Are you focused on the right numbers?
In today’s home services market, many business owners have come to believe that success is all about the leads. More leads coming through the door translates into more opportunities for business. That’s why those owners are eager to buy as many leads as they can afford. However, our experience with contractors across the nation tells us there’s another number that’s far more important when it comes to boosting your revenues and growing your business.
Look at your average ticket
That number is your average ticket – the measure of the average revenue your company earns every time you send a service technician or installer out the door. Knowing and monitoring your average ticket provides insights that have helped business owners like you achieve significant gains in revenue. Put another way, booking more jobs and increasing your average ticket makes it possible to dramatically increase your revenue without spending additional marketing dollars. You’ll be able to mine more revenue from the same number of leads.
What is today’s standard for the average ticket?
Today’s average HVAC service call generates around $500, while an equipment sale averages roughly $15,000. That’s an important differentiation, because it means HVAC contractors need to make at least 30 service calls to generate as much revenue as they earn from a single equipment sale. Despite that, far too many contractors think all leads are equal and don’t pay attention to some basic information that can identify the better opportunities.
The key is booking by profitability
Your company can handle a finite number of calls, based on the number of your employees and the hours in each day. Based on those averages, when you send someone out to address a customer’s need, they’re either going to come back with $500 in revenues or $15,000. Which would you prefer to have? That’s what booking for profitability is all about. Instead of treating every lead equally, you prioritize the leads that offer a greater potential to become equipment sales. That doesn’t mean you ignore the other leads – it just means they move farther down your schedule.
Your CSRs need to do more
Booking for profitability demands more effort on the part of your customer service reps. During the initial conversation with a customer, your CSRs need to devote a little extra time to better understand the situation. A repair call on a two-year-old system that’s still under warranty is likely to generate far less profitability than a call about a 20-year-old system, because the older system is a prime candidate for a replacement installation.
Won’t lower-priority leads cancel?
When you put potential equipment sale customers at the head of the line and take longer to handle the lower-priority leads, you will likely lose some business. If you tell a low-priority lead that you won’t be able to get to them until Friday, there’s a good chance they’ll make the appointment, then call your competitors to see if someone can come out more quickly. If they do that and cancel your appointment, what are you losing but a low-revenue sale that may not even be profitable? By giving more profitable appointments priority service, your CSRs can ensure that cancellations have a smaller effect on the bottom line.
Training makes the difference
If you want to spend money in the way that will generate the greatest revenue, your best bet isn’t buying more expensive leads or stepping up your advertising budget. Instead, it’s investing in staff training. That includes giving your CSRs training in how to learn more about a caller’s situation and training your technicians to recognize how they can turn a service call into a chance to sell a new system or add-on. Training isn’t cheap, but our work with clients proves that even small, incremental improvements in your team’s skills will generate significant bottom-line increases.
Consider this real-world example
Let’s show you how booking for profitability works, using real results we’ve documented with our clients. Take an HVAC contractor who receives 1,254 leads to service customer equipment and 345 for new equipment. Historically, the contractor’s CSRs have been able to turn 65% of the service leads into booked calls, with a completed job rate of 95% and an average repair ticket of $564. That gives us 774 service jobs for $436,731 in revenue. The CSRs are less successful with equipment leads, booking just 55% with a 75% completion rate producing 142 completed jobs at an average of $12,874. Total overall revenue is just about $2.3 million. Not terrible.
What happens if the CSRs receive training that bumps their service booking rate up to 70% and equipment up to 65%? Keeping all other variables the same, total revenue jumps to $2.6 million. In other words, a slight performance increase added $366,709 to the bottom line. Suppose the techs also receive training that allows them to increase the average service job to $764 and equipment sales to a slightly higher $13,500. Now total revenue is $2.9 million, a gain of $638,777 over the original scenario. That’s without paying even a penny for any extra leads.
Just sharing what we know
Knowledge and proven strategies like these are how Cornerstone has helped home services companies throughout the U.S. and Canada achieve growth their owners didn’t believe was possible. We’ve shared this and 11 other critical questions to help you determine whether your marketing is an effective investment or a frustrating expense in our white paper: “12 questions to assess your marketing’s efficiency … with answers that can supercharge your marketing ROI.” You can access it here.