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Table of Contents
Why haven't you re-printed your flat rate books?
Dave Says: 5 Ways to make hard decisions easier Announcements: Profit Building Blog; 2012 Bootcamps announced ProfitMaxx: Do your techs believe in your hourly rate? Team Solutions: Hiring (an exceptional!) lead install technician Small Business University: The One-minute negotiator  This e-mail address is being protected from spambots. You need JavaScript enabled to view it This e-mail address is being protected from spambots. You need JavaScript enabled to view it This e-mail address is being protected from spambots. You need JavaScript enabled to view it |
A Message from Grandy & Associates
Why haven't you re-printed your flat rate books?
by Tom Grandy
Thousands of contractors across this nation have been using Flat Rate Pricing books for many, many years. As a matter of fact, flat rate pricing is rapidly becoming the standard within the trades industry. However, it is not becoming the standard within the industry because it’s a great program (which it is!); flat rate pricing is becoming the standard because more and more contractors are becoming aware of what it really costs to run a profitable service department. When the actual numbers are run, it is the rare company that can charge less than $100 per hour and still generate a reasonable profit in their service department.
Let’s say Company A has just run their numbers to determine what they need to charge per hour in their service department for the coming year. With all the increased costs of doing business, the company is fully aware of the fact that to generate a 15% overall net profit in service, it will require charging $138/hour to the customer. Now if you are on time and material, charging $138/hour can be a difficult task. What’s the answer? Obviously, the company needs to switch to flat rate pricing so the customer never sees their $138/hour figure.
Ok, let’s assume the company is now on flat rate pricing. Profits are up and complaints are way, way down. Company A has just passed through their one year anniversary. The phone rings. It’s the representative from your flat rate company. “Hello, this is John Doe from ABC Flat Rate Company. Mr. Contractor, it has been a little over a year since we printed your flat rate books for you. Your costs of doing business have gone up over the past year, so are you ready to have your flat rate books reprinted?”
Unfortunately, the answer is all too often, no. The contractors' excuses are endless. “It’s only been a year since we printed the manuals.” “We really can’t afford to have the books reprinted.” “Profits look good, perhaps next year.” “I don’t want to increase my pricing again; the customers won’t stand for it.” The list goes on and on.
I recently presented our brand new one-day program entitled Service Manager’s University. After we discussed the pros and cons of flat rate pricing we did a class exercise. I asked the class what costs had gone up within their service departments over the past 12 months. In order to keep things simple, we assumed the company had three service technicians. We also assumed 50% of the companies gross sales were generated by installation and 50% by the service department. That means that 50% of the general overhead costs will go to each department. Below are just a few of the costs that had increased over the past twelve months:
| Item | Cost | Amount to Service |
| Rent | Up $100 per month | 600.00 |
| Utilities | Up $30 per month | 180.00 |
| Health Insurance (3 techs) | Up $100 per month per tech | 3600.00 |
| Gasoline in service | Up $25/week per tech | 3900.00 |
| Office salaries for 3 people | Up $100 per month with 50% to service | 1800.00 |
| Workman's Comp Insurance on 3 techs | 900.00 | |
| Vehicle Maintenance | Up $500/year for 3 techs | 1500.00 |
| General Office Expenses | Up $6,000 with 50% going to service | 3000.00 |
| Cost of parts (tech typically sells $20,000 in parts per year) | Parts cost increase of 10% ($2000 per tech) | 6000.00 |
| Total increased cost in service department over the past year | $21,480.00 | |
Can the bottom line profit in your service department afford to absorb $21,480? Most can’t, although contractors across the nation continue to argue that they simply cannot afford to reprint their manuals.
Let’s do some quick math. Take the $21,480 and divide it by 3,000 billed hours (each service tech bills out about 1,000 hours per year). That means when the company reprints their manuals, they would need to increase their internal hourly rate by $7.16/hour ($21,480/3,000 billed hours). Can you afford NOT to increase your hourly rate and have your flat rate pricing books reprinted? I don’t think so. As a matter of fact, if this were my company, I would increase my internal hourly rate by $10 per hour. That would not only cover my increased cost of $21,480 but it would increase my overall profit for the year by $ 8,520 ($10 - $7.16 per hour additional profit) x 3,000 billed hours a year = $8,520).
One of the great benefits of being on flat rate pricing is that you no longer have to “announce” to your customer base that your pricing has increased. You simply reprint the manuals and out the door your techs go. The customer never knows you increased your hourly rate, nor do they care!
