My shortest book yet (85 pages), it will teach you the right way to price jobs so you make a profit. More importantly, it will teach you what kinds of jobs to go after (and show you how to do so with a sharp competitive edge) and what kinds of jobs to avoid (sending them to your hapless competitor instead).  Designed for a contractor in ANY trade (HVAC, plumbing, electrical, cabinet making, landscaping, pool installation and maintenance, and so on), the principles taught in this book are fundamental to all contracting businesses and cut across specialty trades with equal power.

If you follow the advice of this book consistently, you could easily do 50% more sales with the same employees and overhead. This means that virtually all the gross margin on that extra work would go directly to your bottom line! Could you use THAT this year?

One drawback: your tax bill will probably go up, because you’ll experience bracket creep. But what a problem to have!

You will learn three powerful job pricing methods:  SID, COWL and DORM. You will learn that SID is the most common method (and most dangerous to a contractor’s financial health!), while COWL and DORM can help you land more material-rich low-labor jobs than contractors using SID (or SWAG for that matter).  [If you don’t know what SWAG stands for, you are not a contractor.) And the amazing thing about all of these methods is that they are based on a document you should already be getting– the income statement– and do not require the use of special nomographs, curves or mumbled incantations under a full moon.

Here is what others have said about this book:

The financial practices that Richard teaches can help any contractor improve the bottom line.  We use many of his tools in seminars with our customers, and it is pleasurable to watch the astonishment on their faces.  Put into practice the information he gives you, and watch your profits increase rapidly.

Eric Griffin
Sales Director
Mitsubishi Electric Cooling and Heating

Pricing For Profit, penned from the fertile knowledge of Richard Harshaw, is an absolute must read for every HVACR contractor.  The beginners will learn how to earn a profit from day one.  We old timers will re-learn what we have become negligent in applying.  By applying the principles of Richard’s vast knowledge and experience, success will be assured from day one. 

Aaron York, Sr.
York’s Quality Air
Indianapolis, IN

Dick has done it again. He puts mathematics into an easily readable style that will make every contractor profitable if they follow his teachings. If you can implement just one item from this book, the price is well worth it. Put this on your book shelf, right next to The E-Myth.

David S Taylor
Sales Manager
National Excelsior Company

Pricing for profit steps directly into that secret world of: do you really make the kind of profits you would like in your business?  This is a scary subject for most small business owners.  Harshaw outlines simplistic ways to assure you will know whether you are or are not making your profitability goals.   In this business climate knowing your bottom line is critical for success.  Pricing for Profit guides the reader to those sometimes shocking, always import answers.   

Mark Gaylor
Gaylor Business Services
The ACT Group Inc.

Richard Harshaw has given us another helpful and informative book.  Pricing for Profit is written in an easy to understand format to help you know how to price any job, at any time and make a profit!  Using the methods that Richard effectively explains will definitely make you wealthy & wise!
Thanks for a great book, Richard!

Natalie DeRousse
Senior Sales Training Manager
Johnson Controls, Unitary Products

Wow!  Dick taught me Pricing For Profit in a seminar over 25 years ago and he has now put it in an easy-to-follow recipe that will make anyone a master chef!

It is as true now as it was then and it really, really works. You gotta try it!

Tom Gabrilson
President, Gabrilson Indoor Climate Solutions
Davenport, IA

In my early years as a contractor manager, I learned from my mentors and accounting textbooks how to utilize and apply some of the techniques Dick has applied in Pricing for Profit. However, my competition evidently did not understand the principles of good accounting. Asking several friendly competitors how they priced their jobs surprised me. Their focus was on being the lower price and not selling the value of their company. Dick describes these flaws and explains why one should consider focusing on one’s business health and not his competitions’ pricing. This book is a must read for every business owner or manager regardless of their skill at accounting practices and sales practices.

Rhamy Morrison
Consolidated Services
Tyler, TX

You can download the book from Amazon for Kindle ($9.95), or you can order an autographed copy from me by clicking this link.

