It’s easy to fall into the trap of keeping your focus on day-to-day business activities. Look at how busy you are. Where would the time come from? Just can’t afford to think about those things.
Let me share some information with you that might get your attention and direct your thinking toward the future of this industry — and your business in particular. If for no other reason, I want to review with you the effects of three major influences on the industry. Their impact will necessitate you spending time to plan changes in the way you run your business. I’ll also share some techniques for boosting profits that are easier to learn about from someone else’s initial experiences, rather than trying techniques on a trail-and-error basis.
Before outlining those influences, it may be interesting to know what other businessowners are doing to prepare for their future. The leaders in the service and repair business are out there getting training, instead of being out of time.
Training programs are being offered all over the country, and people are taking advantage of them. They are learning what they need to know to meet tomorrow’s challenges, not just this week’s headache.
More than 16,000 participants have completed our training programs. Somebody has the time. The leaders could be your competitors. These leaders know they have to plan their time and make sacrifices so they are prepared for the future. If you are not enrolled in training programs now, you are already behind. Let’s see why.
Major Influence No. 1 — Home Centers: Large warehouse stores are permeating every market in the country. Not even small towns are safe anymore.
Why are they affecting your business? Aren’t they going after the home-improvement, do-it-yourself market? Yes, but home centers also offer lines formerly reserved for the trade. The same high-end brands that advertise to the trade are being sold in those warehouse stores, and at low prices. In the past, your customers couldn’t normally buy the same brands — or even commercial grade or high-end products you sold them as part of your service and repair call. Now they have access to those brands and more.
These warehouses buy in such quantities that the supplier you normally purchase from can’t buy the materials for the price the home centers offer, let alone sell the products to you for those prices. You need to be prepared to deal with customer inquiries about prices for materials and customer-purchased parts.
In our business, we have set policies to deal with this competition. I’ll give you three examples. First, we focus on customers who want service — top quality service — rather than those people who want to try to save a few bucks and install the products themselves. Our 60–minute service catches the attention of our customers, as does our reputation for quality and professionalism, and our guarantee of satisfaction.
Next, we offer products and guarantees unavailable in the warehouse stores or, for that matter, in the industry. For instance our 10–year guaranteed water heater carries the Maio brand. Nobody sells it but us. It’s a private label product that you can arrange to get from the manufacturer. If your volume is not sufficient, your local trade association can band together to buy the products in an order large enough for your own private label.
The manufacturer is responsible for the first five years of the water heater’s life; we are only responsible for the next five years. However, if you look at failure rates, most occur early or not until after more than 10 years. Additionally, most people move before the guarantee is up, so we face minimal risks for the few replacements we may have to make. Competitive advantage: ours.
Third, we flat rate price, so the cost of the materials is part of the price of the job. That alone discourages customers from price shopping our materials. There is no way to compare. We also anticipate the homeowner who attempts to save money or time by purchasing the parts needed at the home warehouse and then wants us to install them. Though we used to be firm and refuse to install other companies’ parts, we are now realistic. We simply subtract the price the customer paid for the part from our flat rate price, which works out fine for us — financially. It also satisfies the customer.
Major Influence No. 2 — Deregulation Of Public Utilities: You should have already heard public utilities around the nation are being deregulated, meaning they can enter all sorts of related businesses besides selling energy. For example, utilities will soon be able to offer electric power and the air conditioning system your customers want, including installation and maintenance. Their customer list is impressive: anyone who buys electricity or gas. They can mail to the list — offering discounts and seasonal specials. Look at the built-in credibility they have: They are the power company. What can you do to compete?
But remember one important factor: These companies have no consumer service departments in place. To build them from scratch would be a monumental task. So they probably will contract the service and repair business out to local companies — companies like yours. However, only those companies with the reputation for quality work and the resources to take on additional jobs will be selected.
Instead of viewing this market influence only as a threat to your business, you may have a new opportunity to expand. But your business had better be in good shape, employing modern customer service practices and staffed with trained technicians. For the companies who are prepared, substantial growth potential exists.
Major Influence No. 3 — Consolidations: You have probably read or heard me talk about the substantial impact of consolidations on the industry. It’s impossible to ignore the influence of this movement that is changing not only our industry, but many industries across the country.
