Now that we have examined two other ways to increase profits in your business in the last two months' columns -raising prices and cutting overhead expenses - it's time to address the final phase, generating more business. This approach is sometimes the only one that service business owners consider because, on the surface, it looks like the easiest way to accomplish the goal.
Before we review ways to bring in more business I want to reiterate the importance of applying all three methods of boosting your bottom line profits. Employing only one of the techniques may help but won't let you truly maximize the amount of money you get to keep. Each works with the other two in a synergistic approach. So using all three can significantly increase your profits.
It may surprise you to learn that one of the most effective methods of generating new business is not from new customers. You might expect me to begin talking about increasing advertising or getting a bigger Yellow Page ad - or more of them - before looking at any other methods of getting new business. Not that some of those ideas are out of the question, but I first want to focus on ways to generate new business that are the most cost effective, and at the same time, bring in the most business.
Just because a customer already calls you, or has at one time called you, for their service and repair work does not mean they are solidly in the "regular customer" category and will always call you. Nor does it mean that they will purchase all the service and repair work they need on any given service call without some analysis of their home from a skilled technician, trained in providing maximum service to each customer. Since there are several ways to build your business from existing customers and it's easy to implement some of the policies that will produce more business, I want to give you examples of ways to maximize each service appointment before I review any other approach.
Normally, service business owners adopt the policy that the technician should complete a service call in as timely a manner as possible, so they can get on to the next service appointment; then finish that one as quickly as possible, etc. I disagree. I have found, quite to the contrary, that zipping through the customer's repair work in order to get to the next customer's job actually limits a company's ability to maximize revenue. It's very simple: How do you know that the customer doesn't need more service and repair work in their home. Why pass up work when your technician is already there? Are you confident in relying on the customer's assessment of everything that needs fixing has been identified? If they were the technical experts and could locate problems they would probably fix problems themselves. Often a technician can spot trouble before it becomes serious, before a part fails and is more expensive to fix. Or, worse yet, before the situation becomes hazardous to health. It is cheaper for customers to have these potential hazards or impending failures, or just maybe the nuisance of a leaking faucet or toilet, fixed while the technician is at their home.
Less Is MoreMany companies in our industry are able to have their technicians complete four, five or even seven or eight service calls in a day. The math looks good: Completing five calls with an average invoice of $120 (producing $600) certainly appears better than finishing four service jobs with the same average invoice (producing only $480). Seems like an easy decision to maximize the number of calls to increase revenues and profits. More calls equal more money.
Here's why my way, I believe, works better. First, let's look at the average invoice amount. Our average invoice has been nearly $400, compared to an industry average of less than half of that. So the notion that the average invoice is a fixed, predictable amount is false. The amount can be increased. If it is increased, your technician drives fewer miles, completes fewer invoices and cuts costs. In fact, our technicians, most of whom earn much more than the average in the industry, often complete an average of two service calls in a typical day. However, with an average invoice that is much greater than the industry average, they are producing revenue in excess of the competition. Plus, they are driving less.
The other advantage of the "slow" service call is that the customer gets better service. All the equipment, fixtures and systems in their home are scrutinized to be sure each works properly.
If you think about it, that is what service is supposed to be - a complete job. For example, would you want your car repaired, let's say a tune-up or a cooling system repair, and not have the car checked for potential hazards or impending failures. If your brakes quit the next day, you certainly would be upset with the mechanic for not checking them and not alerting you to the dangerous condition.
We always train technicians to make a thorough organized examination of all the systems in the customer's home. Sometimes just asking the customer about common items that need service will jog their memory. Then they may remember other equipment and systems that need attention.
It's the technician's responsibility to professionally complete the requested repairs and to detect other work that, in good faith, needs to be done.
Caution your technicians that generating business by suggesting there are dangerous and life-threatening conditions in the home when there are none is not only unethical but illegal. (You never know when the local TV station is monitoring a home for a "sting" story about crooked service companies.) That's not the way you want to run your business.
Saving With Add-OnsAnother customer benefit from a complete service analysis is the savings available to the customer. If a job is performed as an add-on job while the technician is at the customer's home, the flat rate price is lower. There's no charge for another service call.
Naturally, your business saves money because there's also no additional truck expense, nor any of the other costs associated with a new service call. Everybody wins.
Since the price for add-on jobs is lower, technicians can suggest that jobs that may be discretionary (no immediate need, but it would be nice to fix it) should be completed while the technician is there.
The problem is fixed and the customer saves both money and the inconvenience of dealing with the problem at a later time.
Though customers don't often object to checking additional systems and equipment in their home, they may not always be eager for your technician to tour their house.
A simple and effective incentive for the customer to authorize the inspection is to use emergency instruction stickers. For example, a sticker might give simple instructions on how to shut off a gas line in the event a leak is detected or how to shut off the water in case there is a broken pipe so the house doesn't flood. These helpful tips and instructions should be printed on bright colored stickers that contain your company's name and telephone number.
That way, calling your company becomes almost an automatic response when a problem is detected. Since these stickers are visible all the time (and prominent if they are in international orange), customers constantly are exposed to your company's name. They'll call you if they need service - without picking up the yellow pages.
Although a subject for a more comprehensive discussion, selling service agreements is one of the best opportunities to increase sales revenue and a business' profitability. In a nutshell, the technician can offer the customer a service agreement for a nominal charge $40-$69.
The customer, at least using the Maio Menu Pricing system, has a significant incentive to purchase the agreement. First, they receive an inspection of their home, at least, annually to be certain all systems are in a safe, working order. In addition to that, they receive what we call "value pricing." The pricing they become entitled to represents as much as a 25 percent reduction over the standard pricing. This combination of benefits is irresistible to customers. We have sold thousands of them.
The service agreement provides your company with yet another opportunity to identify faulty equipment and systems. I recommend you only perform the inspection mandated by the service agreement at times when business is slow, so you can keep technicians busy generating more business and completing service work. If you have technicians complete the service agreement inspection on a routine service call they will miss an opportunity to get that additional look at the customer's home.
Treat Them SpecialYou can probably design many types of promotions for your business. Some of my favorites are for current customers. For example, you could offer a discount on their next service call for a referral customer. You could also offer a special on specific service jobs, such as a pre-season service for furnaces or air conditioning systems. The object is to keep your name in front of the customer. The last thing you want them to do is to search through the Yellow Pages every time they need service work done. Then you have to start over to catch their attention so they call you for a service appointment.
Some business owners ask, "Why not go after new customers? My old customers will always call me." Maybe you have your customers locked in to the habit of calling only you, although I think that is the exception. There's a lot of competition out there and many reasons why customers need to be reminded that your company is their service company. Let's look at the odds. A current customer knows your business, most likely found the previous service call valuable and professionally handled - if they could just remember your name.
Where is that card or copy of the old invoice? Oh well, better take out the Yellow Pages. On the other hand, a new customer must find a compelling reason to call your company. You could spend tens of thousands of dollars, or more, and only generate a few customers. You still must do a professional job repairing whatever they called about, and even then, not all of them will call you back. With proven, repeat customers most of the work is done for you. They may even request a specific technician, demonstrating their familiarity with your company and their loyalty. I am not saying you should never advertise for new customers, we have to market our business all the time. However, when you are looking for simple, cost-effective ways to build your sales and profits you can't beat the tried and true customer.
In assembling your program to cut costs and increase profits, including raising prices, there are numerous choices. These last three months of columns will keep it simple and give you a boost for your bottom line. Start anytime.