DISTRIBUTORS: This book would make an excellent gift to contractors at your annual dealer meetings. Contact Lodestar (using the “Contact Us” link on this page)  to request pricing details on bulk quantities.

Warning: A tax advisor does NOT come with this book. But the money you make might make it worth your while to hire one!

Whether you file as an individual, a corporation, a small business owner, or are self-employed, as the end of the year draws near, you’re probably thinking ahead to tax season and filing your taxes.

Most tax provisions of course, remain the same (IRA contribution limits for example), but a few such as personal exemptions have been adjusted for inflation and others have been extended due to legislation and are set to expire at the end of 2012.

From tax credits, exemptions and deductions for individuals and Section 179 expensing for small businesses, here’s what you need to know about tax changes for 2011.

Individuals

From personal deductions to tax credits and educational expenses, many of the tax changes relating to individuals remain in effect through 2012 and are the result of tax provisions that were either modified or extended by the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 that became law on December 17, 2010.

Personal Exemptions
The personal and dependent exemption for tax year 2011 is $3,700, up $50 from 2010.

Standard Deductions
In 2011 the standard deduction for married couples filing a joint return is $11,600, up $200 from 2010 and for singles and married individuals filing separately it’s $5,800, up $100. For heads of household the deduction is $8,500, also up $100 from 2010.

The additional standard deduction for blind people and senior citizens is $1,150 for married individuals, up $50, and $1,450 for singles and heads of household, also up $50.

Income Tax Rates
Due to inflation, tax-bracket thresholds will increase for every filing status. For example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $69,000 for a married couple filing a joint return, up from $68,000 in 2010.

Estate and Gift Taxes
The recent overhaul of estate and gift taxes means that there is an exemption of $5 million per individual for estate, gift and generation-skipping taxes, with a top rate of 35%. For married couples the exemption is $10 million.

Alternative Minimum Tax (AMT)
AMT exemption amounts for 2011 are slightly higher than those in 2010 at $48,450 for single and head of household fliers, $74,450 for married people filing jointly and for qualifying widows or widowers, and $37,225 for married people filing separately.

Marriage Penalty Relief
For 2011, the basic standard deduction for a married couple filing jointly is $11,600, up $200 from 2010.

Pease and PEP (Personal Exemption Phaseout)
Pease (limitations on itemized deductions) and PEP (personal exemption phase-out) limitations do not apply for 2011, but these are set to expire at the end of 2012.

Flexible Spending Accounts (FSA)
The Affordable Care Act, enacted in March, established a new uniform standard, effective January 1, 2011, that applies to FSAs and health reimbursement arrangements (HRAs).

Under the new standard, the cost of an over-the-counter medicine or drug cannot be reimbursed from the account unless a prescription is obtained. The change does not affect insulin, even if purchased without a prescription, or other health care expenses such as medical devices, eye glasses, contact lenses, co-pays and deductibles.

The new standard applies only to purchases made on or after Jan. 1, 2011, so claims for medicines or drugs purchased without a prescription in 2010 can still be reimbursed in 2011, if allowed by the employer’s plan.

A similar rule went into effect on Jan. 1, 2011 for Health Savings Accounts (HSAs), and Archer Medical Savings Accounts (Archer MSAs).

Long Term Capital Gains
In 2011, long-term gains for assets held at least one year are taxed at a flat rate of 15% for taxpayers above the 25% tax bracket. For taxpayers in lower tax brackets, the long-term capital gains rate is 0%.

Individuals – Tax Credits
Adoption Credit
A refundable credit of up to $13,360 for 2011 is available for qualified adoption expenses for each eligible child.

Child and Dependent Care Credit
If you pay someone to take care of your dependent (defined as being under the age of 13 at the end of the tax year or incapable of self-care) in order to work or look for work, you may qualify for a credit of up to $1,050 or 35 percent of $3,000 of eligible expenses.

