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It’s All Up from Here! A Guide to Growing Profits, Gaining Customers for Life and Building Wealth in Your Service Business
Profit Strategies President & CEO
Jim D’Amico
It’s All Up from Here! A Guide to Growing Profits, Gaining Customers for Life and Building Wealth in Your Service Business
Jim D’Amico
Copyright 2014 Profit Strategies, Inc.
“(Business People) each and everyone believing... because I understand how to do the technical work of a business, I can run a business that does that technical work. And it’s 180 degrees from the truth. Knowing how to do the work in a business has nothing to do with a business that works. It is the fatal assumption in almost every business you walk into.*” Michael E. Gerber, “The E-Myth” * Michael E. Gerber Companies. Used with permission.
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Why write this book? In 1990, I was running our family fuel business that my Dad started, as well as the heating and air conditioning division I started in 1980 with my father’s blessing. The fuel business was struggling from the price spikes of the 70’s and 80’s and also from a very aggressive utility that was converting oil customers to natural gas on an almost daily basis. I had worked hard at the heating and air conditioning business, but after ten years of reinvesting most of the profits back into the company to grow the business, my wife was asking, “When does this get better for us?” I didn’t have a good answer. Tight money, along with all the other challenges business owners face, caused me to re-think where I was and where I was going. I was turning forty and I was in the throes of career burnout. I had had enough. 4
So in 1992, I sold the heating and air conditioning division. I temporarily stayed in the fuel business because the margins were strong and due to signing a long-term contract for hauling fuel to my customers, I had fixed fuel delivery costs. I then shifted into a new career. From 1995 to 1998, I represented a company that provided a flat rate pricing system for HVAC and Plumbing repairs. I learned all I could about flat rate pricing. In 1999, I launched Profit Strategies with two business partners. The prospects for success looked good, so I sold the fuel business in 2000 and never looked back. I learned a tremendous amount both about myself and about business in the twenty eight years from college graduation to selling my fuel company and starting Profit Strategies. Of course, my education continues. My purpose here is to help readers gain insight into running a successful service business by avoiding service pricing mistakes and failing to grow a solid repeat-customer base. Both areas are where most service companies struggle. I truly hope you enjoy reading this book and improve your service business success as a result. Please let your friends and colleagues know about this book and hopefully they will also gain from it. Jim www2.Coolfront.com/ItsAllUpFromHere 5
About Profit Strategies February 2014 I’ve been fortunate. I decided to re-invent my career in my late forties and I was able to do so. It wasn’t the most comfortable decision, especially for my wife and kids, but thankfully, success has followed. My company, Profit Strategies, recently celebrated fifteen years in business. In 2011, we turned the page in our flat rate book publishing business and decided to join the digital world by developing an app for the service trades. We are fully engaged in and committed to developing superior products using digital technology and cloud computing. I am happy to say, our success in this area is revving up quite nicely. We continue to provide a paper-based flat rate pricing system, 6
Quality Service Pricing™, for servicing Heating, Air Conditioning, Plumbing and Electrical equipment. We have a cloud-based maintenance agreement marketing and management system, Service Frequency™ that we introduced about four years ago. Our newest product is a cloud-based app called Coolfront®. Coolfront provides flat rate repair pricing for HVAC, Plumbing and Electrical systems, as well as work order scheduling and management. I believe our products give our customers the greatest opportunity for success. Our flat rate pricing system in book and app form and our maintenance agreement system are designed to increase service business revenue directly and/or through gains in efficiency. I’m passionate about my company. I have a genuine concern for our staff and for continuing our business success. But, I am most concerned about providing quality products and outstanding customer service for our customers. At the time of writing, Profit Strategies has helped thousands of companies earn tens of millions of dollars. Helping others gain success gives me great satisfaction. I now look forward to an even brighter future as thousands of HVAC technicians, Plumbers, Electricians have taken the next step by using Coolfront, the only flat rate pricing app available to the mechanical trades.
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My excitement continues because I find this business provides great fun and much personal satisfaction. Jim D’Amico President & CEO Profit Strategies, Inc.
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Catching Up DJ was “up” for the dealer meeting sponsored by a local equipment distributorship. It was the one time each year that he could catch up on the new trends in the HVAC industry. Like his dad, he really enjoyed the technical side of the business and wanted to be sure he attended the technical training that was offered. Since he started working in his family’s heating and air conditioning business, DJ always worked long hours. Consequently, he had little time for such events like dealer meetings and business management training. Over time, he had grown to accept that fact, partly because now that he was over thirty he was starting to “get it.” At least that’s what his father, Don J. Sr. was telling everyone. Partly too, because he had lived the business his whole life and watched his father sacrifice many meetings and even important family gatherings and events due to 9
business responsibilities. When DJ first started working for his dad’s company, he would, on occasion, gripe about how many hours he put in with such little reward. Don told DJ to “suck it up and get used to it.” Don said, “You may not get rich running this business, but you’ll always have a job. That’s worth something.” Once in a while he would add, “It’s always been good enough for your mother and me!” DJ often thought about his father’s “job” comment and he had some concerns about all the responsibility for just a “job.” It seemed to him that if he had a job at another company he would not have to “live it” twenty four hours a day. He liked the business, especially troubleshooting equipment breakdowns, but at the same time he had the feeling he was running out of career and life choices. You see, DJ’s life had changed. He now had a loving wife of three years and a newborn daughter. He loved both of them very much. However, that responsibility, combined with running the family business, gave DJ the feeling he was becoming his dad. That was OK, he had a lot of respect for his dad, but he recognized the sacrifices that went into his dad’s lifestyle. DJ’s mom and dad were always there for him, even helping with the down payment on his starter home. His wife, Kelly, worked a full-time job and intended to return to work after her maternity leave. Her job was imperative to their financial survival. 10
Recently, DJ was thinking about the path his father had chosen and was wondering if it was right for himself. Over the years, Don had done pretty well, but DJ remembered lean times too. He had some genuine concerns about providing for his family now that he had the awesome responsibility of raising a child. DJ came in late on the day of the distributor meeting, having to run a service call on the way there. At the first meeting break, DJ ran into David from Dave’s Heating and Cooling. DJ and David always got along well. His father always said Dave’s Heating and Cooling was good competition because they knew what they were doing. To DJ, that meant that they didn’t mess up their service and installation work. They also didn’t give the jobs away. In fact, Don Sr. often remarked that he didn’t know how Dave got so much money for his work. Like DJ, David was working with his father, Dave. Actually, there were a lot of similarities between DJ and David. Both young men were the same age, both had been married for three years and both just became a father for the first time. Even more interesting was both of their companies were started the same year. In addition, Don Sr. and Dave Sr. had worked together at a local contracting company before going into business for themselves. Back in the day, upon learning they were both ready to go off on their own, Dave Sr. spoke with Don Sr. about forming a partnership. However, Don Sr. was the superior technician. 11
