Consulting Recommendations for Small Service Companies

Introduction

All new or small companies have a lot to do before they can grow. The important thing is to prioritize and not get overwhelmed. If you don’t take care of the small things, the large things will put you out of business. Here are many tips that should get you, at least, on the road to being great. These tips are specific, simple, and inexpensive. Let’s call the following advice phase one. When you have done all of these things, you are ready for phase two.

Do not skip any of the steps in phase one. Too many owners think there are shortcuts to success. There are no shortcuts. Success is a matter of details.

Phase One

  1. If you use time and material service pricing (not recommended), adopt strategic material pricing system. Use the parts pricing system available from Easy Street, Inc www.easystreetinc.com). It’s free and it will improve your profits and reduce complaints. Send an email to sales@easystreetinc.com. Also see www.flatratesystems.com for more information.
  1. Adopt and use an Installation Price Worksheet. Email sales@easystreetinc.com for a free copy of theirs. You may select whatever net profit you are comfortable with. Generally, the busier you are, the higher the net profit. When you are slow, use a lower net profit. You should always try and get at least 5% net profit on all installation work.

 

  1. Be sure you have nice business cards. You cannot spend too much on business cards. Your cards should contain your company logo, have at least two colors, and contain information on both sides. Carry your cards everywhere you go. You should go through 2000 cards per year per person.

 

  1. Produce and use professionally designed service invoices. Do not use an “off-the-shelf” version. These should be three part NCR paper. The top copy should be at least two-color. They should include a company logo. Be sure that your terms and warranty are clearly spelled out. Be sure to include the following terminology (substitute MrHVAC.com, Inc., for your company name):

Payment is due upon receipt.  For those customers who have an open account established with MrHVAC.com, terms are NET 30 Days.  A monthly service charge of 2.0% or the maximum amount allowed by law, shall be assessed on all accounts that become past due.  No services shall be rendered for any customers with a past due account. You agree to pay all reasonable collection costs. MrHVAC.com shall not be liable for any repairs necessitated by fire, flood, or other acts of God; damage by negligence or misuse by others, faulty system design; improper operation; malicious mischief or vandalism.  MrHVAC.com makes no other warranties, express or implied, and its agents or technicians are not authorized to make any such warranties on behalf of MrHVAC.com.

  1. Produce and use professionally designed maintenance agreements. These should be three part NCR paper. The top copy should be at least two-color. Do not use an “off-the-shelf” version. They should include a company logo. You will need to establish correct pricing for various systems in advance. Print a price sheet.
  1. Produce and use professionally designed sales proposal. A sales proposal should measure 8 ½” wide by 14” long. Do not use an “off-the-shelf” version. These should be three part NCR paper. The top copy should be at least two-color. They should include a company logo.
  1. If you are using time and material service pricing (not recommended), here are some important tips:

Ø      You should be charging about 4.0 times what you pay your technicians (or would be earning yourself if you were not self-employed), on average, per hour. That should be at least $22.00 per hour

Ø      Do not charge drive time and not have service call fees.

Ø      Charge more for the first 30 minutes. This is usually your hourly rate. Example: $79.00 for the first half hour and $79.00 for each additional hour after that.

Ø      Create a price sheet that includes labor pricing in five minute increments. We have one you can use and it’s free.

Ø      Always round your labor time up - not down.

Ø      Enter your "time out" only after you have finished all work including cleanup and paper work.

Ø      Charge more for parts. Use a multilevel table with multipliers from 6.0 to 1.75. Your parts multiplier table should have no less that 20 multipliers. Use the one we provided.

Ø      Be careful with discounts. If you do not have a 10% discount, do not offer senior citizens or preferred customers a 10% to 15% discount. Hint: Your net profit should be 30% prior to discounting.

Ø      Better yet, quit using time and materials. It is inherently flawed. Contact Easy Street, Inc. toll free at 877-232-7978 and invest in one of their flat rate pricing solutions.

  1. You should collect after every service call whenever possible. Fill out invoices BEFORE you leave the job site. Get a signature before you leave – even if they pay you.
  1. Concentrate on billing and collecting. If you must bill a client, leave them the invoice and a self addressed stamped envelope. If you must mail the bill, mail out invoices every night. Carry envelopes and stamps with you (on your truck) and mail them before you go home.
  1. Your payment terms should be net 15 days. That means you want all of your money in 15 days.
  1. Open accounts whenever possible. If you do not have an account, get an application and pay with a credit card. Write checks if you must, but do not pay cash.

See www.easystreetinc.com for pre-made service invoices, sales proposals, service agreements, policy manuals, job descriptions, flat rate pricing systems, and a lot more.