons. One, we have stages or we have variable speed. And the other reason is the climate has changed. Now it's not all climate. I made a video on this. It has to do with how they irrigate the valley.
We don't have the moisture that's tied up in the soil, so we don't get that tule fog like we used to get. We used to get a really bad tule fog. We don't have it. We get it occasionally, but with the variable speed they're able to defrost in between there. So. And then I after I became the manager company continued to grow.
I took over in 92. I dumped all the refrigeration. I stopped doing any I did commercial, but it was just AC stuff and heating because I hated the hours. I hated when I walk in box for a Denny's went down. I was up at 2:00 in the morning fixing a walk in box, and it just the hours kind of sucked. So I thought I gave that up.
And then the clientele that we dealt with, they changed hands. A lot of the businesses had changed hands, and they weren't willing to spend the money. They just didn't want to spend the money to fix the stuff. They wanted nickel and dime it. There was a better profit in new construction and add on replacement service work, so we switched to that after we went from that new construction to in 2008, 2009, when the economy turned down our Great Recession, we ended up losing about $300,000 to builders that went bankrupt on us, didn't pay us.
So companies survived it. But I switched my model 2010 to just all add on replacement service work. Higher margins. My margins run around. We're running around 6% to 3% for new construction, but it was a lot of work. So, you know, we were turning at one point. We were doing $5 million a year, but it was I wasn't making much money.
So we switched to from new construction to add on replacement service that runs about a 30% margin. Typically for most of the stuff we do, which is was more profitable. But that's good for the business because it keeps us open and it allows us to continue to operate. And for the hopefully into, you know, next 10 or 15 years before I retire.
Team same size since that switch, or did you kind of decrease the team size a bit more profitable? So we downsized. We went we went from 4050 people down to about 16. But today we're running about 12. And it just it varies. I haven't grown the business. I've watched a lot of your stuff and, you know, a lot of guys are all about growing the business.
There's just starting out. I, I'm comfortable where I'm at, really. I don't need to to grow it. It's a good business. It's just, you know, since we've built up clientele over the years, we have about probably a database of about, you know, 30 or 40,000 customers, but we have probably about 3000 just our straight maintenance customers.
And I say real maintenance, not the $59 special going to come out and try to sell you a new system. We've got real customers that we go out twice a year, service their systems, and some of those people have been with us for, you know, 40 years. We've replaced their systems a couple of times over the years. We do have a lot of people who come on and talk about growth.
But frankly, it's nice to hear from folks who just have a business they like running. You know, there's a line that a line I think about a lot, which is how do you build a business you don't grow to hate, which we think about a lot about Amberly. Like, I want to enjoy running this ten, 15 years down the road. Um, and so having it kind of mesh with your vision, your lifestyle, your mission and all that stuff I think is, is super important.
And growth at all costs is not everyone's cup of tea. Right. So like I say, I'm heavy into the sciences. You ever heard of the analysis machine came out around 2000. It was actually a real machine now analysis machine e analysis with a big E analysis. No e analysis. No. No e analysis not analysis e analysis.
Well, the analysis machine is it was at the time. We're doing a lot of new construction and there's new construction has what they call it contingency lawsuits. There's a plethora of kitchen sink lawsuits. So in fact after I dropped doing heating, we changed the entities. We actually formed a new corporation, everything, because our general counsel told us, said because I was getting sued every day.
I had a new lawsuit from a subdivision we did ten years ago because they had filed a lawsuit on the 10th year, 12th month, last day of the year with 2000 Jane Doe's and John Doe's to be filled in later by the contractors that did the work. We ended up having to defunct that company, you know, and sunset it and then so we could get out from underneath all the the liability that we had for doing those houses even though we did nothing wrong.
And I mean, it was there were we'd been involved in probably I'd gone to what they called destructive testing, where you go out to a home and a subdivision and they'll have all the attorneys there, and they'll be cutting holes and they'll count how many nails are in the sheetrock. And if there's only six and there's supposed to be ten, then they'll go through the whole subdivision.
Well, they're supposed to be, you know, this is going to cost $300,000 to fix and everything else. And so and it's all just to get money out of the builder. and he counters, who's all this up? So we're a subcontractor. We're brought into the lawsuit. One set of houses we were doing, the attorneys they're going through and the homeowner, and they're doing destructive testing.
I'm standing there and we had no nothing wrong in this house. We had nothing wrong in any of the homes we were doing. So I, you know, I'm standing there next to the homeowner. And I said, so what's wrong with your HVAC? And the guy before the his attorney could say, don't answer that. He goes nothing. And they jumped all over me.
You can't ask that question. And also that's to me. And I said, well, what am I doing here? This is stupid. We haven't done anything wrong. Our system works great. And so we get named in these lawsuits and have to defend them. My insurance would have to pay it off. So when we changed our business model over from new construction to add on replacement, I had been bought the analysis machine back in 2000 to help defend myself if there was a problem, because basically what it was was a think of measure quick, but with flow.
Hoods that you attach to the system, and it would be a computer. And you take all the readings and it would tell you the zero rating of the equipment if it was charged correctly, the air flow, the whole nine yards, and it would give a printout. And I could take that and say, okay, if we end up record, here it is.
I was doing that back in 2000 when I started switching 2010 over. I decided I wasn't using the analysis machine anymore, but I had decided to do it and some of the tools became available to do it. Flow hoods and stuff like that. We've always owned flow hoods, but this, it became where I was going to do the load calculation on a house.
