Busy? Raise Your Prices!

I remember when I was in Marketing 101 in college and we discussed supply and demand. Below is a description from Wikipedia and how it describes the term "Supply and Demand":

The four basic laws of supply and demand are:
If demand increases and supply remains unchanged, then it leads to higher equilibrium price and quantity.
If demand decreases and supply remains unchanged, then it leads to lower equilibrium price and quantity.
If supply increases and demand remains unchanged, then it leads to lower equilibrium price and higher quantity.
If supply decreases and demand remains unchanged, then it leads to higher price and lower quantity.

The price P of a product is determined by a balance between production at each price (supply S) and the desires of those with purchasing power at each price (demand D). The diagram shows a positive shift in demand from D1 to D2, resulting in an increase in price (P) and quantity sold (Q) of the product.

So what am I trying to say, you ask? When was the last time you bought bread, milk or even gasoline and it stayed the same price every time you bought it? Prices for everything are constantly changing depending upon workload, inventory, customer demand and a volume of other factors. When is the last time you had a price change? Just like every other business you need to adjust your price depending upon demand. During busy times, raise your price 10 to 20%. During slow times offer a lower rate. You could even postpone major, time consuming jobs until business is slow provided you get a deposit and the customers equipment is still usable, to a time when you could use the work by offering the the discounted price.

I even adjust my workshop prices depending upon the popularity of that particular location, if you need certain state credits and my costs for that location. Look at my schedule at www.frankpresents.com and see for yourself.

What should you do? Well, if summer is your busy time, increase your price beginning Memorial Day weekend, then drop it back to normal after Labor Day. I've had some of my clients say things like "What if a customer finds out you just raised your price?" Okay, so agree and say "Yes, it's unfortunate how everything is going up, just yesterday it cost me almost $90 to fill up my truck. Hopefully it will go back down to a reasonable price this fall."

There you go, give it a shot and see what happens, yes you may lose some business, but odds are it will be the price shoppers anyway and if you raise your price 10% and lose 5% of your business, Great Job! Less Work, More Money!

Motivating Younger Employees

There was a time when most people looked at their job as a reflection of who they are as a person. In recent times and more with younger employees, their social life and status amongst their friends dictates who they are, a job is simply a means to help them elevate their social status. Geezers like me believe that our career is who we are and many of us can't comprehend the motivational factors of this younger group. We were driven by the idea of "Improving our financial status so we could take care of our immediate and future needs" People now are driven by "What can I do that will improve my social status". Take a moment to look over "Abraham Maslow's Heirarchy of Needs" and it will explain it. Here is a link: http://psychology.about.com/od/theoriesofpersonality/a/hierarchyneeds.htm

Us old guys used to, and still think as if we are on the bottom two levels. Since our younger folks have not really had to be too concerned about having someplace to stay that they could call their own home, or fear of losing everything or worrying about how to feed their family. They have become a society of people who, no matter what, have all of their basic fundamental needs taken care of, no matter what. Compared to the rest of the world, our poorest would be considered rich. People don't fret that much about whether they have food, they are more concerned about having Direct TV or the latest, greatest pair of basketball shoes or smart phones. This group is motivated by esteem and status.

So Frank, what do I do? You ask. Just understand that this is the way it is and sometimes money isn't the main motivating factor. Provided you have good measurement systems that everyone understands and know how they may be able to improve, set up reasonable goals with rewards for success that may include more free paid time off with friends and family. It may be status or esteem building awards such as a night on the town, paid for by you, or maybe a gift certificate to a nearby mall. Just be creative and realize what you are dealing with and respond accordingly.

I'm sure I'll get the typical responses like "They should be happy they have a job" or "A paycheck should be considered award enough" That worked for me and you other old guys, but does really not apply 100% now.

