Not as many people venture out when the weather is foul compared to when the weather is good. When the TV weather person predicts rain, people cancel events.
Similarly, when the media highlights data that implies economic downturns, the mass of viewers begin thinking about what they can do to tighten their economic belts and cut back on expenditures. Anything that is not of immediate concern may be dropped from their budgets.
With the frequent reports about shrinking real estate values and corrections in the mortgage markets - both of which mean money will be more difficult to borrow and probably more expensive - consumers are becoming more reluctant to spend money on service and repair work for their home or business. The rainy days of the economy may be on the horizon. We need to recognize the appearance of this cycle in the economy and plan to address it with our business strategies and practices. What economic “rain coats” can we use?
StrategyBefore dealing with any change in the business climate that affects consumers, you must identify what the potential effects may be for your business. Is the volume of work from your standard jobs, the common ones that are the mainstay of your business, going to decline? What jobs does your company do better than the competition?
Other inputs to your strategy, besides maintaining and building revenue, are going to include cost reduction and cost management. Let’s look at those pieces of your strategy first. Keeping control of costs in a tightening economic market is essential, so let’s consider several techniques to accomplish the goal.
OvertimeOne aspect of overtime is that it is easy to compute. Time-and-a-half wage payments add a significant amount to overhead. You can quickly add another 50 percent of the hourly wage rate for every hour of overtime worked (100 percent increase for holidays). How many businesses can absorb a 50 percent increase in labor costs and still generate a profit from most service work? Your labor cost is the most significant contribution to service and repair costs. So when it goes up to half again as much as the normal cost, profit suffers.
Simply controlling overtime, without any other cost-cutting practice, can make the difference between profit and loss in many businesses. Any strategy for reducing overhead has to include virtually eliminating overtime pay. You would be surprised how many businesses find overtime expenses creeping up. Employees soon discover that they can earn much more if they work more than 40-hour work weeks.
Eliminating overtime expenses requires some management skills (i.e., planning and discipline). You must plan job assignments and schedules. Monitoring technicians’ work schedules and performance will show any changes needed. You may find that the same technicians routinely receive overtime pay; make certain the situations that dictated the overtime were warranted.
As a manager or owner, you must publicize a no-overtime-without-approval policy. You cannot refuse to pay overtime if an employee actually works in excess of a 40-hour work week (or in some states or on federal projects, an eight-hour day). So the responsibility for scheduling and job completion - essentially managing employees’ productivity - is yours.
If managers and supervisors get a reputation for ignoring overtime charges, overtime expenses typically rise in those companies. Soon employees expect a certain amount of overtime pay in each check.
Pay For WorkIt sounds fundamental but paying for work done - and only for work - directly affects the efficiency and the overhead expenses of a service business. For example, paying employees to run personal errands causes problems. First, of course, they are not contributing to the revenue of the business by working. But second, they also are burning up fuel and truck expenses by going to the bank, grocery store or any other nonbusiness destination. Third, by tolerating use of the company’s resources for personal business, you may quickly establish an unpublished company policy that may become accepted practice. When one technician sees or hears about another technician using company trucks to run errands between jobs without repercussions, the message becomes clear to all technicians: It’s OK to do personal business while on the clock, using company trucks. That’s not a message you want to convey to any group of employees.
To combat any misunderstandings, as well as avoid spending company money needlessly, publicize company policies on the prohibition of personal errands, as well as the consequences of violations of those policies. As with other policies, a combination of written policies in a professionally designed employee manual, a review of those policies with new employees when they are hired, and another review from time to time with all technicians during routine weekly meetings will keep employees’ memories refreshed. Then no excuses need be accepted.
Another waste of company resources is to have technicians driving about the city chasing parts for a job. They are paid to perform service and repair work, not for being parts runners. Parts for the job should be on the truck, or if something special is needed have someone from the warehouse get it. Proper truck setup will solve most of these types of problems.
Only in really small, amateur service businesses do technicians carry a minimum of common parts, supplies and materials. Customers are not fond of technicians leaving to get parts while equipment and systems are left disassembled in the customer’s home.
Professional Attitude And TrainingBeating the competition in tough economic times is more important than simply attempting to gain market share or increase revenues; it might mean the difference between surviving and not surviving during the economic downturn. Top quality professional service - more than just good technical expertise - is the best way to outdistance the competition and maintain a healthy business.
There is always going to be a certain volume of business. Customers are going to lose heating systems, have leaking pipes, clogged drains, failed air-conditioning systems and water heaters, and all the other common household problems. In tougher economic times, part of your strategy in running the business should include three additional aspects that are directed at increasing revenue.
Given that there will be some business out there, you must make sure the customer calls your business instead of the competition. And when your technicians have an opportunity to see customers for service work, you must make certain they present the customer with incentives for additional work. They already are at the customer’s home, so why not take advantage of the opportunity? Finally, the technicians need to get in front of the customer more often.
The goals are simple:
1) persuade customers to use your business;
2) generate add-on business while in the customer’s home;
3) get in front of the customer more often.
With professional training and a professional attitude, your technicians will have part of your strategy in place by using the latest customer service techniques. For example, a professional technician will arrive in a clean uniform, on time, and respect the customer’s home and property. Customers will be encouraged to agree to service work on a higher percentage of calls upon recognizing these professional practices. Prior customers will already have experienced this higher level of service and be more likely to call your company for future service work.
Value PricingOther examples that illustrate professional training and attitude for technicians include proper use of a flat rate pricing manual. You have to have an attractive, easy-to-read manual for the best results, one that has large type so the customer can see what the technician is talking about.
The trained technician will use that manual to share the guaranteed price with the customer, making the job price quote painless for the technician and comfortable for the customer. No surprises. The flat rate manual also can help with the second and third part of our strategy: getting in front of the customer more often and generating add-on business while in the customer’s home.
By using a flat rate manual that offers a lower price on each job (the “Value Price” for service agreement customers) and a special offer for add-on work done on the same call, the technician can accomplish those goals easily. Customers recognize the savings available for the add-on work; they can see the discount in the pricing manual. Plus, they can take advantage of a lower job price, if they purchase a service agreement.
The service agreement is a good deal for both the customer and the service business. The customer gets a free home inspection, preventing unsafe conditions and possibly detecting equipment failures before outages, floods, gas leaks or other hazards develop.
During slow times, the business can conduct the home inspection, where the technician often (in good faith) finds fixtures, equipment or appliances that need repair. Customers benefit and the business prospers.
If the service agreements are sold to the majority of customers during busy times, there will be plenty of work during the slower times.
Economic CyclesIf there is one thing that you can predict about the economy it is the fact that there are cycles - up then down and up again - continuing over the years. By following the latest, proven professional management techniques, you will grow the business successfully during good times and maintain a strong, viable business during downturns.
Implementing both cost-cutting and business-building practices allows you to get through all the rainy days and emerge successful when the sunshine returns.