Give me 20 minutes and I’ll show you how to raise your margins by 20%. Ever hear anything like this? This is a variation on the popular commercials with the caveman who is miffed at the reference that cavemen are Neanderthals. The insurance provider claims that if you invest 15 minutes, they can save you up to 15% on your auto policy. I’m not as conservative. Take 20 minutes to read on and I will show you how to increase your margins by almost 20%. And without your customers beating you up over your prices.
Ok, so you do all the things right. You hired service people with a good aptitude and attitude, gave them some training through your distributor and manufacturers, promoted your company in your community, added some new truck signage and then, alas, you get called by a customer for your services to do a remodel, start weekly maintenance or repair something that has broken. But when all is said and done and you get your Income Statement, you found that you have lost money in service. How can that be?
This scenario is not unusual, and has even prompted some influential and sizable companies in the pool business to minimize or even close their service departments. Some construction companies have even resorted to having a subcontractor friend who does service to “take over the account” once the pool is out of warranty.
What the contractor is really saying is that they do not know how to charge enough to make money in service. Since so many contractors charge LESS than breakeven, it’s no surprise that they want out of service. It’s not unusual for a service company to incur a breakeven per hour cost of $75 – 85 per hour or higher*. Why, oh why, do so many service companies charge less than that for service? Do you?
“We can’t charge any more, our customers are already complaining about our rates”. Have you ever said this?
If your customers are complaining about a service rate that is BELOW your breakeven, it does make sense to want to shed that losing department and let someone else worry about the customer. “After all, the customer already gave me $48,000 for a new pool and I don’t need to lose any money on the customer”. Sound logic. But not the best for your company in the long term.
So what is the answer? Stay tuned for next week’s blog!
*See June, 2016 blog about calculating your breakeven point