If I went into it, I was going to compare it to what it should be. It's going to tell the customer what they needed to do to fix it, and then give them the options of what they want to do. And not all customers want to do everything. Sometimes you go in and you say, yeah, you need insulation, and they'll go, I think it's fine.
I'm not going to worry about it. And then I try to show them where they can fix that kind of thing. But then a lot of times they just go, no, it doesn't work for me. So my budget only allows this. So we fix what we can. In some cases we can fix all, but some people are willing to go that extra mile and do that kind of stuff.
Mitch, you actually, there's so many interesting nuggets you touched on and all the different areas you just discussed. I want to circle back to a couple of them. So one, it sounds like this the trigger really for you going from new construction to retrofit add on replacement business model one sounds like the liability issue was a big deal, but it ultimately there are higher margins.
Can you just talk a bit more about like why there are higher margins in the retrofit business model versus the new construction? And, you know, you started getting into these aspects of how you're diagnosing the home. Like I'd love to hear more about that as well. Sure. When it comes to the
00:21:26.110 — 00:26:15.370
New construction. It is a wholesale market. Builders expect a discount. Builders don't pay as much. Builders hold your money longer. You get paid over a period of time. I start a house at frame stage. Take it through frame to drywall. Set the equipment to finish. Those are you get paid in stages and we try to make it to where we got paid our profit up front in case the builder went under.
So we would add more money in the front end of it. That didn't work at the end because they just didn't pay us, so it just didn't work. The other thing is to when you're doing new construction, we were getting 200, $300,000 checks from builders. If a builder got sideways with you, they that could hurt your company a lot because they decided not to.
So the add on replacement service in is a retail market. I'm talking to the end user. I'm talking to the builder, not the end user. All I'm dealing with the end user, I'm dealing with the person that's actually makes the decisions that's going to live in the house. Okay, builders not living in that house.
They're selling it. And so they're motivated by profit. The customer, the people that live in the house, they're motivated by comfort and whether it's going to cost them a fortune to run this system. So it's a retail market. It's a higher profit margin because of that. It's because of that ability to switch there.
It's also one customer at a time. So if a guy owes me $20,000 and he decides not to pay me, it's not going to put my company under. Recently we did stuff. We were doing some work for Gallo. I don't know if you heard of Gallo Wines. Yeah, yeah. J J Gallo, one J Gallo wines. Yeah. Ernest and Julio Gallo. So. J Gallo they have what they call G3 which is a they're one branch of their company.
And we had a bad compressor on a 50 ton unit. And we ended up changing it out. And because we were a train dealer and it was through train that they did it and this. So the unit went down again after we changed it out. And they had this other company did all their work. The guy came in and did nothing but badmouth my company and how we screwed everything up.
But then I sent my service manager, Bob, over there, and in 20 minutes he had the unit up and running. It was another problem with the same unit, but it had nothing to do with what we had done. They went nuts. They go, we want you to do all our work. The guy that run that department. And so that would have been a 3 or $4 million contract.
And Bob came and says, do you want to do it? And I said, not done the commercial stuff before, and I don't want to get sideways with Ernest and Julio and not get paid. So that would put the company under. So we decided to pass. And so sometimes that's one of the hardest decisions that any contractor has to make is to pass work on work, not to take it.
And that's one of the things that as you become more and more into the business, you find those customers, that man, I wish I hadn't taken that customer. And that's always a regret in you. In the back of your mind, you're always thinking. The guys are always thinking, I gotta have that job. An example is we used to do a builder, Florsheim Homes, and when I first started with him, he was doing small subdivisions.
You ever heard of Florsheim Shoes? That's the two grandsons. Florsheim shoes is. They used to be a big brand of shoes and spend all the malls and stuff. But their grandson, their granddad, had the contract with the military for their insoles to make all the shoes for them. So they were millionaires. There were 300 million bucks between the two brothers, Dave and Bob, but they did their work for years, never got their work, never got to work.
And then one day they had a little 40 House subdivision in Modesto they were doing and I bid it. I, Dave Florsheim, call me. He said, come into my office, come, come down here. I want to talk to you. I get to his office and I sit down and I said, Dave, how are you doing? And I'm looking at his office. It's beautiful.
It's got, you know, offices bigger than, like three of my offices. And it's, you know, he had paintings on the wall. It's probably worth more than my truck. And so I'm talking to him and he's like, Mitch, I've heard good things about your company. I really want to use you. But I got a problem. And I said, what's that, Dave?
And he goes, you're 150 bucks high a house, and this is a 40 house side division. So he says, I said, well, Dave, my first price and my best prices that never come off on my new construction stuff. And he says, well, can you meet me halfway? 75 bucks. And I said, no. He says, okay, $50, I said, no. He said, okay, $25.
No. And he goes, $5. That's all I'm asking. And I said, I almost reached in my pocket and pulled out $200 to David. If you need the money that bad, here's 200 bucks. But I did, and I kept my mouth shut, got the contract, did his work halfway through the project. Well, we had about five houses we were going to set the equipment on, and I was walking the project and he come running up to me and he goes, it just let me know when you want me to write a check to your supplier for the equipment.
