A comprehensive guide for owners and operators of plumbing, heating, air conditioning and electrical service companies on 10 quick ways to inject profits without having to grow.
Warning: Most have immediate results, some will take time. The principles in this article apply to just about any residential home service or trades services business. If you need help improving your performance get ahold of us today.
1) Put your business on an EKG machine and start measuring your results.
One of the biggest challenges our newer clients have is they don’t have data about their existing business. Data is one of the most valuable resources on the planet and it’s critical to have this data in order to be able to measure the effect any changes you make in your business. Tracking data doesn’t have to be difficult. It can be done in a note book, excel, or a software system if you’re using one. Key metrics that must be tracked:
- How many service calls are coming into your office
- How many of those service calls are getting booked
- What is your average service ticket/sale
- What is your maintenance agreement conversion ratio
If you don’t have this data available to you today, you can get most of it. It’s not going to be easy or fun but it can be done. And if you don’t want to do it, then hire PlumbAmatic™ to do it for you.
Pull 24 months of invoices. Enter the dates of the service call and the total into an excel sheet. Sort the sheet by the dates and average the revenue. This will get us hand grenade close to the number of calls being booked and ran each day and the average sale.
2) Implement a weekly training meeting with your team.
Pick a day of the week and require they come to work an hour earlier than normal. We meet with our team at 7:00AM every Monday no matter what. Pick up some bagels, brew some coffee. There is a specific format to these meetings that works best that PlumbAmatic™ is happy to teach you. For the purposes of this white sheet, the general flow of the meeting should be to discuss any successes that have happened recently, any points of improvement that could be made from the week prior and some sort of brief to the point training topic. Its best to get the team used to meeting and talking about business before implementing major changes. Too many changes all at once can cause issues with technicians.
Holding a weekly meeting:
- Shows your team you care about your business
- Shows your team you value their feedback
- Demonstrates to your company that you are a professional organization
- Forces you to focus on the positives that are happening around you
- Forces you to face any opportunity for improvement in your business
3) Charge a service and diagnostic fee.
If you are already charging a service/diagnostic/trip charge, good for you! The question is, are you waiving it if they go ahead with the work? In today’s business environment, your clients expect to pay some sort of a service and diagnostic fee. We have clients that both charge the service fee in addition to work sold, and others who waive it if the client goes forward. Both ways have pros and cons. Here is why you should start charging a fee for service:
- Immediately add revenue to the bottom line. In a company that runs 300 service calls a month this can add $30,000 of additional revenue. Every $30,000 helps.
- It qualifies the service call. If someone doesn’t book service because of your service fee they are likely not going to be a great client to work with.
- Your clients already expect to pay for service.
4) Tighten up the way you handle your inventory.
We see so many clients that are way over loaded with inventory. Unless your business is located in the middle of nowhere and it takes weeks to get inventory, there is no reason to have months or even years of inventory sitting on your shelves. Your cash tied up in excess inventory is hurting your business. Here are some ways you can adjust your inventory and ordering processes to add money to the bottom line:
- Take the “we’ll use that someday” inventory and toss it in the dumpster, scrap it, sell it or whatever you have to do, but purge it from your shop
- Write out an official truck stock list- this is an exact list of items and quantities you want to have on each of your trucks
- Purge your trucks of everything that is not on your list
- Require your technicians to write down everything they take off a truck
- Negotiate a daily delivery from your main suppliers
- Negotiate consignment arrangements on equipment
5) Start answering your phones live an hour earlier and 2 hours later than you do now.
If you’re not answering your phones with an actual employee of your company until 7:00PM, you’re missing a lot of calls. One would think that these calls are just emergency calls, however, after 15 years of personally handling calls that come in between 5PM and 8PM, I can tell you most of these calls are not emergencies. People as a rule tend to procrastinate things and during the course of the day they forget to do things like call the plumber. If you’re able to help these people when they call, the work is yours. Give it a try:
- Instead of forwarding your phones to an answering service, forward them to an employee
- Set up an after hour call schedule with your office team
- Provide a way to access your scheduling program
- You’re going to book more calls by doing this
The call volume you get after hours will of course depend on the size of the market and your business. If it gets to be too much, you can pivot to a different solution but I think you will be surprised how easy it is to pick up extra calls this way.