For two or more qualifying dependents, you can claim up to 35 percent of $6,000 (or $2,100) of eligible expenses. For higher income earners the credit percentage is reduced, but not below 20 percent, regardless of the amount of adjusted gross income.

Child Tax Credit
The $1,000 child tax credit has been extended through 2012. A portion of the credit may be refundable, which means that you can claim the amount you are owed, even if you have no tax liability for the year. The credit is phased out for those with higher incomes.

Energy Tax Credits for Homeowners
Energy tax credits for homeowners expire at the end of 2011 and are not as generous as in previous years. In addition, a taxpayer who has claimed an amount of $500 in any previous year is not eligible for this tax credit.

Homeowners can claim an Energy Star window tax credit of up to $200 maximum as well as a water heater tax credit, which includes electric, natural gas, propane, or oil, up to a maximum of $300. The same maximum ($300) applies to air conditioners, but insulation, doors, and roof credits are capped at $500. The furnace tax credit (includes natural gas, propane, oil, or hot water) and is capped at $150 maximum and efficiency must be at 95%.

Earned Income Tax Credit (EITC)
The maximum EITC for low and moderate income workers and working families is $5,751, up from $5,666 in 2010. The maximum income limit for the EITC has increased to $49,078, up from $48,362 in 2010. The credit varies by family size, filing status and other factors, with the maximum credit going to joint filers with three or more qualifying children.

Individuals – Education Expenses

Coverdell Education Savings Account
For two more years, you can contribute up to $2,000 a year to Coverdell savings accounts. These accounts can be used to offset the cost of elementary and secondary education, as well as post-secondary education.

American Opportunity Tax Credit (Higher Education)
The expansion of the Hope Scholarship Credit by the American Opportunity Tax Credit has been extended through 2012. For 2011, the maximum Hope Scholarship Credit that can be used to offset certain higher education expenses is $2,500, although it is phased out beginning at $160,000 adjusted gross income for joint filers and $80,000 for other filers.

Employer Provided Educational Assistance
Through 2012, you, as an employee, can exclude up to $5,250 of qualifying post-secondary and graduate education expenses that are reimbursed by your employer.

Lifetime Learning Credit
A credit of up to $2,000 is available for an unlimited number of years for certain costs of post-secondary or graduate courses or courses to acquire or improve your job skills. For 2011, the credit is fully phased out at $122,000 adjusted gross income for joint filers and $61,000 for others.

Student Loan Interest
For 2011 and 2012, the $2,500 maximum student loan interest deduction for interest paid on student loans is not limited to interest paid during the first 60 months of repayment. The deduction begins to phase out for higher-income taxpayers.

Tuition and Related Expenses Deduction
For 2010 and 2011, there is an above-the-line deduction of up to $4,000 for qualified tuition expenses. This means that qualified tuition payments can directly reduce the amount of taxable income, and you don’t have to itemize to claim this deduction. However, this option can’t be used with other education tax breaks, such as the American Opportunity Tax Credit, and the amount available is phased out for higher-income taxpayers.

Individuals – Retirement

Roth IRA Conversions
There is no longer an income limit for taxpayers who want to convert regular IRAs into Roth IRAs. The difference is that taxpayers who convert to Roth IRAs in tax year 2011 must pay taxes on the conversion income now instead of deferring it in later years as was the case in 2010.

Businesses

Standard Mileage Rates
The standard mileage rate increases to 51 cents per business mile driven (19 cents per mile driven for medical or moving purposes and 14 cents per mile driven in service of charitable organizations) for the first half of 2011. From July 1, 2011 to December 31, 2011 however, the rate increases to 55.5 cents per business mile. This increase is a special adjustment by the IRS and reflects higher gasoline prices.

Health Care Tax Credit for Small Businesses
Small business employers who pay at least half the premiums for single health insurance coverage for their employees may be eligible for the Small Business Health Care Tax Credit as long as they employ fewer than the equivalent of 25 full-time workers and average annual wages do not exceed $50,000. The credit can be claimed in tax years 2010 through 2013 and for any two years after that. The maximum credit that can be claimed is an amount equal to 35% of premiums paid by eligible small businesses.

