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The Power of TEN

The Power of TEN

This article is about power. 

The power of TEN and yes, it is powerful. It is not new math; it is not about logarithmic math; it is not about number set theory. 

But it is about simple old addition.

The power of $10 means raising $10.00 additional revenue dollars on each and every invoice. An invoice is a revenue touchpoint. So this is about raising $10 more on each and every revenue touchpoint; A ten-dollar bill –  Ten dollars – about the cost of two Starbuck coffees. Surely your team is worth two Starbuck coffees with the customer for the attention to detail, the customer service, culture, and professional experience offered by your organization!

Revenue per customer touchpoint is an interesting concept. It is a KPI. It forces an overall evaluation of the business model, the process refinement level, business mix management, and deployment of labor capacity. Here are a couple of examples.

First Example: 

Company A does $4,000,000 in revenue and has revenue touches of 240 install touches plus 1100 demand service call touches plus 950 service maintenance touches. That is a total of 2,290 revenue touches. Now divide $4,000,000 in total revenue by the revenue touches of 2,290. This equals $1,747 per revenue touch opportunity.

And with $10.00 more on each invoice, Company A gets an additional $22,900.00 net profit before taxes. 

There are no additional parts, no additional labor. It is simply setting your pricing to reflect the fact that you and your team are worth $10 more per call.

Second Example: 

Company B generates $11,000,000 in revenue and has revenue touches of 870 install touches plus 8,400 demand service call touches plus 4,000 service maintenance touches. That is a total of 13,270 revenue touches. Again, if the total $11,000,000 is divided by the 13,270 in revenue touches, this company’s per revenue touch opportunity is equal to $829.

And with $10.00 more on each invoice, Company B generates an additional $132,700.00 Net Profit.

Third Example: 

Company C does $3,800,000 in revenue and has revenue touches of 600 install touches plus 1600 demand service touches plus 1500 service maintenance touches. That is a total of 3,700 revenue touches and equals $1,027 per revenue touch opportunity.

And with $10.00 more on each invoice, Company C gets an additional $37,000.00 NPT.

Fourth Example: 

Company D does $6,000,000 in revenue and has revenue touches of 475 install touches plus 2300 demand service touches plus 3800 service maintenance touches for a total of 6,575 revenue touches. 

This equals $913 per revenue touch opportunity.

And with $10.00 more on each invoice, Company D gets an additional $65,750.00 NPT.

In Summary:

Company A….$4,000,000….$1,747 per touch point

Company B…$11,000,000….$829 per touchpoint

Company C…$3,800,000….$1027 per touchpoint

Company D…$6,000,000…$913 per touchpoint

Notice this KPI has nothing to do with the size of the revenue. Instead, this analysis is about efficiently balancing install and service labor utilization. That is the major difference between these companies. It is about effective marketing and building a strong value proposition in the market brand. It is also driven by average ticket and gross profit dollar contribution performance. It is about a very positive break-even mark. Here is a mini case study. 

Our son just had a no cooling event in Texas, where we have many 100 plus degree temperatures. He called a service provider who came out at a promised time. 

It was a condenser fan motor. Parts and labor were $629.00. Done deal, right?  

Here is the other part of the story. My son’s home is 16 years old and has the original builder selected system. He is lucky if that 16-year-old unit that is out of warranty is functioning at 9 SEER today. 

The technician never presented the option of a replacement solution and the benefits of a ten-year warranty and higher efficiency. And this is a consumer with the financial capacity to upgrade. So $629.00 could have been $8,629.00 very easily. And with financing only $120.00 per month for the customer! This is indicative of a revenue touch that was not optimized. This touch under-performed. That was not a good deal for the customer and not a good deal for the HVAC company.

Vicki and I attended one of the Super Conferences conducted by Stochastics, one of the Service Roundtable Preferred partners. Mike Layton commented that the perfect HVAC company is one that does installations only. Now, the reality is we have to stand behind what we sell and install and service. And leads do come from service for replacement equipment. But Mike makes a good point: We must balance the labor capacity utilization between installation and service. And looking at the revenue per customer touch illustrated above, too much service labor burn rate can stifle a company’s performance.

Vicki and I like to see 80% installation revenue versus 20% service revenue as a business model target, or as close as management can get to a 4:1 ratio.

Conclusion:

Too many labor hours devoted to service can stagnate a company’s growth potential. So, track and trend the revenue per customer touchpoint KPI. 

You will be glad you did.

 

Written by John LaPlant

Service Roundtable is dedicated to growing your bottom line and helping your business maximize its full potential. These groups of contractors work together to assist you with marketing, sales, business, and so much more. Twice a month, seminars around the United States and Canada are held to network and further assist your business. Visit Service Roundtable.com to see if there are Success Days in your area!

