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Category: Business Management

What Software Buyers Can Learn from Agile Development and Lean Manufacturing

Software companies long ago abandoned complex release processes where comprehensive new versions would show up every few years. So why do software application buyers continue to plan for and tolerate implementation schedules that span several months or in some cases even years? What’s good for the goose is good for the gander, and software buyers need to wisen up and stop being lulled into an unreasonably long technology implementation that will almost certainly not yield the benefits promised during the sales cycle.

What is Agile?

Agile development has been a mainstay in software development for at least ten to fifteen years now. It coincides with the rising popularity (and dominance these days) of software as a service (SaaS) offerings. The basic premise of agile development is that you deploy new technology frequently with the smallest amount of incremental code possible. Agile development also gave birth to the popular notion among technology startups of the minimal viable product (MVP). In all these cases, the idea is to do and learn and do and learn and do and learn – over and over again. Here are the four key principles of agile development from the agile manifesto:

These principles contrast with the historical waterfall method of software development where you plan and plan and plan and plan and plan and code and code and code and code and code and then deploy and OH SHIT! NOTHING IS AS WE EXPECTED!!! HOW DID THIS HAPPEN?!!

Agile is so popular because waterfall is simply broken. For so many reasons, but primarily because planning is filled with the flaws of confirmation bias. When development teams have lots of time to plan and code, they avoid real feedback from the market for extended periods of time and just do what they want to do. Agile and MVP concepts force the issue of a reality check as quickly as possible. It’s like the Japanese concept of lean manufacturing: reduce the amount of work in process inventory and you will find the flaws and waste in your manufacturing process. Funny how all these industries, from software development to manufacturing, all ultimately arrive at the same wisdom over time.

Use Agile and Lean Concepts for a Smoother Software Deployment

It’s time for the folks that buy and deploy software to learn from these agile and lean concepts. I cringe every time I hear about a potential customer’s long planning and deployment cycle for a new software package. When they are thinking in terms of several months or even years before the first system capability hits production, they are not thinking about the problem the right way.

The problem

Planning for the perfect system that does everything is the enemy of real progress that could improve the business tomorrow. First, you will inevitably not plan for several things that could improve the business because you have confirmation bias in believing that you really understand what will actually improve the business.

Second, the thing that you believe should improve the business (although it might not) will undoubtedly work differently in production than the staged demonstration that you observed. You simply cannot plan for success when the scale is too big because few organizations (none) have the resources to actually plan and deploy at large scale. It just doesn’t work for all the same reasons that software developers abandoned waterfall and embraced agile.

The solution

So what is the solution? Simple. Small and incremental deployments of minimal viable technology functions that deliver well defined outcomes (a minimum viable deployment, MVD if you will). And then another deployment. And another and another and another. In this manner, any singular failure is quickly discovered and quickly modified to address the flaw that was not visible in planning. The failures will also tend to be small and minimally disruptive. As the principles above direct, let people do, learn, collaborate, and correct instead of thinking you can plan your way to large scale successes.

3 Tips to Put Into Practice

How might this work in practice? First, constrain the timeline to have something, anything, deployed in production and improving the business. Any schedule longer than six to eight weeks from initial kickoff to first production output is too long. Narrow the scope until you can hit the schedule target. You can narrow the scope by feature winnowing or by narrowing the portion of the organization that faces initial adoption.

Second, don’t be overly concerned about integrations and optimizations until primary value is achieved. Primary value is NEVER the elimination of gaps between systems. Primary value is always something more fundamental like faster quoting, easier payment of invoices by the customer, easier scheduling due to a map or routing feature, a better sales demonstration, and/or faster communication to technicians through mobile dispatch.

You can always streamline administration between systems AFTER primary value has been achieved. I cannot tell you how many folks buy on the value of “integration” only to discover the integrated solution is a horrible piece of software that fails to deliver the primary value they were seeking. When the primary value fails, the promise of integration is worthless.

Finally, just say no to any vendor that proposes a huge services implementation requirement for your organization to see first benefit. Force them to absorb the risk or rescope the project until you see value in six to eight weeks. This will eliminate most of the failures you are likely to encounter BEFORE you spend a bunch of money for the simple benefit of learning from a failure.

Forcing the discipline that has made agile development so popular onto the application purchasing and deployment process will speed deployments, minimize expenses and failures, and maximize the amount of innovation your organization is able to absorb. Pay close attention to the key principles of agile enumerated above as you plan your next software purchase and deployment, and I bet you will get a far better result for your organization.

