Make More Money With What You Have

February 11, 2005
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[Editor's note: Welcome to another installment of "Money Talks." Each month, Terry Nicholson, president of AirTime 500, provides business management information and advice with the aim of helping contractors, as he put it, "make money every day."]

Each month my focus has been on helping you make money every day. When it comes down to it, you may already have all that you need to make more money every day.

Many people think making more money means they have to run more service calls. They get so caught up in running service calls that they don't stop and think about making the most of what they already have.

What you already have are service calls. And one of the quickest ways to make money every day is to enhance your level of service on each of those calls, which can maximize the revenue on each service opportunity.

You don't have to run two, three, or four more service calls a day. I'm going to suggest you have enough service calls right now to increase your revenue substantially. Let me explain.

Let's say, for this example, that you run an average service invoice of $250. With that average, you would bring in $2,500 of revenue for every 10 service calls you ran. Let's also say you operate with a 60 percent gross margin. That means that after you pay your direct costs, such as parts and labor on those service calls, you have this 60 percent of the revenue (gross margin) left to pay your expenses, such as truck expenses, marketing, and other overhead, and have the remaining money left over as profit.

Going with that scenario, those 10 service calls would give you a gross margin of $1,500 after you pay for parts and labor ($2,500 x 60 percent = $1,500). That's $1,500 to pay your entire overhead and the remaining dollars, after paying expenses, would be your profit.

But what would it mean to your company if you increased the revenue from those 10 service calls? You already have a technician in the home, so you won't have any additional overhead costs or marketing costs for the call or additional costs getting the technician to the home. That means increasing your average invoice on those calls will directly influence your gross margin.

Profitability Will Increase, Too

How can you increase your average invoice on those 10 calls? The only way is to enhance the level of service you provide to the client. Here's one example: Let's say you've decided to offer the new Nature's Home™ line of indoor air quality products, particularly the MicroPower Guard® air filter. Your cost on the Micro-Power Guard is $164, and the suggested retail price is $495.

If you ask any experienced technician, they'll tell you most breakdowns in HVAC systems occur because of the filth created by improper maintenance. So, acting in your client's best interest would involve reducing that filth, which involves the MicroPower Guard. Using it will reduce the filth, and, subsequently, reduce the breakdowns and aggravations that the client experiences. In short, you've enhanced the services you offer to your clients.

Boosting Profits

How will this impact your profitability?

Will every client want one? Absolutely not, but is it realistic that, given the option, 2 out of 10 homeowners will invest in a MicroPower Guard at $495? I'm going to suggest that when they see the value it brings to their comfort and home, the answer will be yes.

With 20 percent of your clients investing in a MicroPower Guard, your numbers will change. Instead of creating $2,500 in revenue on those 10 calls, you're now bringing in $3,490 after two homeowners from the 10 service calls bought a filter.

With the additional parts, your direct cost would increase by $328 ($164 x 2 = $328). Given your original direct costs of $1,000, your direct cost would now be $1,328 ($1,000 + $328 = $1,328).

At this point, the two numbers you're concerned with are average invoice and gross margin. The enhanced service to your clients would boost your average invoice from $250 to $349. At the same time, your gross margin would increase from 60 percent to 62 percent, and since the MicroPower Guard fits into the existing system, there is no increase in labor so there is no direct costs increase associated with it.

The best part is you are generating an additional $990 in revenue without the additional costs of getting your technician to another call. You don't have advertising costs or truck expenses, just the cost of the filters.

By simply offering your clients additional options, you're creating $662 in profit after paying the costs of the filters ($990 - $328 = $662). That equates to an extra $66,000 for every 1,000 service calls you run, which is approximately what an average service technician will run in a year. By enhancing your services with the MicroPower Guard, your technicians can each realistically add $66,000 to your bottom line this year.

Don't Ignore Profit Opportunities

I know highly successful business owners won't allow me to call the entire $66,000 profit, but if you're ignoring this opportunity today, you're ignoring, at a minimum, huge profit opportunities.

You have the opportunities right now to make more money every day. It's just a matter of enhancing your services enough to maximize them.

Next month, I'll look at how you can introduce your technicians to this method of enhancing your service.

Nicholson is president of AirTime 500. For more information on AirTime 500, call 800-505-8885 or visit www.airtime500.com. Nicholson can be reached by e-mail at tnicholson@venvestinc.com.

Publication date: 02/14/2005

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