This article is about power. 

The power of TEN and yes, it is powerful. It is not new math; it is not about logarithmic math; it is not about number set theory. 

But it is about simple old addition.

The power of $10 means raising $10.00 additional revenue dollars on each and every invoice. An invoice is a revenue touchpoint. So this is about raising $10 more on each and every revenue touchpoint; A ten-dollar bill –  Ten dollars – about the cost of two Starbuck coffees. Surely your team is worth two Starbuck coffees with the customer for the attention to detail, the customer service, culture, and professional experience offered by your organization!

Revenue per customer touchpoint is an interesting concept. It is a KPI. It forces an overall evaluation of the business model, the process refinement level, business mix management, and deployment of labor capacity. Here are a couple of examples.

First Example: 

Company A does $4,000,000 in revenue and has revenue touches of 240 install touches plus 1100 demand service call touches plus 950 service maintenance touches. That is a total of 2,290 revenue touches. Now divide $4,000,000 in total revenue by the revenue touches of 2,290. This equals $1,747 per revenue touch opportunity.

And with $10.00 more on each invoice, Company A gets an additional $22,900.00 net profit before taxes. 

There are no additional parts, no additional labor. It is simply setting your pricing to reflect the fact that you and your team are worth $10 more per call.

Second Example: 

Company B generates $11,000,000 in revenue and has revenue touches of 870 install touches plus 8,400 demand service call touches plus 4,000 service maintenance touches. That is a total of 13,270 revenue touches. Again, if the total $11,000,000 is divided by the 13,270 in revenue touches, this company’s per revenue touch opportunity is equal to $829.

And with $10.00 more on each invoice, Company B generates an additional $132,700.00 Net Profit.

Third Example: 

Company C does $3,800,000 in revenue and has revenue touches of 600 install touches plus 1600 demand service touches plus 1500 service maintenance touches. That is a total of 3,700 revenue touches and equals $1,027 per revenue touch opportunity.

And with $10.00 more on each invoice, Company C gets an additional $37,000.00 NPT.

Fourth Example: 

Company D does $6,000,000 in revenue and has revenue touches of 475 install touches plus 2300 demand service touches plus 3800 service maintenance touches for a total of 6,575 revenue touches. 

This equals $913 per revenue touch opportunity.

And with $10.00 more on each invoice, Company D gets an additional $65,750.00 NPT.

In Summary:

Company A….$4,000,000….$1,747 per touch point

Company B…$11,000,000….$829 per touchpoint

Company C…$3,800,000….$1027 per touchpoint

Company D…$6,000,000…$913 per touchpoint

Notice this KPI has nothing to do with the size of the revenue. Instead, this analysis is about efficiently balancing install and service labor utilization. That is the major difference between these companies. It is about effective marketing and building a strong value proposition in the market brand. It is also driven by average ticket and gross profit dollar contribution performance. It is about a very positive break-even mark. Here is a mini case study. 

Our son just had a no cooling event in Texas, where we have many 100 plus degree temperatures. He called a service provider who came out at a promised time. 

It was a condenser fan motor. Parts and labor were $629.00. Done deal, right?  

Here is the other part of the story. My son’s home is 16 years old and has the original builder selected system. He is lucky if that 16-year-old unit that is out of warranty is functioning at 9 SEER today. 

The technician never presented the option of a replacement solution and the benefits of a ten-year warranty and higher efficiency. And this is a consumer with the financial capacity to upgrade. So $629.00 could have been $8,629.00 very easily. And with financing only $120.00 per month for the customer! This is indicative of a revenue touch that was not optimized. This touch under-performed. That was not a good deal for the customer and not a good deal for the HVAC company.

Vicki and I attended one of the Super Conferences conducted by Stochastics, one of the Service Roundtable Preferred partners. Mike Layton commented that the perfect HVAC company is one that does installations only. Now, the reality is we have to stand behind what we sell and install and service. And leads do come from service for replacement equipment. But Mike makes a good point: We must balance the labor capacity utilization between installation and service. And looking at the revenue per customer touch illustrated above, too much service labor burn rate can stifle a company’s performance.

Vicki and I like to see 80% installation revenue versus 20% service revenue as a business model target, or as close as management can get to a 4:1 ratio.

Conclusion:

Too many labor hours devoted to service can stagnate a company’s growth potential. So, track and trend the revenue per customer touchpoint KPI. 

You will be glad you did.

 

Written by John LaPlant

Service Roundtable is dedicated to growing your bottom line and helping your business maximize its full potential. These groups of contractors work together to assist you with marketing, sales, business, and so much more. Twice a month, seminars around the United States and Canada are held to network and further assist your business. Visit Service Roundtable.com to see if there are Success Days in your area!

