You've read the books, attended the seminars and crunched the numbers. No doubt about it, you must raise your prices. In fact, you may have to triple your prices to make the kind of money that will make it worth your while to stay in business one more day. Otherwise, this new year will bring you just what the last year did - debt and heartache. Sigh. Time to bite the bullet.
When you announce the price increase at the weekly staff meeting, the room becomes pin-drop quiet. Your service techs look at you with unblinking eyes and dropped jaws.
Sound familiar? Or does this next story strike a chord? Once upon a time, a service contractor asked me to deliver a sales training program to his service techs. The training was going well. I was updating the owner on our progress when we were interrupted by one of the techs. The conversation went like this:
"Hey boss, I need to ask you about this job I went on today, " began the technician.
The owner responded, "No problem, Joe. How can I help?"
"Well, the furnace was initially installed by Fred's HVAC Co. (A competitor.) I see why they don't want to come back to this job. The layout of the house is pretty complicated and I think they may have been in over their heads. Of course, I didn't mention this to the owner, but now she wants me to give her a price to bring the system up to speed. This isn't a typical situation, and the price book won't work here. Could you help me price it out?"
Unbelievably, the owner said, "Well, give her a break. How many hours do you think it will take? Eight? OK, charge her for six. Oh, heck, make it five hours. She is going to wail when she figures out what we charge!"
I was shocked! Wouldn't she be delighted to have someone knowledgeable and willing work on her system? There were no indicators that this job would lead to a price complaint. At that moment, I realized no amount of sales training was going to make a difference in that company.
Until the owner buys the price, the techs won't sell at that price.
Do you believe your selling price? Really? Would you rather close your doors than lower your price? Do whatever it takes to settle on a selling price you can buy. Use as much real cost data and billable hour information as you can. Guess where you need to, put together a budget, create a selling price for labor that covers all your costs and includes a healthy portion of profit. Then, commit to it.
Here's a four-point plan for selling your techs on your higher prices.
Helping HandsHave your techs help you put together your price book. When you significantly raise your prices, make the move to flat rate pricing, if you haven't already. Have your service team help you put the book together.
"Canned" flat rate book packages have an advantage over the one you could build from scratch - the "canned" book is written and you'll never get around to writing yours. I recommend using a flat rate program that allows you to customize the tasks loaded into the database. (There are advertisements for flat rate programs in the back of this magazine. Or feel free to call me to discuss options.)
Communicate to the team that you are going to put together a price book of the most common jobs, the jobs that comprise 80 percent of your total sales. Each job, or task, consists of materials and the number of hours it will take to do the work. Who knows this information better than they do? Ask for their help.
Start by going over your price calculations. Show them what goes into the price of an hour of labor. Show them what's in it for them - benefits, education, vacation, retirement and salaries befitting professionals of their caliber. Show them what is in the price for the customers' benefit. Top-grade equipment, quality products and installations, community contributions, and professional and ethical business practices require money. Show your techs your justification for the selling price. Your employees may or may not be interested in the numbers.
For those who are interested, offer to go into detail in one-on-one financial education sessions. For those who don't want more detail, your willingness to share the data is enough. It builds trust.
Next, get their input for the tasks. I call this the "Name That Tune" session. In a group meeting, ask them how many hours it takes to put in a 40-gallon gas water heater, on average. Usually, they will respond with their record best times.
"I can put in a water heater in one hour!"
"Oh yeah, well I can do it in 45 minutes!"
See what I mean? Remind them of the things that can go awry in the world of service, and add some "real life happens" time. Then, piece together your book using their input. Make it under 50 pages. Agree on how to organize the pages. Come up with guidelines for creating a price when the task isn't in the book. Practice looking up tasks.
Even if you buy a "canned" flat rate program, plan on doing a lot of editing. Make it yours. Better yet, make it
Be Worth ItIf you are going to be more expensive than the average plumbing company, you're going to have to be a lot better than they are. No fair charging top dollar for bottom drawer service. Clean the place up, paint and polish your trucks and equipment, create a formal training program, etc. Do more for your customers at each level of your organization. Spend time and money marketing. Help your techs and your customers understand the advantage of using your company, and not the other guy.
You must be worth more if you're going to charge more. The company must raise its image. And your techs need to raise their self-esteem. What can you do to help your service techs realize their true worth?
Operate as a professional company. Treat your people with dignity and respect. Remind them of the impact plumbers have made on this earth. At your weekly staff meeting, you could read portions of the "History of Plumbing", available at the PM Web site.
John Ward, owner of Applewood Plumbing and Heating in Denver, Colo., has a nice way of welcoming a new hire
to his service team. He drives him through the best neighborhoods in Denver. He tells him that this is where their
customers live. And, John tells him that they deserve to live as well as their customers. It's a powerful message.
Don't Pass The BuckHold your technicians accountable and teach them the skills to win. Your techs will better understand the need for good data if they helped set up your price book. You need to know if the number of hours built into the task is going to cut it in the "real world." You've got to keep score.
You also need to know how much they are selling, and not selling. Based on your budget, you need so much in sales each day, week, month and year. Keep track of that information. The techs must deliver this data. They may insist that time spent on paperwork is non-billable. True. However, the information is essential. Without it, as a manager, you are driving blind.
Keeping score will also help you help your techs. How are they doing in sales, productivity, call backs, customer complaints? If you don't know the score, you can't help them get better. The data clues you in to what each tech needs to do to improve.
n virtually every plumbing shop there is one "hot shot" sales maker. And then there are the rest of the technicians. Help the rest learn to make sales. Teach them! All good sales programs teach the basics - communication, discipline, accountability, practice, follow up. Look into Dale Carnegie, Tom Hopkins, Brian Tracy, Dennis Waitley, Mark Victor Hansen. Join an association that is committed to delivering training for your team. It's out there. Find it and teach your techs the skills they need to sell your wonderful services at a realistic price. Unless you know how to sell value, you will be condemned to selling on price.
The ultimate sales training? Hop in the truck with one of your techs and go on a few calls. Take turns. Practice your communication skills. Help each other. You'll demonstrate that you believe in your services and prices, and that you're committed to each employee's success.
By the way, pay them for sales training. Do you want them to take it seriously? Then you take it seriously, and pay
them for their valuable time.
Address The Real ProblemWhat is the real reason your techs don't want you to raise the prices? They are scared to death!
Picture Tom the Plumber, one of your service technicians. He may look and talk like a tough guy, but inside he is a pussycat. He's got a big heart, though he doesn't share his feelings or fears. He takes pride in his craft. In fact, it defines him. He is a Plumber. The self-esteem that he has is wrapped up in his ability to move water, air and electricity. To keep people safe, warm and healthy. To make things better.
Your price increase threatens his ability to work. What if the customer says, "No?" Then, what will he do? Even worse, the "No" hurts. He doesn't want anyone to think he is a crook or a rip-off artist. Unfortunately, our industry is full of uneducated and misguided contractors. They have de-valued his skills and services. He will get "No" with some regularity. He will be called a gouger. And it will always hurt.
Acknowledge these fears. Commiserate on a rough day. Then, get back to work. Sales are part of the gig. Good salesmanship doesn't involve sleazy tactics. Good sales happen when good people do their best to listen, and offer solutions to problems. It's all about fair play, service and love. Love your team. Love your customers. And charge what you must.
Mention that in the weekly staff meeting.