Now tell me again why you can’t afford to have your flat rate books reprinted? It was a real eye-opener in class. Nearly the entire group of contractors in the seminar went home determined to have their manuals reprinted as soon as possible.
Contractors are not stupid. Most make the right business decisions when the facts are in front of them. Unfortunately, most contractors spend their days putting out fires and simply don’t take the time to think through the logic of things like reprinting flat rate manuals. Well, if you just read this article, the facts are now before you. What will YOU do in terms of having YOUR books reprinted? The choice is simple. Keep your current books for another year, and absorb the increased cost of doing business, or reprint your books and pass the increased cost of doing business onto your customer. My personal recommendation is to have your flat rate books reprinted a minimum of once a year and, if at all possible, I would suggest reprinting your books twice a year. The longer you wait to reprint your manuals, the more that your increased cost of doing business will be absorbed by the company, instead of the customer.
Always keep one thing in mind. The fear factor of raising your hourly rate is always on the part of the company, not on the part of the customer!
If you are on flat rate pricing, and your internal hourly rate is not set correctly, you will never be profitable no matter how hard you work. This month's website special features our industry-recognized labor pricing modeling software program called Labor Pricing for a Profit. This program will model each department of your company telling you exactly what you need to charge per hour to cover costs while generating a reasonable profit. This software retails for $399.95; however, this month's web special provides a $100 discount. It has a 100% money back guarantee if you are not completely satisfied. No risk, order today!
Special to Grandy & Associates' eNewsletter
Pulling the trigger: 5 ways to make hard decisions easier
Have you ever had to make a decision that was so monumental that you were nearly paralyzed with fear? If the answer is yes, don’t feel bad. You are definitely not alone. One of the hardest parts of being an EntreLeader is making those tough calls, especially when you know that whatever you decide affects others around you.
In fact, Dave says fear is the ultimate cause of paralysis. Still, he never makes decisions based on it. Instead, he has a system that allows him to make the tough calls. As Dave teaches in EntreLeadership Master Series Lesson 18, elements of good decision-making include these five steps.
1. Setting a Deadline
Come on. You know you’ve done it. You put off making that tough decision by simply justifying your procrastination. I can’t decide until my office is clean. Who can think in a dirty office? Combat the “put-off” syndrome by giving yourself a deadline and placing it on your calendar. It will force you to deal with whatever is happening.
2. Taking Your Time
This may seem odd since we just told you not to procrastinate, but part of making good choices is taking your time on monumental decisions. How do you know if the decision is big?
Dave says measure it by:
- The amount of money involved
- The amount of time involved as the result of the decision
- The number of people involved.
3. Gathering Options
Remember that famous line from Dirty Dancing? “Nobody puts Baby in the corner.” Well, by giving yourself a number of options, you can be as corner-free as Jennifer Grey. Options take away a lot of the fear of making the wrong choices. If something doesn’t work, plan B is always available.
4. Gathering Information
The late British Prime Minister Benjamin Disraeli once said, “The most successful man in life is the man who has the best information.” And when it comes to decision-making, we agree. The more information you have, the easier it is to recognize the best choice. As Dave says, “Information removes fear.”
5. Avoiding Financial Risks
When making a decision, Dave always asks himself and his team if the company can handle the financial hit if everything goes south. In fact, when an idea is launched, it must meet the following financial criteria.
- If the product fails, the consequences can’t be financially fatal.
- No money can be borrowed to launch the product.
Tune In
Want to learn more decision-making elements? Download the latest EntreLeadership podcast to hear Dave’s advice on the subject. Also featured is an interview with one of Dave’s favorite authors, Jim Collins. Jim has written extensively on leadership, including making those tough calls..
Special Announcements from Grandy & Associates
Profit Building Blog
Grandy & Associates has updated and improved its popular Profit Building Blog, which highlights the latest trends, information and insights for the trades industry. Due to the recent upgrade, if you were a former email subscriber to the blog, you will need to re-input your email address to continue receiving updates when new posts are available. If you have not signed up to receive notifications, you are encouraged to do so! You can also subscribe to our RSS feed, so you'll know when new information is posted to the blog. Read some of our recent posts:
- I Deserve What I Got -- Go with Quality, Show Your Value
- Meetings With Your Teammembers Don't Have to be Unproductive
- Fogging a Mirror Not Required
- Don't Bank on a Line of Credit
2012 Bootcamp Schedule Released
Grandy & Associates has released its schedule for bootcamps taking place in early 2012. These bootcamps are intensive, 3-day workshops that guarantee you will walk away with the tools and expertise you need to increase the profitability of your company. For more information, visit the Basic Business Bootcamp section on our Website or register for a bootcamp today!