How to Grow Your Service Contracting Revenue 23.4% Year Over Year

On average, commercial service contractors who use ServiceTrade grow their invoice revenue by 23.4% year over year. All you have to do is buy ServiceTrade and you’ll grow! Our work here is done. The end.

If only it were that simple. There is a big difference between the best and worst performers. For example, contractors that engage their customers online, quote more repair work, and drive more revenue per customer and per job grow much faster than those that don’t.

These conclusions came from an analysis of millions of data points. Over the last year, ServiceTrade customers invoiced over $1 billion through 1.5 million invoices on 1.9 million jobs. On top of that, their customers approved 140,000 quotes to the tune of $450 million. That’s a shedload of service work! We measured YoY revenue growth for companies generating invoices in ServiceTrade since 2017Q2 and here’s what we found:

Drive more revenue per customer and per job to yield faster growth

We wanted to know where the fastest growing contractors earn their new revenue. As it turns out, the old business adage that it’s easier to drive more revenue from your existing customer base than from acquiring new customers is true even for service contractors.

We found that a company’s growth rate is proportional to how quickly they grow the average revenue per customer (chart) and revenue per job (chart). Surprisingly, a company’s ability to attain net new customers does not impact revenue growth. In fact, some of the fastest growing companies have a shrinking customer count because they fire lots of their worst customers and win a smaller group of new customers that represent more revenue.

So, how are you going to drive more revenue from the work you already have? Read on!

Engage customers online to create revenue growth

We divided ServiceTrade customers in half based on how often their customers engage with Service Links*. The top half, whose customers viewed Service Links more often, grew their service revenue an average of 29.1% YoY. The bottom half only grew 9.2% YoY. Your customers want to trust that they are getting the value they are paying for. If you provide more transparency with a convenient, online experience, you build that trust and differentiate yourself from your competition. Being different and better makes it easier to command a premium price and earn more revenue from each customer.

*With ServiceTrade, you send online summaries of the services you are performing with a feature called Service Link. Here’s an example. Much like the notifications you receive for every Amazon order about shipping, delivery, and feedback, Service Link keeps your customers informed about the value you deliver on each service. We call these Marketing Impressions Per Service (MIPS) and they reinforce your value while keeping your customers informed about the service process.

Sell more repair work

Then we divided our customers based on a ratio of the number of approved repair quotes to overall job count — how often are they earning new repair revenue for each completed job? The top half grew their revenue at an average rate of 27.7% YoY. The bottom half only grew 10.8%.

Sending online quotes to your customers that are easy to approve and include details, pictures, and videos reported from the field is quick and easy with ServiceTrade. And, as I showed in my last data-driven blog post, quotes that are sent quickly, that include rich media, and are convenient for the customer have much higher approval rates.

At the beginning of this post I joked that all you have to do is buy ServiceTrade to grow. The fact is, when used effectively, ServiceTrade is a powerful tool to help you drive more revenue from the customers you already have. ServiceTrade will help you grow by engaging your customers online and executing more effectively on repair sales.

The data analysis and graphs for this blog post were all generated with Amazon QuickSight that is available to ServiceTrade customers to analyze their own service data. Call us at 919-246-9900 if you’d like to learn more.

The Economic Downturn is Coming. Are You Ready for Greedy Growth?

Trade wars have sent steel prices up twenty five percent and farmers are getting killed by the collapse of the agricultural commodities market.  Job growth slowed to a paltry 75,000 in May, and the two prior months of April and March were revised downward by 75,000.  The European Central Bank is already easing monetary policy and hinting at future stimulus measures to fend off weakness in the Eurozone economy.  Jerome Powell, the head of the US central bank, just telegraphed a rate cut. Brexit is a mess with all manner of political and economic uncertainty driving the UK economy into a contraction. Chinese investors are pulling out of the US real estate market due to retaliatory regulations associated with the trade wars.

A downturn in the economy is coming.  It always comes, and the signs are everywhere that the happy days are close to an end.  When the easy-money construction market dries up, will your contracting business still be poised for profitable growth?  Will you be ready to take advantage of your weak competitors? Or will you be one of the weaklings that struggles to keep the wheels on the bus as competitors sharpen their knives in the battle for the stability of a highly profitable service business? 

Warren Buffet is fond of saying “When others are greedy, be fearful. When others are fearful, be greedy.” What steps should you take to exercise fear now and be greedy when the downturn comes? Here are some ideas to prepare for greedy growth during the downturn.

Lock In Service Contracts Now 

The last thing you want during the downturn is for your best customers to be shopping for service or responding to the desperate sales pitch of the low price competitor who is getting killed in the downturn (and hence getting more desperate and lowering prices even further).  Customers can always breach a contract, but most will not want to do that, or they will simply ask for some consideration (payment terms, maybe a slight rate cut) in a down economy. Get on the right side of this negotiation now by offering a good contract that commits you to the services that will keep their facilities in top shape during the boom times when others are out chasing new construction opportunities.

