As we are in season and replacement in all services is an area, we must all capitalize on let's look at what might cause our gross margin to lag behind industry standards. In any industry we must be proactive in this area. There are many areas to look at so this week we will break this up into two posts so that we don't take time away that is needed to run your operations. Here are the first 4 areas we will look at:
- You’re not priced properly.
- You’re experiencing labor challenges.
- You’re paying too much for equipment and materials.
- Your revenue per replacement lead is substandard.
Management Actions (potential solutions):
- Price yourself properly.
- Review the replacement pricing formula you are using. Is it industry standard?
- Conduct a random sample job costing. You can do this right in the ST platform.
- Consider a semi-annual price increase to cover increased costs. Although this may be something you may want to look at on a weekly basis now with the supply chain issues in the industry.
- Assess your labor situation.
- Examine how many call-backs the company receives. Call-backs should be minimized. Determine if certain installers need additional technical training or if your entire team does.
- Examine how many warranty calls you’re receiving. Determine if you have a recurring issue with a particular piece of equipment or material. If so, contact the manufacturer to see if a recall has been issued. Keep a record of any warranty issues, and if the problem persists, look into using another brand.
- Determine if your installers have the appropriate skill level needed to competently perform their job. They may be spending far too much time at each job for the amount of revenue generated. Invest in additional technical training as it’s deemed necessary.
- Determine if you’re paying your employees too much. All field employees should be on performance-based pay. Note: Be cognizant and follow all state regulations regarding overtime pay.
- Your installers may be spending too much time running to the supply house because your trucks are not adequately stocked or unorganized. Your trucks should have a standardized inventory plan.
- Meet with your team regularly to discuss what your expectations are for each one of them.
- Develop a standardized staging process of equipment to reduce wasted time.
- Assess how much you’re spending on equipment and material.
- Negotiate with multiple manufacturers to receive the best price possible on your equipment and materials. Let them know that you’re shopping for your business and will select the company that offers the best value.
- Examine your purchase order (P.O.) procedures. Establish if you’re buying too much of a certain type of part or material and it’s sitting in your warehouse. Also determine if certain materials are being wasted or stolen.
- Contact your suppliers to determine if you are eligible for any available discounts. Consider letting them know that you are making your business available to the company that offers the best value.
- Process warranties as quickly as possible.
- Determine if your installers are giving away materials during installations to meet safety codes. Use each situation as a training exercise for the comfort adviser who incorrectly quoted the job and developed the work order.
4. Improve your revenue per replacement lead. (Look back at last weeks posts on how to attack this.)
These are the four begginning managemnet solutions on Friday we will give you the final five. Remember being proactive this time of year will increase your profits and make your businesses leaders in your area.
