Archives for March 2019

Here’s a question I get on a fairly regular basis: “Tom, my techs install and repair equipment. Why should I waste time explaining what it costs to run a company? They are techs, not owners.”

Think about that for a moment. More than 90% of all owners within the trades industry used to be a tech working for someone else. But, again, you may ask, “So what? They are techs now, so why should I invest time and money helping them understand what it costs to run a company?”

The answer is twofold.

1. Under Pricing
If technicians don’t believe what you are charging is fair to the customer, they will tend to under-bill the customer. They need at least a general idea of what it costs to run a company in order to justify, in their own minds, what you are charging per hour. It’s up to you, as the owner or manager, to help them believe the hourly rate you are charging is both necessary and needed, in order for the company to survive and, therefore, provide a certain degree of job security.

Try this. During your next service meeting make a list of your 10 highest costs of doing business. The number one cost of doing business is the cost of non-billable time. Non-billable time is the time the company pays the tech for that cannot be charged directly to the customer. That includes things like shop time in the morning and afternoon; travel time between jobs; sick, holiday, and vacation time; warranty work; callbacks; and company meetings.

The second highest cost of doing business is equipment replacement. This is money that needs to be saved each year in order to be able to replace equipment when it wears out. Other costs would include things like insurance, vehicle maintenance, gasoline, rent, office salaries, etc. You get the idea.

Pick 10 items then ask your employees to guess how much it is costing your company per year for each one. Make it fun by offering a prize for the closest number to each item. As the game comes to a close, simply mention that these 10 costs only represent a few of the costs of running your company which is why you need to be charging what you are charging.

2. Future Competition
As I mentioned earlier, more than 90% of all company owners used to be a tech working for someone else. Most techs who go out on their own tend to undercharge the customer because they actually believe the difference between what they are paid, and what you are charging the customer, is all profit. The thinking is something like this. “The company is paying me $20/hour and they were charging the customer $100/hour. When I start my own company, I don’t need to rip off the customer like my boss does in order to make a nice living. I can change $50/hour and still make a nice profit.” So, they do just that. Now your new competition is grossly under-billing the customer which makes it really tough on all the contractors in your area,

Teaching your techs the basics of what it costs to run a company will result in one of two situations. Either they will understand what’s involved in running a company and therefore might just decide that they really don’t want to go out on their own. Or, should they decide to go out on their own, at least they will be priced properly and therefore become fair competition without messing up your local market.

Teaching your techs the basic costs of doing business will bear fruit in the short run as well as the long run, no matter whether they stay with your company or go out on their own.

by Dave Ramsey

Published with permission in the March 2016 newsletter

Seminars that teach employees how to handle money are a dime a dozen. The problem is, if you rely on them to meet the needs of your employees, you will get dime-a-dozen results. Studies show that employees who spend more time thinking about their financial troubles tend to be less productive at work and have lower morale, which in turn hurts your company.

The purpose of a wellness program is to help, not hurt. Choosing a high-quality program is the first step in meeting the needs of your employees and your company. Here are five features that the best plan must offer:

1. It creates sustainable behavior change. A successful financial wellness program must be easy to follow and serve your employees over time in order to create lasting behavior change. Not only will a quality program have a proven track record for sustained success, but also it will provide leadership with statistics to show the real difference it’s making in employees’ lives.

2. It is scalable. A good program will meet your employees where they are. Your company may have multiple locations, different shifts or even spouses who would like to participate, making class facilitation a huge challenge. Employees need a program that is available online any hour of the day or night. Since practically all employees have some level of access to the internet regardless of income level, they can get the information they want at their own pace. A mobile program is the best fit for people’s busy and unique schedules. Online programs also provide a much-needed layer of privacy. It’s tough enough for someone to talk about a money situation—and almost impossible to get them to do it in a workplace or classroom setting.

3. It teaches over time, not with a one-time seminar. A 45-minute lunch-and-learn session once a year is not enough financial education for your employees. And, let’s be honest, those sessions fly right over their heads. Besides, that level of communication won’t lead to any sustained behavior change for them. The program should offer material that helps them learn over time so they can form good money habits. Someone who is in the midst of paying off debt won’t be interested in investing, but if they can go back and reference the material when they are out of debt and ready to build their nest egg, they are better served.