Optimize Website SEO with Reviews

When the weak competitors begin to go belly up, or more likely they fail to make payroll and their technicians begin looking for the next opportunity, you want your company to be the number one hit (and number two and three and four as well) on the search engines.  The downturn is prime-time to lock in new technicians who discover their employer is a weak player. They will be looking online. Will they find you? They will if you have your online reviews juicing your SEO results.

Get Your Careers Page Looking Spiffy

Hiring is difficult, but it is even harder when no one knows what types of positions you are offering.  Always list openings for skilled technicians on a careers page on your website. Be specific about the skills that you value and the unique capabilities of your company, including any special technology capabilities that you deploy in service to your customers.  Being specific about these things is better than simply declaring your company is better because you work harder, care more, been around longer, love mom and apple pie and blah blah blah.

Upgrade Your Customer Service Technology

When competitors begin their desperate attempt to keep customers at all costs, you want to be the one that has the most leverage in the fight for keeping the best customers.  If you have put in place systems that help you understand customer contract performance, equipment maintenance condition, and technician productivity and revenue performance, you will be in the best negotiating position possible. 

You will be able to reward good customers that follow maintenance protocols and repair recommendations with better rates while letting the customers with a history of poor maintenance and disruptive emergency calls fall to the competitor.  Let them have the aggravation and low rates for these customers.

You will also be able to provide more competitive rates when you can use technology to maximize technician productivity and minimize wasted unbillable time. If you can increase their billable productive time by 10%, you can lower rates by 10% if necessary to keep the good customers from making a mistake and switching to Desperate Don.

Offer Customers Unique Capability and Insights

Although this is a capability that should be part of your customer service technology upgrade, it is worth mentioning as a separate item.  In a world of Amazon and Uber, customers will expect their suppliers to give them more than just the labor and parts they bargained to buy. They expect information and insights as part of the customer service experience, and they expect them to be delivered online. 

Challenge the customer that is about to make a mistake by switching to Desperate Don to make Don prove that he can provide the unique, information based and convenient experience that comes with your service. If the customer works with Don, can they:

Maybe they will turn Don’s desperate offer down when he cannot provide any of this customer experience value.

Are you ready to be greedy when others become fearful?  The key is having the confidence that you are operating with the best information to provide the best experience with maximum technician productivity so that you can aggressively hire and sell.  When you know that the sale is going to stick and technician productivity is going to be high, you can hire and sell and hire and sell when others are struggling and become tired as hell of trying to figure out how you do what you do.  Let’s hope the downturn is soon so the best competitors can wipe the floor and benefit from some greedy growth.


Commercial Service Contractors – Can You Reduce Busy Work in the Busy Season?

Busy season is here for many commercial service contractors.  Being busy is much better than the alternative, but this busy season may be a good opportunity for you to examine your current operations and workflows and ask, “What are my people busy doing?”

Busy doesn’t necessarily mean productive. In fact, busy often means hurried, overwhelmed, and constantly running in reactive mode.  This isn’t good for you or your company. Eliminating the unnecessary busy work can go a long way in improving morale during a stressful busy season. Instead, focus on working smarter and increasing productivity across the board for all your employees.

For the purposes of this post, we are looking at the busy work that arises when customers are calling in emergency repair work.  Let’s look at four basic stages or phases of an emergency repair job to identify areas where you can potentially reduce busy work, and reduce stress levels for you and others in your company.

Phase 1: The customer calls

A customer with an emergency calls in a repair request.  One of your front office staff members fields the call and gathers all the necessary details.  They may scribble notes on a piece of paper, or type information into a spreadsheet saved to their computer.  Either way, it’s likely the beginning of information about the job being recorded everywhere but one central location, which is going to cost you a lot of time over the course of the job.

Busy work time drains:

Phase 2:  You schedule the service call

Once the work order is created, it’s time to schedule the service call, and fast. But unless you have real-time visibility to your techs’ schedules, an increased volume of emergency calls can create a lot of distracting, time-consuming phone calls in just getting the tech to the job.  The pace that comes with the busy season can make even the best organized spreadsheet or whiteboard outdated by mid-morning.

Busy work time drains:

Phase 3: Your service techs do the work

Once the tech is on site, questions they have about the location or facility will require that they search through a stack of papers, search their email, or call the office to get more information. Even worse, you may find the information your tech needs is on a piece of paper you can’t find, or in the head of an employee who is on vacation.

