From A to Z: The Best of Tom McCart from the Service Roundtable, Part 9 Topics Beginning With the Letter "S"

Sales Appointments

There are three lead requirements...
#1. A need or interest

#2. An ability to pay or finance (easy to develop with the finance programs we’ve got today)

#3. The presence of a decision-maker.

All three are present in the evening and on weekends. Tha's why you should pursue only evening and weekend calls. Let the daytime people run the leads with only two of the requirements. I'm sure the majority of their sales must be second call closings.


Sales Commissions

Sales people should be fully commissioned. They should sell to eat.

It’s DANGEROUS in sales when your sales people are allowed to become too satisfied!


Sales Compensation

I've found in the past 30 years that the highest paid salesperson has always been commissioned. Salary will make him/her lazy. What are they doing to earn it?

I am a salesperson. I get paid for making sales, not getting coffee, picking up parts, getting permits, or going for lunch. I have found that most salespeople usually get paid what they are worth.

I peach paying a progressive commission:

∑ If you sell a unit out of the box, it’s worth 4% or 5% of total sales
∑ Sell a unit with a 5-year parts warranty and it’s worth 6% or 7%
∑ Sell a unit with a 10-year parts and labor warranty and it’s worth 8% or 9%.

The more you sell, the more you are worth. The better you sell, the more you are worth. But the salesperson has to believe in better products and believe in meeting the client’s needs and wants. Most salespeople don't really know their products or how to talk about them with clients.


Sales Performance

A new salesperson should generate at least $650,000 in annual sales. I don't care how many leads he gets. Good salespeople should be doing well over $1 million in large market areas.

Sales Tracking

It's always beneficial to track sales so it's visible to the whole team as a percentage to total goal monthly and annually. I highly recommend your sales staff track themselves individually as well any tracking you provide.

Salesperson Auto Allowance
Your new salesman wants 34 cents per mile flat. That’s great. Tell him the government is willing to pay 36 cents per mile. Now you are out of the picture.

You hired this guy to sell for you, not to pay him to drive around. If he is selling, why would you have to pay his cost of sales?

Everyone has said that a company vehicle as a billboard is the ideal way to go. That would be great if you all were netting 15%+ profit, paying yourselves a decent wage, and taking a real family vacation instead of going on a "Dealer Trip" with your supplier or manufacturer.

Personally, I needed the vehicle deduction and any other deduction I could get when I was on commission. I don't ever remember not being able to make it to a sales call because I didn't have gas or my vehicle was in for repair.
If you want to help the salesperson out, put him or her on a "draw against commissions" and settle the account every 60 days.

The next thing you know, you'll be buying his tape measure, pens, laptops, and cologne. Why not adopt him and take the dependent deduction? Boy I wish I could work for some of you. No expenses, no responsibility, no liability, and all I have to do is sell jobs and make sure the customer is happy with my company. I just have to produce or get out.

Salesperson Benefits

You wanted a view of how a salesperson thinks.

#1. Why wouldn't I expect the same benefits as everyone else? Am I an employee or a sub-contractor?

#2. Most salespeople take their vacation in the slow selling period or sandbag some sales prior to vacation time. I don't agree with this practice. Personally I held commissions back all year long to level out slow sales periods and to fund vacation time.

#3. I owned my own car, as did my company's other eight salespeople. The company provided magnetic door signs. My sales car was great on fuel and 100% for work. I wanted the tax deduction, depreciation, and fuel allowance the government paid.

#4. I also bought my own car phone, also a tax deduction.

#5. I most liked the graduated commission plan, but not the structure of the different grades of equipment offers.


Savings Bonds

Sending a U.S. Savings Bond as a referral thank you sends subliminal messages.

  • You appreciate the referral
  • Perception of value is much higher
  • It shows your patriotism
  • It provides custoemrs with another opportunity to save.

Savings Bonds can be purchased in most banks.

Selling to Sam

I learned early on not to judge a book by the cover. Ninety percent of salespeople would blow off Sam Walton if they didn't know who he was.

Selling Through Big Box Retail Programs

Get a "Non-Disclosure" or "Confidential Proprietary Rights" agreement signed by the distributor. We need to start protecting ourselves. About the only thing we have that our competitors don't have is our customer list and our employees’ information.

