Raising Prices During Inflationary Times And Beyond: Part I
What Should I Do About Inflation? Give ‘Em a Big Ass Price Increase!
The most efficient way to grow revenue in your business is to increase the price you charge for the services that you provide. Sounds easy, right? Well, it can be if you understand the underlying psychology of buyers and you have the operational capability to adjust prices easily across your business. The keys to successful pricing adjustments are:
An expectation on the part of the customer that your brand is worthy of a premium price.
A customer service approach that demonstrates value beyond the price of the service.
Operational capability to implement price adjustments seamlessly.
In this article, I’ll focus on commanding a premium price and demonstrating value through customer service. You can catch my thoughts on operational capabilities in Part II.
Inflation sets the stage for a price increase
Inflation rose 7% in 2021. Fuel prices rose a remarkable 58%. The price for trucks and cars is up between 10 and 30%, depending on the category. How easy has it been for you to raise prices for the services you sell to your customers?
Let’s start with this inflation excuse as a case study for customer reaction when they expect price increases. When all of the news outlets in America are braying about the highest inflation since 1982 and every Tom, Dick, and Harry is paying $15 for a burger and fries at 5 Guys, most folks will expect their vendor bills to be more pricey. When higher prices are all around you, it is difficult to single out a particular vendor for a protest over a price increase. The inflationary environment and all of the market symbols that go with it has set the stage for the price increase.
But how do you increase prices without help from these inflationary symbols?
How do you create symbols that confer an expectation on the customer that prices will be on the premium side of a fair trade?
Well, you do it by placing your own brand symbols in front of the customer everyday to reinforce the idea that you deserve to be paid more because of the way you do business. If the customer sees images of your brand everyday that are consistent with premium service, they are unlikely to protest when your invoice arrives sporting a higher price than they paid last year and one that is higher than the competitor down the street would likely charge. And then, they pay it.
Ideally, you are doing things differently to elevate your brand above the minimum commodity status where price is the only determinant of value. If you do not want to compete on price, you need to develop a premium brand, even if customer expectations for the products and services you deliver are generally low. How do you overcome commodity expectations? Let’s look at an example from a commodity market.
The Big Ass fan example
My first experience with a Big Ass fan was in an open air concourse at the airport in Punta Cana, Dominican Republic. This thing was huge! And it worked well also as I was there in August when it is hot and humid, and the fan in the open airport made a big difference.
Big Ass is a good case study for price expectations because generally speaking there is nothing more commodity than a fan. The market for fans generally should be one where price is the ultimate determinant of value. Yet when I recently went looking for a fan for an outdoor kitchen project, I totally expected the Big Ass version to cost significantly more than the competition. My expectations were met and exceeded.
A Big Ass fan at the Punta Cana airport
An 84 inch HVLS (high volume low speed) fan in oil rubbed bronze can be found online for less than $1,000. The comparable Big Ass versions will run between $2,000 and $3,000 depending on options. Really? For a fan? Why not? And people with the money will pay for it because they trust they are getting a better product and better customer service with the Big Ass brand.
I expected the Big Ass brand to command a premium (I was a little shocked at the 100% plus premium to be honest, LOL), but how did I come to have that expectation? What did they do to prime me to pay so much more for their product?
First, the brand caught my eye years ago in Punta Cana. Of course the name created a conversation among the people that were traveling with me (creating a conversation is good branding, btw). What did we do? Picked up our phones and began searching around for Big Ass information.
What did we discover? An interesting story, of course. The company began cooling cows, who apparently will eat more and produce more milk if cooler. Soon the company branched out into other industrial settings like warehouse distribution centers and open air applications like the Punta Cana airport and amusement parks.
The name came about from customer calls asking if they were the manufacturers of “those big ass fans.” The mascot, Fanny the ass, is ever present as both a part of the logo as well as numerous statutes on the Lexington Kentucky campus.
The company pays premium wages to employees, invests heavily in research and development, and has about 10,000 applicants for every 200 job openings. And the website sports customer reviews and makes it super easy to buy really expensive fans direct from the company. All of this information was readily available online from multiple sources.
Takeaways for commercial service contractors
So how are we going to use this review of Big Ass to teach your customers to expect big ass price increases from your company?
Lesson 1: Do something uniquely well. Do not try to serve everyone with the same old thing. Big Ass started with cows and industrial settings. These were unique markets that were likely underserved, but with a terrific value proposition for the customer: low cost cooling relative to the alternative of conditioned air. Who cares if the fan is super expensive when the alternative technology is prohibitive. Focus on a unique capability for a unique market.
Lesson 2: Tell an interesting story online. We talk about this all the time, but your Digital Wrap is really important. Your technicians gather lots of “stories” everyday with the work that they do. Get that story into the hands of your customers and prospects via your online marketing impressions (MIPS). If you don’t know what I am talking about, you really need to spend some time with ServiceTrade.