Everyone at their old company knew that. Don was the go-to guy whenever there was a service problem that nobody could figure out. He was never stumped and never outdone. Don could troubleshoot anything and everything. He was acknowledged by his boss as Mr. Fixit. He was well-liked by customers and coworkers too. Consequently, when discussing a partnership with Dave, Don was concerned that Dave’s technical skill set wouldn’t match up with his own and he didn’t want to always have to cover for Dave on service. He once told DJ, “I always figured, if I have to cover for the other guy, I might as well just do it myself. Taking on a partner would only mean that I would share the profits, but take on most of the workload.” As a result, Don told Dave he would go it alone. Dave, by his own admission, was not as technically proficient, but he was a fast learner. As Dave used to say, “You only have to show me once and I got it forever.” Dave had studied business and accounting in college and he was quick with numbers. He was also one heck of a salesman. Both skills served him well in business. Being easy to talk to, handsome and articulate didn’t hurt either. Early on, Dave began to attend business training sessions offered by manufacturers, local distributors and national trade associations. He paid close attention to sessions dealing with pricing for profit and how to get and keep customers. He quickly 12
recognized the challenges facing small business, especially service and contracting firms. He realized that he didn’t have all the answers and he could always improve the way he ran his company, even if it was only by making things better one percent at a time. He was quick to implement change in his organization. Soon, Dave was out of the service truck and behind a desk, orchestrating the daily activities of his office, sales and technical staff. At the distributor meeting, David said Dave’s Heating now employed over fifty people and was expanding into other services like plumbing, electrical and home security. Indeed, Dave’s Heating and Cooling was considered a shining star and among the best in the business. In fact, the company had received several industry and local business awards for excellence. By contrast, Don’s Heating and Air Conditioning, while also considered top notch, employed just eight people and it seemed every year was a roll of the dice to determine if the company would make money. DJ and David began comparing notes on the local economy and the HVAC industry. They both observed many of the same customer attitudes and they were both aware of the pool of local talent. They discussed trends on new equipment and exchanged ideas about how social media was impacting their businesses. DJ told David he thought it must be exciting to be a part of an ever-growing company that is recognized to be one of the best. 13
David responded that he found the family business very rewarding and he confided that although he had significant responsibility, he didn’t think he could have greater earnings potential anywhere else. DJ was taken by surprise and just slightly envious. He was thinking about long hours he was working and wondered how he and Kelly would be able to balance running the business with her work schedule while raising their new-born daughter. He assumed that in order to expand the way Dave’s Heating was expanding, more hours would be required. He thought too that Dave’s company must be in significant debt. He was surprised when David said that his company was up to date on all their bills, took discounts when offered and as a result of their great credit rating, they received very competitive pricing on parts and equipment. David asked DJ if he would be attending the session on growing business profits. DJ said he was planning on attending a technical seminar instead. David suggested DJ should attend the profits seminar. David said his father credited the speaker, Ken, with providing the information many years ago on flat rate pricing for service that had the single most important and positive financial impact on Dave’s Heating and Cooling. David then said, “You’re a pretty good tech right?” DJ said, “I think so. My dad taught me everything and he’s amazing.” David responded, “OK. The way 14
I see it, the last thing you need is another technical seminar. Do yourself and your company a favor and learn how to turn a profit in service. This guy Ken is not only talking about flat rate, but how it all ties into maintenance agreements. He’s also discussing the new mobile app that his company developed. We’ve been doing flat rate for almost twenty years. Now we’re doing flat rate using mobile technology. This is a really great system, so I want to learn even more if I can. Why don’t you join me to hear what this guy has to say. If you’re interested, I can fill you in later on what we do in our company.” Then he added, “You know, my dad has a saying...’It’s all up from here’. When I was a kid I didn’t understand what that meant. I do now.” DJ thought for a moment and said, “The problem is my Dad is set in his ways.” David replied, “You mean he doesn’t want to make more money?” They both chuckled. “No that’s not it, everyone wants to make more money” David said, “I’ll tell you what. Come to this seminar with me. If you want to make some changes and you need a little moral support, I’ll talk to my dad. We can grab breakfast some morning with you and your dad. If Big Dave can’t convince Big Don on 15
the reasons why he needs to make some changes, I’ll buy. If Big Dave convinces Big Don, you buy. I guarantee, the cost of that breakfast will come back to you a thousand times over in the next couple of months. What do you say?” “I sure hope you’re right. I can’t afford to be buying anything extra!” said DJ. David replied, “I get that. Newborns add a lot of stress to the budget, don’t they? Well, that’s about to change for you. As my dad says, ‘It’s all up from here.’ ”
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The Profit Seminar It Starts With Flat Rate Pricing DJ and David attended the afternoon session presented by Ken, a nationally-known speaker. The seminar was all about service pricing and profits, longevity in business and how to make it all happen. Ken focused on flat rate pricing, maintenance agreements and his company’s new mobile app. DJ had read articles about flat rate. He and his dad had discussions in the past about flat rate pricing. In fact, Don Sr. had tried flat rate some years ago, but his company had moved back to time and materials pricing. But DJ didn’t realize he had so many misunderstandings about the subject. Many of those misunderstandings reflected his father’s bias due to improper implementation, not necessarily about the facts on the subject. 17
In the seminar, Ken asked how many companies were using flat rate pricing in their service departments. A show of hands came to about half the companies in attendance. Ken then asked what system they were using. One or two flat rate providers dominated, Ken’s company being one of them. But, there was a smattering of other flat rate providers being used across the group of attendees. Some of the contractors said they did their own flat rate. By digging deeper, Ken found that of those that said they were using flat rate pricing, many were using a hodgepodge of time and materials pricing and flat rate. Most of those companies were making up repair pricing on the fly without any basis in accounting, mathematics or desired net profit. Ken asked, “For those not using flat rate pricing, is it safe for me to assume you’re using time and materials pricing?” All responded, “Yes.” Then he said, “O.K., I have another question. When you started in business, who told you to use time and materials pricing?” There were some blank looks, some puzzled looks and a few laughs. One big guy, Billy, in the front row said, “That’s the way my Daddy did it. He said we had to. He said that’s what everybody did.” Ken smiled and said, “And you always did everything your Daddy told you to do?” Billy responded, “Yes sir. If I wanted to stay alive. You don’t know my Daddy!” Everyone laughed. Other comments were, “I don’t know how to do it any other way.” “My customers want to know I’m charging a fair price.” “I don’t want to gouge my customers.” “I’m an honest businessman and 18
I don’t want anything to cause my reputation to be tainted.” “We talked about it, but my guys were against it. If I can’t get my guys to do it, I can’t do it!” “I don’t think it will work where I come from.” Ken said, “Great. That gives me a good place to start. The gentleman in the back said he doesn’t think it will work where he comes from. I will tell you there is one place it won’t work.” He brought his hands up to his ears and tapped his ears repeatedly and said, “It doesn’t work between the ears. That’s right. If you think it won’t work where you come from, it won’t work. If your mind is already made up, it doesn’t matter what I or anybody else tells you. And that’s true in everything. Henry Ford once said, ‘If you think you can do a thing, or you can’t do a thing, you’re right.’ ” Ken continued, “For those of you that think it may be unfair to the customer or harm your reputation, remember that you set the rates that build your flat rate system, nobody else. You can make those rates as high or low as you like. But, the real value with flat rate is you can set those rates at a level that will allow you to make a profit. Did I say Profit? For some here that may be a new concept!” A few laughs could be heard around the room. “If you’re concerned that your service staff will resist and refuse to use flat rate pricing, ask them to think about their own pay and benefits and their concern for their job. I always ask the following questions, ‘How will you get higher pay and better benefits if your company is just 19
