Profitability Revolution Paradigm
During the holiday you probably reviewed the good, the bad, and the ugly of 2015. Lessons learned. What went well. What needs to be improved. One thing you can never have enough of is cash. So, as you plan for 2016, plan to have enough cash in the bank to cover six weeks of payroll, or 3 months of overhead expenses, or the entire overhead of your company for one year, or another benchmark.
Only you can decide what the “right amount of cash” is for your business and you. Determine that number. If you already have it in the bank, then great. If not, then plan to put it in the bank in 2016.
Here are eight ways to raise the cash:
1. Determine how many maintenance agreements you need to cover the entire overhead of your company. If possible, generate those agreements in 2016. Or, put a plan to own that many agreements within two or three years.
2. Go through your data base of clients. Call every client who does not own a maintenance agreement and offer them a check of their air conditioning or plumbing. Give them a reason to do it – save money on utility bills, identify potential water problems, longer equipment life, or many other reasons.
3. Go through your invoices. Find clients who spend several hundred dollars last winter. Send them a letter and offer to talk with them about saving money this year on a new system.
4. Go through your database of clients who own extended warranties. They should be on a maintenance agreement program to keep their warranty in effect. Give them an option of 1, 2, 5, and 10 year maintenance plans. A few will take the five and ten year plans. When sending the letters, put them in a colored envelope, hand address them, and put a stamp on the envelope. They will get opened.
5. Go to your commercial accounts and ask whether you can do a lunch and learn where you discuss ways to save money and be more comfortable in their homes. Bring lunch if possible. Then at the end offer their employees a heating, air conditioning or plumbing check up. Assuming you have a great relationship with your commercial clients, they should be willing to do this. After all, it is an employee benefit to them (especially if you give them an incentive to have a maintenance check) where the commercial company does not have to invest any dollars.
6. Go to your church, synagogue or place of worship and offer the same as in #5.
7. Review every proposal that has not closed. Call the potential client. If, when you call, you discover that the client has purchased from another contractor, ask whether you can contact the potential client when the warranty period is up. You’d be interested in maintaining his system on a regular basis. Some will say yes.
8. Create and implement your referral program. Talk with your current clients about the program. As a rule, referrals generate less price comparisons, less negotiating, and more trust because a friend referred your prospective client to your company. The referral client thinks that if you satisfied her friend, your company can take care of her needs too.
Referral programs pay people in many different ways. Remember to pay your employees as well as your clients. At a minimum, a thank you note is expected. In addition, some companies write a check. Imagine a client’s surprise when he receives a check for a referral or a thank you gift. Decide what you are going to do and implement the plan.
At a minimum, in 2016 Commit to building and continuing a strong maintenance agreement program. Maintenance agreement programs build client loyalty. The more agreements, the larger the client base. The more agreements, the more service and replacement work. Service technicians actively believe in them and talk with clients about their benefits.
When you have enough agreements you know that the overhead for your company is covered – so in slower times you still can sleep at night without worrying how you will make payroll.
Use these action ideas, make a plan and implement that plan in 2016.
I wish you great cash savings and many restful nights’ sleep in 2016.
Ruth King is CEO of HVACChannel.tv and a nationally recognized HVAC expert. You can reach her at firstname.lastname@example.org or review her manuals at www.hvacoperationsmanual.com.