00:26:16.410 — 00:50:46.260
And I said, what the hell are you talking about? He goes well. All the other guys. I've had to write a check to their supplier. I said, look, Dave, I have a $250,000 line of credit with my supplier. How about I set the equipment, buy it, set it, and then you just pay me because all the other companies were insolvent.
I found out later that every company he had used was cheap. He was the cheapest guy, and that guy always went under and it always cost him money. So for years we did his work and at one point we were actually doing like six subdivisions with him. And but he hated my guts because I never gave him an inch whenever I just my way.
I just didn't do that. And so when he finally fired us at that point in time, I thought, you know, I was thinking, I have to have his work to continue to operate. But when he fired me, I had it back then we had pagers. This is back in there. This is in the 90s. So I had a pager at after I got fired, I'd have to take the pager off my hip and look at it to make sure it was still working, because it wasn't going off, because there was nothing that I had to do for Florsheim anymore.
So I was able. I realized at that point, I don't need all this grief that comes along with doing new construction and stuff. The add on replacement service and has its own problems, but not near as we had with new construction. It is a retail market. It's not a wholesale market in my mind. I'm like like fist pumping in the air.
We just put out an article that we called stop Competing on price, start winning on trust, and we break down kind of the matrix of different types of business models. And I think one of the most controversial things that we had in there, because, you know, we're on episode whatever, 40 to 50 of this podcast.
And we kept hearing folks who had a crystal clear view of who was and who was not their customer, and that was different to me than at this point I've done, I don't know, a thousand, you know, sales calls for amply and met different HVAC entrepreneurs. And there's two mentalities. There's folks who like every lead must be one.
And if it's not, it kills me. And there's another one which is like, you know what? I like this kind of customer. And I say no to hear you say, with such calm and nights of good sleep behind you. Like, you know what that kind of customer is not was not for me is I was that guy 20 years ago though. I was the guy 20, 30 years ago.
I was the guy that thought that she needed every job, you know? Yeah, yeah. And when I lose jobs, I would ask what I do now. But even toward the end, I was asking when I got a job, what did I do wrong? What did I leave off the table? How much money did I leave on the table? And it got to the got to the point of remorse.
Yeah. Well, no, no, the equivalent of buyer's remorse. Like when you, when you get the bid on the house and you win, you're like, crap, I bid too much, you know. So years ago I did a Honeywell. So Honeywell sold the analysis machine, but they bought it out for another guy. Okay. And they wanted us to use that to end our service department.
I wanted to use it to keep me out of court. When I took a business course, actually, Honeywell paid for me. They sent me to Florida. It was called Build a Better Business, and the guy that did did that. He did new construction, and the way he did it is he built himself a sales office and he would have the homeowners buying subdivision houses come in or custom homes, and he would go over their options because the builder, they're not going to pay for the highest efficiency or the other stuff.
We could walk a customer in, show them like this is what the builders this is paid for by the builder, but this is your option. And and then they could buy an upgraded unit and we would mark we would make money on that. Very good profits on that stuff. More than 50% margin on all that stuff. And the builder would make money on it because we would just he would just take our price and just double it, and then he'd just keep the difference.
So after I took that, as soon as I took that course, build a Better business, I went ahead and I knocked out some a wall in an office, turned it into a sales. My sales room I had with the time. We're doing three different brands of equipment Goodman, Amana, Lenox, and Rheem. And so they had different levels of equipment.
We'd have the unit and I used three different brands at the time because we're doing so much subdivision work. The manufacturer would sometimes run out equipment in the summertime, so I could switch them if I needed to. I could go, okay. You're not getting the Linux this, you're going to get a Rheem. And it was the deal with all the builders.
What ended up happening is customer would come in and I have a unit running, and they'd meet with me, and the unit would be like the base unit, and it would just be just gone. Na na na na. And the customer walk in and have to yell as I'm talking to them, say, yeah, this is the unit right in your backyard. This is the unit.
And I would turn it off and then there'd be another unit over here. And I said, this is our top of the line right here. And they walk over and I say, oh, by the way, it's running because it was so quiet. And they'd go, wow, honey, we got to have that one. And so my first sale out of there was $26,000 in options for my first sale, plus what the builder was paying me to do the house.
Now, we didn't make 26. Builder made 13,000 on that, so it was costing so 13,000, but our profit margin was 5,060% on all that stuff. So that was really would have kept me in the business. Except for one thing, when the economy, home prices started climbing and going up. The builder found they didn't have to sell options.
They got to the point one guy was at the point where a customer comes in and says, I want to buy this house. And he'd raised his price on that house $5,000 last week, and the customer come in, I want to buy the house, but I want to do this. And the builder would say, you're taking it as it is, or I'm selling it to somebody else tomorrow or today.
So what do you want to do? And the people just, okay, not do the option. So the options kind of went away. The other thing that happened was people's budgets got squeezed to the point to where they couldn't afford all the options. We would sell them, they'd come in and go, hey, we want that option. We want that guy.
You know, that that upgrade for the air conditioner and the heating system to 5000 bucks and this air cleaner and this other product, but they couldn't afford it. The builder would even tell me at the end says, you can't sell this customer a filter or they won't be able to qualify for the house. So they come in.
I'd say, I can't say none of this stuff. I can show it to you. One guy canceled a front door that cost $8,000 on one builder because he wanted the. He said, honey, this makes more sense than that $8,000 door. And so the builder called me. He was livid. He goes, oh my God. He goes, if I have to pay for that door, you're paying for it, not me.
