Curing The Summertime Blues

June 10, 2005
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Summer is nearly here. It's time for the mercury to rise and for the callboards of most contractors to start filling up. Business owners love this time of year. Most HVAC companies are busier than ever, but the problem starts when that increase in business leads to the Summertime Blues.

What are the Summertime Blues? The blues happen when you've been busier than ever during the cooling season months, yet you find out one horrifying fact - you didn't make any money!

How does that happen? Quite simply, it happens because you are too busy. You may neglect to track the important numbers. You may neglect to make sure your team isn't rushing through calls just to get to the next one.

The customer is usually the No. 1 victim of the busy summer months. When your technicians rush through calls, often the homeowner does not receive the same level of service that's customary from your company. They aren't presented with all of their options, and their needs aren't adequately taken care of.

Even worse, managers typically are too busy to notice this pattern. As a result, nothing is done to curb the problem before it spirals out of control, and one day you find that although you've been busy all summer, you haven't made a cent.

Figure 1. Average invoice may decrease as the number of calls increases.

Shaking The Blues

To make certain that your company and your customers win this summer, I suggest you track the following numbers over the cooling season months.

Average invoice: This is one of the most telling numbers when it comes to your team's performance over the busy season. Sure, your team may be running an abundance of calls, but that could be a profit-destroying catastrophe.

Many times, business owners mistake activity for performance. They think, "We are so busy, we must be making a lot of money." Your team may be running more calls than normal, but there is a possibility that you are bringing in less money than before the busy season started.

Figure 1 illustrates this point. At four calls a day, your technician may be able to produce a $250 average invoice. However, as the temperature rises and they receive more calls, their average invoice may actually go down. As you see, if your technicians start running six calls a day, their average invoice may dip as low as $150. When that happens, your revenue may actually shrink.

Those six calls are only bringing in $900 instead of the $1,000 your four calls a day were bringing in. In addition to that decrease in revenue, you also have an increase in expenses with the extra travel time, gas, parts, etc., it takes to run those extra calls.

Labor percentage: Along with a decrease in the average invoice, a busier summer can also lead to an increase in your labor percentage (as a percentage of revenue), thus shrinking profits. If your team runs more calls and brings in less revenue, obviously, your labor percentage will increase.

Running extra calls and overtime calls is acceptable as long as your labor stays within your targeted percentage of revenue goal.

In the heat of the busy summer, often owners and managers neglect to track their labor percentage and discover after the summer is over that their labor has eaten away most of the summer's potential profits.

There is an inverse relationship between your average in-voice amount and your labor percentage. If your average invoice goes down, your labor percentage will go up. If you find that your labor percentage is rising due to the increased number of calls you've been running, it may actually make sense to reduce the number of calls your technicians are running per day.

Lead conversion: When your technicians get busier, they may hurry through calls without giving your clients all the attention and options they deserve. One of those options may be replacement, and when your technician speeds through the call without offering this option, you'll see your lead conversion ratio plummet.

If much of your replacement revenue comes from technician-generated service calls turned over as replacement leads for the sales department, it's vital that you track your service call-to-replacement lead conversion ratio. For example, if you ran 80 service calls and your technician converted eight of those calls into replacement leads, you'd have a service call lead conversion ratio of 10 percent.

As your team gets busier, avoid the Summertime Blues by making sure you continue to track your service call lead-conversion percentage. That way you can ensure it doesn't drop off as your team gets busier.

By tracking all of these three key numbers, you can be certain that you'll achieve peak profits this summer and avoid the Summertime Blues.

Terry Nicholson is president of AirTime 500. For more information on AirTime 500, call 800-505-8885. Nicholson can be reached by e-mail at tnicholson@venvestinc.com.

Publication date: 06/13/2005

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