getting by and doesn’t earn a profit? How will you keep your job if you refuse to obey the policies and procedures your boss has established in his company?’ They start to pay attention when you start bringing it back to their pay and potential to earn a living.” “Remember, flat rate pricing is not a license to steal. It’s a proven pricing method that will allow you to turn a profit in your service division. It puts the decision about what a repair should cost in your hands and takes it out of the hands of your service guys. And you know, when your guys are confronted about the labor or part fee that your company is charging for a repair, they will always give in to the customer. They don’t want to fight. Here’s why. First, it’s uncomfortable to be at odds when they are working in a customer’s home on the customer’s behalf. Second, they are going to get their pay regardless of what the customer pays. Think about it. You’re the guy that loses out, not them. Now, I know I can’t convince you to change what you’re doing without good reason, so here we go.” Ken explained that the best way for a contractor to really know what to charge in service and installation, was to have a clear understanding of the financial data of his company. He said, “I encourage you to departmentalize your income statement. You have to know your income and expense by service and installation department to accurately price your service and installation work.” Ken said, “You need an accurate income statement and cash flow report. If you throw everything into one bucket it will only tell you if you made or lost money as a 20
company. That method will not tell you if each department is profitable and whether you can become more competitive in one area over another. Without departmentalization you cannot recognize your growth opportunities or where cash is being drained. It’s like flying a jet plane without a navigation system and a fuel gauge. You’ll end up landing somewhere, but you may not be anywhere near where you want to be. Worse yet, you may run out of fuel before you land. Think of your income and expense statement as your navigation system and your cash flow report as your fuel. My goal is to get you to stay on course and experience a nice smooth landing precisely where you want to be before your fuel runs out and you crash and burn!” One attendee, Mike, said “Man, I don’t have all that financial data until I get around to sending the numbers to my accountant. Even then we don’t break it all out. So what do I do?” “Well,” Ken said, “this isn’t the best way to do it, but take your current hourly rate and add ten, twenty or thirty dollars per hour to that rate and give it a try. If you explain about your service call or diagnostic fee to the customer right upfront and then quote the repair right there on the job, you’ll probably be surprised at how easy it is to get the new rates. If your customers complain and you’re doing everything right, that is keeping them informed, you can always use a lower rate. My guess is that won’t happen. But remember, that’s only a stopgap measure. You still need to take the time to understand your financials. Pay your accountant an extra hour per month to give you some financial training. Go to financial training seminars, it will be worth the investment. 21
DJ recognized the value in Ken’s message and began to pay attention to the details he was discussing. He also now understood why Dave considered Ken his mentor. Ken had a lot of good practical suggestions. DJ felt pretty good about departmentalization. Don’s Heating had been separating their income and expenses by department for many years. There was one big problem. DJ knew their service department struggled to make money, even in busy times. He knew that quoting their hourly labor rate placed them at the limit that most customers were willing to pay for a technician to complete repair work. He and his dad feared raising their hourly rates. Their fear of going beyond the rate they currently charged by the hour became a built-in threshold guaranteed to lock them into losing money in service, year after year. Back a year ago, they tried to raise their rates, but they had so many complaints from customers, they nearly faced an insurrection from their staff. They just couldn’t bring themselves to raise their labor rates again and answer to irate customers about what they perceived to be very high labor fees. Month by month, as expenses went up, it became a bigger problem. They knew they had to raise their labor rates, they just didn’t know how to do it without compromising their customer relations and reputation. Losing money in service placed the company in jeopardy. It added more pressure on their salesman to sell more equipment to make sure they could meet their expenses. Consequently, they often lowered their installation pricing to “buy the job” as Don Sr. would say, to keep positive cash flow through the company. 22
“We do what we have to do to keep the lights on,” Don would say. Their salesman was never really pleased in cutting prices because he would consequently earn less in commission. To that Don would say, “Hey, half a loaf is better than no loaf at all!” It was a never-ending cycle. Ken also discussed unapplied or non-billable time. He explained that technicians generally only bill out four to five hours a day, but techs are paid for eight hours. “That means the company pays for travel, conversations with customers and the dispatcher and very often the expense of running for parts at a distributorship,” Ken said. DJ knew his company never billed all the hours for which their technicians were paid. He began thinking long and hard for the first time about a couple of goals Ken had discussed. Ken mentioned that a company goal should be to bill every hour for every technician at their retail labor selling rate. The word “retail” struck a chord. Whenever he and Don Sr. talked about pricing, they always seemed to talk about their costs. The cost of labor, the cost of equipment, the cost of parts and materials. They never really discussed what a job or repair was worth or what they should expect a customer to pay for their knowledge, expertise and good workmanship. Perhaps most importantly, Ken said overhead expense on service, due to unapplied time, increased to about fifty to fifty-five 23
percent of each service sale. “Unapplied,” he said, meant there was no job to charge labor against, so the time went un-billed. He also said a ten percent net profit in the service division would require a sixty to sixty five percent gross profit margin on every repair. Ken said, “If you’re running your business out of fear you will become paralyzed and you won’t make good decisions about making money. You need to get over your attitude and concern about repair pricing and start thinking about reinvesting in the business to assure its success and continuation and ultimately your pay. What good are you to your customers if your company doesn’t survive?” Ken asked. He then said a well-designed, wellthought-out flat rate pricing system was the only way he knew that would consistently deliver the appropriate desired net profit every service company needs to stay in business. He added, “If you just want to work for wages, go get a job and get rid of the headaches of running your company.” DJ’s interest piqued, but he needed more information to get on board completely. Ken explained that when properly implemented, flat rate pricing allowed service companies to raise rates and enjoy improved customer satisfaction at the same time. Ken said, “Think about it. Customers only have two questions when their system breaks down. What’s wrong? And, how much? You have an obligation to let them know upfront about needed 24
repairs and what each repair will cost. There is nothing customer friendly about keeping quiet about needed repairs and the cost of those repairs until after the work is completed! Would you be willing to buy a new pair of shoes not knowing if those shoes were sixty dollars or a hundred sixty dollars? Would you fill your gas tank without knowing what each gallon of gas will cost before you pump it? Of course not! Your customers need to know what’s wrong and how much it will cost them to be able to make a good buying decision. Moreover, it’s their comfort system, not yours. Since they are on the hook to pay for the repairs, they have a right to know before the work is done!” Ken went on to point out that regardless of the cost of a repair, its far better to discuss the cost prior to turning the wrenches on the system. “After the work is completed is not the time to discuss what repairs were completed and at what cost. Such discussions in advance of repair draw customers into important dialog about repair versus replacement.” He said the time to consider replacement equipment is before your technician spends the time to install parts. There is significantly more anxiety for both the customer and your staff when a customer decides after repairs are completed to then replace their comfort system. “Remember, customers are never happy when they need repair work. It makes no sense to create a situation that makes the customer more uncomfortable and adds even more pressure to the customer experience. Keep in mind, customers want to do business with a service company that is professional, honest and upfront. Flat rate pricing promotes price and repair discussions up front. Since you are the professional in the eyes of the customer, you need to act the part, every day on every call. Flat rate pricing underscores 25