It, like the deregulation of utilities, is both a challenge and an opportunity. Here’s why: For the service and repair businesses that are up-to-date, offering top quality customer service, flat rate pricing, service agreements, professional-looking technicians who are trained in the latest techniques for service and repair, the trend is good news. Those businesses will have the opportunity to either sell or effectively compete with the consolidated companies. They can’t lose.
Everyone agrees the consolidation effort will raise the bar for standards in professionalism and service. The customers will be the main beneficiaries of theses changes. For the companies who send out technicians in dirty T-shirts who are gruff with customers and price their jobs by time and materials, good luck.
Those companies will be relegated to the bottom of the heap in their communities, and be forced to compete on price in a cutthroat way for the price-shopping customers. Their margins will decline until they are fighting for survival with other low-end companies and small, poorly run start-ups. For them, consolidation means tough times.
Profit Booster No. 1: I was in business for many years before I discovered a way to increase customer loyalty (read reduced reliance on Yellow Pages), increase cash flow and more effectively use my technicians’ time. If you are not offering your customers this simple business product, you are missing a significant opportunity. The product, service agreements, is a win-win.
For a small, fixed fee customers receive an annual home inspection, where safety concerns are checked as well as worn or defective fixtures, switches, thermostats, appliances, etc. Work that needs to be done is identified and completed without the price of a service call. Often safety hazards are corrected. Customers save time and money. Further, customers benefit by getting a discount on the flat rate pricing schedule because they are a service agreement customer. Frequently, the cost of the agreement is recouped from savings on a single service and repair job. It’s a winner for customers.
For the service and repair business, service agreements provide extra cash. From our roughly 10,000 service agreement customers who pay $50 for their agreement, we accumulate $500,000. That would help the cash flow in any business. The good news is still to come, though. Everytime you send a technician to a service agreement customer’s home for an inspection, you can expect more service and repair work. It’s an opportunity to check for work that needs to be done, and it’s paid for by the customer.
Naturally, you send your technicians out to service agreement customers’ homes when business is slow, so they would be idle anyway. Now they are productive and generating business. That’s why technicians like service agreements, too.
If you are not selling service agreements in your company, you are leaving money on the table. Since customers have an agreement with a company where they know they receive a discount they call you. Eventually, since your customers stop using the Yellow Pages, you can reduce your reliance on this expensive advertising and save even more money. Don’t miss this opportunity.
Profit Booster No. 2: It’s almost impossible to discuss modernizing your business without addressing your pricing. If you are not using flat rate pricing you are not up to date. It’s that simple. Flat rate pricing is everywhere. Does the waiter in a restaurant break down costs for the food, preparation and service? Of course, not. I took my car in for service recently. The first thing the mechanic did was to look in the flat rate manual for the cost of the job. Every other industry has already switched to flat rate.
There are several specific advantages to flat rate pricing. One, more profit can be built into the job. Customers never complain about the hourly rate or the price of the materials (you have to build your margin in to one of those or both) when they receive a fixed, flat rate price up front, before the job is begun. Since the price comes from a price book that the customers can see, they know everyone is charged the same price for the same job. No more made up prices, based on the neighborhood or type of car in the driveway.
If there is a single business practice that can minimize customer complaints and maximize your service and your profits, it’s switching to flat rate pricing.
Profit Booster No. 3: Since your customers call your business, the first exposure they have to it is not the quality of your technicians, their professionalism or technical skills, but your telephone answering people. If your workers are trained to expeditiously handle the calls, you will: schedule more service appointments; have fewer complaints; and make more profits.
Prevent your call-takers from giving out prices for jobs that a technician has not yet analyzed. When your representative gets the necessary customer information professionally — and does it quickly — it will keep your telephone answering efficient and profitable.
There are multiple techniques we employ to keep our call-takers doing the best job possible. For example, they don’t eat while they are talking on the phone, or joke around with others, or spend more than a few minutes with a caller. And they note all the pertinent information for the job. The only way they can do all of this is by using a script and by following our standard procedures.
I have given you just three of the major influences you face in your business. I also added three profit boosters to get your business where you want it. There are multiple influences and profitable techniques you need to be familiar with. Training is the only way you can keep up. Take the time.
Are you going to be “out of time” when the competition is running past you?