And I was like, I didn't make that decision. She did. Luckily, they were able to cancel the door. But yeah, so I would have stayed in new construction if I could have continued that. But my sales went from 26,000 to 12,000 to 10,000 to 3000. I mean, literally $500 a customer coming in by $500, and it was filtration and maybe a better bath fan.
And that was it. You know, it wasn't attainable because the builders found they could just take all the profits, more profit, without having to do anything, just put it in their pocket. I want to talk a bit more on the retrofit service side. You know, a couple of things. You mentioned just about how there's so much more alignment with what you're offering and what a homeowner values.
And you know, that example on the new construction side where you're talking about, like, you know, comparing the low end unit that's making a bunch of terrible alterations, making a much terrible sound, and then they hear what the higher performance unit it's like, it's basically silent like that is really tangible.
A homeowner can really understand that. You can sell that benefit. We know, like a huge part of your business today is about, you know, measuring air flow and, you know, static pressures and, you know, system performance instead of just talking about, you know, sizing. Can you just spend a little more time?
How have you figured out how to communicate the different things that you are doing for a given project? You know, in the retrofit application, how do you explain that to a homeowner and do that? Well, before that one for the audience, would you paint a picture of what your process looks like today? Because I think we haven't totally gotten into it.
And you're like an NCI trainer, a high performance contractor, they maybe even start one step earlier. Like, what does that mean to be a high performance contractor? How does your sales process differ? And then we can talk about how you communicate that value to a homeowner. Well, prior. So I'm lucky in that I have an actual they have what they call the SH2 quality bid.
Tier two from a programs put together by Frontier Energy runs it here in the area through tech program. And what it is is again is part of that public surcharge money. They funded a program that's been going for two years now, and it'll go through 26. And then they're going to see reevaluate. The only problem is they don't have enough participation a tier.
They actually made me a tier three contractor. They have a tier one and tier two. And what that is is we go in, we do a load calculation, we do a little bit of testing on tier one and they give me 350 bucks. We're tier two contractors. So we do a little more testing, we do a little more stuff and they give me $700.
Now prior to that program, we did that testing the exact same thing. I'd go into houses. And so our process was when we go into a home. What? I'll tell the customer, I says, look, you've got a three ton currently. Let's say I can't. I don't know if it's the right size. I'm going to have to test your house to see where it's at.
I got to test the infiltration. I got to do a load calculation. I'm going to have to test your airflow, and I'm going to have to see about duct leakage. And then I can evaluate it. I also bring a floor camera. So I go through their house so they can see it. I go in the attic. I put a stake in the insulation, I put it in there and the stakes like, you know, three inches, four inches in insulation.
I said, that's, you know, it's code at the time when the house is built and code the day is here, let's bring it up at least the R 38. And the customer is like, oh, okay. And I call that when I teach my classes. I call that my high tech selling tool. I tell the guys I'm giving these out in class, I'll bring insulation stakes.
And I said, anybody want a free high tech selling tool? And they'll go, yeah, and I'll hand out these insulation and I'll tell them, you show this to the customer, take a picture of it, bring it down to them, give them a price on the insulation if you don't want to do installation, let's say I'm going to heat air.
I don't want to do installation. Make a deal with a local insulator and you give them the depth of the insulation, and they'll tell you what it'll cost to blow insulation. Just you just need the square footage of the attic, and you just add 300 bucks for yourself. For us, we have two blow trucks. So we go and do the.
We blow our own insulation. I say we have to blow. We have a portable blow machine, and we have one that's truck mounted in a big 26 foot box fan. But the insulation is easy, quick money, but it does a lot of stuff because it makes the house warmer in the winter, cooler in the summer. It's going to make the unit cycle on and off less.
So that's going to save wear and tear, and it's going to save energy and save money. So it's a win win for everybody. And it's a simple thing to do. And again, like if you're a heating air contractor and you don't want to do that, make a deal with the eight local insulators, they'll be happy to come out and blow that for you.
All you can do is got to make the deal with them. But that process, when I go over the customer, I show them all these things and I tell them what we're going to do prior to the QB program, the quality HVAC Residential Services program. What we would do is we would put it in our price, and then when the customer says yes, we'd come out and do it.
Two years ago, I was driving to teach a class up until Larry, my daughter called me and says, dad, they got this program called quality HVAC Residential Services. They'll pay you 700 bucks to do this test and give the customer a quote. And whether you get the job or not, you get paid 700 bucks. So we do it on every house we do now.
So we go in. We're fortunate. Like I tell when I at the HVAC summit, I told other contractors, don't be hating this. I got this available and I use it. I take advantage of it because it was exactly what I do. I test in every house, I test out every house, and when I do the testing, I go as deep. I'm also on the Ashrae 221 committee.
I don't know if you guys know what the ashtray 221 is. So that is test in the field. The actual performance and capacity of equipment that's installed in residential systems and commercial. But we go in and we do the testing. And I had a simplified version that I was doing that I still do the simplified. I don't do the complete ashtray two, two, one and use their software.
I use my own stuff. So I and then the other thing that we usually do is we will calculate for the customer how much it's going to cost, how much savings it's going to be compared to the cost. And in most cases it will pay for itself, sometimes depending on the utility within ten years. So the system, just by replacing your system, it will pay for itself in ten years.