Busy work time drains:

Phase 4: You invoice the customer  

Once the tech drops off the paperwork (unnecessary in and of itself), the fun for the back office begins.  

Overwhelmed techs are filling out paperwork faster than ever.  Sloppy handwriting and incomplete descriptions can be an even bigger than usual source of frustration for your back office staff. Someone in your back office has to retype information from work orders into your accounting system. Techs are hard to get a hold of when your accounting team has a question about the paperwork, or, even worse, an irate customer calls in with a question about their bill.

Busy work time drains:

All these time drains assume the paperwork is already in the office. Waiting on paperwork to get back to the office is a common problem for commercial service contractors. Techs keep paperwork in their trucks until the end of the day or week, and then bring it into the office for back office staff to process. (Unless they’ve lost it somewhere along the way.)  While it’s more of a bottleneck than busy work, it’s a huge opportunity for companies who want to streamline processes. While you are identifying busy work tasks, take a look at this process within your organization to see if there are opportunities for improvement.

Use this busy season to better your business

Commercial service contractors can save time for techs in the field, front office staff, and back office staff by reducing busy work that comes with a higher volume of jobs. Use this busy season as a discovery period to identify inefficiencies in your processes.  Then, you can use your slower season to implement solutions based on your findings. Otherwise, you’ll be losing time and money from the same busy season busy work this time next year.

Cyber Attacks in Fire and Life Safety

In 2019, there’s a fresh wave of ransomware hackers targeting US-based fire and life safety contractors that have legacy server systems. Several have been either forced to pay a bounty or face devastating disruptions when the cyber attack is unleashed.  If you believe you are safe because no one is going to notice or care about your business, you are wrong. And the weakest link on your network that hosts your legacy server systems is no match for the professional criminals that are extorting you.


Now is the time to move all of your critical customer operations data to a modern cloud architecture.  It is no longer a matter of being competitive in customer operations in your market. It is now about a choice to remain an ongoing business concern or be wiped out by a cyber criminal.  The idea that you want to connect all of your technicians and all of your customers to a server on your network for them to collaborate in delivering your service value opens up innumerable vulnerabilities.  It is just a crazy idea. If instead, they are all connecting to Amazon’s network (all ServiceTrade applications are protected by Amazon’s security) or Google’s network or Microsoft’s network, you are largely insulated from attack.  

No one keeps their financial assets in a safe on their property any longer – they trust a commercial financial institution to be a good steward and use computers to deliver interesting applications to protect those assets while growing their value.  It is time to take the same approach with what is arguably the most valuable asset of your business – your customer operations data. Who do you serve? What is the schedule? What equipment do they have? How do they pay you? What is your contract with them?  What new opportunities for revenue are at their locations? If this information is protected by Amazon or Google or Microsoft, your business can continue to deliver value everyday. If it is vulnerable because of a legacy server on your network, that value can slip away pretty quickly.  Don’t lose what you have worked so hard to build simply because you did not take the time to transition to a modern customer management platform.


Need help buying SaaS software?

You’ll always make good software-buying decisions when you follow the 6 pieces of advice in the Software Buying Guide for Commercial Service Contractors. Download and read it here.

Avoid This Pitfall When Going Paperless

When we talk to commercial service contracting companies about going paperless, the conversation usually starts with how they envision paperless processes will benefit their back offices by saving time and money. They want to send invoices faster, save money on postage, and reduce tech phone time.

Going paperless definitely results in these and other improvements in administrative efficiency. But once companies start making the transition, we usually hear that it takes their techs longer to fill out a form on a tablet or their phone than it did on paper.  And we don’t disagree with them. Pencil whipping paperwork is just faster.

However, these same companies find that moving the information online is worth every bit of additional effort when the ultimate goal is to make your customers’ lives easier. Going paperless necessarily means capturing, organizing and communicating that information in a more effective way that meets (and hopefully exceeds) your customers’ expectations.  If you focus solely on the administrative efficiencies, you’ll miss the bigger picture – the opportunity to improve the customer experience and drive scalable growth.

What Do Your Customers Expect?

In short, they expect access to the information they want, when they want it. (You can thank companies like Netflix and Amazon for this on-demand mentality.)  Remember when you used to have to watch the local news to get the weather forecast? Or better yet, when the Weather Channel made everyone’s lives a little bit better when they brought us weather every ten minutes through their segment local on the 8s? Today, you just open your favorite weather app on your phone, or, if you’re like my 5 year old, you just ask Alexa.     