your professionalism.” Ken explained how easy it is to accomplish. “It all starts with how you handle the initial phone call from your customer. You and your office staff should tell the customer that your company will charge a service call or diagnostic fee to get to the house to determine what repairs are needed. Next, say that once the needed repairs have been determined, your technician will quote the repair before completing the work. That places the customer in a position to make a buying decision about the repair. If the customer is faced with an expensive repair on an old system, he or she may decide to replace rather than repair. If the customer is unsure about what to do, your technician can give advice. Keep in mind that customers have confidence in the technicians working on their system, much more so than in a sales or office person. If a customer is not satisfied with the repair quote and wants to shop your price, you should then simply collect for your service call or diagnostic fee. Explain that if the customer calls back for the repair within a week, you will not charge another service call or diagnostic fee. That’s only fair.” What was being said made a lot of sense to DJ. He realized that his company had two major problems. The first problem was they couldn’t raise their rates using time and materials pricing. The second problem was they usually failed to properly inform customers about their rates on the initial call for service. Complaints about labor rates and time on the job were frequent. He remembered his dad telling him that when they tried flat rate pricing, customers were complaining about service call fees and 26
they argued about the charges after the work was completed. DJ realized now that those complaints were all indications that his staff was failing to communicate with customers about their fees each step of the way. In fact, he recognized that telling customers, “We’ll have somebody there right away,” does nothing to shape a customer’s expectations about service fees or the company’s expectation of payment upon completion. Nor does it address repair warranties. All vital information to promote a good customer experience. Ken then asked a rhetorical question. “Have you ever received a call from a customer asking you to sell them some time and some parts?” There were a few chuckles around the room. Ken smiled and said, “Of course not. So why are you giving them all that information? The clock becomes their measuring stick against your hourly rate. And when they get to the end of that stick, that is, the length of time that they believe is reasonable, they beat your technicians with it to work faster by saying things like, ‘Hey, how much longer is this going to take?’. Or, they poke and prod them with that stick and refuse to pay the bill unless the tech makes a fee adjustment. Or worse yet, your technician, in an effort to avoid the beating in advance, just doesn’t bill all the time on the job. Maybe you’ve noticed your technicians are always more willing to argue with you than the customer. That’s because they can’t always justify why a repair took so long to the customer, but they can always justify saving the customer to you.” Ken said flat rate pricing doesn’t necessarily allow a company to 27
bill every hour that each service technician works, but it allows for labor rates high enough to compensate for those hours that cannot be billed. Ken said he once heard, “Money doesn’t solve all problems, but it makes all problems solvable.” He added, “In my life I have spent time with no money and I have to tell you, life is more fun when you have money. So, money is a good start to solving your problems.” Ken said, “OK, let’s review. We talked about the many reasons why flat rate pricing is better overall than time and materials pricing. Here’s a recap of why it’s better for the customer. First, it keeps the customer informed and addresses the two important questions, ‘what’s wrong and how much?’ Second, flat rate allows the customer to make informed decisions in advance of repair about repair versus replacement of their equipment. Third, it allows customers to relax about repair fees. Flat rate pricing is not an open-ended arrangement. More time on the job will not cost more money. Fourth, there are no surprises after the work is performed. The repair that has been recommended and approved is the work that is completed. Fifth, the customer never pays for education of apprentice and journeyman technicians. If your tech takes longer because of his lack of skill, the customer doesn’t incur that expense. Of course, that places the expense of educating and training your technicians on your shoulders. But, I think we all agree, it’s the service company’s responsibility to send competent technicians out into the field. How does flat rate help the technician? First, the technician can relax knowing the repair has been approved before the work 28
begins. Second, technicians can be more thorough because they don’t have to rush to keep repair fees low. Third, techs can complete thorough diagnostics because the customer has been informed up front, by the office staff, about the service call or diagnostic fee. Fourth, it eliminates guessing as to how much time it will take and multiplying that time by the hourly rate to answer the customer’s question ‘How much?’. Fifth, once the problem is diagnosed, technicians quote a total fee for the repair right from their pricing guide and ask for customer approval to complete the repair. That process makes the technician more professional and keeps the technician in control of the process. Sixth, upon approval, customers generally allow the technician to do his job without interruption. Seventh, upon completion, the technician completes the invoice for the appropriate service call fee and repair fee without concern the customer will press him for a lower price. Eighth, because the technician is no longer adjusting repair fees downward to satisfy the customer, lengthy explanations to the boss as to why he didn’t charge for all the labor on the repair simply go away. All of the reasons I just mentioned give validation to the technician and his role with the company, thereby promoting greater job satisfaction for the tech.” Ken continued, “What about office staff? Well, they find it better all around, too. First, the process promotes better communication from the staff to the customer about the service call or diagnostic fee. The office staff should also communicate that the technician will quote the repair fee up front. Those talking points eliminate complaints both on the job and after the fact. Second, fewer 29
complaints about pricing allows the office staff to remain more relaxed and focused on important tasks. Third, your company will experience lower call volume as a result of fewer questions or complaints about pricing. That allows everyone, especially service managers, to deal with customer needs rather than revisiting past customer invoices. For the company the benefits are numerous. First, flat rate generates more money than time and materials pricing. Second, flat rate allows the technician to complete repair billing with fewer math errors. Third, a good flat rate system will display maintenance agreement discounts, thereby giving technicians an easy way to offer and sell maintenance agreements. Fourth, because there are fewer complaints, the entire staff has a better attitude day in and day out. Fifth, with increased rates and higher margins, the owners gain a better return on investment.” Ken said it was time for a break. Afterward, he would address maintenance agreements and mobile technology. DJ and David stepped into the hall outside the meeting room. “Wow! You were right, this guy really knows his stuff,” DJ said. “I really didn’t think I would get much out of this. I just hope I can remember half of it.” David responded, “You don’t have to remember all of it. The best part of dealing with Ken’s company is they provide excellent training and great customer support.” 30
“That’s good to know” said DJ. “Well, my dad always said that regardless of what he buys, he would rather pay a bit more to get good quality products and service. He always said, ‘When you buy cheap, you buy twice.’ ” DJ said,“I’m looking forward to what Ken has to say about maintenance agreements. We’ve tried over and over again to get our maintenance agreement program off the ground, but we’ve never been successful. We have about a hundred twenty, but every time we grow to about two hundred, something happens, like an employee quitting and things start falling through the cracks. Tune ups get pushed back and customers leave because we didn’t get to their tune up on time. We lose our focus, renewals drop off and our guys stop selling them. We even had to extend customers’ agreements for another year to salvage the accounts.” “Actually, that’s all very common,” David said. “First, you need to develop a system that works and then you need to work that system to be successful at selling maintenance agreements. Let’s go back in and hear what Ken has to say,” said David.
