Turning Service Into a True Profit Center

CFM Equipment Distributors (Sacramento, Calif.) believes that its dealer customers should have every opportunity to make money and increase profits. The company's success is tied to the success of its customers. One way of doing this is by using a pricing strategy that utilizes two key elements: Profit Strategies/CFM Up-Front pricing program.

"The intention of this program is to turn our customers' service departments that have historically lost money into true profit centers," said Rod Toner, CFM marketing & sales director. "By creating a profit center out of the service department, dealers tend to grow, buy more equipment, and pay for what they buy."

For the last six years, CFM, in conjunction with Profit Strategies, has been providing its participating dealers with their Up-Front (flat-rate) Pricing books, in return for a modest parts purchase commitment. CFM pays the initial setup fees and then pays the entire monthly book rentals. Dealers agree to purchase parts and accessories as a means of offsetting CFM's cost of providing the Profit Strategies books.

CFM has brokered a huge increase in revenue for its Profit Strategies users. According to Profit Strategies, CFM's customers have annually raised their hourly billing rate an average of $35 per hour. A full-time service van will bill over 1,400 hours per year. CFM has had as many as 225 Profit Strategies books in the field. Using those figures ($35 x 1,400 hours x 225 books) represents an increase in revenue of more than $11 million for dealers who use Profit Strategies.

In addition to the positive financial results for dealer service invoices, dealers also see an increase in changeouts instead of repairs. In addition, the Profit Strategies user promotes maintenance agreements (ESAs) enrollments by using the ESA discount column in the Profit Strategies books.

"If the homeowner enrolls in a maintenance contract, they receive a discount on that day's and future repairs," said Toner. "Dealers improve the profitability of their service department, increase the ratio of changeouts to repairs and actively grow their ESA database, all from using the Profit Strategies program."

Selling more systems is obviously the bottom-line motivation for CFM to make this investment in its customers.

"CFM Equipment believes that the relationship between us and our contractor customers should be a true partnering one," said Toner. "CFM believes that by providing business tools and programs, our dealers look to us to help guide their businesses. It is our strategy that by investing our resources into helping our dealers prosper, that we then develop loyal relationships that will motivate the dealer to make CFM their primary supplier.

"The proper use of Profit Strategies books also reinforces the business model that we advocate as part of CFM's dealer support. Many HVAC coaches promote the residential ESAs as a solid business model for companies to pursue. This ESA-based business model provides a way for an HVAC contractor to grow a business, level out the seasonal ‘ebbs and flows,' improve closing rates and margins, allow for forecasting of sales, implement a cost-effective customer retention marketing campaign, develop equity in the business, and even execute an exit strategy. CFM considers this business model to be crucial to our dealers' and ultimately to CFM's long-term success."

For more information,contact CFM Equipment Distributors at 916-679-4033, or visit Profit Strategies at www.profitstrategies.net.

Publication date: 10/09/2006

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