Pricing for Profit What Are You Worth? What Do You Need to Charge?

Transcription

1 Welcome to Pricing For Profit The Elusive Money Mack Heaton No Secrets Training Pricing for Profit What Are You Worth? What Do You Need to Charge? Do You Deserve a Profit? 2004 No Secrets 1

2 The HVAC Dealership Approximately 59,450 firms. $677,500 average annual sales. Most have five employees or less. Average owner: $36,450. That s less than $18.00 per hour! Most have no health insurance. Average net profit before taxes: 2.48%. 37% annual business failure rate. Source: Robert Morris and Associates 1997 How Does Our Hourly Rate Compare To Others? Copier repair costs far 160 more than HVAC. 140 Even a cab ride costs 120 more More skill, more tools, 60 more parts, expensive trucks, fewer 40 technicians, and we 20 are still cheaper. 0 Estimated Hourly Rates Copier Repair Cab Ride HVAC Repair 2004 No Secrets 2

3 How Does Our Gross Profit Compare To Others? McDonalds has a very high markup on its items. Taxis charge more. Bread has a higher gross profit margin. Bottled water. It costs far more than gasoline. HVAC parts. Are we too expensive? Estimated Gross Profit Margin Large Drink at McDonalds Loaf of Bread Bottled Water Repair Parts How Does Our Pay Compare To Others UPS drivers make approximately $53,400 per year plus awesome benefits! The HVAC industry pays technicians only about $30,120 per year or $14.48 per hour.*. HVAC and plumbing installers make even less. Source: 1997 National Occupational Employment and Wage Estimates. See appendix. 60,000 50,000 40,000 30,000 20,000 10,000 0 Annual Compensation UPS Techs Installers 2004 No Secrets 3

4 How Does Our Net Profit Compare To Others? United Parcel Service enjoys a 24% NPBT. McDonalds earns 23% NPBT. HVAC and plumbing industries suffer with a 2.6% NPBT. Source: Robert Morris & Associates, IRS Net Profit Before Taxes UPS McDonalds HVAC/P What is paid with our labor rate? Building Rent/Lease Dispatcher Property Taxes Files School Taxes Office Training Tangible Taxes Office Training Management Training Building Mortgage Tech Training Building Maint. In-House Training Building Insurance Training Equip. Electric Utility Mfg. Training Telephone Waste Utility Trash Removal Water Travel Subscriptions Vehicle Lease Truck Loans Employee Insurance Mgmt.Insurance Tires Liability Insurance Bonds Truck Tags Inspections Toll Calls Truck Maint. upkeep Truck Racks Ladders Licenses Cell Phones Beepers Radios Radio Maint. Co. Tools Safety Equip. Shop Tools Office Equip. Computers Comp. Maint. Software Phones Postage Printing Copy Machine Forms Office Supply Vacation Pay Holiday Pay Uniforms Uniform Maint. Life Insurance Business Insurance Workers Comp. Legal Answering Serv Wages Salaries Retainers Accounting Tax Preparation Stationary Grounds Maint. Trade Assoc.. Memberships Fuel Oil Advertising Marketing Yellow Pages News Paper Donations Unbillable Hours Damages Shortages Theft Unemployment Pay Roll Taxes Credit Sales Interest Bonuses Commissions Court Filings Uncollected $ Bad Checks 30+ Day Receivables Law Suits Call Backs Christmas Party Spiffs Incentives Safety Training Replacement Parts Inventory Floor Plan Equipment Material Purchases Test Equip. Trips to Supply House Delivery Warehouse Space Parts Storage Coffee & Supplies Dues Bank Charges Tool Repl. Court filings Damages 2004 No Secrets 4

5 Why Do Dealerships Fail? Failure to calculate break even point. Poor sales and marketing skills. Under capitalized and inadequate cash flow. Poor coaching and recruiting skills. Cheapest guy in town or PRICE mentality Failure Rate, First Five Years All Food Ind HVAC Copier The Four Keys To HVAC Success Financial management and analysis. Knowing your true breakeven point and pricing for profit. Marketing and REAL salesmanship. Recruiting and coaching. Organizational design and planning No Secrets 5