Section 179 Expensing
In 2011 (as well as 2010), the maximum Section 179 expense deduction for equipment purchases is $500,000 ($535,000 for qualified enterprise zone property) of the first $2 million of certain business property placed in service during the year. The bonus depreciation increases to 100% for qualified property. If the cost of all section 179 property placed in service by the taxpayer during the tax year exceeds $2 million, the $500,000 amount is reduced, but not below zero.

Please contact your accountant if you need help understanding which deductions and tax credits you are entitled to. I am sure they would be delighted to assist you.

For more information, contact my accountant, Professional Accounting Services, at www.paskc.com .

I subscribe to a service performed by The Risk Management Association (formerly the Robert Morris and Associates organization). Every year, this group publishes financial data on hundreds of business types in the United States, including in particular the HVAC sector. So I pay a few hundred dollars every year to get 2 pages of data, but it is well worth it. In this blog, I want to report some of the new data I received and the trends it shows.

So let’s peel the HVAC onion. Here’s a snapshot of the data I got. This data is current as of April 30, 2011 and is being compared to the data over the last five years.

• Cash is up 31%. Surprising, but the next few facts explain why this is so.
• Accounts receivable as a percentage of sales is flat compared to prior years.
• Inventories are down 35%! (Having been turned to cash, thus feeding fact #1.)
• Net fixed assets are down 27%. (We are letting things wear out and not replacing them for now.)
• Notes payable are down a whopping 31%! (We are getting rid of debt as fast as possible, getting light on our feet so we can be nimble if another downturn comes along.)
• Current portion of long-term debt is down 22%. (See previous fact.)
• Long-term debt is down 35%! (See previous fact.)
• Total liabilities are down to 24%. (Ditto.)
• Equity up 12%. (Consequence of less liability in the face of nearly constant assets.)

• Gross margin is down 20%! (Prices are taking a nose dive.)
• Overhead is down 24%. (We have cut out a lot of fat!)
• Operating profit is up 7%. (But at a high price to the health of our businesses.)

• Current ratio is flat. (That’s good news, actually. Although we have not grown more solvent, we have not gotten worse either, and this in a terrible economy.)
• Quick ratio is down a little. (Cause for concern, but not alarm.)
• Sales to receivables is down 7%. (With A/R being down to begin with, this suggests that those jobs that ARE being financed are bigger than the past.)
• Inventory turns are up 140%!! (We are using our suppliers as our barns.)
• Working capital is flat but still under 10%. (Always a concern; when WC is under 15% of sales, cash flow problems arise.)
• Owner compensation as a percentage of sales is down a whopping 37%. (This makes me want to cry; for all the hard work contractors do, to take such a huge cut to survive is repulsive. But I understand their thinking: it’s that or go out of business.)

There is much to be mined from this data.

1. Dealers have converted inventory into cash.
2. Assets are not being replaced as they age.
3. Dealers are reining in debt.
4. Pricing is taking a nosedive.  (But we already knew that!)
5. Dealers are squeezing their overhead for every ounce of fat.
6. As a result, the lower profits are actually higher in percentages.
7. Dealers are using their suppliers to manage daily inventories.
8. Owners are taking huge pay cuts to keep the business financially healthy.  In the long run, this will be a disaster. At some point, you have to ask  yourself if the lower pay is worth all the crap. Atlas may yet shrug!

The good news is that the recession has knocked a lot of the fluff out of our trade, both in terms of flea bag contractors and in waste in the surviving legitimate shops. The bad news is that this economic nightmare is not over and the signs over the horizon don’t look encouraging.

So if you are a contractor reading this blog, congratulate yourself. You are a survivor! But not get complacent. Stay vigilant. The second shoe has not dropped yet.