| Date | Location |
| February 14-16, 2012 | Aberdeen, SD |
| February 21-23, 2012 | Los Angeles, CA |
| February 28 - March 1, 2012 | Houston, TX |
| February 28 - March 1, 2012 | Fargo, ND |
| March 5-7, 2012 | Florence, KY |
| March 6-8, 2012 | Phoenix, AZ |
| March 13-15, 2012 | St. Petersburg, FL |
| March 13-15, 2012 | Minneapolis, MN |
| March 27-29, 2012 | Green Bay, WI |
| March 28-30, 2012 | Columbia, SC |
| April 24-26, 2012 | Columbia, SC |
Do your techs believe in your hourly rate?
By Tom Grandy
See if you can answer this quick question from your service tech's perspective. You are paying your service tech $20/hour, and you are charging your customer $85/hour. How much profit does the tech think the company is making? If you guessed $65/hour, you're right. The average technician has absolutely no idea what it costs to run a company. To them the math is simple. "Let’s see, we are charging the customer $85/hour, and you are paying me $20/per hour, so that means the company is making $65/hour profit for every hour I work."
If the technician has no idea what it costs to run a company, they will tend to undercharge the customer. They look at the $235 invoice price and immediately think of the customer. “Golly, Mrs. Jones is 127-years-old and on social security. She can’t possibly pay that much. So I’ll drop the price to $185.” It is in the interest of every company owner to help their technicians (and office employees, as well) understand some of the basic costs of doing business. No, I am not saying open your books and show them where every dollar goes. What I am saying, however, is to share with them some of the basic costs of doing business and relating them back to a dollar-per-hour figure.
Step one is to help the service tech understand that the number one cost of doing business is his or her non-billable time. Non-billable time is the time the company pays the tech that cannot be charged to the customer (at least not directly). Typical non-billable time for a service tech is 50%. Non-billable time includes sick, vacation and holiday pay. It also includes shop time in the morning and afternoon, plus travel time between service calls. Non-billable time includes company meetings, warranty work, callbacks, customer no shows and several other “not thought about much" items. Relate the cost to dollars per hour. The raw cost of non-billable time for the year is $20,000 (1000 non-billed hours at $20 per hour). That means of the hourly rate charged to the customer your company has to charge $20 per hour…..just for non-billable time.
Select half a dozen major costs to your company (the vehicle, insurance, rent, telephone, etc.), and relate them to dollars per hour for your technicians. This will help in two ways:
- They will tend not to under bill as much, and
- They may be less likely to leave and start their own company if they have some idea of the cost of doing business.
If you want to know YOUR real cost of doing business, you might want to order this month’s website special . We are featuring our totally re-written Labor Pricing modeling software at a $100 discount. Your cost this month is only $299.95 ($399.95 less $100 discount). Order today! The software is 100% guaranteed or your money back. No risk so order today!
Hiring (an exceptional!) lead install technician
By Bill Kinnard
The installation part of your business has been going pretty much according to plan. The guys are performing well and staying on schedule ... for the most part. You have not received negative feedback from your builders or customers. But, your previous Lead Installer left the company several months ago and you need to replace him. Don’t make the mistake of simply hiring the applicant who has a lot of experience with a company that is well-known in the area. You may be overlooking the top candidate from within your own organization. Let’s take a look at the Behaviors, Values and Skills that make an installation team as effective as possible:
BEHAVIORS
1. CUSTOMER ORIENTED: The Lead Installer job demands a positive and constructive view of working with others. There will be a high percentage of time spent listening to, understanding and successfully working with a wide range of people from diverse backgrounds to achieve “win-win” outcomes.
2. FREQUENT INTERACTION WITH OTHERS: The Lead Installer requires a strong “people" orientation, versus a "task" orientation. The job will comfortably deal with multiple interruptions on a continual basis, always maintaining a friendly interface with others.
3. VERSATILITY: Being a Lead Installer calls for a high level of optimism and a “can do” attitude. It will require multiple talents and a willingness to adapt them to changing assignments as required.