4. It is personalized for the employee. People have different needs depending on where they are in life (just starting out, getting married, having a child, or nearing retirement). A good wellness package addresses that person’s specific needs and helps them where they are, rather than just offering blanket answers.

5. It should be offered to everyone. If you only offer a financial wellness program to employees who want it, the guilt and shame may drive away those who need it the most. When you offer it to all employees, as you would other benefits, participation rates and ROI substantially increase. It may even cost less to provide the program to all employees because of different pricing structures for companywide initiatives.

The power to select the program that will bring success to your employees is in your hands. The result will be felt by your entire company for years to come!

by Tom Grandy

You have a bad headache. What do you do? Probably search for the bottle of aspirin. But, ask yourself this:  Is your body really lacking aspirin? No, the aspirin treats the symptoms, not the cause. The aspirin simply manages the pain so you don’t feel it any more … but the underlying problem remains.

Commercials that advertise drugs promote the same thing. None “heal” the problem; they simply manage symptoms. Secondly, nearly all have side effects! “This product may cause bleeding, heart attack, stroke … or death.” In addition, sometimes the drugs’ side effects are actually worse than the original problem. The reality, however, is that many people would rather take a pill to manage the symptoms than do the work of making lifestyles changes in order to receive a cure. Do you want to be healed or do you want your symptoms managed?

What are you doing as an owner or manager? Are you managing symptoms or solving root problems?

If you are an owner or manager, you probably have lots of irons in the fire every day. When a problem arises, we all want the fastest solution possible so we can move on to the next fire. The reality is that, in the long run, it’s better to spend a bit more time, energy, and money today than to have to deal with the same problem again down the road.

One example of this principle is delegation. One of the most difficult things for most owners to do is to delegate duties and responsibilities to others. We feel like we are losing control if we are not intimately involved in everything. Also, it seems easier to simply do it ourselves than to spend time training someone else to do it. “After all, I can handle it in 30 minutes, and it will take me an hour or more to show Joe how to do it.” The results are obvious. If I do it myself, next time a similar situation arises I will be the one who has to take the time, again, to fix it. If I trained Joe how to handle it, I would not have to be involved when a similar situation comes up. The choice is yours.

Let’s look at another situation. Say things are busy and we need another service tech … today! We quickly hire a warm body to get the position filled ASAP. However, we later find out the tech is not all that skilled, his customer service skills are poor, and he ends up losing several long-time customers. Within a few weeks, or months, he either leaves or we fire him. What did that cost the company? Perhaps we really should have done an assessment on him before we hired him to see if he had the technical ability, could handle paperwork, and was willing to be a team player. Checking references would have been helpful, too, as doing a background check would have revealed he had three DWI’s over the past two years. The pill (hiring the first warm body we could find) seemed like a good idea at the time, but in the long run it caused a lot of damage.

How about this one. You just invested $5,000 in a new piece of equipment that should increase productivity and profitability. William is a sharp tech; we will let him use it. We hand him the manual and rush him out the door. He spends precious minutes skimming the manual, uses the equipment improperly, and bingo. He messes up the job and breaks our new piece of equipment. Maybe we should have sent William to that half-day training class.

Now let’s look at one last example. Sam has been with the company for 10 years and handles most of our sales. His close rate isn’t great, but he is a hard worker. As time goes on, you’re sure he will get better. After all, he is on 100% commission, so his income depends on it. Over the next few months Sam starts selling more jobs; however, the company seems to always be drawing from its line of credit to survive. You know you should be job costing Sam’s jobs, but that takes time … time you don’t have. However, you eventually decide to take the time to job cost a few of Sam’s jobs and you realize the company lost money on most of them! You discover Sam has been lowering the price for some time, and you discover that Sam’s sales began going up at the same time profitability began to fall. Sam, however, is doing ok. He is earning a commission on every job while the company is losing money.

Ignoring problems that we know in our heart need to be fixed doesn’t help anyone. The short, quick, answer is seldom the right one. Pay attention and make the hard decisions.