Stewart Docter August 10, 2011 Stewart Docter, 85, of DeWitt (New York), died Wednesday, August 10, 2011 at Crouse Hospital after a short illness. He was a life resident of Syracuse. Stewart was a graduate of Syracuse University, where he received his bachelor’s, master’s and doctorate degrees. He was employed by General Electric as a technical writer in the heavy military department. He later served as manager of the Dealer Development Department of Carrier Air Conditioning. Upon retirement, Stewart formed Management Options Group. He was member of Temple Adath Yeshurun and DeWitt Rotary. Predeceased by his wife, Marian Jacobs Docter, in 1999. Survived by his son, David (Jan); daughter, Karen Docter Johnson (George); sister, Betty Ruth Raines; and five grandchildren. Funeral services will be held at Birnbaum Funeral Chapel, 1909 East Fayette Street, at 1:30 p.m. Friends may call from 12:30 to 1:30 p.m. Friday at the funeral chapel. Burial will be at Woodlawn Cemetery. Contributions may be made to Temple Adath Yeshurun. Birnbaum Funeral Service, Inc.

Stew was my personal mentor for a few years in the 1980′s, teaching me much of what I continue to pass on to my clients.  (Some might say that I have done  Stew a disservice.  If that is the perception, I apologize to Stew.) Stew had the ability to take difficult and complex financial principals and make them understandable to contractors.  Stew did his work in the days before the personal computer and as a result his business management workshops took quite a bit of time and a lot of labor on the part of the participants (who had to bring calculators to the workshop). When Stew stepped down from the lecture circuit, I picked up his mantle and transferred his tools and techniques to spreadsheets. This made it possible to teach the wonderful principles that Stew expounded in shorter time, allowing the participants to explore multiple scenarios.

Farewell, Stew.  You will always have a secure place in my heart and I thank you for all you poured into me.

I am talking about my powerful Excel-based business tool, The Financial Management Control Center (or FMCC), a suite of workbooks that cooperate to help you understand your business from a financial vantage point like never before.

Those of you who are Carrier dealers (or know any that I may have taught in the 1990’s) may remember the old “Financial Management” software program I developed and taught for Carrier in the 1990’s. I have letters in my file cabinet from “graduates” of those courses that testify how the software changed their businesses for the better. (One letter even said that the banker was so impressed that the bank agreed to up the dealer’s line of credit and lower his interest rate!)

FMCC is light years beyond where the old Financial Management program could ever go.

With FMCC, you enter data from you latest year-end financial statements into a file called the VAULT. You then activate the VAULT for use to analyze your business.

Three main program groups tap into the VAULT when they run. These groups are:

1. Where We Have Been
2. Where We Are
3. Where We Are Going

In turn, each group drills down into the details using 40 different spreadsheets to explore such things as your financial statements and a detailed ratios analysis (with advice and commentary) to setting a solid labor rate (both installation and service) to service agreement pricing (residential and light commercial) to forecasting and growth planning.

For a full treatment of this powerful new suite of programs and how to obtain a copy for yourself, click this link.  I promise you that you will be amazed and excited by what FMCC can do for you!

The first twenty to order the program can get a discount of 10% off the published price. To get the discount code (needed when you fill out the order form), contact Lodestar (use the “Contact Us” link on this page).

And HVAC distributors– contact Lodestar about quantity discounts for acquiring the program for your Territory Managers!

Caricature by Jerry Dowling

The news has been abuzz this week with snippets of our Community-Organizer-In-Chief (COIC) bloviating about those “wascalwy Wepubwicans” endangering the country’s safety by insisting on no tax increases as an agreement (whatever that means in Washington any more) is reached on our debt ceiling before the August 2 bewitching hour. He went on for almost 45 minutes about fat cats with corporate jets and oil company tax subsidies and that the wascalwy Wepubwicans will have to give some ground on these “vital” loopholes to bring resolution to our national crisis. And if they don’t, they’ll ruin the lives of countless children and threaten the lives of good seniors everywhere.

Let me see… General Electric posted BILLIONS in profit last year and paid $0.00 in Federal income taxes. And guess who has a corporate jet?