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The Agreement Session When the meeting resumed, Ken asked if the attendees believed they learned some new information about flat rate pricing in the morning session. Everyone said they had. Some of the attendees had more questions. Ken said he would be happy to talk with them after the meeting or by phone over the next few days. Ken continued, “There are two things about maintenance agreements that I am about to tell you that are really important to the success and longevity of your company. If you don’t remember anything else, remember this; first, maintenance agreements provide you customers for life. And second, while flat rate pricing allows you to earn enough money to pay yourself what a business owner should earn, its maintenance agreements that allows you to keep earning it, year after year. The combination of earning more money on a repeat customer that stays with you, year after year, is unbeatable. 32
Even better, you may actually find your revenue is increasing. Here’s why. As you grow your customer base with maintenance agreements and provide good quality service, customer satisfaction and customer retention should improve. It has also been shown by companies that are very successful selling maintenance agreements that equipment and ancillary product sales increase as well. And, the revenue generated from additional service, equipment and ancillary product sales is significant. In fact, over a ten-year period, you can expect cumulative sales to every maintenance agreement customer to total about seven thousand dollars. That’s seven hundred dollars per year! If I’m not mistaken, that’s far more than you can expect to sell to each customer without an agreement. So those are the obvious benefits. But there is another benefit that you may not have thought about. Maintenance agreements have a big effect on your company’s value when it’s time to check out. That’s because, when it comes time for a service business owner to sell his company, the only really significant asset is his customer list. Here’s why. Business appraisers generally only consider customers to be real customers if they have done business with you within the last eighteen months. Nothing else matters. Now you’re probably thinking, but what about my trucks and inventory? Well, anyone can buy used trucks anywhere. Right? And anyone can buy parts and equipment anywhere. Right? So what is all that stuff worth? Think about that junk you’ve been moving from shelf to shelf and bin to bin hoping for the day 33
you can unload it on some unsuspecting sucker. I’m kidding of course.” There were a few laughs. “But you know, everyone has dead inventory they’ve been counting, over and over again, for the last five years. What’s that worth? Basically nothing. Therefore, the value of maintenance agreements becomes even more significant because they provide your company repeat business. And that’s what business analysts look for when they value your business. Consequently, a sizable maintenance agreement customer list provides more value when you decide to sell it or pass it on to the next generation. That, my friends, is the reality of your situation. So, you have two choices. One, don’t begin a maintenance agreement program, advertise like hell, year after year and hope the phone will ring. Or, two, begin a maintenance agreement program, advertise like hell, year after year, and hope the phone will ring. But when that phone rings, sell that customer a maintenance agreement so that eventually you won’t have to advertise like hell, year after year. Another word of advice, you have to recognize that maintenance agreements aren’t a get rich quick scheme. But if you do it right, by providing your customers quality service, quoting flat rate fees upfront and maintaining your customer base by selling each of them a maintenance agreement, you will ultimately do much better and beat your competition to the punch and to the bank!” Ken said, “OK, now I’m going to tell you why you have no choice 34
but to offer maintenance agreements. There’s a situation that has developed over the last fifteen to twenty years that demands that you implement a maintenance agreement program. Allow me to start with a question. How many of you are seeing a decrease in demand service?” Nearly everyone in the room raised their hands or nodded in agreement. “A couple of you aren’t experiencing a decline in service. Please tell me what you’re doing.” David was quick to tell Ken that his company had recently expanded into plumbing, electrical and home security service. Another contractor said his company, up until five years ago, strictly installed systems in the new house market. They were now tapping into the long list of customers that had moved into those new homes for service work to take up the slack when the housing market slumped. Still another contractor said that he moved his company into commercial service and also expanded his geographical reach. Ken said, “OK, all of that makes sense. Obviously, you’re not seeing the decline because your companies have been pro-active in seeking service work in new ways and in new markets that are now contributing to the expansion rather than the contraction of your service businesses. That’s good. But in general, most companies are seeing a real decline. It’s been going on for a while now and for several reasons. One 35
reason is extended warranties. Once manufacturers began offering five and ten year warranties, demand service began to slow. That’s because manufacturers are requiring annual maintenance on those systems to keep the warranty in effect. Systems that are maintained annually have fewer breakdowns. Another reason is the systems now being installed are designed to house and building specs much better than systems from years past. Sales engineers for years have been completing load calculations to properly size equipment, making certain that duct sizing is matched with the BTU and blower capacity of the furnace and air conditioner. On older systems now being replaced, those improvements ensure the systems cycle properly and operate at peak efficiency with fewer breakdowns. Equipment in general has improved due to better manufacturing techniques. There has also been significant improvement in the education of the of installers and technicians. Fewer installation and service errors make for fewer breakdowns. Now that’s a good thing, but once again it cuts down on demand service. In general, parts today are far superior to their predecessors and much more reliable. Lastly, federal tax credits for replacement equipment in recent years took older equipment out of service, in some cases, years sooner than one would have expected. So, there you have it. I believe those are very compelling reasons to offer maintenance agreements. I think you will agree, a service business without maintenance agreements will certainly be a struggle, a struggle to survive.
