We all knew this was coming. Monitoring the health of customer HVAC systems via the internet sounds cool, but does it add value to your HVAC business?

In the smart home, many systems are internet-enabled. This includes refrigerators, garage doors, security systems, vacuum cleaners, and even coffee mugs.

In the heating and air business, we’ve had connected thermostats for a while, but the next level is monitoring the performance of the entire HVAC system. That’s just what consumer technology company SmartAC has done with their newest system. Through an app, your home office can see when customer systems need maintenance and even predict failures before they happen. It’s like a check engine light for your HVAC system. The typical in-person planned maintenance visit is avoided, or at least its frequency is reduced. 

But aren’t fewer customer visits a bad thing? We get paid for those! In addition, we know that if your techs are trained properly, they should be talking to customers about additional products and services such as infrared filtering for indoor air quality. 

South Florida-based Terry Zarling, with True Cool AC has embraced the technology enthusiastically. He isn’t concerned about selling traditional PMA’s. Instead, he’s selling remote monitoring subscriptions. Consumers are already trained on subscription models. At just $30 per month, it’s an “easy sell,” he says.

Zarling likes the new tech because, among its other benefits, it’s ‘sticky.’ “I’m finding that we have less customer churn now. Calling customers proactively because we detect a fan out of spec is a great way to over-deliver and add value. My customers appreciate that we spot small problems before they become big ones. The fastest way to lose a customer is to have their system fail, and they’re left sitting in a 95-degree house. The customer is going to call our competitors if we can’t immediately respond.”

 

 “I’m focused on lifetime customer value, not monthly revenue per customer.” – Terry Zarling

 

Patrick Lange, the industry’s business broker offers his perspective. “One of the questions I have for HVAC company sellers is: ‘How many maintenance agreements do you have in place?’ Generally, more is better because It provides recurring income. It’s particularly important in the spring and fall seasons when temperatures are more moderate. Buyers are looking for companies that don’t have wild swings in revenues. They want to know where their next dollar is coming from. 

It’s the recurring income and the relationship with the customer is what adds value to an HVAC company when it’s time to sell. Technology will disrupt our business in the future, but keep your eye on stable, and predictable sales. It doesn’t matter if it comes from old-school PMAs or subscriptions. The result is the same. 

For Zarling, it’s been good for business. Even though he charges less for a subscription than he used to for a maintenance agreement, he makes it up by managing the business better. For example, if the SmartAC system tells him there is a minor problem, he can dispatch a junior tech instead of a more expensive senior technician. It’s working too because he grew 10% last year without adding any new staff. He sees it as a way to differentiate himself in a highly commoditized and competitive industry. 

For sure, technology will continue to change the HVAC industry. How you adapt and embrace it should be centered around customer value. Repeat customers will reward you with their loyalty. If a good portion of your future sales come from existing customers, that’s the kind of company that sells quickly and for the highest multiple.