This class-warfare-mongering COIC thinks wise Americans will side with him and demand an end to all “corporate welfare”. Even Ben Stein, a fiscally conservative Republican, agrees with him.  Ben said that he was all in favor of soaking the rich, because that would generate some $900 billion in additional revenues. This in the face of a $3 Trillion PLUS Obama budget? And national debt of over $14 trillion (click here). Is Ben serious?

We don’t have a tax problem. We have a spending problem. And I for one am for relieving ALL of the current residents of the Capitol Building of their duties in 2012 (including the occupant of the White House).

What most Americans don’t understand is that NO CORPORATION PAYS INCOME TAXES! Suppose the Congress caves and takes away the deduction for corporate jets (not including, of course, Air Force One). Gee, do you think GE (or an insurance company or Shell Oil) will eat that hit on the bottom line?

OF COURSE NOT. They’ll factor that into the price of the product and pass it on to their customers. Likewise if Congress takes away tax loopholes for oil exploration, or oil leases, or securities transactions, and so on.

So by blaming those wascalway Wepubwicans and those mean big businesses, the COIC convinces the American people that we can heal our economy with minimal tax increases (with everyone going “Hoo ray!”).

Then they’ll wake up next week and wonder why gasoline went up 50 cents a gallon, or why their insurance deductible just rose by $1,000 or why their bread costs a quarter more per loaf.

Remember, people. Corporations don’t pay taxes. The consumer ALWAYS pays ALL taxes.

Period. Do you understand?

I should have a prototype by next Thursday. After that, we are off to the races!

The manuscript is 111 pages long and the book will be released in an e-book format (readable on Kindles, Nooks, iPads, and the like– even my Android Phone has a Kindle app I can use to read it on my phone!).

For those wanting a hard copy, it will be available in a printed version, but I will be putting most of my promotional efforts into the ebook format.

Stay tuned!  Should be an awesome summer!

In the second blog, I wrote about the horsepower we expend in America to push air through 1.5 billion feet of ductwork, to say nothing of duct losses, air leaks, balancing problems and zoning.

In this posting, I will describe what I think is the emerging successful new curve.

First, did you notice that in the 2011 AHR Expo in Las Vegas this year that ten companies were cited for innovation—and not one of them was an American unitary product manufacturer? (They included  two building automation products, a desiccant air cooling device, air purification systems, commercial hot water systems, a new compressor control technology, a refrigerant analyzer, and three—three­—manufacturers of ductless split systems.)

Let’s focus in this article on that ductless split concept. It’s time has come!

I say that for several reasons. First, did you know that in 1999, only 1 system out of every 112 sold in the United States was a ductless split? But only ten years later, in 2009, that ratio had swelled to 1 in 23! That is 438% growth in only ten years. Meanwhile, unitary shipments actually dropped.

Did you know that throughout the world, ductless splits dominate HVAC systems, except in the United States. In Europe, fully 81% of the market is treated with ductless splits. In China, that number is 86%, and in Japan it is 90%. But in the United States, it is a paltry 3%. Due, in part, to how we evolved our ducted split systems, but also due to a product bias that we can no longer afford.

Don’t get me wrong. I have been in this trade 35 years, and been a strong advocate of unitary products for 34 of those years. But things have changed and we either adapt or we suffer the consequences.

Consider, for instance, the technology inherent in almost all of the off-shore ductless split systems—inverter drives for the compressors. These solid state devices, just now becoming mainstreamed in American products, give their systems a tremendous advantage in the SEER world. Plus, they don’t  have an inrush current problem like impedance motors do. (As an example, a typical 2-ton unitary condenser has LRA of around 40 amps, while a typical 2-ton inverter driven unit has LRA of 16 or so and because of the inverter controls, the inrush current is actually much lower. This means that an inverter powered ductless split can work quite well with a solar power panel system, letting a contractor who installs ductless splits take full advantage of the green movement, especially in sunshine-blessed states.

Ductless splits don’t have any of the drawbacks ducted systems do as it touches on duct heat gain or loss, air leakage, or balancing air flow.