VALUES/MOTIVATORS
1. THEORETICAL: Rewards those who value knowledge for knowledge’s sake, continuing education and intellectual growth.
2. UTILITARIAN/ECONIMIC: Rewards those who value practical accomplishments, results and rewards for their investment of time, resources and energy.
3. TRADITIONAL/REGULATORY: Rewards those who value traditions inherent in social structure, rules, regulations and principles.
SOFT SKILLLS
1. SELF MANAGMENT: Your Lead Installer must have the ability to prioritize and complete tasks in order to deliver desired outcomes within allotted time frames.
- Independently pursues business objectives in an organized and efficient manner
- Prioritizes activities as necessary to meet job responsibilities
- Maintains required level of activity towards achieving goals without direct supervision
- Minimizes work flow disruptions and time wasters to complete high quality work within a specified time frame
2. RESULTS ORIENTATION: The Lead Installer has the ability to identify actions necessary to complete tasks and obtain results.
- Maintains focus on goals
- Identifies and acts on removing potential obstacles to successful goal attainment
- Implements thorough and effective plans and applies appropriate resources to produce desired results
- Follows through on all commitments to achieve results
3. PERSONAL ACCOUNTABILITY: Your Lead Installer must have a measure of capacity to be answerable for personal actions.
- Accepts personal responsibility for the consequences of personal actions
- Avoids placing unnecessary blame on others
- Maintains personal commitment to objective regardless of the success or failure of personal decisions
- Applies personal lessons learned from past failures to moving forward in achieving future successes
4. LEADING OTHERS: He or she must have the ability to organize and motivate people to accomplish goals while creating a sense of order and direction.
- Inspires others with a compelling vision
- Empowers others to accomplish common goals
- Represents a positive, motivational example for others to emulate in becoming leaders
- Supports others through providing clarity, direction, organization and purpose
5. GOAL ACHIEVEMENT: This person has the overall ability to set, pursue and attain achievable goals, regardless of obstacles or circumstances.
- Establishes goals that are relevant, realistic and attainable
- Identifies and implements required plans and milestones to achieve specific business goals
- Initiates activity toward goals without unnecessary delay
- Stays on target to complete goals regardless of obstacles or adverse circumstances
6. SELF STARTING: The Lead Installer has the ability to initiate and sustain momentum without external stimulation.
- Initiates relevant activities toward achieving business goals
- Independently completes projects and produces desired results
- Requires little or no supervision to stay focused on necessary activities
- Readily indentifies and pursues business opportunities without outside direction
7. DIPLOMACY AND TACT: The Lead Installer also has the ability to treat others fairly, regardless of personal biases or beliefs.
- Maintains positive relationships with others through treating them fairly
- Demonstrates respect for others
- Understands and values differences between people
- Respects diversity in race, national origin, religion, gender, life style, age and disability
It’s more than just behavior
As you can see, finding the right person is more than just looking at their behaviors. If you are using a DISC assessment in the hiring process, congratulations! Keep in mind, however, that behaviors are only a small part of what you need to be considering. Make sure you are using a tool that looks at the values and skills as well as the behaviors.
If you want to find out if one of your employees has what it takes to be a great Lead Installation Technician, send us an email. We'll walk you through the process of having them take an assessment where we compare them to the requirements laid out here. Find out if you’re going to have problems with a person before you hire or promote them. (Learn more about Team Solutions on our Website!)
The one-minute negotiatorby Don Hutson
Everything is price-focused today. When customers talk about price, you need to talk about value. Once you determine your desired productive outcome (DPO), it is simply a matter of negotiation. Negotiation is part of life and business. It takes place in sales, marketing, bidding jobs, customer service and even in relationships. Don Hutson wrote The One Minute Negotiator, which was #1 on the New York Times Best Seller List. If you want to learn to negotiate, the shortest path is to learn from the best.
- Definition of Negotiation
- Understanding Up Front Agreements vs. Negotiation
- “Negoshafobia” - Fear of Negotiating Based on Limited Experience, Discomfort with Uncertainty and a Lack of Skill.
- Four Styles of Negotiation: Avoidance, Accommodators, Competitive, and Collaborative
- Strategy Magic: When to avoid, accommodate, compete and collaborate
- Negotiation Principles
- Understanding compromise and when to use it
- Bargaining chips (three kinds of chips: red, blue and green)
- Individual and company reputation (Brand creation, brand advocacy)
The Small Business University features a new trade focused audio presentation every month. These programs are designed to provide the trades contractor relevant information that can help their business immediately. Get more information on this program or sign up for a monthly subscription today.