The Value of Service Contracts

While working at the RCA Service company many years ago I remember one common theme. "Sell Service Contracts". This indeed was the main revenue stream for the business.What are the benefits?
1. Provides a continuous revenue stream
2. Connects your customer to you. Why would they call anyone else? They have an agreement with you.
3. Adds value to your business. One of the first questions you'll be asked when you decide to sell your business is "How many contract customers do you have?"
4. With regular maintenance checks, it allows your field people to keep busy during the slow times.
5. Improves customer relations. You have less catastrophic failures because service is rendered regularly for minor problems rather than during emergency no cools or no heats.

Ready for Summer?

Are You Ready for Summer?

This is the time of year when most of my clients get too busy to talk to me. It's kind of good because it allows me time to get a vacation, learn some new information, do some research and catch up on things around the house.
Since most of you are in the heating and air conditioning business this is the "make it or break it" time of year. I hope you make it . . so I put together a few tips that may help you reach your goals.
1. Set a goal
So many times we jump into the busy season with no planning, no forecasting and no goal setting. Take some time before it really gets crazy to put some thought into what you expect to accomplish this summer as it compared to last summer. Learn from your mistakes from a year ago.

2. Raise your price
Since demand goes up, so should price. Every other business in the world does it, you should too. Every time you go to buy gas or even milk the price is different from the last time you bought it. Set your prices to increase when you're busy and decrease when you're not. If possible attempt to divert non-emergency work to the fall when things slow down and your price is lower. I've had contractors ask me questions like "What if one customer tells another that they paid a lower price?" Your answer should be "My price goes up when I'm busy." I see nothing wrong with that.

3. Use technologies
Over the last few months I've reviewed dozens of technologies to help contractors work more effectively and efficiently. If you have not taken the time to review the various dispatch, pricing, GPS systems and mobile devices in the last two to three years, you are missing out on some very useful systems and products that will more than pay for themselves in a matter of a few weeks. Call me if you want more information.

4. Be customer friendly
Sometimes we get so overwhelmed with business that we forget about keeping time commitments, calling people back, being friendly, thanking them for their loyalty, acting professionally and answering the phone properly. You want these people to remember you for what you did well, not what you did wrong.

5. Be creative in your work schedules
Air conditioning systems fail whenever they want not just during your normal working hours. One of my clients has her technicians work four, twelve hour days followed by three days off one week and four days of the next. This allows them to capture late calls and gives them a nice break during the busy times. They also stagger starting times to begin anytime between 6AM and 11AM. This allows them to provide regular service hours for clients from 6AM to 11PM. Don't be afraid to work people overtime if they want to, it's cheaper than hiring someone.

Top 10 Ways of Knowing Your Prices are Too Low!

. . . and You Need to Come to My Class!
1. You get every job that you quote on the phone
If every price shopper that calls sets up an appointment with you, that means you are the cheapest, and if you are the cheapest, in my opinion, that is nothing to brag about. (Read some of my previous blogs about trying to be like Walmart, the low price leader in your market)
2. You are really busy, but still can't afford to buy the things you want? Do I really need a comment here?
3. When someone asks you what your net profit margin was for last year, you don't know what they are talking about. Are you a businessman or not? Go buy the book "How To Sell At Margins Higher Than Your Competitors, by Lawrence L. Steinmetz.
4. You go by the name of "Discount, Budget, Cheap or Fly by Night" Just trying to be funny here . . . or maybe not.
5. You say the phrase "At least it is work" or "At least it is keeping us busy" at least once per week! Personally if I wasn't making a profit doing work, I would go fishing all day instead.
6. You're slogan is "We will beat any price!" It should be followed by "And we'll go broke doing it!"
7. You are afraid to answer the phone. Those pesky bill collectors actually want their money too!
8. You are not set up with a regular paycheck and only pay yourself when there is some cash left over. Your pay should be considered as a regular part of overhead.
9. You have no retirement plan. You should charge enough to have funds set aside regularly to take care of you and your family when you decide to leave the business. Or, have enough service plans & contracts to make your business have value when you choose to sell it. I recommend you seek a financial consultant's help here for a plan to exit your business some day.
10. When you call to schedule a continuing education class with me, you say I am too expensive and you can get it cheaper somewhere else. If you think an extra fifty or sixty bucks isn't worth getting information that will help you turn your business around, there is nothing I can do for you. I would rather not have you as a client.