And we show the customer that does it close sales. It does. I just I gotta say, because when I show this testing to any engineer, I get every engineer's house. I go to a guy that's an engineer. I've done three engineers in the last two months, and every time I went in there, they were like, they couldn't sign faster.
One guy had eight quotes, eight, and he landed on me. And I wasn't the cheapest. I wasn't the most expensive either. I wasn't the cheapest. He had a four ton unit in his house. Four ton. Okay, when I did, the load, calc came out to just over three times. Same thing for the heating, just over 36,000 BTUs. And I told him, I said, look, if we go to our 60 in the attic and you fissure infiltration, this will drop down to about a two and a half ton.
And I did the what ifs for him when I did it. He said one guy told him you need a five ton on his house. And he, you know, and he says, no, this other guy says, I need a three. That's all I need. That's what we ended up putting was a three ton just finished him and he says, well, good luck. Call me when he's all done because he's not going to work.
And that's how that's the problem with this industry. There's too many guys that don't know how to size equipment, how to do it right. They just they're swapping boxes. That's the big thing. They just want to swap boxes, or they think throwing a bigger unit in is going to fix all the customer's problems.
They think it's a silver bullet. Customers also think it's a silver bullet if they think a new system is going to fix problems. That's one reason why I do the testing, because you'll find out later after you. If you just swapped a box and didn't do anything, the testing the customers go, well, that didn't fix my living room.
It's still hot and still cold. And you're like, you didn't tell me that it was a problem. Please. Yeah, you got a point. Me? When there's an issue, you know, that's why you ask those questions. But if I do the testing, it usually pops out. Sometimes when I do the testing, I'll go in a room and I'm testing it, and I'll do the load calc before I even get done testing.
And I know there's a problem in that room because they've got a portable air conditioner going out the window and they've got all the windows blacked out. And I said, does this room not cool? Very well. And they go, yeah, how'd you know? That's obvious. You have a problem, dude. So we try to fix those things and like I said, I'm I've done the testing.
It sells systems and it does cement stuff because example, last year we did a customer toward the end of summer and he was a lawyer and we ended up doing his house in Stockton. We got done doing it and everything. And May rolls around this year it was like middle of May and it was going to be 101 or 102 that day, and I get a text from him at 630 in the afternoon and I'm like, oh shoot, what's going on?
And I start reading his text and I was like, oh. He goes, I just want to thank you for all the good work and everything else. I just want to let you know. It's 630 in the afternoon and the unit just came on. It's 100 degrees outside and that's like, fantastic. That's what the house is supposed to do. It's not supposed to run.
And when it does, it's supposed to maintain temperatures and cost nothing to do it. So. And yes, he did everything. Infiltration, insulation, new system, new ductwork, the whole nine yards. He spent $50,000. So. But he had two systems. So can you go one click? Like, I totally get so Eric's an engineer and I'm not.
Eric would choose you all day long. How do you get that to land with a non engineering customer? This is a hot topic for us when we're talking about Peter Trost over Energy circle a lot about it because the technical sale can be intimidating to folks who don't understand it. So like, how do you make that testing land with a non-technical customer?
I made a lot of videos. I've actually put the customers to videos a lot of the time, so and that they're my videos, but if somebody else wanted to point them to my videos is fine to the like and subscribe, by the way. So when I what's the name of, what's the name of the channel? You gotta plug that to Mitch, it's Mitchell Bailey.
It's I didn't I didn't make up. I wasn't potato jet or be Mr. Beast or any of that stuff. No, it was just my name. By the way, there's a rapper with the same name. That's not me. If you. You got to put in Mitchell Bailey HVAC and it'll pop up my beautiful mug. And then you can you subscribe to it? And it's an old picture.
That's a 25 year old pic. You know, years ago I took that pic. But when you're with a customer that that's another problem with our business. We tend to start talking sear, we start talking tonnage. And I ask customers, do you know what a ton. You know what a ton means. And they'll go, no, not really. You guys say that all the time, but I don't know what it is and so you can explain it to him.
I can point him to the video and say, yeah, I'll send you a video on it or what seer is, I'll send you a video on it. And we start talking acronyms and doing all that stuff, and it just goes right over the customer's head. So what they hear, though, is with a system that I want it to be bigger because my other one didn't cool properly, okay.
And that's what guys try to fill that blank and go, yes, let's make it a bigger system. And the customer is all for that because that's going to make it cool better. But with that, the customer doesn't understand is it doesn't do that. And so I try to explain to them by say, look, I could put a for ten on this system and it's a three ton currently.
It's not going to work. It's not going to work because I can't fit four tons of air through three tons of ductwork. Think of it this way. I have a bag, a 5 pound bag, a potato sack. I can only fit 5 pounds of potatoes in that sack. I can't put ten. Same thing with the air conditioner. I can't do it. It just. It's not going to work.
We have to modify everything now that it's going to go up in price. Why don't we size your system to the house and then fix some of the problems, and maybe we can make it smaller? A lot of times they still don't want to change size. They'll go, no, I want a three ton. I'm not our four ton, whatever it is. And I'm not opposed to doing that for customers because of the variable speed today.
The thing is, if it's way oversize, I will bring it up to them and say no, the system is oversize once I get to do the testing on the house, and once they find out that it's actually free from us, it's a no brainer. And usually I close most of those sales because I come in and they see us do the testing that nobody else is doing.