Lesson 3: Be transparent and available online. Big Ass publishes reviews on their website, including the poor ones. Several of the reviews indicated the way that the company recovered when the product failed to meet expectations – the customer service response was terrific. Also, it was easy for me to engage directly to configure and buy a fan online. It should be easy for your prospective customers to qualify themselves for a purchase or sales call from you using your website. Have you tried it lately disguising yourself as a customer?
Lesson 4: A premium price pays dividends in employee loyalty. You cannot build a premium organization if you do not charge a premium price. There is not enough money to go around. The customers have the money you need (as opposed to cutting corners in your business). Find a way to take it from them and pass it around your organization. You will find that your organization becomes better at taking more when you take care of them. Did you see the statistic on applications for jobs at Big Ass relative to openings? How would you like to have that problem?
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High inflation is not the only excuse for a price increase. A premium brand is the other excuse that works every time all the time. So get your Digital Wrap going and give the customer a Big Ass price increase as often as your contracts allow.
Don’t Use Residential Software for a Commercial Service Business
Commercial and residential service contractors work completely differently. So why would a commercial contractor adopt service management software designed for residential contractors?
While they work in similar fields — HVAC, plumbing, electrical — commercial and residential service contractors work in altogether different ways.
Three key differences highlight the complex work demands that face commercial contractors — and reveal ways in which the right service management software can drive success.
Commercial contractors generally work:
In long-term relationships wherein both maintenance and repair work is structured contractually.
On complex systems of capital equipment that require years — sometimes decades — of precise, detailed, and documented maintenance.
With facility owners and managers who require a clear understanding of the condition of the equipment in their facility so they can make good decisions that reduce the risk of costly downtime.
Let’s examine each of these three differentiators more closely.
Long-term relationships with customers wherein both maintenance and repair work is structured contractually.
The work of residential contractors tends to be transactional in nature — a home’s air conditioner isn’t cooling properly, so the homeowner calls for help. That homeowner may not experience a similar problem or interact with the same contractor again.
So, the residential technician must capture the homeowner’s consent and credit card information immediately, while still at the property, lest the company not get paid for its work.
This contrasts significantly with commercial service contractors who sign long-term contracts with customers detailing exactly what maintenance and service repair work is involved before a technician steps foot on the property.
The commercial service contractor performs their work under contract to make workload and cash flow more even and predictable throughout the year. In return, the customer realizes better outcomes with higher equipment uptime, fewer emergencies, and predictable pricing.
Commercial service contractors require software that manages the delivery of complicated recurring services on specific pieces of equipment within each contract. They also want to communicate information to the customer in a way that validates the value of the contractual relationship.
Complex systems of capital equipment that require years — sometimes decades — of precise, detailed, and documented maintenance management.
Commercial service contractors work with complicated, integrated, and expensive systems — the failure of which puts customers at serious legal, financial, and reputational risk.
The right service management platform helps the commercial service contractor intervene early by delivering on an established preventative maintenance schedule, staying ahead of potential problems, and mitigating that risk of failure.
Say, for example, a commercial technician performs routine maintenance on three compressors for which there are six blowers, and identifies that one blower needs repair. Consulting the equipment’s service history, the technician sees that the same blower has been repaired two times already for the same issue. At that point, the technician might escalate the repair to recommend replacement.
Likewise, commercial service technicians need to see incremental movement on potential problems — a pressure gauge registering 8% now, whereas it registered 4% the month before. More than seeing the potential problem, a commercial service contractor needs to share that information with the customer in pictures, videos, and notes to help the customer fully understand the problem, and appreciate that a repair may be necessary now or in the future.
Appropriate intervention on expensive and long-lasting capital equipment can extend lifespan — and help safeguard the customer against short-term and long-term risk.
With facility owners and managers who require a clear understanding of the condition of the equipment in their facility so they can make good decisions that reduce the risk of costly downtime.
A homeowner can tell right away that the residential contractor did the work they were paid to do because the problem went away.
The facility owner pays for annual preventative maintenance services that may not result in detectable changes. So how does the customer know that the contractor did the work they were paid to do? Moreover, if the contractor delivers their work well, the customer will see no disruptions, no downtime, and experience no drama.
To validate that customer’s trust, commercial service contractors must share reports with the customer that detail what equipment was maintained, when it was serviced, and if any problems were discovered. This is a challenge; commercial customers are busy with non-facility matters, so vendor interactions must be fast, easy, and readily available.
Modern commercial service management software should deliver reports online and offer other conveniences, such as the ability to request service and or view a detailed service history in a portal — showing work in ways that help keep the customer a long-term customer.
Putting relationships over transactions.
ServiceTrade enhances a commercial service contractor’s ability to demonstrate long-term value to commercial service contractors by fostering communication and transparency, and mitigating customer risk.
To learn how ServiceTrade can help your commercial service business build stronger and more transparent relationships with customers, request a demo with an application expert.
Growth Benchmarks for Commercial Service Contractors
At ServiceTrade we know that you want to be the best commercial service contractor in the markets you serve. It’s difficult, however, to be the best if you don’t know what the best is. You could only guess about how your peers were performing, until now.