Your customers’ expectations are similar when it comes to engaging with you.  Imagine a facility manager or building owner who has been running between meetings all day. He finally gets some desk time – at 9 pm, and wants an update on the work that was performed by your techs earlier that day. He needs details now and he can’t wait to call your office tomorrow morning when your first staff person arrives at 8 am.  

How Going Paperless Improves Customer Experience

The most detailed information in the world is of little use to your customers if it’s all on paper copies of quotes, work orders, and invoices filed away somewhere in your office.  Or if they have to call your office during normal business hours to get it. Let’s look at a few ways going paperless improves the customer experience and strengthens customer relationships.

The customer can engage with you 24/7 from any device.

Like I said, today’s consumer expects access to the information they need, when they need it.  We can do everything from our phones these days. Order groceries. Buy a birthday present. Make a tee time. Why not make it as easy as possible for your customers to engage with you?  So whether they need to submit a service request, review the work your techs did that day, or approve a quote, they can easily do so from their computer or phone.

The customer can speak with any employee to get an update.

They don’t have to wait until you track down the person (or people) who did the work.  So when a new tech goes out on a service call, he can quickly see what work has been done on a piece of equipment by previous techs by looking at the service history.  He can immediately jump into an intelligent conversation with the customer, and not have to tell the customer he’s going to have to get back with him after he makes a phone call.

Building trust isn’t limited to face-to-face interactions.

As you grow, it’s difficult to scale the personal touch that you built your company on. The good news is, going paperless provides ways to build trust through online interactions with customers.  You can’t attach pictures, videos, and audio notes to paperwork. You can’t tell a rich story about the services provided with paperwork. All you get is chicken scratch in broken English. Going paperless means collecting rich media in an organized way that lets you easily share it with your customers and show them what’s going on with equipment.

Share urgent or essential information with customers in real time.    

I remember the first time my weather app sent me a push notification about a serious storm that was sweeping through the area. I was about to leave my office and head home. Because of that notification, I made the safer decision and delayed my commute until the storm passed.

You can do the same for your customers. Take the facility manager or building owner from my earlier example. Would he prefer to be notified about a serious equipment issue while you are on site and can address it, or wait to get a call about it later, which forces him to schedule another call and wait for you to come back out? You guessed it.  When it comes to information that is essential to your customers, sooner is better. Pushing notifications to your customers regarding essential or urgent information will set you far ahead of your competition.

Ready to Get Started?

Anyone who started down the road of going paperless will tell you it takes more than scanning all those piles of paper into pdfs and saving them to your desktop.  Going paperless is a big step in the bigger journey of digital transformation – a journey that requires a company to take a closer look at their business processes and how they deliver customer service.

To realize the full benefits of going paperless, don’t limit your business by thinking small and focusing solely on administrative efficiencies. The real value is in improvements to customer engagement and service. A better customer experience means happier customers and a competitive advantage in your market.  Going paperless allows you to leverage the power of the internet to drive truly scalable growth.

End of Quarter Questions for Commercial Service Companies

Think back to the start of the year – did you set goals for your business? Of course you did. But how do you know your goals are focused on the right things?  That you are monitoring the right numbers?

To help make sure you are on the right track, we’ve put together three questions for you to answer. The end of the quarter is a great time to run a diagnostic check on your company’s performance. 

Don’t avoid this exercise just because you are nervous about what the numbers might tell you.  A clear understanding of where you stand currently is essential if you want to set realistic goals that will move your business forward.

Here are the questions you should answer about your business:

  1. What is your revenue per technician?
  2. What is your ratio of maintenance work to repair work?
  3. What is your ratio of revenue delivered to revenue available?

A Closer Look at Key Metrics

Let’s take a closer look at each of these questions.  Below, I’ve outlined some benchmark data from high performing companies and tips to improve performance for each.

Revenue Per Technician

Technician revenue will vary by specialty.  Generally, we see the following annual averages among high performing companies:

All too often, we find commercial service companies that want to improve their numbers but are fixated on too small of a piece of this equation – usually utilization of technician time.

To hit the $400k+ mark, you have to think bigger.  How much are you charging the customer? Market leaders can charge more.  Are you finding high margin work that doesn’t require as much labor? This includes repair work.  

Let’s look at how you can maximize repair work opportunities.

Ratio of Maintenance Work to Repair Work

Tracking this metric shows you where opportunities for generating more revenue may be falling through the cracks. To increase repair revenue, you’ll need to track:

  1. The number of deficiencies techs are reporting;
  2. The number of those deficiencies that convert to quotes; and
  3. Your approval rate on those quotes.