Let me suggest one other tip. Women seem to have a God-given ability to sense trouble before men do. I have been married 46+ years. Early in our marriage, my wife would come to me with a “feeling.” She would say, “Tom, I don’t feel comfortable with this situation or that.” My response was usually very straightforward — tell me what the problem is and I’ll solve it. Since it was a “feeling,” she couldn’t give me specifics, so I tended to ignore the situation only to have the problem she described pop up several weeks, or months, later. Why do I share that story? If your wife or the women in your company share a “feeling” about an employee, customer, or situation do yourself a favor and take the time to check it out. It might just save you a lot of time, energy and/or money.

by Dave Ramsey

Published with permission in the February, 2016 newsletter

Have you noticed that there are some business owners out there who just seem to get it right? Whatever they touch turns to gold. And the last time they were stressed, Bill Clinton was in the White House. So how do they do it? What’s that magic formula that makes them so blessed while so many of us continue to struggle?

For the majority of successful people, it’s as simple as this: They write down their goals and stick to them. They have a plan. As financial expert Dave Ramsey teaches in his book EntreLeadership, “Goals force practical steps into your life to make your dreams come true.”

So if you haven’t tackled your business goals for the new year, we’re offering some general suggestions to help you get started. Remember, though, they’re only recommendations. Because in order for goals to truly work, they have to be your own.

1. Get your finances in order
Want to know the number-one reason small businesses fail? Poor accounting. If you don’t keep up with it, you’ll sink faster than Leonardo DiCaprio in Titanic. But that’s just the start. You can’t rely solely on a profit-and-loss statement to tell you what’s happening with your business. You need a budget that focuses on the future. “Doing a budget will make the obvious become a reality and force you to prepare and think of options,” Dave says.

2. Commit to a better hiring process
The main reason small businesses owners hire the wrong people is they are afraid the work won’t get done until the position is filled. But the truth is that it takes more time to hire six people who don’t work out than one good person who’s perfect for the job. Commit to slowing down your hiring process and invest more heavily in interviews. Hold off until you find the perfect person, no matter how long it takes. At Dave’s company, each new hire has been interviewed at least six times. You want someone who is passionate about the position, not just looking for a J-O-B.

3. Find a mentor or coach
What is one trait that almost every successful entrepreneur has in common? They have a mentor—an experienced someone who shows them the ropes and holds them accountable. Find people who are doing things you wish you were doing and learn from them. And you don’t have to stick to just one. You can have a different someone for every area of your life.

4. Get healthy
When you get really tired, you don’t have a lot of fight left in you. And in business, there’s always going to be a battle. So like that old song goes, take good care of yourself. Get in shape, eat good food and get enough rest—literally feed your engine so you can fight another day.

So what are you waiting for? Write down those goals and get started. You’ll be amazed at where you’ll be. Goodbye, stress. Hello, prosperity!

by Tom Grandy

One of the few things in life that you can count on is change. You don’t have to like it, or even embrace it, but it’s sure to happen.

I’m confident many of you are familiar with the book, “Who Moved My Cheese?” by Spencer Johnson. There were four characters: two mice named “Sniff” and “Scurry,” and two little people named “Hem” and “Haw.” The four characters live in a maze (which represents environment) and their activity is to look for cheese (which represents their life’s happiness and success). It’s a wonderful story about the change that takes place when, one day, the cheese has been moved and how the four characters handle it. If you haven’t read it, I strongly suggest you do!

I have noticed a lot of changes and trends over the past 27+ years of providing business training for contractors. However, there are also some things that really haven’t changed all that much. Let’s talk about both.

Changes and Trends

• Flat Rate Pricing – More contractors have made the shift to flat rate pricing. Although the numbers are growing, our industry is still a long way from where the automobile industry is. The auto industry has fully embraced flat rate pricing to the point that it’s difficult, if not impossible, to find a shop of any size that still charges by the hour. Even 25 years into the program I still find 30% to 50% of my class attendees are NOT on flat rate yet. Those who have embraced flat rate pricing are trending more and more away from physical books in favor of programs that work on their iPads and Smartphones.

• Financing – What made Sears famous? Financing! Sears found out that people will buy almost anything if they can pay $25/month…no matter how long it may take to pay it off. With our debt-ridden economy – where most people have huge credit card debt and little cash – offering financing is becoming a must. Offering choice, while providing a way to comfortably pay for it (financing), is increasing the closing rate for companies across the country.