6) Get your pricing squared up.
A leading cause of business failure across all industries is failing to price your goods and services correctly. In order to determine if your pricing is correct, you have to know your direct costs of providing the service and your overhead costs. As a starting point to making sure you’re pricing your services correctly, pick five of your most common services. For most plumbing contractors we suggest looking at your two most common water heater replacement tasks, your two most common repair tasks, and one service you offer that you would like to do more of. For each of these items:
- Add up your current cost for all materials involved with this task, down to the screws, and consumable items such as Teflon tape. Add any sales tax you pay on these products and you have your direct cost of material.
- Add up your other costs related to this job such as permits, disposal, etc.
- Add up your true total cost on the labor it takes to perform this job. All of the labor, drive time, time it takes to get the parts used back on your truck, all of it. Don’t forget to factor in the hourly burden of all of the technician’s benefits (health insurance, dental, vacation time, payroll taxes, etc.).
- Add all of these costs together and divide it into the total amount you charge for the service.
- Call PlumbAmatic™ to discuss your findings.
7) Implement a maintenance agreement offering for your clients.
This can be a big task to bite off but it is one of the most impactive services you can start offering your clients. Here is why you should have a maintenance offering:
- Adds tons of revenue to the bottom line
- Builds long-term relationships with your clients
- Reduces the amount of emergency calls you get after hours from your clients
- Stops people from shopping for the services you offer
- Balances out the peaks and valleys in demand service cycles
- Its really required if you ever want to sell your business for more than asset value
- Gives your technicians a way to earn extra money
If you want to build a bigger, brighter future for your business and have happier clients, involve as many of them as you can in a solid annual maintenance program.
8) Start offering financing on larger jobs.
One of the largest factors homeowners consider before moving forward with a large repair or replacement job is how they are going to pay for it. By aligning yourself with a consumer financing provider, you can offer your clients a way to clearly see how they can bite off that major job you’re recommending. Here are some things to consider about financing:
- Most people that will take advantage of financing don’t actually need it. This may sound counter intuitive, but we see a lot of financing applications come through our office with a reported household income of over 200k. People with a lot of money and people with little both like the thought of spreading out expense over time.
- It’s fairly easy to implement.
- It only takes 15 minutes to get financing approved.
- It won’t cost you anything if you pass the financing costs on to the homeowner.
- It will help improve the closing ratio of larger jobs.
9) Take a hard look at how you’re spending your marketing dollars.
When we audit a client, we are typically blown away at the amount of money clients are paying for advertising. The worst part is most clients aren’t even sure what they are paying for or if it works. By tracking where the calls you’re getting are coming from, you can quickly figure out what marketing dollars are going to work for you and which are going to work for the sales person that sold you. Here are some ways you can get a handle on what’s working and what’s not:
- Any time you try a new marketing program, track that specific type of advertising with a tracked phone number
- Invest in a software to record and track incoming calls
- Ask your clients how they got your phone number and keep a spreadsheet of it
- Schedule a mid year meeting with all of your advertising vendors and have them provide you with information supporting the results YTD
10) Set goals for your business and hold yourself and your team accountable.
None of the above profit building tips will have a sustained impact on your bottom line if you don’t hold yourself accountable to making them happen. When it comes to setting goals:
- Set achievable goals
- Attach a deadline to all of your goals
- Don’t bite off more than you can handle
- Hold yourself accountable to your goals
- Keep them SMART. Specific, measurable, achievable, relevant, time bound.
As you go about your business over the next few days, spend some time thinking about how some of these ideas could impact your business. Because it’s far better to successfully implement one change than it is to fail at implementing three, choose the tip from the above 10 that you are the most excited about! Then pull the trigger and ride the bullet.
Keep in mind, you’re in business for yourself but not by yourself. We did not get where we are in business without the help of others and chances are neither will you. PlumbAmatic™ can help you implement these profit building tips and hundreds of others.
PlumbAmatic™ is business strategist and consulting firm for Plumbers, HVAC, and other homes service businesses.
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