Is It Too Late to Create a Success Budget For 2017? – (Part 2)

Joe knows that he needs a solid plan to be more successful, but he thought he had a good plan before. What does he need to do differently?  How can he get his team on board and turn service calls into more installs and maintenance club members?

First, let’s look at the role of service calls for a contractor’s business.

#3 – SERVICE CALLS

Joe’s information on service customers is one of the most valuable assets in his company. These are the people that trust him. He has fixed or replaced their problem and they appreciate his assistance. These are the people who are the MOST likely to call him again, since he treats them well.

Joe suddenly realizes that he is not in the HVAC business. Joe is in the “people business.” He helps homeowners fix their problems. Joe is also in the business of coaching the people on his staff on the best ways to communicate with people as well. Wow, this insight might change the way that Joe acts too!

What actions will Joe take?

• Set up and use an email list – provide weather warnings, a positive thought of the day, monthly filter replacement reminders, …
• Provide a monthly E-Newsletter. It costs far less than mailing out a hard copy and it is fast and easy for his customer to share this with a friend. Some may prefer to do both, which is just fine.
• Inform and educate customers in an ongoing manner. Make them look forward to hearing from him. Don’t offer coupons or “sell” all the time. It is more powerful to just inform and educate on a regular basis.

Joe’s techs need more than a minimum service invoice to aim for. He needs to train his technicians on the behaviors he expects them to display and to repeat on every call. His technicians need weekly targets and monthly targets for behaviors such as adding maintenance customers, getting customer reviews, putting out yard signs, add-ons per week, etc. Joe decides to choose 3 to 5 behaviors to target every week and to record the results for each person on the team.

The right behaviors WILL produce the average invoice he expects. Joe knows this is true. The problem is not his people. The problem is Joe’s inconsistent training plan and a weak connection between behaviors and personal recognition for his employees.

#4 – INSTALLS

Can Joe plan his installs on an annual basis? Positively and definitely YES!

Many companies have identified their replacement ratios. This information is extremely powerful in planning his business growth. Does Joe replace a system for every 6 service calls, 8 service calls, 10 service calls, 12 calls, 20 calls? He has no idea, but he is going take a few minutes to figure this out. It is important if you want to grow your revenues and increase your profits right?

Do Joe know the ratio of replacement revenues to service revenues for growing companies? Is it 1:1, 2:1, 3:1, or 4:1? What is Joe’s ratio? How does his ratio compare to the national average for growing companies? Joe is about to find this out as well.

If Joe is at either extreme, he is likely struggling to produce a healthy annual profit or he may be creating a highly profitable business that turns and burns. In either situation, Joe may be in danger of his customer base falling apart. Joe realizes that he needs a better plan and he needs it right now. The longer he waits, the more money he is losing every day that he delays.

Since replacements are the highest revenue producing jobs with the highest gross profit dollars, maybe it would be good if Joe knew the ratio between service calls and installs? Is the ratio of replacement revenue to service revenue is approximately 3:1… 70-75% replacement revenue to 25-30% service revenues?

Joe is going to figure this out too…and he knows it will be pretty easy to calculate.

#5 – MAINTENANCE MEMBERSHIPS

Joe got rid of “Service Agreements.” He finally decided that homeowners do not like to sign “Agreements.” This feels too much like a contract, so he created a Maintenance Club program instead.

Joe also decided that his maintenance program did not have to create a significant profit stream. The annual fees for most maintenance programs limit the potential for it to become a major profit stream. However, neither should Joe’s maintenance program be a “loss-leader.” The good thing is that it does generate good cash flow, but with annual payments, it is also inconsistent from month to month.

Joe needs to think of his maintenance program as functioning like the rebar that holds together the concrete foundation of Joe’s home. It is the support structure that keeps his customers connected to him. A maintenance program may not generate a lot of emotion, but it holds together one of his most important assets – his customer base.

Joe’s maintenance club program is priced well and offers two annual tune-ups and home safety checks. He wonders, “Why are more people not signing up for it?”

Joe considers a key question – “Why does he have only one option for his maintenance club program?” He has heard of companies that have two or even three options for their maintenance club program. Joe’s program is more like a light switch with only an “on” or “off” option. What would happen if he created three options?

What if one of the options even built credit toward the customer’s next replacement? Would his customers shop around or leave their accrued credit behind OR would they definitely buy their next replacement from Joe so they could use their credits?

Joe currently offers a one-time annual payment. This takes a good bit of time and energy to “re-sell” the maintenance club each year. “Surely there is an easier method,” he thinks.

He has heard about companies that sign up their customers on a monthly plan, which makes them more like clients than just a customer. However, Joe isn’t sure it would work with his customers. After all, could his company get the same results as other contracting companies? His people would probably not do the same things that people in other communities are doing. Joe believes things are just different where he lives.

Joe also wonders what would happen if his technicians received residual income from signing up customers for the monthly maintenance program, instead of a one-time spiff? Would it really help him keep his technicians and even attract new guys to his team?

Would Joe’s technicians be tempted to leave his company after they have sold 100 or more maintenance memberships? What could his techs do with an extra $300 – $500 additional residual income each month? Surely they would like the extra “fun money.” Maybe this could actually inspire his technicians to sign up more customers on the maintenance program each week? 

FINAL TIPS FOR JOE:

JOE NEEDS TO FOLLOW A PREDICTIVE MANAGEMENT PLAN

• Focus on behaviors, not dollars in revenue.
• Create rewards for the right behaviors and make work more fun.
• Appeal to his people’s emotions and core values.
• Target actions for his staff to achieve.
• Provide positive cues for people who get on board and do the right things.

For instance, if Joe’s budget requires $95,000 in replacements, then a good behavioral goal might be for his team to sell and install 14 systems at an average of $6790 or higher. The number 14 seems attainable. It is easy for his technicians to count to 14. Then Joe can break the goal down to 4 installs per week for his team. These kinds of goals seem achievable.

In contrast, if Joe tells his guys to bring in $95,000, this amount of money can seem daunting. Most of his people have never held $95,000 in their hands. How could they relate to such a large amount if most of them don’t make $95,000 as an annual salary?

Joe’s new system will let him easily measure his breakeven and achieve his annual profit goals! Now the REAL FUN can begin. With a solid financial strategy and a savvy business coach, Joe can get on the fast track to growth and profitability for 2017. In fact, Joe has heard that a good coach will give back 10 to 20 times in revenues in return for his fees.

If Joe doesn’t have a “winning coach” should he consider, maybe it’s time for a change? Joe is tired of working so hard to just feel like he is spinning his wheels. He decides this has to stop right NOW! He wants more out of life and he deserves it!

STAY TUNED for more information on Predictive Management Planning.

More to come real soon!…

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