Last post I gave you the history and reason for the space race to the moon.
This post I give you the 8 questions you need to answer to rocket your profits.
Here they are:
#1. Productivity – For every dollar you take in the door, how much do you spend on payroll and payroll taxes?
This ratio includes all payroll – field, office, and owners. Don’t include any benefits in this calculation. Payroll taxes are FICA, Medicare, and unemployment. This percentage can be departmentalized and it should be under 40%. For new construction this ratio should be under 20%. The lower the better.
#2. Net profit per hour – For each billable hour how much profit do you generate?
Determine 2024 total billable or revenue producing hours. Do not include holidays, vacation, meeting, training or unapplied hours. Then take your net operating profit and divide it by your billable hours. This is your 2024 net profit per hour. If you don’t like the number, your first rocket goal is to increase it to a net profit per hour you are comfortable with.
#3. Overhead cost per hour – for each billable hour, how much overhead cost is there?
To determine this number, take your department or company overhead and divide by billable, or revenue producing hours that you calculated for net profit per hour. Overhead cost per hour should be under $40/hr for service, under $30/hr for replacement and under $20/hr for new construction.
#4. What is your average service ticket revenue and average job revenue?
#5. What is your maintenance plan enrollment percentage?
For every opportunity you have to talk to a customer about your maintenance program, how many enroll? The national average is 30% for residential maintenance. For commercial maintenance, the national average is enrolling 1 new maintenance plan for every two surveys you perform.
#6. What is your maintenance plan renewal rate?
This should be higher than 90% for both residential and commercial maintenance clients.
#7. What is your replacement sales closing ratio – for maintenance customers and non-maintenance customers?
Your maintenance customer closing ratio should be 80% or higher. Your non-maintenance closing percentage should be higher than 40%.
#8 – Job cost a minimum of 20 jobs chosen at random.
What was the net profit per hour for each of these jobs?
Make sure your employees are on board with the goals. Tell them “what’s in it for them” so they help you achieve the goals.
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Ruth King is well known as “The Profitability Master.” She is passionate about helping small business owners become profitable and stay profitable. For over 40 years she has coached, trained, and helped contractors and others achieve the business growth and goals they wanted to achieve.
Contact Ruth by emailing ruthking@hvacchannel.tv.
