Tips Designed To Double Your Service Profits

December 11, 2002
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TORONTO, ON, Canada — James Leichter, whose moniker is Mr. HVAC, talked about doubling service profits during his seminar at the recent ISH North America trade show. He summed up his philosophy quite simply, stating, “Service is where you want to optimize your profits.”

Leichter mentioned that the HVAC industry has the second-highest failure rate among business start-ups, behind restaurants. He said that a majority of the failures could be chalked up to one or more of the following factors:

  • Failure to calculate a break-even point;

  • Poor sales and marketing skills;

  • Undercapitalized and inadequate cash flow;

  • Poor coaching and recruiting skills; and

  • The“cheapest guy in town” or “Yugo” mentality.

    In many cases, “Your family would be better off if you just quit and got as much for the business as possible,” Leichter said.

    He also primed attendees for his lecture by citing how HVAC contractor’s hourly rates, gross profits, and wages compare to those in other businesses. He stated that copier repair and even a cab ride costs far more per hour than HVAC work, which requires more skill, more tools, more parts, and expensive trucks.

    “We have service techs driving around $30,000 hardware stores on wheels, which is a lot more than what a cab costs,” Leichter said.

    Leichter showed attendees a chart depicting a UPS employee with an average annual salary of $53,400 per year. He compared UPS employees to HVAC technicians, who average $30,120 per year. He said that business owners who work 70 hours a week and earn $70,000 a year make an average of $15.84 an hour. “You can make that working for someone else and have fewer headaches,” Leichter stated.

    KEYS TO SUCCESS

    Leichter said there are four keys to HVAC success:

    1. Financial management and analysis — Know your true break-even point and price for profit;

    2. Marketing and salesmanship;

    3. Recruiting and coaching; and

    4. Organizational design and planning.

    Leichter realizes that not every owner has the financial experience to manage the budget and others don’t have the money to hire a full-time accountant. For these people, he recommended hiring a certified public accountant (CPA) to produce a monthly profit and loss (P&L) statement. The cost? About $120 per month.

    He also advised attendees not to try and take every financial management step at once. “It is too overwhelming, and it is the reason why a lot of the information is never utilized,” Leichter said.

    Some of Leichter’s tips for boosting service profits included:

  • Dispatch one call at a time and schedule four per day.

  • Sell maintenance agreements. He recommended offering a discount. “Come up with a nice form and train everyone on the importance of a maintenance agreement.”

  • Pay service techs on performance, not just for being there. “The best technician is not the most technically proficient, it is the one who makes the customer the happiest,” said Leichter.

  • Create a callback policy.

    Leichter also believes in the flat-rate pricing system, but he added, “Flat rate is just a tool. It is not a method of doing things.”

    For more information, visit www.mrhvac.com (website).

    Publication date: 12/16/2002

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