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August 1, 2017

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Creating Financial Balance

October 5, 2017

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 competitors are at your door? They want your technicians and your customers.

 

What’s the secret? Some seem to make it look simple… What is it that they know.... We look at the profit and loss and talk to our CPA and still there’s no clear answer.

 

There are two big - very big - principles frequently overlooked. The first, market position. Examine 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’s only rare exceptions and even those exceptions are debatable. When you lower the price you must compromise a combination of Quality and 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 price. 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 need to raise their price to get more customers…. Don’t believe me?..... Look around your community. Answer this question. “Who’s are the top 2 most expensive competitors of yours? Can you name them?..... Now, look around your community again. Answer this question. “Who’s the top 2 largest competitors in you community? Most of the time I ask that question, it’s the same 2 companies. It seems odd and counterintuitive, but many need to raise their price to get more customers.

 

The second very big economic principle is also routinely overlooked. I bet you that if you were to take your profit and loss statement to the top CPA group in your community that 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! You know why? Because the biggest expense you have is the sale you didn’t make!

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.

 

 

Study the example above. The 3 Service Request in the gray follow a typical construction model of efficiency, hurry hurry hurry, more more more. But it doesn’t work very well in the service / install business where there’s less productive time. The way we change our productive time (efficiency) is by offering the customer choice and a few other on-site best practices.

 

In the 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 business. Zip Solutions has all the tools to help you put these best practices into place. 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 now!

 

 

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