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Any questions? “Yes, I have a question. I don’t have a clue about how to get started. What do I do?”, asked Billy. “Well, some hire consultants to get them off the ground, some decide what they want to offer and then hire graphic artists to design brochures and sign-up forms. Some buy prepackaged forms and documentation on how to manage the agreements once they start selling them,” Ken said. “You have to remember, whatever you do will take effort. Getting started is only the beginning. When you take a customer’s money and agree to render service at a later date, you have to honor your commitment. Check the laws in your state because you may have to place money in an escrow account until the service work is rendered. You also have to remember to get every tune up scheduled in a timely manner and get the work completed when promised. That way the customer will experience the benefits you sold them when you offered your maintenance agreement. Ken asked for the attendees to share their experience. David raised his hand and offered some information. “We’ve been selling maintenance agreements for many years. We have found that unless we continually remind our staff to offer them, they tend to forget. To keep everyone interested, we pay commissions on agreement sales. We keep a scoreboard up on the wall in our shop and track our agreement sales daily. Every week we hold a staff meeting and we announce the leaders 37
in maintenance agreement sales. At the end of the month, we tally all of the agreement spiffs and at the first meeting in the following month we pay out the spiffs to everyone, in cash. And we use five dollar bills. Those have become the most lively meetings each month because everyone counts the cash out loud, together. Everyone participates in the commissions, including the guys and girls who answer the phone and everyone earns fifteen dollars for selling a new agreement. We have one young woman, Emma, that sells more maintenance agreements than anyone else almost every month. And, she loves waiving that cash in front of those techs and plumbers that are coming up with goose eggs!” Ken asked, “Will you tell us how many agreement customers you have and how you manage the process.” David said, “Yes I can, just one moment.” David took out his smartphone and accessed a website. “We have four thousand six hundred and fifty two maintenance agreement customers as of right now. Hold on, I can give you more information. We have one hundred fifty five tune ups scheduled this week, seventy nine scheduled for next week and it’s only Tuesday. We’ll probably get another fifty to eighty scheduled in the next three or four days.” Did you just access your own website?” Ken asked. “No Ken, I pulled that from the cloud. Just so everyone knows, I subscribe to a cloud-based maintenance agreement service that Ken sold me about three years ago.” “Oh, so this guy’s a shill!” said Billy. Everyone laughed. 38
“Not really. David has a great story to tell and I think everyone can learn a lot about the way Dave’s Heating and Cooling is getting the job done and growing their business at the same time. David, tell us about your program from the time you started to where you are today” said Ken. “Sure,” said David. “We were a lot like most of the companies in this room. When we got going we had good intentions and really expected to boost our business. We did a pretty good job deciding what we wanted to sell, but we did a pretty bad job with everything else. We had some guys that were good at selling agreements but some guys never sold one. As we grew the maintenance agreement numbers, we kept having problems getting the work scheduled in a timely manner. Every time we grew to about six hundred we did a bad job with renewals and scheduling and we would slide back down to about four hundred fifty. So, I hired a young woman, Stephanie, just to work on maintenance agreement sales and tune up scheduling. That helped quite a bit. But, once we got up to between a thousand and twelve hundred she couldn’t handle any more work. Her workday was stretched to the limit. We knew we needed to get her help, but it’s expensive putting on new help, so we kind of maxed out at twelve hundred. Then Ken told us about his web-based maintenance agreement service. We checked it out and it sounded like a good deal. We pay a monthly base fee of ninety-nine dollars and then just fifty cents per month for each maintenance agreement we enter into 39
the system. Billy said, “Good Lord! That system is costing you almost twenty five hundred dollars a month. That’s thirty thousand dollars a year!” David responded, “Actually it’s saving us about ninety thousand dollars a year.” “That sounds like that George Bush’s fuzzy math” said Billy. There were a couple of laughs around the room. “Actually, the math works really well” said David. “We know we need an office person for about every twelve hundred maintenance agreements. With four thousand six hundred fifty two and growing, we would need four to five people to manage the program effectively. Each person would cost us about thirty to thirty five thousand dollars in pay and benefits. Instead, we have Stephanie and one part-time person handling the whole program. Our people enter the customers into the system, select the agreement the customer purchased and they schedule the first tune up. The system then projects the date for the next tune up and schedules it automatically. About two weeks before the tune up is due, the system makes an outbound call to the customer to remind the customer to call our office to schedule their tune up. The system calls the customer five times before it gives up on them. We find that eighty-five percent of our customers return a call to us to schedule their 40
tune up after the first automated call. Think about the time savings. Eighty-five percent of four thousand six hundred fifty two is...what’s that? Almost four thousand calls? Yep, that’s four thousand calls my office staff doesn’t have to make. If you figure two minutes per call that’s eight thousand minutes. Eight thousand minutes divided by sixty is over a hundred thirty three hours. That’s huge! The best part is by reducing your outbound calls your staff can cover more customers. You know how it goes when you call to schedule appointments. The customer says something like, ‘Oh gee, I didn’t think it was time to do that yet. Umm, I’ll have to check my schedule.‘ Or, they say, ‘I’ll have to ask my husband, or my wife. Can I get back to you?’ And then you know what happens...they never call you back. So your girl or guy in the office is trying to chase them down again and again. On the other hand, when the customer calls you to schedule an appointment, they already have a date or two in mind and they have their calendar out and ready to write the appointment down on the appropriate day. It makes the whole process so much easier. But that’s not all. Once the tune up is scheduled, the system calls a day or two ahead to remind the customer the tune up is scheduled. After the work is completed, the system sends a ‘thank you’ email to the customer. Billy raised his hand and asked, “Does it sound like a computer voice on the phone?”
