Technically, though, there may not be a shortage of qualified technicians. Instead, we just may have an overage of owners who should still be working in the field as technicians (and at times probably wish they still were). Regardless, there is a solution to this so-called shortage of help. The answer is simple: Raise your prices.
Strange, But TrueHopefully, a price increase will chase away half of your customers. Really. And, that is a good thing. In the end, you’ll make more money and have fewer problems.
Be careful, though. Usually a price increase doesn’t chase away as many customers as you would prefer.
For instance, let’s say you are charging $60 per hour and making a 10 percent net profit. That means that for every hour you bill out, you’re making a net profit of $6. Want to double those profits? Go to $66 per hour.
Now, here is where the problems may come into play. You won’t chase away many customers with a lousy $6-per-hour price increase, so you’ll still be short on technical help. However, you’ll be making more money.
In truth, what you should probably do is go to a flat-rate pricing structure and raise the rate to about $90 per hour. Let’s see if we can’t chase away a few customers with a whopping 50 percent increase in the price of labor.
If you look at flat-rate books and your old service invoices, you’ll notice that the vast majority of repairs we perform, task by task, take 45 minutes or less. That means that the labor portion of a 3¼4-hour repair, at $60 per hour, equals a $45 charge for labor.
The labor portion of the same repair under a flat-rate system, based on $90 per hour, would be $67.50. That’s a $22.50 increase in price per task, every dime of which goes directly to your bottom line. At 600 tasks per year (conservatively), that’s an extra $13,500 per year per tech that you’ll have to pay taxes on.
Unfortunately, that may still not solve your problem of a technician shortage. I just can’t see customers, who were otherwise satisfied with your services and wouldn’t otherwise complain about money, complain about an average increase of $22.50 or less, per task, and take their business elsewhere. (Now, should that happen, then get your techs to some sales training immediately!)
When you raise your prices, new customers won’t give you any more grief than they would have prior to your price increase. Your existing customers may give you some grief, though. Try to raise your prices high enough to chase enough customers away for your employees to be able to handle the remaining number of customers without hiring anyone new and without having to force your techs to work around the clock.
Benefits Are ThereThe benefits you see when you raise your rates high enough to make the remaining customer base manageable include:
A price increase, especially a significant one, will also provide you with the financial resources to provide your customers with a level of service your competition could only dream of.
Don’t kid yourself. Double the size of your company and you double the amount of headaches. Diminish the size of your company with a price increase, and you diminish the number of headaches along with it.
Contrary to popular opinion, you don’t have to take care of everyone who calls. Your customers are the ones with the problem, and they need you far more than you need them.
Guest columnist Charlie Greer is a service technician, a salesman, and president of HVAC Profit Boosters Inc. He is the sole instructor of the Sales Survival School for HVAC technicians and salespeople. He can be reached at 800-963-4822 or email@example.com.
Publication date: 06/02/2003