What To Do About Gas Prices!

During my last three workshops the topic of what to do about gas prices came up. I usually answer a question by asking the group how they handle it. It went like this . . . "Frank, gas prices are going crazy, what do you think about adding on a surcharge to each invoice of maybe ten or twenty dollars to cover the increase in fuel prices?" I then of course asked the class what they thought and received several different responses such as "We just increase our fee enough to cover the additional cost" or "We add $15 to each call for fuel along with a $10 shop supply fee."

I don't know about you but I get very annoyed when a company adds on extra fees. In fact two years ago I went to buy some tires for my car. After some negotiating we agreed on the price of $145 per tire. An hour and half later the representative tells me my car is ready. I look at the bill and it totals $720! I told the man that this is $35 per tire more than we agreed. He said the $35 was for valve stems and balancing. I told him I didn't request new valve stems and balancing. He explained that they always do this when they replace tires. So I said "If this is a part of the normal installation of tires, why do you charge extra?" I then directed him to put my old valve stems back on and unbalance my tires. Of course he said that it was not possible to do that. At that point I demanded to have my old tires put back on and was no longer interested in doing business with them. Of course he decided to go ahead and accept my original agreement and take the $145 per tire.

To me, when you add on something that is required for each job, just include it in the price, please don't annoy me and your customers with add-ons! Imagine going into a restaurant, ordering a steak for the price of $22 and getting a bill for $30 with an add-on of $8 for preparation and cooking, or an add-on of $2 for a fuel surcharge, or kitchen supplies.

If your costs go up, increase your total fees. Customers are annoyed enough about fuel costs, no need to remind them. Plus, who is reimbursing them for fuel costs when they go to work? That is an argument you may get when you add it on separately.

So in conclusion, get rid of the annoying add-on charges. Just put it in your total fee. In fact the less you break out your pricing the less ammunition you have for those folks who like to pick apart everything.

Quit Being a Wimp!

I was presenting a workshop recently and the subject of how to handle employee problems surfaced. One of the attendees seemed to have encountered every employee issue known to man. Every time I said something or made a recommendation to someone's inquiry he would say "Oh yeah, well what about this! He would then go on to explain some weird scenario of circumstances that may only occur once in a million years. I could almost bet that this was an attempt to stump the teacher and impress his friends, but I played along for his entertainment and the amusement of everyone else in the room. I've been facilitating meetings and training sessions for about twenty five years, so I have already seen everything.

One of the questions he did bring up was something that I believe occurs in just about every business, and I was glad he brought it up. He asked; "I know it's important to sit and have a review with your employees at least once a year or more. You try and make it sound like it is so easy, I don't know about everyone else in this room, but I hate it. In fact I hate doing it so much that I can't sleep the night before the reviews. What would you recommend to make this process easier and less stressful?"

To me this was the best question of the day and I was very glad that he had the guts to bring it up! My response: First, remember this is a review, a review is simply a formal meeting to discuss everything everyone already knows.

If you look up the word review in the dictionary it says "the process of going over something again". So if this is the process of going over something again, why should it be difficult or stressful? I believe an employee needs to know when they are not performing well as soon as the poor performance is noticed. If you were coaching a baseball team, would you mention a critical mistake a player was making immediately or would you wait until the end of the season to discuss it? The same applies at work.

So if the formal review is a discussion of everything you have already discussed, and everyone in the room is already aware of what is happening, there shouldn't be any stress! It's just a formality!

Let your team know what they are doing right and what they are doing wrong, all the time. Remember you are the coach, they are the team. If we all do our job and do it well, we win more often! So don't be a wimp, tell people regularly what you think and how they are doing, everyone will be happier!
Strategic Alliance and Recommendation Announcement
For the last ten years I've received request after request an who I recommend for this and who I recommend for that. After much research and time spent reviewing products I have so far decided that there are two products that hit the highly recommended by Frank list and they are:
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As I evaluate what's out there and find the best of the best, I'll let you know. Why? Because I want you to be successful, and if you're successful, I will be too!