Wayne Gretzky was asked how he got to be the greatest hockey player of all time. He stated very simply, “I always tried to skate to where I thought the puck was going to be.”
The last two years in our industry have toughened and wizened us all. Having survived, you might now be asking yourself, “How do I restore profit and also grow my company into the future?”
There is no one that cares for their homeowner clients like you. You care about their health, comfort, energy savings, extending the life of their home comfort system, and about providing them with opportunities to do their part to leave the earth in good shape for their children and great grandchildren.
Here is one growth opportunity I urge you to consider. HVAC contractors are ideally positioned to capitalize on the rapidly emerging re-insulation and weatherization industry. Government and utility resources are already in play with much, much more ahead. I can forsee a decade of extraordinary growth just ahead.
We can help you “skate towards where the puck is going to be”!
With our AttiCat® Re-Insulation Business Systems we have the finest equipment and training available. Our new TRUST PRO™ in-home sales system software is the perfect fit. Add in our weatherization and air sealing products, systems, and training to your current HVAC business and “you are looking at the puck – right in front of you”!
Are you ready to take the shot? Email Tom for dealer success testimonials, references and more information now.
All pricing methods have one goal in common: that you produce your target net profit. We’ll look at several approaches beginning with using a single divisor (or a single multiplier…they provide the same result).
What you need to know:
1. Your product and material costs
2. Your hourly labor costs
3. The hourly labor burden costs (this includes the company benefits provided for each labor-hour)
4. Your overhead as a percentage of sales
5. Your desired net profit as a percentage of sales
6. Your sales commission as a percentage of sales
Step 1: Add Up Your Costs
For each job add your costs for equipment, materials and burdened labor. If you aren’t sure what your burden per labor hour is you can start by assuming it’s 30% of the hourly wage.
Example:
Equipment = $2,000
Labor 16 hours @ $20 per hour = $320
Burden @ 30% of labor = $96
Total Costs = $2,416
Step 2: Calculate Your Divisor
Add your overhead as a percentage of sales and your desired net profit as a percentage of sales. Subtract that number from 1.0. The remainder is your divisor.
Example:
Overhead = 45%
Desired Net Profit = 15%
Total = 60%
1-.60 = .40 = Divisor
Step 3: Calculate Your Selling Price Before Sales Commission
Divide your Total Costs by your Divisor.
Example:
Total Costs = $2,416
Divisor = .40
$2,416 / .40 = $6,040 Selling Price Before Sales Commission
Step 4: Calculate Your Selling Price Including Sales Commission
Add the percentage of the sale that will be the sales commission to the selling price and the total is your Total Selling Price Including Sales Commission.
Example:
Selling Price Before Sales Commission = $6,040
Sales Commission = 8% of $6,040 = $483
Total Selling Price Including Sales Commission = $6,523
How to Calculate a Multiplier
The multiplier will produce exactly the same selling price. Divide 1.0 by the divisor and the result is the multiplier.
Example:
1.0 / .40 = 2.5 Multiplier
Try this out on the example above and you’ll see the same selling price as a result.
What’s good about using a single divisor or multiplier?
It’s simple and easy to use. It helps contractors just starting out how to think about their costs in relation to overhead and the difference between gross profit and net profit. This method works well if the contractor consistently does the same kind of work, such as high-efficiency furnace and air conditioner replacements that have similar material costs and labor time to complete.
What’s not so good about a single divisor or multiplier?
When jobs vary widely in equipment, material and labor costs this method will produce too wide of a pricing range, tending to “over-price” high-end equipment and “under-price” lower end equipment sales making you less price competitive. If this is the case then another method, which we’ll cover next week, is more desirable.
Email me for a How to Price For a Profit worksheet.
I talked with a comfort advisor today who finished October at $140,000. Nice. It gets better. September was $150,000 and August was $120,000. Fluke? Anomaly? Freak occurrence?
Not likely. So I asked.
This guy’s not the “hard closer” type although he does ask, and ask again. And he’s pretty good at objection handling. His overall closing rate just under 40% which is a solid but not off-the-charts number. And his first-call close rate, which means out of the jobs he does get, the percentage that are on the first call, is only 20%. That means that he sells 4-out-of-10 leads and that just less than one of those four buys on the first call. So his success can’t be because he’s using high-pressure tactics.
So what’s he doing?
Read more
Sales Coach Mission
To train and support motivated sales professionals to achieve extraordinary sales success.
Sales Coach Objectives
To be determined by each client but will include:
- Create a personalized in-home sales process
- Create appropriate selling tools and materials
- Learn how to effectively use the sales process, tools and materials to address the most common sales situations
- To reach a targeted goals in sales revenue, gross profit margin, close rate, referral lead generation and income
- To provide owners and managers with a sales process they can manage and support
Few have put thought into what to leave behind after a call and fewer still see it as a significant part of the sales process. It is.
So that we’re all thinking about the same thing, I’ll define “leave behind” as whatever you leave with the customers at the end of the call, whether you make the sale or not.
Do this: in the margin on this page write down what you always leave behind after you make a sale. Then write down what you always leave behind when you do not make the sale. I emphasized “always” because I’m interested in helping you create a standard practice…not an occasional and random one.
I’ll wager that many of you were stumped on the “always” requirement. Your list may include only product literature and a copy of your “bid”. For some of you the margin is blank. Whether you make the sale or not it’s vital that you leave behind appropriate information to either reinforce that the customer made the right decision in buying from you or, if they didn’t buy yet, that they should buy from you.
by Tom Piscitelli
During a recent interview on HVACTV.com, three of us were asked, “How can our industry reach the millions of existing homeowners with the breaking news about the new products and services we have to offer?” Most of us would readily arrive at the opinion that we need to get contractors and manufacturers to advertise more. Sure that works, but to really have impact, to really create consumer demand, we’d have to spend millions of dollars — money our slim-margin industry just doesn’t have.
Read more
by Tom Piscitelli
How many times have you bought something that was “cheap?” Or bought something from someone you weren’t completely comfortable with? We all have. And what was the result?
Perhaps the product didn’t live up to your expectations, and you had to buy it again. Only this time you bought the better one, or even the best one. And if you purchased it from a salesperson you weren’t quite comfortable with, did you refer friends or relatives to him or her? Probably not.
Read more
by Tom Piscitelli
Congratulations! You just made a sale! Now what? Some sales people might think the work is done, that they’ve completed their part by getting the customer to say “yes” and sign the agreement. Well, if the sales person’s goal is to get the sale and move on to the next prospect, they could be right.
Read more