And by the way, with that CB2 program, the quality HVAC Residential Services program, I could go give the quote, do all the testing. Another company can go give the quote, do all the testing, and another company could go give the quote and do all the testing, and all three of those guys would get paid the 700 bucks.
They have $4 million left in the program that they want to get rid of before the end of 26, and at 700 bucks a pop, that's not a lot. Oh, by the way, there's a test out that they do. They have a tier one and tier two quality install. Testing the tier two gives me a thousand bucks. So and we're actually a tier three contractor for that too.
So because we grandfathered in we didn't have to do you have to do so many tests. Tier ones. And then they'd let you do the tier twos because we've been doing it forever. So they allowed us to do it. They said switching back to energy here in California. So California is unique. We have some of the most expensive rates.
When I switch to heat pumps, my heat pump switch was forced on me because remember I said it was we had a bad rep. He pumps out a bad rep in this area, but he pumps were forced on me because of ultra low NOx furnaces. I hate them, they're junk. I wouldn't put one of those in my house. Okay. And I was trying to sell customers on another way to another the other path was a heat pump.
We had to switch into heat pumps. Heat pumps. Or at the time, this was in 2019 when we were forced to do it. It was cheaper to do a heat pump that to run a heat pump than it is to run a gas furnace. It's just simple math. We can make because of this efficiency of a heat pump, the scope, we're able to get more BTUs for a kilowatt hour rate than we can with the terms that actually comes out, where it's much more efficient and it costs less to run.
That has flipped in PGD territory, PGD territory. It's actually more expensive to run a heat pump than it is a gas furnace. The variable on that is that the customer has solar. It's a no brainer to do the heat pump. It's going to cost them less if they have gas furnaces. If they want to go gas furnace, you can still do dual fuel in which we can.
The incentives in California is also geared toward electrification. They want you to do heat pumps. They don't give you any incentive. It's as dual fuel. Usually you can still get the federal tax credit to 25 C for doing that, but that you can't get some of the utility stuff money or some of the money through tech program Texas Technology and equipment for clean heating, which is again, it's I think some of that also comes from cap and trade money.
And that's they just ran out of money last week or two weeks ago. They ran out of money. It'll go for about six months and then they run out of money. They won't get it for another 6 or 8 months and then they'll run out of money. And but it's we're pretty good incentives, 1500 bucks for a system. And they were given up to 3000 for a water heater if you're gonna heat pump water heater.
So with the flip where the operational cost of the heat pump, it's now more expensive than the gas furnace, what is your strategy there? Because obviously there's other benefits to heat pumps beyond the operational cost, ultra low NOx. I don't want to put an option in the box in your house, and I have to put an ultra low NOx, so I'm still pushing toward the heat pumps.
We just the guy that we just did was he wanted to go dual fuel. But guess what? I've locked out his his gas furnace down to 27 degrees, because that's what his bounce point is in the house. So there's no reason to run it until it gets there. I've refined that now to where it was just basically it was now I do be cop break even cop that's in manual S at the HVAC NCI summit.
I went ahead and I did a presentation and I did a spreadsheet at the presentation. Do you want me to bring it up for you guys? Let me share it. Sure. If you got it handy. Yeah yeah yeah. So let me bring it up. Let's see. This is B cop. This is the b cop that I had right here. So on it, I built it so that it depended on the state.
And don't send this to you guys so you can have it. You can update it if you want. But so let's just say what say, do you live in Maine? Eric. Oh, man. Yeah, yeah. So let's go to Maine. So if we look up Maine in Maine this is based on averages. So for the state. So I didn't have one for me, darn it. So there must have been some missing information.
Let me go back to Massachusetts. That's me. Yeah, we knew Massachusetts, though. Let's do Massachusetts. So here's Massachusetts. So if you have a 96% efficient furnace at the if the the break even cop if the the cop drops below 3.445 then you have you you should be switching to a gas furnace. Does that make sense?
Yep. In other words, if it was LP, the b cop can be as long as it's above 2.22. It's cheaper to run a heat pump than it is to run LP. And if it's oil $2.50, you know b cop is 2.52. So the break even cop now it depends on the furnace. Let's see if we change this to like an 86% or 82% furnace. The b cop drops. Yeah. So this makes complete sense.
And it's why Massachusetts just rolled out a heat pump electricity rate, which I am. Like literally it's on my to do list to do before Thanksgiving because I run complete heat pumps. Electricity is very expensive in Massachusetts, and that is going to save me a lot in January and February. And why they had to do this, because the break, even the backup was not very good for Massachusetts, even though they're pushing heat pumps substantially.
Yeah. So here, let me show you. I'm an MIT territory. So let me go up here because this is this upper part. So you can modify this for your local area and your local utilities if you have more than one utility. We have several in our area. We have MIT, which is Modesto Irrigation District. So in my area right now and then this is winter time rates too.
So this is what they drop the rate in the winter. They drop it down in the winter. It's like $0.21 in the summer and it's $0.18 in the wintertime. And the break even Cop as long as my unit stays above 2.30, I'm running a heat pump. And that's on a 96% official. If I made it 98%, which I can go up to, I just have to have a copy of above 2.35.
It's cheaper to run the heat pump than is the furnace. Switch that to. Let's switch that to PG and E.
