Since
1992,
NSPG has been providing the tools that allow contractors to
increase profits and minimize business hassles. With our
simple-to-use-tools, you can make being a business owner
what you always wanted to it be -
successful, profitable and rewarding.
Do You Know Where You're Headed Today?
 Every
once in a while we encounter a business manager who
seems to have done everything right, but can't seem to
get his sales to where they need to be. Whenever
this happens, we almost always hear that the fault lies
with their prices. They always believe that they
are charging too much even though they seem to have done
all the right calculations.
Sometimes they focus all
of their attention on the price in their flat rate books
as if the book itself was the cause of the problem.
Sometimes they blame their well trained technicians for
not selling. So, instead of stepping back and
taking a good look at their situation, they print new
books with unprofitably lower prices. Or, they
push their employees to sell higher priced equipment to
try to increase profitability.
 The
solution is often found not with the numbers or the
techs, but with the manager. A successful manager
needs to always know where the business stands right
now, and the direction the business needs to go.
This two part process is similar to how a GPS guides you
to your destination in your truck. The GPS always
knows exactly where your vehicle is, and the progress it
is making. Once you enter your destination, it can
guide you there.
Most managers have gotten
very good at setting the profitable destination for
their business. It's knowing where they stand now
that is hard to see without the right tools and
techniques. There are some numbers that you just
have to know to be sure that you are heading in the
right direction.
Some of the numbers
that a good manager needs to know include their
technicians' average close ratio; their average sale and
invoice total; their average productive hours sold.
These numbers and many more affect and reflect the
performance of your business. They need to be used
throughout your operation from your pricing to your
staffing and inventory.
Without knowing these
key performance parameters for the business, the manager
is trying to navigate without enough information.
Take one of the easiest to understand items listed
above: average productive hours sold. If you are
not actively tracking this number for your business,
your prices are wrong.
 Searching
trade publications for information on average productive
hours can yield a wide variety of numbers for different
trades. Most publications seem to recommend that
you use an industry average when setting your prices.
One of the most prevalent numbers we found was 65%
productivity. The means that your tech would have
to be billing out about five hours and 15 minutes each
eight hour day.
So, if your business is
lucky, and you have super productive techs, your prices
could be correct using this rule of thumb 65%
productivity number. This number could work for a
new construction type business, but it is way too high
for most service businesses who struggle to reach 50%
productivity. Remember that vacations, holidays,
lunches, and breaks can eat up as much as 20% of a
technician's time.
The vital point is that
many managers do not know the critical performance
factors for their business. Even though there are
business tools that help to measure these factors, most
businesses do not use them. They end up closing
their eyes, and hoping they are headed in the right
direction. They believe that their prices are too
high, or their techs have forgotten how to sell, or it's
just a down market.
The cost of not knowing
how your business is really performing can affect more
than just the numbers part of the business. For
example, if you do not measure your tech's performance,
they can't know how they are doing. They will tend
to focus on the last job they did not sell. If
they have a bad day, it can spill over into the next
day, and affect how they present themselves to
prospective customers.
As we mentioned before,
there are now business tools that can help you track
these performance benchmarks for your business.
But successful companies have been manually tracking and
using these numbers for many years. A key
motivator for many companies is to publicly post
benchmark items like close ratio, productive hours, and
average invoice to motivate their technicians.
These numbers can inspire under-performing techs to work
harder, and can keep a few sub-par days from
discouraging a high performing tech.
 So, even though you spend
time and money setting your prices, stocking your
trucks, manning the phone, and training your techs, if
you don't know where the business stands, you're lost.
If your manager does not know what the specific
performance goals are, the company may not be moving in a profitable
direction. Your techs may in fact be doing well and not know it
because they are focusing on the call they just lost and not
the overall picture.
It is the function of the
manager to keep the big picture in front of the tech,
and to coach them on the benchmarks. If you choose
to use a rule-of-thumb performance benchmark at first,
be sure you use a conservative number that will get you
started in the right direction. Then, measure the
important performance benchmarks every day so you can
periodically adjust your business to match what is
really happening.
You and your business
will have the added benefit of knowing where you stand
rather than just hoping that you are going in the right
direction.
- - - - - - -
Give Mike Conroy a call to
discuss your business, your numbers, your performance
benchmarks, or your flat rate
books. Take advantage of his experience working
with hundreds of companies like yours to help you achieve your own business success.
Measure Monthly, Adjust Quarterly
& Achieve Annual Profit Goals
|
Finally! Your business can be easier to
manage every day. |
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