Our data shows that high performing companies convert at these rates:

For example, a fire protection company performing $5M in inspections should expect to generate an additional $5M in repair work from deficiencies found on those inspections.  While a mechanical company performing $3M in inspections should expect to generate an additional $12M in repair work. Think about how that could impact your earnings.

Increasing Quote Volume

Giving your techs the ability to gather detailed information about deficiencies is a surefire way to increase quote volume.  (To learn how one of our customers increased their quote volume by 50% using ServiceTrade, click here.) This means providing technicians with mobile applications so they can go beyond describing deficiencies to showing them – through photos and videos – which can be quickly communicated to your sales staff, who can turn them into quotes.

Increasing Quote Approval Rate

Your quote approval rate is determined by dividing the sum of approved quotes by the total number of quotes sent. For a more in-depth discussion on measuring quote approval, take a look at our previous post on the subject.

We talk to people all the time who say they have a 90% approval rate. But when we dig a little deeper and ask questions, we find they don’t actually know their approval rate. They’ve never measured it. On top of that, they send out a very low volume of cherry picked quotes. If your approval rate is in this range, take a closer look at how you are collecting the data.

Many factors improve quote approval rates, but the top 3 factors that we’ve found are:

By doing these three things, your online quote delivery process will earn a 3x approval rate over traditional quote delivery processes.

Ratio of Revenue Delivered to Revenue Available (Done versus Due Ratio)

Finally, you want to track your done versus due ratio.  To calculate this number, divide revenue delivered (or work that is DONE – the amount of planned work completed and invoiced) by revenue available (or work that is DUE – the total amount of work authorized by maintenance contracts or approved quotes.)  

Highly productive companies will generally have a ratio around 95-97%.  Companies with low productivity will be closer to 75%. For a more in-depth discussion on this metric, read our earlier post on the subject.

Improving Done v. Due Ratio

The first step, and one we see many companies struggling with, is organizing and tracking this information in a manageable way. (Unless they are using ServiceTrade’s QuickSight capabilities.) But once you have a tracking system figured out, you can improve this ratio by prioritizing work related to higher margin contract maintenance, monitoring, inspection and planned repair revenue over unplanned service calls.

Setting Goals for the Next Quarter

Once you have determined your Q1 numbers, you can look to setting goals for Q2.  For example, to set your goals for revenue per tech, break down your first quarter revenue by corporate division and by technician.  How much revenue per day and how many jobs per day do your best techs drive? How do your best techs handle sending quotes?

Use performance of your best tech(s) as a goalpost for all techs.  Once your techs start hitting that number, move it out. Your goal should be to increase revenue per technician 20% per year every year, or approximately 4.5%-5% per quarter.  

Even if you don’t like the answers you find, you’ll feel more in control with a realistic snapshot of where you stand on these key questions. Schedule a recurring quarterly check-in on your calendar so that you can compare your performance quarter-to-quarter.    

Interested in learning how ServiceTrade can track these metrics and improve your performance? Schedule a demo with us today.

5 Questions to Help Service Contractors Build More Valuable Businesses

Much of the popular culture in management consulting today is focused on the customer experience. Matt Dixon, the author of one of my favorite management books, The Challenger Sale, is spending many of his cycles promoting another of his books, The Effortless Experience.  Shep Hyken is a customer service guru with a new book called The Convenience Revolution.  And my latest book with Shawn Mims, Money For Nothing, focuses on the science behind making a customer feel good about their experience buying from commercial service contractors.  

Yet even with all of this focus on customer experience, I still find that most service contractors remain firmly entrenched in a war to optimize the effort expended in their back office instead of directing their management attention to enhancing customer service. I have come up with a couple of questions that might help challenge that back office focus if the goal is to build a more valuable business.

Question 1: How easy is it to hire a new back office administrator versus hiring a new skilled technician?  

This is an easy one, right? The answer is that hiring an administrator is very easy when compared to hiring a technician. Management’s focus should be on maximizing the productivity of each technician so that they deliver the maximum amount of revenue each day while simultaneously eliminating the risk a customer faces due to potential equipment failure.  Your goal should be to increase revenue per technician 20% per year every year. Never yield in the pursuit of greater productivity for the technicians. Hiring administrators is easier, so transfer as much work as possible off the technicians and onto back office staff.

Question 2: How easy is it for your customer to review and approve a new quote? 

If the answer is that they have to download an Excel file or PDF, print it, sign it, scan it, upload it, and email it back to you, that answer sucks.  That is difficult. Not easy. Compare that level of effort with an online quote with pictures and video of the issue and a single button to push to “Approve” (or request changes) and provide a purchase order for billing purposes.  Oh, and it never hurts that when the customer has viewed the quote online, the salesperson knows it has been viewed and can follow up to answer any questions. Don’t make it difficult for the customer to give you more money and remove risk from their environment by upgrading or repairing equipment (which is also good for you).