This article is about power. 

The power of TEN and yes, it is powerful. It is not new math; it is not about logarithmic math; it is not about number set theory. 

But it is about simple old addition.

The power of $10 means raising $10.00 additional revenue dollars on each and every invoice. An invoice is a revenue touchpoint. So this is about raising $10 more on each and every revenue touchpoint; A ten-dollar bill –  Ten dollars – about the cost of two Starbuck coffees. Surely your team is worth two Starbuck coffees with the customer for the attention to detail, the customer service, culture, and professional experience offered by your organization!

Revenue per customer touchpoint is an interesting concept. It is a KPI. It forces an overall evaluation of the business model, the process refinement level, business mix management, and deployment of labor capacity. Here are a couple of examples.

First Example: 

Company A does $4,000,000 in revenue and has revenue touches of 240 install touches plus 1100 demand service call touches plus 950 service maintenance touches. That is a total of 2,290 revenue touches. Now divide $4,000,000 in total revenue by the revenue touches of 2,290. This equals $1,747 per revenue touch opportunity.

And with $10.00 more on each invoice, Company A gets an additional $22,900.00 net profit before taxes. 

There are no additional parts, no additional labor. It is simply setting your pricing to reflect the fact that you and your team are worth $10 more per call.

Second Example: 

Company B generates $11,000,000 in revenue and has revenue touches of 870 install touches plus 8,400 demand service call touches plus 4,000 service maintenance touches. That is a total of 13,270 revenue touches. Again, if the total $11,000,000 is divided by the 13,270 in revenue touches, this company’s per revenue touch opportunity is equal to $829.

And with $10.00 more on each invoice, Company B generates an additional $132,700.00 Net Profit.

Third Example: 

Company C does $3,800,000 in revenue and has revenue touches of 600 install touches plus 1600 demand service touches plus 1500 service maintenance touches. That is a total of 3,700 revenue touches and equals $1,027 per revenue touch opportunity.

And with $10.00 more on each invoice, Company C gets an additional $37,000.00 NPT.

Fourth Example: 

Company D does $6,000,000 in revenue and has revenue touches of 475 install touches plus 2300 demand service touches plus 3800 service maintenance touches for a total of 6,575 revenue touches. 

This equals $913 per revenue touch opportunity.

And with $10.00 more on each invoice, Company D gets an additional $65,750.00 NPT.

In Summary:

Company A….$4,000,000….$1,747 per touch point

Company B…$11,000,000….$829 per touchpoint

Company C…$3,800,000….$1027 per touchpoint

Company D…$6,000,000…$913 per touchpoint

Notice this KPI has nothing to do with the size of the revenue. Instead, this analysis is about efficiently balancing install and service labor utilization. That is the major difference between these companies. It is about effective marketing and building a strong value proposition in the market brand. It is also driven by average ticket and gross profit dollar contribution performance. It is about a very positive break-even mark. Here is a mini case study. 

Our son just had a no cooling event in Texas, where we have many 100 plus degree temperatures. He called a service provider who came out at a promised time. 

It was a condenser fan motor. Parts and labor were $629.00. Done deal, right?  

Here is the other part of the story. My son’s home is 16 years old and has the original builder selected system. He is lucky if that 16-year-old unit that is out of warranty is functioning at 9 SEER today. 

The technician never presented the option of a replacement solution and the benefits of a ten-year warranty and higher efficiency. And this is a consumer with the financial capacity to upgrade. So $629.00 could have been $8,629.00 very easily. And with financing only $120.00 per month for the customer! This is indicative of a revenue touch that was not optimized. This touch under-performed. That was not a good deal for the customer and not a good deal for the HVAC company.

Vicki and I attended one of the Super Conferences conducted by Stochastics, one of the Service Roundtable Preferred partners. Mike Layton commented that the perfect HVAC company is one that does installations only. Now, the reality is we have to stand behind what we sell and install and service. And leads do come from service for replacement equipment. But Mike makes a good point: We must balance the labor capacity utilization between installation and service. And looking at the revenue per customer touch illustrated above, too much service labor burn rate can stifle a company’s performance.

Vicki and I like to see 80% installation revenue versus 20% service revenue as a business model target, or as close as management can get to a 4:1 ratio.

Conclusion:

Too many labor hours devoted to service can stagnate a company’s growth potential. So, track and trend the revenue per customer touchpoint KPI. 

You will be glad you did.

 

Written by John LaPlant

Service Roundtable is dedicated to growing your bottom line and helping your business maximize its full potential. These groups of contractors work together to assist you with marketing, sales, business, and so much more. Twice a month, seminars around the United States and Canada are held to network and further assist your business. Visit Service Roundtable.com to see if there are Success Days in your area!

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