How To Avoid Becoming A ‘Crash-And-Burn' Firm

June 4, 2004
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[Editor's note: Welcome to the sixth installment of "Money Talks." Each month, Terry Nicholson, president of AirTime 500, will be providing business management information, all with the aim of helping contractors, as he put it, "make money every day."]

An acquaintance of mine in the insurance industry shared with me that 18 service vans would crash this month in his city. How did he know that? It's history.

Using their actuary tables, insurance companies can predict when and if service vans will crash and burn. They know what days most of them will crash; how rain, snow, and sun will affect this number; how many injuries will result from those accidents; and how many fatalities will happen. They know this all from studying what's happened in the past.

Will they always be right in their predictions? Of course not, but these predictions allow them to set the premiums they need on the automobiles they statistically know won't crash to offset their statistically proven crash-and-burns. They can set their rates so they end up in a profitable position at the end of the year.

Do you know how much revenue you need to offset your expenses of being in business? Do you know your history as well as the insurance companies?

How many contracting businesses will crash and burn this year? I don't have a precise number for that statistic, but I can guarantee it's more than 18!

Three Important Areas

How do you avoid crashing and burning? It starts with focusing on building wealth, generating revenues, and boosting your sales. To do that, you must focus on the following three areas daily.

1. Know what you need.

The simplest way to know what you need is by determining your average invoice. Figuring out your average invoice is a quick process.

Take last week, for example. Pull every service invoice you had for the week and add the revenue from each call. Let's say you ran 20 calls and your total revenue was $3,000. Now, you simply divide your total revenue by the number of calls you ran, including the calls where no revenue was generated. In this example, your average invoice is $150 ($3,000 divided by 20).

Once you know your average invoice, you'll know how many calls you have to run to generate the revenue you need to avoid crashing and burning. Now your focus is to get that number of calls. Share that number with your team each morning and track it throughout the day.

If you're falling behind on this goal, it's up to you to make it happen. Don't sit around and stare at the phones. Start calling your customers with a special offer or schedule your yearly maintenance agreement visits. If you don't know what you need every day to meet your goals, you'll be headed towards "crash and burn."

2. Boost what you have.

Boosting your revenue begins with maximizing the number of calls you book from the calls that come in. Your call-taker should have a highly effective script for booking calls and you should train them frequently on this script.

Here's a tip. Mystery shop your call-takers and record them. Then, use these recordings in your training sessions. If your average invoice is $263 and they miss one potential service call a day, you're losing $68,380 in lost revenue each year. To say the least, training is crucial.

Secondly, your technicians must also make the most of each service visit they run in a day. That doesn't mean taking advantage of your clients because that is never the goal. It means doing what is in the client's best interest. This will maximize the amount of revenue available on each call.

Perhaps it is in the client's best interest to replace their system instead of going forward with an expensive repair that may break down again in the future. Not only is this scenario in their best interest because their comfort will be protected, but it is in your best interest, too, because you'll reap the replacement rewards.

Boosting what you have comes from training. Train your call-takers to turn as many incoming calls into booked calls as possible. Train your technicians to offer options to your clients that are in their best interest. Training your employees in these areas will boost your sales and the money you make every day. Do you have a training schedule this week? If not, you could be headed for disaster.

3. What gets measured, gets improved.

If your focus is on sales and meeting your goals every day, then this step should be a no-brainer. You have to track your results to see if you are meeting your goals. Doing so will show you where you have to improve and what you must do differently to meet your goals. You'll see where your team needs more training, and you may even end up changing your goals.

Focusing on sales every day takes a top-down commitment. As the owner, that commitment must start with you, and you must pass it on to your team. Get your team excited about hitting their goals. Show them why revenue and profit are important to the future of your company and to their future success.

Getting your team involved in this daily sales focus will help refocus them on the most important goal - service success. At the same time, it will help you avoid crashing and burning.

Next installment: Some simple strategies can help you reduce expenses. Of course, if you can reduce your expenses, you'll boost your profits, which will help you make money every day.

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: 06/07/2004

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