How to Increase Service Technician Revenue

By James Leichter - May 1, 2018

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Before we cover some ways to increase technician productivity and revenue, we should go over a few key performance indicators used to judge service technician output.

Residential service technicians should produce at least $250,000 in annual sales with a 63% or higher gross profit margin. A better way to measure technician output is by annual gross profit dollars. That number is $157,500 annually or $630 gross profit dollars per average man day. Techs should run an average of four service calls per day with an average retail invoice amount of $250 each.

When technicians are allowed to sell equipment change-outs, those numbers need to be adjusted to consider the potential reduction in repair revenue and the increased revenue from the replacement sale.

It gets a bit tricky to assess the performance of a technician who does both service work and installation work. Installers should produce $825 gross profit dollars per day. A two-person crew should produce $1,400 gross profit dollars per day. You will need to consider both types of work independently when assessing their performance.

There are numerous ways to increase technician revenue. The rest of this article will cover some of the most significant ones.

Supercharge Your Diagnostics.

One of the fastest ways to increase sales and improve customer satisfaction is to detect additional legitimate service work. This is done through high level diagnostics. Implement a weekly training program to teach technicians the finer points of diagnostics and pre-emptive failure detection. Technicians should think and work like aircraft mechanics. These highly trained and regulated technicians replace parts before they fail, and the public should agree with that philosophy. After all, no one wants an aircraft mechanic to wait until an aircraft part fails before they replace it.

Your technicians should have sophisticated instuments such as megohmmeter, combustion analyzers, anemometers, digital manifold gauges, and more. These tools should be thought of as an investment. They will pay for themselves over and over again. Of course, training will be necessary to assure that they are being used properly.

Reduce Unbillable Time

Unbillable time includes labor hours paid to the technicians but not billed to a customer. You should keep unbillable time under 25%. Reduce efficiency crushing trips to suppliers by creating and maintaining a customized inventory list for each technician. Consider performance-based compensation that pays technicians far more per hour for billable time than unbillable time. Improve service call management by implementing an integrated business management software system that includes a strong mobile software app and GPS tracking.

Reduce Callbacks

Callbacks reduce billable time and kill profitability. They also hurt your customer satisfaction scores. A callback can be defined as the following: "Any repeat service call that is unbillable, for any reason, within thirty days of the original call." Callbacks should be less than 5%; 1% is best in class. Sometimes techs simply don't have the correct tools for the job. Create a Required Tool List for each job function and train your techs on how to use the lists.

Sometimes a callback isn't really a callback, but we have no choice but to work for free. Often it is simply due to the fact that the technician did not properly document what they may have very well told the customer. Thorough documentation will help reduce callbacks. Mobile apps can make this process easier through a database of prewritten repair descriptions and voice recognition.

Give Technicians Time to do Their Jobs

This might require a change in culture. Technicians need to take their time. They should be able to run three to five service calls a day. Anything more than that might mean that they are hurrying through their work or that they need additional training. It is better to charge a customer $600 for a single service call than it is to charge them $300 each, for two separate service calls. When you need two service calls to repair a system, your customer will always wonder which service call wasn't necessary and they will resent paying for it.

Selling Accessories

Families want cleaner, heathier, and more comfortable living conditions but they rarely realize they have so many options. Technicians should sell one accessory for every 12 service calls they run. Accessories might include whole house dehumidification systems, air filtrations systems, and water treatment systems. They can also include UV air treatments and WIFI thermostats. I consider service agreements to be accessories too. Technicians should be able to sell one service agreement for every six service calls where there is no service agreement coverage.

Generating Replacement Sales Leads

You may not wish to have every service technician sell replacements, but all service technicians should be working to create solid sales leads. Technicians should be able to produce one good sales lead for every 12 demand (non-maintenance) service calls they run. Obviously, this depends on your customer base and average age and condition of their equipment.

Technicians should be educated on the various signs that a system may need to be replaced. A "Replacement Decision Worksheet" can be a useful tool in helping the technician assess the pros and cons of repair versus replacement. This worksheet should be filled out in the customer's home and a copy should be printed or emailed for future consideration.

A replacement lead may not count towards annual technician revenue, but it should factor into your annual assessment of their production.

Selling Equipment

Service technicians are in a unique position to sell equipment upgrades and replacements. Customers see them as experts and are often less defensive than they might be with a "salesperson". Think about it like this. Would you rather talk to an auto mechanic about the need and cost of replacing your truck's transmission or with a salesperson? Sir, you are going to need a transmission replacement. Wait here while I get our transmission salesperson to speak to you. Technicians will need product training, basic sales skills, and complete cookbook pricing for all common replacement scenarios.

Let service technicians sell if you believe they have the skills required to do so; otherwise, they can help the team by creating quality sales opportunities for someone else.

How to Encourage Technicians to Sell

I am often asked, should technicians sell equipment replacements? Yes. They certainly should. I believe selling is a natural part of being a service technician.

As long as they have the desire and the ability, service technicians should be allowed and encouraged to sell equipment change-outs. I have worked with technicians that didn't believe it was proper for them to sell equipment. Many believe it is a conflict of interest for a service technician to sell replacements. I ask them if they would take their children to a doctor who refused to sell x rays, physical therapy, an MRI, or other medical services. Of course, they wouldn't. They would expect their doctor to recommend whatever was proper and necessary for the wellbeing of the patient. The same is true when it comes to HVAC service. Techs will become more comfortable with selling once they have been introduced to some basic selling tools and techniques.

I believe that the word "selling" has something to do with the apprehension that some feel when talking about system replacements. Again, I would go back to the doctor patient metaphor. Reiterate that it isn't so much about selling as it is doing what is best for our customer. You are simply asking them to give people options and recommending what you think is best.

Many technicians are proud of their ability to "fix anything". That's noble but it may not be in the customer's best interest. Training is the key here. You will need to provide your service technicians with high quality training and ongoing encouragement. Show them how to calculate energy savings based on EER and AFUE increases. Teach them concepts such as cost of ownership, return on investment, the cost of future breakdowns, enhanced comfort, the value of peace of mind, and so forth. Remind your technicians that they are a customer, but they are not their customer. Just because they have certain feelings and opinions does not mean that they should impose them on their customers.

One final point I would like to make with your service technicians is this; you never know if someone can or cannot afford to properly repair or replace their system. Many poor people may look rich and many rich people may look poor. You cannot always tell someone's economic state by the clothes they wear, the car they drive, or the house they live in. Do what's right. Passionately explain your recommendations and let your customer decide for themselves.

ABOUT THE AUTHOR

James R. Leichtern

President & CEO, Aptora Corporation, Mr. HVAC LLC, RA Tax and Accounting Inc.A

MrHVAC.com

James is a successful entrepreneur and master mechanic whose accomplishments include being the founder of MrHVAC.com, the CEO and founder of Aptora, the President of RA Tax and Accounting and a partner with ProAmerican Investments.

James' company MrHVAC.com is a website dedicated to improving the lives of contractors. It includes industry articles, specialized HVAC calculators, forms, templates and one of the most extensive operations manuals in the country. As the founder of Aptora corporation, he has created some of the most popular software programs in the service industry including Flat Rate Plus and Total Office Manager.

James is well known for his burning passion to help contractors and it shows in his unique speaking style. He has hosted management workshops all around the United States and has conducted onsite consulting since 1996 with hundreds of contractors.