00:50:48.460 — 00:50:54.660
And now I have to have a six copy. And you tell me which heat pump hits six copy.
00:50:56.540 — 00:57:06.590
It doesn't do it. That's really tough now. The difference here is this is also based on your thermo. So you can go in and you can. This is the average. You can go in and change this for your area. You can also go down I think do I have it down here. Lower. You can change what the the natural gas rate is that you're paying for 1000 cubic feet because it's going to change that.
You change one week, you're paying $2 a therm, and two months later you're paying $3 a therm. So that varies. That's one reason why he pumps makes more sense, because your electric rates kind of stay nice and steady. They don't jump up and down. Gas rates go up and down all the time. They can spike 3 or $4 a therm and drop way down low.
Now, why is a natural gas is kind of expensive in California? Because we actually pipe it in, even though there are natural gas wells all over the state. Why do they pipe it in? Because the state's got so many regulations, they're shutting them down right and left. And so just, you know, there's natural gas fields all over California, but they don't let them sink new wells and they won't let them take advantage of it.
So that's why our natural gas is kind of expensive. It'd be it might be cheaper in different areas. So but you can change it. You can modify this spreadsheet and I'll stop sharing unless you got a question about it. Do you want to see another state or. I love this tool. Mitch, this is so helpful. And it's great for folks if you know they can hopefully get a chance to play around with it because it's just an awesome learning tool.
That's yeah, like you shown, it can be tailored to a specific area. And it's particularly interesting, like Matt or Matt that Ed brought up around, you know, there are a lot of states Massachusetts, Maine has had a heat pump rate for a long time. Various parts of New York have a heat pump rate. There are a lot of states that are doing this in negotiations with the utilities, because it makes sense for the utilities.
They're getting more low growth. And then it's actually, you know, it's a very powerful incentive for heat pumps. And, you know, in my state of Maine in particular, you know, we have relatively low in like cash rebate incentives for heat pumps. It's a few thousand dollars relative to Massachusetts. It's over.
You know, it's $10,000 for a whole home retrofit. But in Maine, we have a heat pump rate where it's $0.21 a kilowatt hour for a standard residential electricity rate. But in the wintertime, on the heat pump rate, it drops down to around $0.11. So it's a fantastic incentive for growing number of parts of the country.
And yeah, it's a really interesting thing to look at. And then also to remind folks like you are that model is fantastic. You can see exactly where that backup is for a given scenario. But also it's important you can look and see how many hours a year are you actually below that backup. And so if you have a scenario where you know what it might be like 20 hours a year, 40 hours a year, even 100 hours a year, you're not really going to care.
And it just so wouldn't make sense to bother with a dual fuel system, right? This flips back the reason why I do load clocks, because when I do load calc, I look at the bin data too. So we do houses in the mountains or in the foothills. And so a house here in the valley, typically my cooling load is the same as my heating load.
So I can put a three ton unit in and a three ton heat pump. Well, that will handle the heat load fine and with the variable speed. And if they run it correctly, it's going to be fantastic for the customer going to have low bills, very comfortable home and everybody's happy. When I go into the mountains though, there's a couple of factors.
This is, first of all, the heat load is typically going to be double like we just did one up in Twain Harte, which is around 5000ft, and they get snow. They'll have snow for, you know, three months up there in the wintertime, two months. And so they're needing 60, 70 000 heat for this. The same house I did in the Valley have 30,000 heat, 35,000 heat.
What they wind up doing is we end up going usually dual fuel. Two reasons with the dual fuel, when I can go with a gas furnace or LP up there, what we'll do is they're able to when the power goes out and it does go out up there all the time, they can run the gas furnace off a standard 120 volt generator. And they so they have heat all, you know, they also have usually most of those homes have backup heat like wood heat as a backup and some other things because the power goes out all the time.
Other parts of the country have that same issue. They'll have power, go out for several days, and heat pumps usually can't run off a generator unless it's sized correctly. And it does have to be variable speed if you're going to do that, or you have to put a soft starter kit on it for it to work properly. So I don't.
But 95% of the stuff we do here in the valley is straight. Heat pump I don't do dual fuel unless the customer is just like an uncomfortable. And I said, yeah, we can do dual fuel wheel, I lock it out. You're not going to be using it 90% of the time, maybe one day out of the year because I look at my bend data. And if you look at your Ben data, like if I take a house and say the house here in California, I might have four hours during the whole five hours during the whole year, that it's below the actual balance point of the house in my bin data, which I don't know if you guys know what Ben Data is.
I know you're shaking your head, Eric. You know what it is. Do you know what it is? I know what it is because Eric says it to me about seven times a week. So. Yeah. Okay, so you look at your Ben data, but but if you're in an area like, say Ohio, you're Ben. You may need you may have eight, 900, 1200 hours that you're going to be below your balance point.
And so then you have to wait. Do I need to do heat strips or does that work out. Sometimes that's what you need to do. Heat strips actually might be the best option. Or do I go do a fuel with a customer and to make them comfortable? Because we what we don't want to do is give heat pumps a bad rep by putting it in and not sizing it correctly and install it correctly.
Because if you want to continue electrification in the nation, there's several things. After we have to do it right, we have to size it correctly. We've got to make sure our ductwork correct, and we got to make sure the house is correct. If that house is not going to if the house is crap, you can put the best system in the world and it's going to be crap when it's done.