ServiceTrade analyzed data from 600 of our customers to establish performance benchmarks for the commercial service industry. We used Amazon QuickSight, the same business analytics platform available to our customers, to audit growth statistics for the two-year period of March 2018 through February 2020.
Here are the ServiceTrade customer growth benchmarks we found.
Revenue Growth
Average: 23.4% Top 25%: 61.7%
Customer Count Growth
Average: 6.9% Top 25%: 26.3%
The top quartile in the above categories is not made up of only small companies as you may expect. That group of high performers is reflective of the company sizes found across the entire dataset. If you are a large contractor, aggressive growth is attainable.
Revenue per Customer Growth
Average: 16.7% Top 25%: 51.6%
Revenue per Job Growth
Average: 10.8% Top 25%: 34.5%
Companies that earned more revenue per customer and job found additional, high-dollar sales opportunities with existing customers such as repair opportunities and additional services.
We’ve also heard from many of the top performers that they “upgraded” their customer base by firing the worst customers and selling to more valuable prospects.
As the adage goes, if you don’t measure it, you can’t manage it. This is true of your metrics compared to industry benchmarks. If you don’t measure how your company performs compared to the rest, you’ll never know if you are the best.
Solving the problem bigger than double data entry
Is the administrative burden of data entry in your back office the biggest problem you face as a service contractor? Just imagine how much easier life would be if you could eliminate all of that wasteful double data entry. Just imagine what it would be like if your technicians could capture data in the field that would flow directly into your accounting system without any additional steps. Your technicians, after all, are known for their accuracy and attention to detail when it comes to recording financial information, right? And, no big deal if they make a mistake! You can easily reconcile data on the backend and make adjustments all while trying to close the books, right? Is your blood pressure elevated yet?
Though it may feel like the infamous “double data entry” is your most important problem to solve, think again. Double data entry, also known as two-pass-verification, is actually an established quality control method where two people enter the same data separately into a system in order to find errors. Sound familiar? How often does your back office catch errors made by your service team? Never, right? Jokes aside, the back office and double data entry are not fully appreciated for their role in catching errors and making sure that financial data is accurate.
To be clear, I’m not suggesting that all double data entry is good. With quality control in mind, you should eliminate as much unnecessary administrative burden as you can with integrations and bulk-data imports to your accounting system. However, the time spent on data entry pales in comparison to the time wasted on a much bigger problem that is often overlooked. This problem spans all the way from data entry to collections and leads to delays and issues in running your payroll and closing your books every month. You can refer to this as the “what happened” problem.
How much time does your financial team waste and how often is month-end delayed when they have to drop everything to chase the details about exactly what happened on a job so they can accurately account for costs and bill the customer?
How often does your team have to chase techs to find out what happened this week so they can run payroll on time?
How much time does your team waste chasing payments only to get push-back from customers because they don’t understand what happened on a particular job?
Once your financial team finally figures out what happened, how much time do they waste correcting data, reconciling accounts, making adjustments, and issuing customer credits?
Be the back-office hero by solving the “what happened” problem.
“What happened” is killing your back-office efficiency and, even worse, tarnishing your customer service delivery. The good news is that there is a solution to this problem. ServiceTrade not only integrates with your accounting system or enables bulk data imports to reduce unnecessary administrative burden, it is specifically designed to answer the question “what happened?” by enabling techs to capture rich information about every job including pictures, videos, equipment details and issues, digital paperwork, payroll details, items used, and much more. All that information is not only easily accessible by your entire team, but also by your customer, so everyone will know exactly what happened on every job.
Just imagine what it would be like if your team knew exactly what happened on every job and had all the information they needed when accounting for work delivered. Just imagine not having to chase payments because customers understood exactly what happened on every job and pay you promptly because they know you did a great job. Double data entry may seem like the most important problem to solve, but “what happened” is the hidden problem that’s really killing your back-office efficiency.
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:
individuals and interactions over processes and tools;
working software over comprehensive documentation;
customer collaboration over contract negotiation; and
responding to change over following a plan.
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:
See evidence of the work performed online?
Review and approve quotes online?
Review equipment service and repair history online?
Request service online?
See the progress of the technician online as he executes the maintenance routine on a complex site?
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.
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:
What is your revenue per technician?
What is your ratio of maintenance work to repair work?
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:
Fire protection technicians (extinguisher): $200k/year
Fire protection technicians (sprinkler and alarm): $300k+/year
Mechanical service technicians: $400k/year – $500k/year
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:
The number of deficiencies techs are reporting;
The number of those deficiencies that convert to quotes; and
Your approval rate on those quotes.
Our data shows that high performing companies convert at these rates:
Mechanical services: $1 of maintenance revenue to $4 of repair revenue
Fire protection: $1 of inspection revenue to $1 of repair revenue
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:
Turn quotes around within 24 hours of finding the problem
Include rich media (photos, videos, audio) of the issue
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.