Service Agreement Discounts

The goal is to transform your customer base into mostly agreement customers. Peaden in Panama City, Oliver in Pennsylvania, AirRite in Ft Worth, Cropp-Metcalfe in Virginia, and others have more than 70% of their customer base signed up as "raving fans" of the company. The raving fans own service agreements. Could any business really afford to give a 15% discount to 70% of their customers? I don't think so.

Calculate your "value rate" (i.e., your rate for your service agreement customers – a 15% discount price) as the rate you need to reach your budgeted profit. Your "Standard Rate" (i.e., your everyday street price) should be your full value rate price market up so you can offer a 15% discount to your service agreement customers (i.e, divide your value rate by 0.85, or 1 – 15%).

We need to look to the future and not just today. One day, hopefully, you will have 7,000 plus agreement raving fans" so you can afford to deliver exceptional service.

Service Agreement Renewals
Make every effort possible to convert all your agreement customers to automatic billing, annually with a 30 day written cancellation clause. All refunds for written cancellations should be refunded on a pro-rated basis. Try to price your agreements with a number that is divisible by 12.

Draw attention to every manufacturers warranty highlighting the statement "seasonal or regular" maintenance in keeping the warranty valid.

Service Agreements and Senior Discounts

I recommed a 15% discount for agreement customers, rather 10%. If you set your flat rate up correctly, your normal street rate is your agreement rate and your standard rate is your street rate divided by 0.85 (1 – 15%).

Now you can offer a 10% discount to seniors. When they purchase an agreement they will get an additional 5% savings.

Check out advertising in the local AARP magazine, they're printed regionally.

Service Price Resistance

I had a contractor convert to flat rate. He knew his productivity level based on four years of history, had his overhead at 23%, and field labor below 14% to service sales. He accidentally entered the wrong numbers in the flat rate program and was on the street with his flat rate books for $356 per hour labor rate, thinking he was only $180 per hour.

His service sales were showing 20+% increases at $356. When he found his error, he went to the $180 per hour.

Shortage of Labor

Your profit is a direct result of how well you manage your P&L, not how many calls you can run in a day! Most contractors would make more profit serving half of their customer base. I am already hearing horror stories from contractors who are losing business due to insufficient help. Demand for labor has exceeded our ability to deliver it. Raise prices!

If you're a residential contractor, change to flat rate, and charge by cash, check or credit card. Your P&L should be setup using the "retail" format and a cash basis.

Slow Pay

Collect from your slow pay customers, and then drop them as customers or charge them interest on your money they are using. I find most contractors don't have this kind of money to loan out!

Springtime Recommendations

When the season is upon you, you must be prepared to capture sales opportunities and sell your company's image. It all starts with YOU.

Recommendations:

  • Make sure your labor rate is consistent with your overhead and desired net profit
  • Rather than run every service call, run four good calls
  • Get your equipment price book set up and profitable
  • Make sure all personnel market and sell every day
  • If you're not measuring your business daily, your business isn't being managed properly
  • For residential, have a policy: "In GOD we trust, all others pay by cash, check or credit card."
  • Get excited about your business again and have some fun.

A long-time contributor to Contracting Business, Tom McCart was HVAC’s first million dollar residential retail salesperson. Tom died of Lou Gehrig’s Disease on Jun 10, 2004. ALS took a toll on Tom physically. It took a toll on his family financially and emotionally. Tom’s business has survived. Please support Tom’s survivors and his legacy by purchasing his books or attending No Secrets training (www.nosecrets.com).

You can also purchase “From the Sky Up, the Tom McCart Story on DVD,” or any of Tom’s seven sales, marketing, and management manuals, at www.hvacprofitboosters.com. All proceeds from the sales of Tom McCart’s products go to Tom’s estate to help his survivors pay Tom’s medical and long-term care expenses.

For more information about the Service Roundtable, including a FREE e-book on service company marketing, visit www.ServiceRoundtable.com, call Liz Patrick at 877/262-3341, or e-mail [email protected].

Matt Michel is president of the Service Roundtable (www.ServiceRoundtable.com), an organization dedicated to helping contractors prosper. Matt is also the publisher of Comanche Marketing, a free marketing e-zine. Subscriptions are available at www.ComancheMarketing.com. You can contact him directly at [email protected]. Or send your comments to Contracting Business at [email protected].
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