Ductless splits allow a contractor to perfectly zone a job with a minimum of time and effort. If a room needs only 9,000 btuh to keep it comfortable, a contractor can install a 9,000 btuh indoor “head” and be done with that room.

This is critical for today’s market. The housing market is in the tank and shows no signs of a quick recovery. As a result, people are staying put (at least those who can still make their payments). Since they can’t move, they have to think of remodeling and upgrades. A growing number of people in America are empty nesters—kids on their own, large house (for when the kids were home), and just the two of them. Why replace a 5-ton unitary split system and heat and cool that entire house off of one hall-mounted thermostat when they are going to be in (at most) only 2 rooms at a time? Ductless splits let a contractor fully zone a home so that the homeowners can heat and cool only those rooms they are using at the time. And nothing saves energy like a unit that is off!

Did you know that some of the ductless split manufacturers now offer you the ability to install as many as 8 indoor heads fed off of 1 outdoor unit? This is because of another innovation American manufacturers haven’t figured out yet—variable refrigerant flow (or VRF). We’ve had VRF on large commercial units for some time, but the technology, cost and complexity of installing these systems (usually using an electronic expansion valve) is not friendly to the residential market.

Did you know that ductless splits can be installed with the traditional visible wall-mounted heads—or with cassette units that mount flush with the ceiling, or even with ducted units that can be installed in the attic or crawl space and tap into existing registers and grilles? There are even floor mounted units now.

And most importantly—did you know that an experienced mechanic can install a ductless split with one indoor head in about 4 hours (slightly longer for more indoor heads)? How long does it take to install a typical unitary split system?

And did you know that contractors who have jumped on the ductless split bandwagon are now netting profits, even in this down market, of over 20% net?

What do you think? Maybe it’s time to investigate what ductless splits can do for you and your business? But timing is everything when getting onto a second curve. Don’t wait too long. You’ll be left holding the unitary bag.

The first book will go into editing and production in April. (It takes about 60-90 days for this process to be completed.) The working title (and this may change) is The Power of Throughput. This is a book for contractors and territory managers that explains how to improve daily procedures so that more work can be done with the same (or fewer) people. It will be over 100 pages long and contain 70+ sure-fire and simple (and best of all, inexpensive) things that can be done to get more done with the resources a contractor has. This book should be ready for release sometime around July1.

Throughput has to do with how fast a process can be completed (and completed well). It is a non-financial measurement, although it does utilize data from the Profit and Loss Statement. The book will contain about a dozen benchmarks for high-throughput companies and explain how to calculate each one. Then, if you find your numbers are not where you want them, you will be presented with a checklist of things you can do (most of them at no cost) to improve the procedures. As I point out in the book, better procedures mean better numbers on the P&L.

It will be released in two formats– an ebook format (which you can download to a Kindle or other ebook reader) and a CD-ROM format. If you order the ebook version, it will cost less, but not include an Excel workbook I created to accompany the book. The ebook will have a page in the front that tells you how to get the software from my website at half price. If you order the CD-ROM format, the software will be on the CD along with a PDF copy of the book.

The second book (which should go into editing and production in July, with a release around October 1) has a working title of You Priced That Job HOW??? It is a book version of the popular workshop I teach on how to price jobs. As I do this workshop (and now probably 5,000 contractors have been through it), I always give out a job to bid early in the workshop. Consistently, 95% of the group gets it wrong! That should scare the daylights out of you! The book will explain a simple method of job pricing– and a method that is wrong and fatally flawed. (Many contractors use this method and do not realize how much they are hurting their businesses!) I will then explain two simple methods to price jobs that result in you getting the high material jobs and losing the high labor ones. (And it is not complex or convoluted like many you may have seen.)

The pricing book will also be released in an ebook format with the option to buy the CD-ROM version. Again, the book has associated Excel workbooks that come on the CD but must be ordered from my website (for half price) if you order the ebook version.

