The question came from Tom Scarangello of Scaran Heating & A/C. He wrote in part:
"My company does HVAC service and we are often â€˜sold out' for emergency service. We have 15 service techs but when the weather gets above 90 degrees F or below 25 degrees we struggle to meet demand. We guarantee service agreement customers same-day service and will bump a new account to service a SA customer. We hate to cancel maintenance calls and try not to even if it means turning away new customers in need of emergency service. I like your sentiment that we should leave room to take on new customers, but my questions is how?"
Tom brings up a very good point and it is one that I'm sure others of you have encountered.
In fact, those of you who have this problem are really in an excellent position. Most contractors would love to have the problem of how to deal with too much business rather than to not have enough business.
We encountered this exact problem when we first started aggressively promoting maintenance agreements. We found, as Tom has, that the solution is not an easy one. The real underlying issue is how to grow your business, profitably, and not at the expense of your existing customers.
Tweaking The ScheduleOne of the approaches we took was to arrange the schedule so that we could handle a minimum number of emergency calls within our normal eight-hour days. We knew that if the weather turned out to be extreme it would be necessary to schedule calls on overtime. Sometimes the overtime calls were the emergency calls, and sometimes the overtime calls were just the routine maintenance calls.
So, how could we afford to run maintenance calls on overtime? We looked at the big picture. We had read and heard for years that the cost to obtain a new customer is somewhere between $200 and $300. We felt that if we obtained a new customer by performing an emergency call during normal working hours, it made it worthwhile to perform the maintenance call on overtime.
Think about it. If the maintenance call requires an hour of overtime at time and a half wages, your actual additional cost is one-half of your technician's wages.
Even in high-cost markets, half an hour of wage cost is considerably less than the typical cost to obtain a new customer. Additionally, we found that many of our maintenance agreement customers were delighted that we were able to come at a time other than regular working hours.
Keeping Techs BusyOnce we found that the number of combined emergency and maintenance calls required an excessive amount of overtime, we knew we were in a position to employ an additional service technician. We had grown the work first to ensure that when we hired a new service technician we would still be able to keep all of the service technicians busy.
We have never believed in the "Field of Dreams" theory of "If you build it, they will come."
That is, we don't believe in hiring technicians in the hope that we will obtain future work in sufficient quantities to keep all of our technicians busy. We work hard to obtain the work first, realizing that we are giving up some profit by performing the work on overtime, but knowing that in the long term this is the best way to grow the business profitably.
While we have had success using this method, I would be interested in hearing from you if you have other ideas which will help Tom Scarangello keep his existing customers while growing his business and specifically his maintenance agreement business.
Remember that while having more customers than you seemingly can handle may be a problem, it's better to be in that position than not having enough customers. The trick is to have too many customers but make them feel like they are your only customer!
Guest columnist Butch Welsch operates Welsch Heating & Cooling in St. Louis. He can be reached by e-mail at Welsch1@primary.net.
Publication date: 11/28/2005