It's going to. That system is not going to work like it is. That's not a silver bullet just changing over to electrification. You have to fix other things in the home. It's like
00:57:07.950 — 00:57:09.909
that is an extraordinarily
00:57:10.910 — 00:57:29.920
good place to end. I think. Mitch like that kind of sums up so much of the themes we talk about in this pod. So our final question is always advice. So if there's a contractor listening who's interested in moving towards performance based work with heat pumps and homes, where should they start? What would you point them towards?
Load calculations.
00:57:31.280 — 00:58:55.299
That was my biggest thing when NCI wasn't doing that. When I joined them, they was on a big deal with them. They were all about the airflow, airflow, airflow and that is very important. And yet once you fix that, I've kindly convinced them. And now I guess they want to partner with you guys, which is great, but load calculations, because if you're not doing a load calculation, you're just guessing.
Their whole thing is, if you're not measuring, you're just guessing. Well, if I don't do a load caching, I'm just guessing. Rule of thumb work probably about 50% of the time and it will be fine. You'll size it correctly, but I do a load calculation because I'm the one that's got to live with it. After you, you have it.
I'm the one that's saddled with that system for the next ten years. You're going to be calling me when it's not working right. And I want to be able to sleep at night. I want to be able to, you know, I don't want that text at four, 6:00, and I don't hide my phone number, my phone numbers. I give it to the customer.
And so when I get a text at 630, yes, if he would have had a problem, I would have had a tech out there. I would have gone out there myself. So being doing load stats would be the main thing. The next thing is, the next step in performance contracting is start measuring things. Simple as static pressures. Take a static on every system you're doing.
If it's over an inch of static, you have a problem. Now that's based on the system. I want to show you one real quick. I'll just bring it up. And because I just did it yesterday and this was
00:58:56.580 — 00:58:57.379
what
00:58:58.420 — 00:59:03.020
that was that guy system right there. That was what the full grid.
00:59:04.980 — 01:00:29.370
So I don't know. Can you see is it reversed. We're seeing. Yeah. No we can see we're in the we're in the red in total external static pressure. And we're terrible red in the airflow. Airflow. Yeah, yeah. The five con unit, he had over one inch of static and he's got a thousand something cfm for his airflow out thousandths.
Unless you have another thing that folks can you see that doesn't look good. Can't quite see the air. Can't quite see the airflow. I can see the dials. Or we're in the bad zone everywhere. So it was 1049 CFM. So. But this guy, I showed him this while I was on the job because I was out there yesterday afternoon doing his stuff, and he didn't.
It just kind of went over his head. Okay. But I still got to do the load calc on his house and I know it's he's that's all he's getting. He's getting two, two and a half tons of cooling out of the unit. And it just drives me nuts that the other company that did it and I'll say their name, their integrity, heating and air.
There you go. You put in the wrong size unit guy. So you know you change that unit out. This is this is stupid. These people do some of the dumbest things. And again, I think he oversize it. He put a five ton in it, probably had a four ton beforehand. And that was probably oversize to begin with. So I don't know.
I still got to do the load count and I'll find out what it is. He had a lot of infiltration. The infiltration was his CFM 50 was 6000.
01:00:31.250 — 01:02:43.680
Well that's serious. Well, yeah. That size of house. Yeah. You're right. Yeah. So yeah, when I, when I see that kind of stuff. What was this? Yeah. It was. Oh no, it was 49, 29. I'm sorry. 4920 still pretty bad. 4929. So yeah. Yeah. So I cfm 50 that's it's not good. That's still bad. He's still going to have, you know, 12, 8 to 12 hour air changes per hour when I get the get it all put in.
So now does amply. Do you got an infiltration number you can plug in there right. Oh yeah. Absolutely. Yep. You can put a 50 CFM 50. You just stick it in. Yeah because I do. Yeah. Yeah that's great. I also do a tool class for PGE. PGE has a tool lending library here in California. So you can borrow blower door duct blasters, flow hoods, true flow grid smart probes, all kinds of recording devices for recording systems.
The voltages, temperatures and stuff in the house. You can borrow all that for free for two weeks from them, and sometimes longer if you want. And they have floor cameras you can borrow from them. They have they have a bunch of tools that are free to use. Doesn't cost. They'll even loan you an induction stove if you want to try one.
So, you know, countertop induction stove. So they have a tool lending library. So does Southern California Edison has a tool lending library. So contractors and their you know, techs can borrow those tools and use them. I tell people the first house you should ever do is test your own home. Just take these tools, go test your own home.
Because I teach a tool class for PGE several times a year, and we bring in techs and contractors and show them how to use these tools. The blower door. In fact, you can't borrow the blower door unless you take my class or you're in get or be trained. So because it's a hazard, because we don't want to, you know, burn a house down because of the fireplace, because we got to go through all the safety stuff when we're doing that.
Right. So that is a that is a great, tangible tactical wreck for folks who are in your area. But also this sort of thing exists in other states too. So, Mitch, thank you so much for spending the time with us and joining us on the Heat Pump podcast. Okay. Well, I hope you got something out of it. So. Oh, yeah, it was super fun.
It was great, Mitch. Yeah, yeah, that'd be great.
01:02:46.720 — 01:03:09.080
Thanks for listening to the Heat Pump podcast. It is a production of Amply Energy and just a reminder that the opinions voice 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.