Stay tuned! Should be an exciting year for all of us!

American homes are somewhat unique. As a general rule, our homes are larger than the world average, with more complex layouts and often eye-popping features. Such is the capability of the world’s wealthiest society with more time on its hands than ever before.

The dominant form of heating and cooling buildings in America is ducted forced-air systems. This came about as the natural evolution of American homes as the nation grew. The immigrants who came to this country (mostly from Europe) and those who were here to greet them learned how vast a country this was and part of that discovery was the building of homesteads on large tracts of land. Such a thing was not possible in Europe. Homes even today are generally far more spread out from each other than anywhere else in the world.

From colonial times onward, homes were built for utility. The ubiquitous log cabin so prevalent in frontier lore was the domicile of choice for most Americans as the nation expanded westward. Simple structures, often of only one room, they were heated with a single hearth and were cooled by natural ventilation. Eventually, we emerged from our frontier days and our homes became larger and more complex. But still we heated them with multiple hearths, eventually replacing the hearths with pot-belly stoves, then floor and wall furnaces, gravity furnaces (with “octopus” gravity powered ducts), and then, with the invention of air moving equipment, central furnaces. In the early 20^th century, mechanical refrigeration came into practical use and the trend to cool our homes naturally piggy-backed onto the central ducted heating systems we already had, leading to the now-dominant split system cooling equipment of today.

Currently in America, we have about 1.5 billion linear feet of ductwork. If we allow for fitting losses and equivalent length considerations, this is probably closer to 2 billion equivalent feet (or even a little more). How much horsepower does it take to blow air through that much ductwork?

The horsepower to move air can be approximated by this rule: Horsepower = cfm x inches of w.c. pressure drop / 6350.

Let’s convert our 2 billion or so equivalent feet to five-ton systems as a reference point for the calculations. A five ton system moves about 2,000 cfm of air. A typical 5-ton duct system probably runs about 150 equivalent feet (counting both supply and return), so our 2 billion equivalent feet equates to roughly 13 million 5-ton systems. If we assume an average pressure drop of 0.30 inches water column, our formula shows that it probably takes about 13.6 million horsepower to move the air. One horsepower is approximately equal to 1 kilowatt of power, so to move the air in American ducts takes an average of 13.6 million kilowatts—some 13.6 megawatts!—of power. That’s the combined output of four Palo Verde Nuclear Generating Stations, the largest atomic power plant in the United States and one of the main sources for power in the Southwestern United States!

But it is actually worse than that.  We must allow for duct air leakage. Duct air losses can run as high as 40% of the system total, but that is the extreme. It is probably closer to 20% for a typical duct system, and since many duct systems are in the conditioned space, the losses go directly to the job of heating and cooling the structure. Still, we are looking at perhaps another 1.2 megawatts or so of power to offset the duct losses for jobs where the ducts are in untreated spaces.

The EPA estimates that fully 70% of America’s structures have the wrong airflow setting too!

Then there is the question of duct heat gain and heat loss. Uninsulated duct can gain as much as 8 degrees of temperature per 40 feet in a summer attic (and lose as much as 30 degrees per 40 feet in the winter). Again, not all ducts are in attics or crawl spaces, but a significant portion are. These losses add another 3 to 5 megawatts to our air moving picture, and that’s even allowing for the insulation of ductwork in attics and crawl spaces.

To say nothing of the degradation of system SEER by these losses! A system rated at 16 SEER achieves this by delivering so many BTUH at the coil, not the room. Deducting losses from a 16 SEER system may see delivered space SEER equivalents of 12 or less!

Finally, we have the fact that properly balancing airflow in a structure is a horrendously complex chore even given exact engineering designs, complicated by the fact that summer load stresses on a building often differ from winter loads as to how many BTUs are needed in which zones and what times of day.

Is there a better way?  Is there a second curve way?

I think so, and people in Europe and Asia have known about it for 50 years. I’ll talk about that in the next issue! Stay tuned. You are about to have your concepts of air conditioning stretched like never before.