It’s a tug of war. The technician needs a raise, the customer complains about cost, and you struggle to make a profit. How do you bring balance when the margins are slim and the competition is at your door? Competing electric, HVAC and plumbing businesses want your technicians and your customers.
So, what’s the secret? Some seem to make it look simple… What is it that they know?… We look at the profit and loss without solving the mystery, and even after talking to our CPA; still, there’s no clear answer.
There are two big (very big) principles frequently overlooked in balancing your business’s finances. The first, Market Position. As shown in the graph below, many service providers choose to compete on price. It’s a well known financial principle that, in most cases, you can’t provide Low Price, High-Quality Work and the Best Service. There are only rare exceptions, and even those exceptions are debatable. When you lower the price you must compromise a combination of Quality and/or Service. It’s a law of economics.
Looking at the graph, we see that most competitors are grouped together competing for the same market share – those looking for low prices. If you are able to move your market position towards the upper right of the graph, you’ll have a larger share of higher-quality customers. It seems odd, but many businesses need to raise their prices to get more customers. This applies to plumbers, electricians, HVAC and other field service trades.
Don’t believe me?….. Look around your community. Answer this question: “Who are your top 2 most expensive competitors? Can you name them?…” Now, look around your community again. Answer this question: “Who are the top 2 largest competitors in your community?” Most of the time when I ask that question, it’s the same 2 companies. It seems odd and counterintuitive, but many need to raise their rates to get more customers.
The second very big economic principle is also routinely overlooked. I bet that if you were to take your profit and loss statement to the top CPA group in your community they could not identify the most expensive cost in your business. If you were to ask them, they might say, “Labor? Material?” But they would be wrong because the biggest expense you have is the sale you didn’t make!
The sale you didn’t make doesn’t show under profit and loss because it never happened, and it’s your biggest expense! It kills your efficiency and saps company profitability while stressing company culture.
In the example above, the 3 Service Requests in the gray follow a typical construction model of efficiency – hurry hurry hurry, more more more. But this model doesn’t work very well in the service/install business where there’s less productive time. The way we change our productive time (AKA efficiency) is by offering the customer choice and a few other on-site best practices.
In the “While We’re Here Sale” example above, adding a small sale more than triples the profit! I repeat myself: The sale you didn’t make doesn’t show on the profit and loss because it never happened, and it’s your biggest expense! It kills your efficiency and saps company profitability while stressing company culture.
Micro-Targeting of price, Market position, Offering well designed flexible choice, Customer Type Presentation, are important keys to building a world-class plumbing, electrician and HVAC business. Zip Solutions has all the tools to help you put these best practices into place at your organization. You’ll be amazed at the results. Your people will be pleased with the simplicity of operations, your customers will be delighted with your professionalism and your bottom line will smile back at you! Schedule a demo today to start raising your profits and lowering your stress levels!