How To Boost Revenues With Price Increases
Originally published: 03.01.07 by Ruth King
Charging an additional $10 is possible with proper diagnostics and materials costs.
Imagine what would happen to your company’s profits if you increased the revenues on each service ticket by just $10. The technician already is there. Most of that $10 will fall to the bottom line. If you generate 1,000 service tickets per year, that is $10,000 more to your bottom line.
Sure, you can increase your hourly rate. However, by educating your customers, it is possible to increase revenues per service ticket without increasing your hourly rate.
Do this in two ways:
First, service-ticket revenues are dependent on how well you train your service technicians. They are your eyes and ears. Teach them that it is their responsibility to do what is good for the customer, which means keeping his/her eyes open to what is going on in the customer’s environment. They must ask questions about a customer’s home comfort and take the time to diagnose and perform a thorough check-up of a customer’s heating and air conditioning systems.
Don’t increase revenues by having your technicians change parts that don’t need to be changed or charging the customers for other things they don’t really need. The technician’s job is to educate customers and
Sometimes the best way to educate is by showing the customer what a technician is talking about. Bringing the customer to see a dirty filter, a dirty blower wheel, etc., can instantly make her understand that her family is breathing in dirt, and it is in her best interest to clean the system.
One of the greatest losses of profit is when a customer pays only a diagnostic charge. In most cases, there is a problem with the technician. Either the customer didn’t trust the technician, or the technician didn’t do a thorough diagnostic of the system. Technicians should focus on fixing the disease rather than the symptom: If a breaker tripped, find out why the breaker tripped.
Write everything down. Technicians will find dirty systems, out-of-balance blower wheels, worn bearings, leaks, etc. Bring these to the attention of the customer and quote the repair. If your company has a flat-rate system, all the technician has to do is look in the book. If not, then there will be some estimating and math that the technician or someone in the office must do.
When you quote the repair, many times the customer will say yes. That’s additional revenue on the same service ticket. If the customer says no, then you have potential work to do in slower times of the year. Either way, you’ve educated the customer, and she has made an informed decision. Most of the time the customer will do things in her best interest, and yours.
The second major way to increase service ticket revenues are to ensure that the customer is paying for everything that you use on her job. If your company uses flat-rate pricing, make sure charges for rags, hand cleaner, wire nuts, and other miscellaneous materials are included in the pricing. If they aren’t, then it is appropriate to add a few dollars to each flat-rate price or have a shop-materials or truck-expense charge added to the service ticket. To determine what your truck charges should be, first decide what you consider miscellaneous expenses. They might include rags, hand cleaner, batteries, screws, oil, duct tape, electrical tape, silicone, and other items that you use on a customer’s job that are not itemized. Total the amount that you spend on these items in one year. Then divide the total miscellaneous expenses by the number of service tickets in one year. This gives you the charge you should add to each service ticket or flat-rate price, usually between $3 and $5.
Because gasoline prices have increased dramatically over the past few years, customers are used to seeing fuel surcharges. Some contractors have increased their hourly rates. Others have added to truck-expense charges. The choice is yours. Just make sure that you aren’t paying to go to the customer’s home or office.
You can increase your service-ticket revenues simply by educating the customer to make informed choices and charging for everything your technicians use on a customer’s job. These activities are in the best interest of your customer, your technicians, and your company.
Ruth King has over 25 years of experience in the hvacr industry and has worked with contractors, distributors, and manufacturers to help grow their companies and become more profitable. She is president of HVAC Channel TV and holds a Class II (unrestricted) contractors license in Georgia. Ruth has written two books: The Ugly Truth About Small Business and The Ugly Truth About Managing People. Contact Ruth at firstname.lastname@example.org or 770.729.0258.
Articles by Ruth King
Increase Maintenance Profitability
If you want to sell your business, or have a strong company, you must have a growing, thriving maintenance base.
Increase Replacement Profitability
Know your overhead cost per hour and net profit per hour for every job. When you include overhead in job costing, then you really know what net profit each job brought in the door.
Increase Your Dispatch Profitability
Your dispatcher can make or break the profitability of your service department and potentially your company. Here are five ways to increase dispatcher productivity and, therefore, profitability.
Pricing for Profit
If you don’t price to earn a profit, the more revenue you generate the deeper in the hole you will get. Takes these steps to profitable pricing.
Increase Service Technician Profitability
By reviewing each technician’s service tickets, you’ll see a pattern and notice whether there are areas of technical weakness.