Make Your Numbers Count

by Bob Levins, Angus Performance Advisors

Does it feel like the margin for error in your business keeps getting smaller? If so, you’re not alone.
The world we knew even 10 years ago is gone. In its place, we wake up every morning to generally warmer winters and customers who use less fuel per degree day. We face greater competition, a shrinking customer base, rising costs, and fuel price whiplash.

Evolve to Thrive
We can complain all we want about these trends, but it won’t change the fact that this is our new reality. If we want to survive in this business, let alone thrive, we’ve got to figure out how to evolve and run our businesses better. If there is less margin for error, we better darn well stay within the margins. And that’s where your metrics become so important.

What Do We Mean by Metrics?
When we talk about metrics, we are referring to the Key Performance Indicators that help you understand what is really happening in your business. When the margin for error is less, you need to get these numbers quicker, so you can act faster to correct problems and preserve your profitability.
In the absence of good numbers, we are left to manage by feeling, by hunch, by intuition, by good guess. And that might have been good enough in the past. But it won’t cut it now.

Putting Your Numbers to Work
A great case in point recently occurred when a client believed he needed to raise his service plan price by $50, because he was losing lots of money in that department. But he feared an increase of this magnitude would cause customers to shop around.

So we did some digging into his metrics. In this case, we focused on his excess call report, i.e. customers who had gotten more than five service calls in the past two years, including tune-ups. This was no easy feat. Pulling this data from his system, and then investigating to rule out call backs, or exclude jobs where a part had to be ordered, took much longer than it should have, but the results were game changing.

Looking at a sample base of 50 random customers, he had a $3,800 loss. But if he took out just five customers who were on that excess call list, his loss turned into a $2,500 gain. He didn’t need to raise his price to an uncomfortable level. He just needed to get these customers off of his parts and labor plan.

As he continued to analyze his numbers, he ended up concluding that he should switch his billing to flat rate, increase his labor rate, and introduce a new type of service plan without parts and labor coverage. He is on track to raise his net on service by $250,000. But none of it would have happened had he not started digging into what his numbers were really telling him.

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