I have heard from contractors who believe there is nothing wrong with offering a special that will obviously be a money loser if all the customer needed was a clean and inspect. The money lost is a mere hiccup if the contractor can lock in this customer for future replacement and service business. It costs business owners several hundred dollars to find and keep one customer so $29.95 is a small price to pay. I understand that.
As I write this, I am looking at a coupon from a local company touting a $19 furnace tune-up. The coupon says the offer is good on all makes and models and "this service will save you at least $25 in lower electric bills over the next six months." Is it possible to make these claims and back them up? Maybe, but I'm skeptical. Is this contractor setting the potential customer up for a hefty repair/replacement invoice?
SO WHAT IS THE REAL DEAL?Can the small-or medium-sized HVAC contractor afford to absorb a one-two week backlog of service calls from people with the $19 coupon? What if most of them have newer, clean furnaces and this is an opportunity to get service on a piece of equipment that, although neglected, is in good working order? If you figure $19 times six service calls per day over two weeks my math says that the total of all invoices for one service technician, working five days, would be $1,140. Not knowing the contractor's cost of doing business, I would believe that $1,140 over two weeks is not going to pay the bills.
Now let's say that a contractor charges $99 for a clean-and-inspect, which is reasonable. Taking that number and using the same math with one service tech over two weeks, the total of all invoices would be $5,940. I think that this contractor would have an easier time paying his or her bills with that $4,800 difference - as well as having a little left over for the P word - Profit.
Anyone can do the math. Showing the totals that come from an $80 difference in each service call are pretty easy and elementary. That's fine because a lot of people like myself appreciate simple math. But there is a bigger issue here - knowing the costs of putting a service technician and a truck on the road before that first call of the day.
DO YOU KNOW YOUR COSTS?I contend that the contractors offering $29.95 clean-and-inspects don't know their costs. Yes, I will get flak and probably deserve some of it. But I believe that the majority of contractors and "alleged" contractors who need low-cost coupon specials to get their foot in the door really don't grasp the costs of reaching the customer's door in the first place.
A lot of people much smarter than I have talked about knowing the costs of doing business. It is possible - and is becoming more commonplace - for contractors to know their costs up to the day and hour. These people are number crunchers and appreciate knowing where their money is at all times. These people also understand that certain costs are not easy to control, i.e., the recent surge in gas and copper prices. But they allow for a little wiggle room when pricing a job and sometimes err on the overcharge side.
Knowing costs up to the day also gives contractors a gauge on when they will break even each month. So, for example, if a contractor has made enough money to pay all of the bills by the 25th of the month, then the last five or six days are all profit - and he or she can compete on price for at least a few days.
The point is, $19 or $29.95 or $99 can all work for a contractor, based on their business model and their costs. But it is imperative to know those costs.
Publication date: 10/09/2006