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“Nope. The system is really slick. There is professional voice talent available for a small fee, or you can record your own message. You just dial the number and speak into the phone, just like when you record your voicemail message. We really like it because it allows us to keep growing our agreements without adding more and more staff. The part I like best is the system never comes to work grumpy, or late and it never calls in sick. And, I can find out anything I want to know about the status of any customer’s maintenance agreement at anytime, from any computer, tablet or smartphone. All I need is an internet connection. You all know how hard it is to find and keep good help, right? I sure don’t want to lose Stephanie, she’s been a tremendous asset to our company. By giving Stephanie this system, I can actually pay her more per hour with better benefits and I still come out way ahead. She’s happy, I’m happy and most importantly my customers are happy. And, they stay on our maintenance program. By the way, we use Stephanie’s voice on our messages because a lot of customers have been talking to her for a few years now. It’s kind of a personal touch. There’s a lot I like about the system but the real reason we keep using it is because we can’t manage all those agreements without a bigger staff. So we look at the additional revenue from maintenance agreements as a direct benefit from using 42
the system. Looking at the seven hundred dollars per year per agreement that Ken mentioned, we gain about two and a half million dollars in revenue over and above what we could have gained if we had been stuck at the twelve hundred number. Remember, it’s not about cost, it’s about revenue and profit. That thirty thousand dollars brings me back about three million dollars. That’s a return of a hundred times my cost. Oh, and one more important point. We charge for maintenance agreements monthly to make it easy on our customers. Our credit card payment processing company allows us to enter customer credit cards into the system and set up recurring transactions on the same date each month. We don’t store any credit card information, it’s all PCI compliant. The advantage is, instead of charging a customer say, two hundred nineteen dollars a year, all due and payable at once, we charge just eighteen dollars and twenty five cents per month. Customers really like the low monthly payments because it helps them keep their system maintained and running efficiently and they can budget their money better.” Billy asked, “What happens if you’ve completed a tune up on a customer’s system and they discontinue their agreement before you have been paid in full?” David replied, “Well, it does happen on occasion. We provide the customer a copy of the invoice that displays the value of the work performed when we complete the work. If the customer makes just a few payments and then discontinues, we discuss 43
with them, usually by phone, but sometimes through email, the remaining balance from the last service rendered and ask permission to bill their credit card for the remainder. Most customers agree to that with no problem. We collect our money and then we discontinue charging their credit card. It works really well. If they refuse to pay, we note that fact on their account and if they ever call back for service, we then discuss the need for them to pay the old balance they owe us.” Ken asked, “OK, what do you think?” Todd, seated in the back, said, “Wow, this is an eye opener. We started to see our service work decline, but we struggled to figure out all the reasons why. We also struggled growing our maintenance agreements. I think I need to get on that system. It looks like we can do much better by starting to use flat rate pricing and building our agreement customer base.” Most of the attendees agreed with Todd. Ken continued, “OK, before we conclude the maintenance agreement section, I want you to take away some key points. First, your customers will benefit by having a maintenance agreement because their system will run at peak efficiency and they will be safe and comfortable and they will likely have fewer breakdowns over the life of the equipment. Regular inspection will also likely extend the life of the equipment.
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Second, your technicians will benefit by working on equipment that is overall in better shape because it has been maintained regularly. The workload will level out because tune ups can be scheduled at off-peak times, so the seasonal spikes in the spring and fall will not be as drastic. There will likely be fewer night service calls among those customers with maintenance agreements because of regular maintenance. Customers in general will be more satisfied and less likely to complain. Technicians also have the opportunity to earn additional income by way of commissions for agreement sales. Third, business owners will experience a more loyal customer base with customers purchasing more services and add-on and replacement equipment. Maintenance agreement customers are less likely to be price shoppers when it comes to buying new equipment. And once again, a loyal repeat customer base adds more operating profit and higher value to your business should you decide to cash out. Let’s take a break. When we return we’ll talk about going mobile in your service department.”
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DJ Becomes a Believer DJ walked out of the meeting room shaking his head and wearing a smile. He said to David, “Wow, this keeps getting better and better. I just don’t know how I can make all of these changes without working eighteen hours a day!” David replied, “Well, you can’t do it all at once. You have to focus on one thing at a time. When you get that going then move to the next item on your agenda. I would start out with flat rate pricing because it will have an immediate return. The day you go out with your new rates, you’ll see higher service sales and more profit. Your service profit can go up by twenty or thirty percent immediately. There’s a bit of a learning curve for your people, but once you have that working well, you can move on and start an aggressive maintenance agreement campaign.
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Why Today’s Service is Going Mobile Ken started the last segment of the seminar as promised by discussing digital technology and cloud computing. “So in our final session today we will be talking about digital and mobile technology and cloud computing and the impact it has or soon will have on your service businesses. The term ‘cloud’ simply refers to the ‘internet’. Everyone has certainly seen what has been going on in the last decade. The growth in cloud computing and mobile technology is a movement away from buying an enterprise software system and servers toward a method of leasing software and server space on an as-need basis. And, cloud computing keeps growing bigger and bigger every day. You may not be there yet, but many businesses now recognize that software and computer servers are becoming obsolete so quickly that it makes virtually no sense to buy them. 47
Cloud computing is kind of like renting rather than owning your computer system. Now, for those of you that think you should own a software system, consider this; you’ll have a significant investment perhaps three to ten thousand dollars in software and likely another three to six thousand dollars in computer servers to get a system to serve your needs. Then you will have investment in support fees, upgrades to software, upgrades to memory and a backup system that you will need to pay for as time goes by. Some software companies even charge for telephone support. If you’re a bigger company, you may need a full-time IT person to keep everything running. And eventually, it seems, all computers crash. When that happens you have concern over hardware upgrades and data recovery. Will Rogers, the humorist philosopher from the last century said, ‘I never met a man I didn’t like.’ I say, ‘I never met a computer that didn’t crash!’ The alternative is to have a cloud-based system. That system only requires a desktop, laptop, tablet or smartphone to access your information that is using the software that a company provides via the internet on servers that they also provide. Basically, you pay for what you need. All of the software upgrades, server space, backup systems and support are rolled into one package for one monthly fee.” “So what’s the advantage? It seems to me that you never stop 48
paying” Billy asked. “Well Billy, let me ask you a couple of questions. Do you own a computer system in your business? Ken asked. “Yes, sir.” “Is that the first computer you ever bought?” asked Ken. Billy responded, “No sir, it’s our fourth, I believe.” Ken then asked, “And do you own a software package?” “Yes, we do for accounting,” said Billy. “Have you ever done an upgrade to that software?” asked Ken. “I think we have a couple of times. I see where you’re going. We even had the darn thing crash one day and it took a computer genius two days to get it back up and running. In the mean time, we were dead in the water. My wife had to work six days straight to get everything back to normal after it was fixed,” said Billy “You’re making my job really easy Billy. So, think about the auto industry. It’s like leasing versus buying a vehicle. You can purchase a vehicle and make high payments over four or five years, pay all the maintenance and upkeep on it and at the end of four or five years you own an old car. But you know, somewhere down the road, you’ll have to bite the bullet and put some big money into repairs or buy another vehicle and start making high 49
