Do you struggle to make a profit?

Photo credit: ©istockphoto.com/nico_blue

Many times as owners we get in the way of our own success by continuing to do only those things that we already know how to do. Doing what you know and actually knowing what to do can result in two different outcomes. If you are doing what you know and aren’t making a profit, then try something different. Figure out what you need to do, create an action plan, and then execute the plan.

You must do something. To me, a poor plan implemented to the fullest is 100% better than a perfect plan never started. Even if you lose money after implementing your plan, at least you now know you can cross that option off your list!

Need a place to start? Here is a simple three-step plan I share with the companies I work with every day:

Step 1: Create the correct selling price. I assure you this correct selling price will likely change as your business progresses, so give yourself some slack on this step. Go through the exercise and put your price together based on your current business assumptions — what you know about your business, right here, right now.

Step 2: Start selling with your new price. Be confident in your selling price and take it to market. You’ve done your homework and crunched your numbers. This is the selling price that will allow you to invest in your business, support your employees and deliver superior service to your customers. Be proud to offer the best value option in your area.

Step 3: Track your selling price assumptions. Once you start selling at your new price, start measuring the assumptions you used to determine your selling price. If you find your actual results are significantly different than your assumptions, refine your selling price to reflect the actual results you’ve been tracking.

Here are the top assumptions I use to determine and measure my correct selling price:

Annual overhead cost;
Annual labor cost;
Annual labor hours paid to techs; and
Annual hours sold by techs (billable hours).

Remember, your correct selling price will change over time and that’s a good thing. That means your business is changing and growing and driving profitability.

All roads lead to sold hours

Want an even simpler place to start? Focus on one of the assumptions in your selling price and get that right. The No. 1 indicator of your business’ success is your annual sold hours. Sold hours is a direct reflection of every aspect of your operations — all roads lead to sold hours. Each of these operational roads has a direct and significant impact on that business assumption and your profitability as a company.

Call count. The first road to travel is your call count. Do you have enough calls for your techs to run? If not, take a look at your marketing. Do you have a marketing plan? Is it working and are you tracking your calls by marketing tactic?

Remember, marketing is one of your top five costs and one of the riskiest. There is no guarantee any given marketing tactic will work, so track as many as you can, cut your losing tactics and double down on your winners.

Be careful not to just focus on getting more calls without making sure you are capturing the calls you already receive. Train your call takers. CSRs and DSRs are the first and sometimes last people at your company to talk with your existing and potential new customers when they call.

Don’t allow your call center to be treated like gum on the bottom of your shoe. The call center is your company’s first opportunity to win that customer and book the call. Without a booked call, you have nothing. Improve your call center.

Conversion rate. The second road to driving your annual hours sold is a conversion rate. Here’s a scenario: You have two techs, each of which ran 10 calls and brought in $10,000 for the week.

Tech No. 1 closed nine out of 10 calls and averaged $1,111 per sold call, while Tech No. 2 closed one out of 10 calls and averaged $10,000 per sold call.

Which tech is the best tech? Which tech can help your company build a solid foundation of repeat customers? Many of you are thinking Tech No. 2 would be the best choice. While I’m not opposed to an average sale of $10,000, I certainly am if it destroys my customer base in the process. Tech No. 2 had only a 10% conversion rate. You can equate that to your favorite baseball team bringing in the reliever in the second inning; never a good thing.

Your goal is to have a close rate of 90%, which is what Tech No. 1 provided and the same weekly revenue. Fix your conversion rate and you can reduce your marketing costs to support a growing and sustainable business.

Average ticket. After you’ve fixed your conversion rate, then and only then can you set down the third road and shoot for that $10,000 average ticket. Offer your customers multiple options. Take the time on your calls to find out what your customers want. You already know what they need, that’s why they called you in the first place.

If you complete your calls only taking care of customers’ needs, that’s good, but you’re not maximizing opportunities to increase value for your customers and raise your average ticket.

The right people. The final road to improving your sold hours is to make sure you have the right people doing the right job. Hire people smarter than you. Think of it this way, “If the objective in your business was to climb a tree, would you hire a squirrel or train a horse?”

Said another way, you should be slow to hire and quick to fire. Take your time when interviewing candidates to make sure you have the right person before you turn over the company assets to that person. It’s not enough for them to have a pulse and breathe.

On the flipside, if you’ve made a bad hire, be quick to take action and end the employment. Don’t hang on to low producers.

To help give you the time you need to find those right people, make sure you are recruiting every day. Recruiting is not hiring. Recruiting is building a database of the right people to hire when the time is right.

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