Extra Edition / Business Management

Hot Topics, Cool Solutions 11: Selling Add-Ons, And More

January 9, 2005
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Al Levi
Editor's note: Consultant Al Levi helps contractors run their businesses with "less stress and more success." HVAC and plumbing contractors seek his advice regularly. Al has agreed to let us share with readers of The News some of the questions he gets and the answers he provides. The focus is strictly on problem solving and handling the day-to-day operations of a successful contracting business.

To send Al your own questions, which if selected will run anonymously, send him an e-mail at info@appleseedbusiness.com or fax him at 212-202-6275.

This column is meant to be a resource only. Please check with your own trusted business advisers, including your own attorney, to make certain that the advice here complies with all relevant laws, customs, and regulations in your area.

Dear Al,

I teach my techs how to speak to customers. I stress the importance of trying to make add-on sales that are in the customer's best interest because it makes the company more money. But my techs seem unmotivated and I end up frustrated and struggling to make ends meet.

What do I need to do differently?

Sincerely,
What Am I Missing?

Dear What Am I Missing?,

You're motivated by profit. But what have you offered your techs to sell more add-ons? Why is it in their best interest?

Most owners miss the important piece to increasing the amount of sales a tech produces and that piece is a well thought out bonus plan. If a tech sells more than his individual sales goal, he's earned the right to make a bonus. It's the only fair way that he can share in the increase of revenue.

If you don't have a bonus program, you need to continue to hope they'll do what you say because you said so. How do you think that'll turn out?

Do an annual budget, add the profit you want, divide that total number by the amount of trucks you have that can sell and do the work, and you've arrived at a tech's individual sales goal.

Any bonus or reward program is paid for with additional sales created above the individual sales goal. It's never money you pay them from your pocket. And, when you pay a bonus for additional sales, you must be checking that the techs are selling the right way. I work with contractors on specific strategies that ensure both increased sales and accountability.

Make it worth their while and watch them add-on.

Regards,
Al Levi

Dear Al,

I've got four trucks and we do about $1 million in sales. From my research, I understand that $250,000 per truck per year is very good. We're able to pay our bills on time, but there seems to be no big reward in sight. I don't have a retirement plan, medical benefits are limited to single coverage, I don't pay my wife who works 40 hours or more, and we're barely throwing off any profits.

Plus, I want to hire a manager so that I don't have to work 75 hours a week.

Sincerely,
How Do I Get Things Jump Started?

Dear How Do I Get Things Jump Started?,

It sounds like you have a tight, well-run company. But it also sounds like a lot still relies on you getting it done if you have to work 75 hours a week.

There are three things that come to mind. One is you probably lack the repeatable and documented systems in place that allow things to run smoothly without you having to micromanage or do everything. Second, you need to add more trucks. You need to have more available hours to sell if you want to generate enough dollars to cover the expenses you have today and want to add in the future. Third, make sure you've included the items you desire in your annual budget so you can calculate a selling price that will afford you the items you lack today.

A quick and effective way to add those trucks is to seek key acquisitions. If done right, it can add new staff and new customers immediately.

Regards,
Al Levi

Al Levi of Appleseed Business specializes, as his Web site says, in "Making Contractors' Lives Less Stressful and More Successful." Through private workshops, on-site assessments, customized operating manuals, and staff training programs, Levi delivers the benefit of the experience he gained from years of operating a large family-run HVAC and plumbing business. Learn more by visiting www.appleseedbusiness.com. You may also contact Levi by e-mail at info@appleseedbusiness.com or by fax at 212-202-6275.

Publication date: 01/10/2005

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