Is Your Service Profitable?
As I meet with integrators it is usually a struggle for most to make money on their projects. For those that have actually cleared that first profit hurdle it is almost always countered by a severe lack of profitability on their service offering. In nearly all cases integrators are literally bleeding profitability on the service side of their business.
The first problem to conquer is the actual bill rate for service (that’s a whole other article… Hint: It should be more than your project labor rate – NOT LESS). Once we sort that out, it comes down to setting expectations with the client and actually getting paid for the service work you do.
Solutions From Other Markets
I always look outside of my business or market vertical for simple solutions to problems. I needed an electrician to service something in our office. I had a buddy who ran a successful residential and commercial electrical contracting firm with several hundred employees; so I called him for help. He connected me to his service department and the very first email was a Service Pre-Authorization Form.
This document covered:
What would be billed (Drive Time, On-Site, Off-Site, Hardware, etc.)
The hourly rate
A threshold amount the client is agreeing to and anything below this is auto-billed. (This amount should cover 80-90% of your service billing amount. Usually $1500 should do the trick.)
Should an amount be above the pre-stated level a quote will be created, sent to the client, approved, and paid for prior to any further work.
The chosen payment method preferred by the client (Credit Card, ACH, etc.)
A signature that the client acknowledges the above and agrees to the charges.
It was GENIUS in its simplicity!
It removes the following:
“I didn’t agree to that”
“I didn’t know it would cost that”
Time consuming collections on small invoices
Clients that don’t want to follow your process and procedures
If you’d like to see an example version, please click here.
The modern version of this is done with DocuSign (or similar) and a PCI compliant method (such as ConnectBooster) to capture/store a credit card or ACH but if you can at least get it on paper we have conquered nearly all issues that keep us from getting paid on service work.
When this is done before a service appointment is scheduled the rest of the process becomes much more streamlined and profitable. For more information on Labor Rates, Service Plans, Service Workflows, and running a profitable service department, please feel free to reach out and set up an intro call!