Question 3: Which is more valuable: eliminating all administrative overhead or showing an ability to sustain 20% revenue growth every year?

Again, it is an easy answer. Eliminating all of the administrative effort is worth perhaps 5 – 8% of revenue. Growth is MUCH more valuable if you can demonstrate you have a systematic way to sustain it due to your customer sales and service approach.  If you ever intend to sell your business or bring on a new shareholder, focusing management effort and technology purchases on enhancing sales productivity is where you should spend your thought cycles and investment capital.

Question 4: How easy is it for you to show the customer the value of your work online?  

Or do you just send them an invoice with a bunch of text and cryptic accounting codes to represent the value you deliver?  If a customer has to wade through a detailed invoice, guess what is going to draw their eye?  You got it, the numbers on the far right and in the bottom right corner. Guess what they are going to want to talk to you about? The value you delivered? Nope. “Why does it cost so much?” is the most popular question generated by an invoice.

Make it easy for them to see that value without digesting a cryptic invoice.  It should be easy for them to see your work online in the form of service history for their equipment with photos, videos, risk assessments, quotes, etc. so that they see you are thoughtful and thorough in your approach to managing their important assets.

Question 5: How easy is it for your salespeople to show a new customer prospect how you are different?

Do you demonstrate the value of your unique approach to customer service?  Pitching a value proposition of “we try harder” or “we care more” or “we are cheaper” sucks. It is much better to show the customer an online experience where they can conveniently review and engage with your company on ways to reduce risk and eliminate disruptions through a rich set of service history and equipment risk analysis.  

If you cannot show prospective customers examples of this capability, what are you selling? Invoices? How do you expect to command a premium in the market compared to the low price competitor? Simple answer – don’t expect a premium and be prepared to compete on price.

I find all of these questions to be obvious indicators of where management should spend their effort – front office innovations that make customer service and revenue generation easier because the customer gets an effortless, or, better still, a feel good experience.  So where are you spending your management effort? Front office and feel good? Or back office? Think about it.


The Data Gut Punch

January 14th marked the start of the AHR Expo in Atlanta at the 1.4-million sq. ft. Georgia World Congress Center. With 50-thousand attendees, that place was a madhouse. I, along with the rest of the ServiceTrade team, was engaged in back-to-back conversations with commercial mechanical service contractors about their growth goals. As we usually do, we made a lot of people very uncomfortable. How? By asking difficult questions and presenting hard data that shook long held beliefs about their businesses. It’s the moment you realize that you’re running your business blind based on gut instincts and then data comes along and knocks the wind right out of you. It hurts. Here’s an example from AHR:

Contractor: What does ServiceTrade do?

Me: ServiceTrade helps commercial service contractors be more valuable to their customers and grow their business.

Contractor: The only thing holding us back from growing are inefficiencies in the office and cost control hiccups. Can you help with that?

Me: We can definitely help there, but how much revenue do you drive per service technician per year?

[Long pause]

Contractor: I’ve never thought about that metric. Based on our total service revenue from last year and the number of techs we had on staff, we did great! We made about $200k per tech.

Me: Our mechanical customers drive $400k to $500k per service technician by focusing on customer service and repair opportunities, but we can talk about back office operations if you’d like.


Examples like this are common, even among our own customers. We perform account health calls with our customers to compare their performance against a benchmark in their industry. Most are caught completely off guard by what they discover. They never bothered to look at their quote approval rate, they just assumed it was over 95%. They never checked their average days to invoice, they just assumed it was under 5 days. It reminds me of something our CEO always says:

Do you know what happens when you assume? You make an ass out of you and me.

Almost every contractor claims to be data driven. However, the reality is that most contractors are rarely collecting the data they need to make good decisions about how to grow. Sure, they can all tell you their margin across different divisions down to the penny, but you’ll rarely meet a contractor who is paying attention to growth metrics like the:

I’ve met far too many contractors that “just know” these metrics. No data to back them up, just pure instinct. Do you know these metrics for your business? Do you have good data to back them up? Check out ServiceTrade’s business analytics features.

Reals, not feels. That’s what you have to remind yourself every time you attempt to make a data-driven decision. As tempting as it is to rely on your gut and your feels to make decisions, the data and the reals don’t lie. Data doesn’t care about your opinion so don’t be surprised when the data disrupts your worldview and punches you in the gut. As much as it hurts, that’s a better outcome than trying to grow a company by feeling your way through the dark.