6 Financial Management Accurate financial reports by the 10 th day of each month. Calculate profitability, efficiency, and solvency ratios monthly. Prepare a budget and update it monthly or quarterly. Calculate your break-even point using your financial reports or... Calculate break-even using your budget.???????? Will your business work without you? Is profit something left over at year end? What s more important-profit or cash flow? Do you have a customer loyalty program? Budgets pre-planned with accountability? What s more important, monetary or psychological pay? Would techs leave you for $1.00 more per hour? What s more important, # of calls or $ per call? What would your family & employees do if something happened to you? 2004 No Secrets 6

7 How Did You Arrive at Your Current Labor Rate? PRICING FOR PROFIT Only replace figures shaded "Blue". Do not change cells in Black! Average Technician Pay Per Hour $15.00 Labor Burden 33% FICA,Wok Comp,Health,Etc Hourly Rate w/burden $19.95 Unapplied or Lost Days Total Annual Hours Available weeksx40 HR/Wk Paid Holidays 40 # Days x 8 Hours Per Day Paid Personal Days 0 # Days x 8 Hours Per day Vacation Hours Paid 80 # Days x 8 Hours Per Day Billable Annual Hours Available 1960 Percent of Available Hours to Total 94.2% Direct Labor Cost per Available Hour $21.17 Applied Time Average Billable Hours per Day 4 Tech Hours Charged Applied Time Percentage 50.0% Technician AVG Efficiency Direct Labor Cost Per Billable Hour $42.34 Overhead Cost Total Overhead Cost $200, Dept or Company O/H # Technicians 3 # Techs full time Total Billable Hours per Tech 980 Total Billable Hours Company 2940 Overhead Per Billable Hour $68.03 Indirect Hourly Cost Break Even Labor Cost Per Hour $ Breakeven Hourly Rate Profit Desired Profit % 20.00% Correct Labor Charge/HR $ SERVICE AGREEMENTS Total Number of Svc Agmts 100 Price of a Svc Agmt $175 Svc Agmt Total $ Value $17,500 Lost $ Revenue on Svc Agmt $10, Correct Labor Charge/HR W/Svc Agmt No Secrets 7

8 Average Technician Pay Per Hour $15.00 Labor Burden 33% FICA,Wok Comp,Health,Etc Hourly Rate w/burden $19.95 Unapplied or Lost Days Total Annual Hours Available weeksx40 HR/Wk Paid Holidays 40 # Days x 8 Hours Per Day Paid Personal Days 0 # Days x 8 Hours Per day Vacation Hours Paid 80 # Days x 8 Hours Per Day Billable Annual Hours Available 1960 Percent of Available Hours to Total 94.2% Direct Labor Cost per Available Hour $21.17 Applied Time Average Billable Hours per Day 4 Tech Hours Charged Applied Time Percentage 50.0% Technician AVG Efficiency Direct Labor Cost Per Billable Hour $ No Secrets 8

9 Overhead Cost Total Overhead Cost $200, Dept or Company O/H # Technicians 3 # Techs full time Total Billable Hours per Tech 980 Total Billable Hours Company 2940 Overhead Per Billable Hour $68.03 Indirect Hourly Cost Break Even Labor Cost Per Hour $ Breakeven Hourly Rate Profit Desired Profit % 20.00% Correct Labor Charge/HR $ No Secrets 9

10 SERVICE AGREEMENTS Total Number of Svc Agmts 100 Price of a Svc Agmt $175 Svc Agmt Total $ Value $17,500 Lost $ Revenue on Svc Agmt $10, Correct Labor Charge/HR W/Svc Agmt The only way to charge profitably is knowing your correct cost and using: Flat Rate Pricing 2004 No Secrets 10

11 One & Two Day Programs The business of business 101 How to price service & equipment to win Keeping your customers YOURS How to track, forecast & measure business Selling, why customers buy Selling, how to let customers buy from you Increasing tech productivity Team building & empowerment Setting up performance based pay Is flat rate pricing for you? The Annual Program Two full days of training every 90 days (Each quarter has a to do punch list) Progressive training modules From business 101 to profitability Over 1600 pages of resource manuals Useful forms, tracking systems & software Free telephone & internet support for 1 year You re in business for yourself, not by yourself Build equity and profit, reduce receivables and improve cash flow! 2004 No Secrets 11

12 Contact Info No Secrets Training Systems 224 Lakeview Road Eastover, SC Phone: Website: Thank you for attending!! 2004 No Secrets 12