Hello friends. Summer is around the corner, and for many of you it means life is about to get much busier. And that’s a good thing. You’ll be focused on getting your techs out on calls and making cash. That doesn’t mean you should ignore your numbers. We often encounter members struggling with their gross margin. Here is the gross margin by trade:
AirTime: Replacement: 49%; Service: 56.8%
ESI: 64%
PSI: 60.3%
RSI: Replacement: 45%; Service: 65%
To make sure we’re all speaking the same language, your gross margin is what’s left over after costs associated directly with the sale of your service—like materials and direct labor—are paid. Now, I realize most of you know that, but what many struggle with is how to FIX that number. So, if you’re stuck in that situation—where your gross margin isn’t quite right—Here are the “7 Steps to Repairing Your Gross Margin”:
- Make sure you’re priced properly.
- Review your pricing formula. You may need to increase it.
- Assess your labor.
- You may have too many call-backs or warranty calls. Your techs may need some technical training.
- Maybe you’re paying your techs too much. You should be on performance-based pay.
- Make sure you’re dispatching properly, and make sure your techs aren’t spending too much time running to the supply house.
- Evaluate how much you’re spending on equipment and materials.
- Contact your suppliers and see if they have any available discounts! Even better, shop your business!
- Examine your POs to make sure you’re not buying too much.
- Process warranties as quickly as possible.
- Improve your average invoice—this is a big one.
- Be sure your pricing and closing ratio are where they need to be.
- Review your dispatching and implement a call-priority system.
- Emphasize to your techs the importance of building relationships and providing complete service.
- Periodically have someone ride-along with your techs to keep them accountable.
- If you’re not offering financing, start!
- Examine your inventory control.
- In addition to examining your POs, which I mentioned earlier, examine truck-restocking procedures.
- Increase the level of security in your warehouse
- Take advantage of any vendor-incentive programs available.
- We mentioned this earlier, but REDUCE CALL-BACKS & WARRANTY CALLS!
- Analyze your techs’ call-back percentage and see if you need more training.
- Develop a quality checklist that must be completed by your techs on every call.
- On warranty calls, see if you’re having reoccurring issues with a piece of equipment or material.
- If a problem persists, switch to another brand.
- Assess your returns and allowances.
- Review how much you’re giving in the form of advertised discounts and financing discounts.
- Examine your call-backs and minimize them by following the steps I listed earlier.
Ensure you’re operating at a proper gross margin―it is very critical to your success. If your gross margin is off, so is your profit margin. If your profit margin is off, you’re not making as much money or growing. If you need help addressing any or all of these points in repairing your gross margin, never hesitate to give us a call.