Here are a few more blog posts about metrics for service contractors that you might find interesting:

Service Contractors: Grow like a software startup

Every Sunday evening I receive an email from the software investment banking team at Key Bank Capital Markets. The subject line of the email is “Software Valuations,” and the email contains a link to a weekly report that details the valuation metrics of about 100 different software companies. All of these companies are public corporations, so their stock information is readily available for the folks at Key Bank to analyze. Most of the companies they follow are software as a service (SaaS) companies, and because ServiceTrade is a SaaS company, this report is very interesting to me as the CEO and a shareholder of ServiceTrade. It is my job to maximize the value of our stock for the benefit of all of our shareholders, and the Key Bank team helps me do this through their analysis of SaaS company valuations.

Here is an annotated version of a table they publish for about 70 different SaaS companies. I limited the table to 10 of the entries to make a point about the importance of growth to shareholder value.

 I sorted these from high to low based on the value-to-revenue multiple. The value-to-revenue multiple indicates how much the total of each company’s outstanding stock is worth as a multiple of their anticipated 2018 revenue. The number-one performer is Shopify, with a value-to-revenue multiple of 17.2X. The total value of all outstanding Shopify stock is equal to 17.2 times the revenue expectation for Shopify in 2018. You are reading that correctly. Investors are willing to buy Shopify stock at an extraordinary premium because they believe Shopify is going to grow, grow, grow. And Shopify is delivering on that promise. Note that Shopify expects to grow revenue by 51.1 percent in 2018 compared to their revenue in 2017. That’s a terrific growth rate. Also note that Shopify has a value of NM (Not Measured because they are not making a profit) in the category of price-to-earnings. That’s because Shopify is going to lose money in 2018. They will probably also lose money in 2019 and 2020 because they are investing like crazy to continue to grow. Despite this lack of profit, their stock is still extremely valuable.

Contrast Shopify with ChannelAdvisor. Their stock trades for just 2.9 times the revenue expectation for 2018. It’s interesting that Shopify and ChannelAdvisor offer a similar value proposition with their software applications – they both help small merchants sell their products online. The biggest difference is that Shopify is expected to grow 51.1 percent in 2018 and ChannelAdvisor is expected to grow only 6.8 percent. The expectation of growth explains why Shopify is almost six times more valuable than ChannelAdvisor.

Why is any of this relevant to your business? It is very relevant because their business model is similar to yours in that they sell a subscription program to their customers. If you are following my advice and developing a subscription program for maintenance, monitoring, and inspections for which you sell an annual or longer contract, your business is similar to these companies, and investors will ultimately value your business in the same way they value these businesses. The point I am trying to make is that growing is better than grinding when it comes to creating value for shareholders.

Grinding means pushing everyone in the organization to squeeze more profit from the current revenue stream. I have nothing against profit, and I think you should aim to be profitable. But grinding does not significantly increase the value of your business if there is the possibility to grow the business instead.

Growing is much more fun for everyone than grinding, for all of the obvious reasons. Growing means that new stuff is happening all the time. New products are being introduced to the market. New customers are being served. New employees are joining the company to help take care of the new customers. New promotions are being handed out because there is more responsibility to be shared. New offices are being opened. New equipment is being purchased. New tools are being deployed. New training is underway on how to use new tools. New, new, new means fun, fun, fun.

Grinding sucks because old tools are breaking and not being replaced. Old employees are leaving and not being replaced or taking on more responsibility for no increase in pay. Old customers are complaining because they are not getting good service. Old trucks are breaking down and disrupting the workday. Old, old, old means suck, suck, suck.

What is your plan for growth? How are you going to orient your company in a direction that gets to the fun of growing? It begins with a commitment to growth. If there is no expectation in the company that growth is an important metric, then no growth will occur. Set growth targets as part of your planning process, and don’t be shy about asking people to stretch to achieve something ambitious. For organic growth, plan to grow by 10 percent per year, and think about pushing for 20 to 30 percent (depending on the size of your company). All the best employees in your business will rally around the growth goal because none of them signed on for a career in which not much was achieved. Your employees will get much more career development from an aggressive growth strategy.

Maximizing the value of your business is the most tangible outcome associated with a successful growth strategy. The difference in valuation of the companies tracked by Key Bank in the SaaS market based on their respective growth rates is extravagant, and it should be a lesson for anyone who wants to build value with a subscription business model. The intangible value of having a growth strategy is that you will attract, develop, and retain a better class of employees who value your company because they expect to experience greater career development. They will be exposed to ever-increasing levels of responsibility, which leads to higher job satisfaction and better retention. Growing is fun and grinding sucks, so aim for growth and get more pay and have more fun along the way.