• Technicians’ Pay and Benefits – Our nation runs on the economic principle of supply and demand. When demand is high and supply is low, the price goes up. Our industry has a huge shortage of qualified technicians, so the results are predictable. The pay and benefits required to hire, and retain, technicians has risen substantially. In case you haven’t noticed, the problem is getting worse, not better. Top quality technicians can make a really nice living in our industry; however, things will not change until we, as contractors, force the issue. We must promote working within the trades industry as a viable option for our young people. That means overcoming the loud voices of those who promote college as the only way to get ahead in life. That means getting involved within the local school systems.

• Technology – Technology is changing everything, including the world of contracting. Paper time sheets, verbal dispatching, flat rate pricing, sales presentations, and marketing literature are all leaving paper behind. iPads and smartphones are commonplace. As the cost of technicians increases in both pay and benefits, the cost of non-billable time becomes more and more expensive, as well. The proper use of technology can help minimize that cost.

• Internet – Our customers are becoming better informed each day thanks to the internet. It’s not unusual for potential customers to literally be better informed about equipment, pricing, and discount offers than we are. As top contractors embrace the internet, you will begin to see amazingly informative websites that will educate the customer. Progressive contractors now offer the ability to schedule service calls online. Maintenance agreements are also being promoted, and sold, online. Customers are selecting contractors based on what they read about on sites such as Angie’s List and the contractors’ own personal websites. Most contractors today have a website, but the contractor’s websites of tomorrow will be far more sophisticated, informative, and interactive.

Also, social media has become a critical piece of every businesses marketing program. You don’t have to embrace it personally, but you better have someone on staff who does, otherwise you will be left behind.

• Marketing – I realize this is a topic that will be covered all by itself in another article. Suffice it to say that the days of only relying on the Yellow Pages is rapidly disappearing as contractors embrace the internet and technology.

So what hasn’t changed over the years?

• How Companies Get Started – This has not changed. Nearly all contracting companies are still founded by technicians who used to work for someone else. One day the light bulb goes on and the technician thinks, “They are paying me this much per hour, and the company is charging the customer a huge amount of money. If I started my own company, I could charge that high rate and I’d be rich!” Sound familiar? Well it’s still going on and it’s unlikely to change.

• Labor Pricing – Grandy & Associates, and others, have been providing classes on how to set proper hourly rates for the past 27+ years, and the industry as a whole has not changed. Sure, quality contractors are setting profitable labor rates; but as an industry, we aren’t much different than we were 27+ years ago. The vast number of contractors still set rates based on what everyone else is charging, and we still beat each other to death rather than charge more…so EVERYONE makes money!

• Basic Customer Needs – What the customer wants has not really changed much either. Most customers still want three basic things:

1. Quality work
2. Have contractors do what they said they would do.
3. Have the work completed when they were told it would be done. (Translated, show up on time!

The number one customer complaint is the same as it was 27+ years ago. Most contractors still don’t show up on time! However, contractors who do the above three things, and mix in a bit of customer service, are finding they have more work than they can handle. Providing these things, consistently, costs money. That is why contractors who provide this kind of service, continuously, are normally charging above average hourly rates AND are making money!

Why do many owners work 60-80 hours a week? There are lots of reasons, but they’re all rooted in the American dream. The bottom line is that he or she, has a vested interest in making the company successful. If the owner works really hard, the reward is twofold. First, the owner has a tremendous feeling of satisfaction. He or she has built something from scratch that perhaps no one else thought they could. Secondly, if he or she does a great job, there is a reward at the end of the rainbow … they makes a lot of money that can be invested, spent, used to put kids through college, or given away.

Now let’s look at things from the technician’s point of view. Many techs are secretly thinking to themselves, “My boss wants me to work really hard so he can get rich. That’s not fair. I do all the work and he makes all the money!” When the owner works hard he gets to enjoy the fruits of his labor. The tech is thinking “What’s in it for me?”

Techs need a vested interest to work hard, just like the owner does. What is their incentive? That is where the owner and/or service manager comes into play. The owner or manager needs to set specific Key Performance Indicators (KPIs) for the technician to work toward.

Next there needs to be a rewards program for meeting, or exceeding, those KPIs. Now the tech has an incentive, just like the owner. If he or she works hard and achieves the stated goals, they will have that great feeling of satisfaction, just like the owner. Also, like the owner, there will be a momentary reward he can enjoy for his hard work.

Everyone needs to have some sort of vested interest in what they do in order to work to their full potential. That applies to technicians as well as owners.