payments all over again for another five years. Or, you can lease a vehicle for three years, at a much lower monthly payment and at the end of those three years, turn it in and lease another vehicle for another three years. You can even pay a little more and get all the maintenance included in your lease agreement. Over a ten year period you may pay a little more, but you always have a relatively new vehicle to drive. You also won’t be putting more money into expensive repairs. It takes the pressure off of you. It also provides peace of mind. Cloud computing is like a leased vehicle. You will always have a new software system to drive. Software upgrades are automatic and if you need more server space that too happens automatically. It provides peace of mind too. So how do you get a cloud-based system? Well, you first need to research your needs. There are cloud-based accounting systems available. There are also some industry-specific cloudbased systems to serve your specific needs that are emerging as well. Some charge by the ‘seat’ which is another term for ‘user’. Others charge by the devices used by your company. In that case, if you’re going mobile, your company will have to register devices and pay a monthly fee per device. Our system, the one David is using...he seems to be my poster child for all that everyone should be doing...gives the best of all worlds. Our system provides a cloud-based flat rate pricing program that builds work orders, offers dispatch to your field 50
staff, calculates the customer invoices and syncs with your office accounting system in real time. Perhaps the best part is it’s transaction based. You pay no activation fee, no monthly fee and no device fee. You only pay for what you use. You even get fifty trial work orders to test it to see if it’s right for your company. All of that is provided for a small fee, just over one dollar per work order. What’s even better is that small work order fee is recovered in the price of each repair your customer pays to you. It’s pretty neat. David, do you have anything to add?” David said, “Yes, we try to stay up on anything new that we think can help us gain a lot of efficiency and keep customers for life. We heard about the mobile flat rate Ken is talking about from our parts distributor. They have a relationship with Ken’s company. Not only does it do everything Ken mentioned, but we can even order our parts for each of our techs, plumbers and electricians with the touch of a button on our tablet devices. It’s really cool. We have been using it for a little over a year now and the efficiency and accuracy we have gained has been tremendous.” Ken concluded by saying, “Ladies and gentlemen, the opportunities in the service business will always be here. Service work can’t be outsourced to a country overseas. But, you need to realize, it’s not your daddy’s service business anymore. Our world keeps changing. It changed when computers were introduced. It changed drastically again with the adoption of the internet and the introduction of smartphones and tablet devices. And, those devices are now being used daily to run some pretty big companies. 51
This is technology you need to embrace. Look at the young people you know. They really get it. They’re using social networks not only to stay in touch, but to market themselves and their businesses. Just about everyone today is carrying a smartphone or tablet or both and using them to access all kinds of information and for all kinds of communication. If you think you can keep waiting for the phone to ring and charging customers for time and materials and writing things on a paper ticket and waiting for those tickets to come back to your office, you’re mistaken. The service business of the future will be way beyond that. In fact, many service businesses, like David’s, are way beyond that now. I encourage you to think long and hard about everything we’ve discussed here today. Then establish an action plan. First, you absolutely need to get your company on flat rate pricing to improve your profitability. Second, start a maintenance agreement program to build and retain your customer base and increase your repeat business. And, third, check out mobile technology to make things happen in a more efficient way. Remember, it’s all about communication, speed and efficiency in this information age. If I can be of help to you and your company please give me a call. I thank you for attending today’s meeting. I hope you found the 52
discussion informative. I look forward to speaking with each of you to help you earn more money, grow your business and get more life out of life. Thank you.” The group applauded as Ken, just for laughs, took a deep bow like a Shakespearian actor.
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Pulling it All Together DJ went up to Ken following the seminar and told him how much he learned and thanked him for sharing his knowledge. Ken said his goal was not only to sell his products, but to give back to the HVAC, Plumbing and Electrical industries that had given him so much throughout his career. Ken said, “I thank you for your kind words. If I can make a difference in the businesses and the lives of just a couple people here, that’s all I’m looking to do. The service trades are filled with good people that are trying to do a good job for their customers. Often, the good they do for their customers is at their own expense. I really believe that the best companies make sure they charge a fair price and make a fair profit on their products and services. That assures they will remain in business to continue to serve their customers. I’m glad I was able to give you a new perspective so you can continue on.” 54
DJ and David left the conference center after setting a date for the next week when they could get together with Don Sr. and Dave Sr. to discuss how Don’s Heating and Air Conditioning could begin the transition to flat rate pricing and a more significant maintenance agreement program. DJ said, “Well David, it’s been great spending the day with you. I really appreciate the recommendation to attend Ken’s seminar. I’m really excited and can’t wait to get things going.” David replied, “It was fun to hear Ken again and to get to know you better. I’m looking forward to breakfast next week. Don’t forget, it’s all up from here! See you soon.”
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Up, Up and Away! The four gentlemen met for breakfast the following week. Just as David said, his dad, Dave Sr. was the perfect person to talk with Don Sr. Dave was someone Don could relate to, and Don had respect for Dave and how he had grown his company. Dave always shared numbers to back up his claims about the value of all of the business policies and practices that Dave’s Heating and Cooling put in place through the years. The men agreed to meet once a month for breakfast, but they also agreed it would be a working meeting with the purpose of reviewing what actions had been taken and what remained to be worked on. At those breakfast meetings, Dave was always good at asking the tough questions, especially of DJ, to hold them accountable for making progress on the action items to which they had committed. 56
In just two months, Don’s Heating and Air Conditioning had implemented flat rate pricing and had begun to see the positive effect on their bottom line. Don’s comment was that doing it right made all the difference. DJ said if he knew it would be that easy he would have pushed harder for it when he first read an article about it a couple years ago. Don and DJ were committed to making maintenance agreements a large part of their growth strategy, so Dave invited them to come see their operation. While they were there, they talked with Stephanie about how she manages the entire maintenance agreement program for the company. Dave even provided samples of their brochures and forms. At a subsequent breakfast meeting, Don asked Dave and David why they were so open with everything they were doing with a competitor in the same market. Dave’s response was that they considered Don’s Heating and Air Conditioning good competition. He said he learned long ago that bad competition tears down the entire service industry in the eyes of the customers. Dave said the old adage was really true about the bad apple spoiling the whole bunch. He would rather have a city full of good competitors doing things right by providing good customer service, top-quality work and telling the same positive message about their products and their pricing. He said “Once everyone is on the same playing field the game gets easier for everyone. It’s then up to the customer to decide the winners.” As time passed, the effect on the Don’s Heating and Air 57
Conditioning was very positive. Employee attitudes improved, bills were paid on time, there was cash in the bank, customers liked knowing repair fees up front and often wrote notes to Don and DJ praising the technicians on the job. A newly hired technician said he had worked at a couple of different companies after graduating from trade school, but Don’s Heating was the best of all. He said he felt he was respected and well compensated for both his knowledge and his work ethic. DJ joined a local trade association and he was now sharing ideas with a mix group of other service company owners. He has also been spending time advocating for his and other companies by participating in manufacturer advisory groups. He was a featured speaker discussing best practices at an industry trade show. Best of all, DJ feels truly engaged in the success of the company and he is earning the pay that is allowing him to plan for a bright future with Kelly and his new daughter, Amy. He now has good reason to believe, “It’s all up from here!”
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One Final Note Thank you for reading this book. I hope it provided clarity about how to turn your service business into a money maker. Please share it with your friends and colleagues.
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