PDA

View Full Version : value-engineering: service calls


Mike M
07-10-2008, 10:43 PM
Here's a thought: led's can make us more money on service calls.

Fixtures will still need to be routinely inspected, cleaned, re-positioned, re-aimed, etc. Save time and resources by not replacing a bunch of bulbs. Charge the same for the first hour, and be out quicker. That, while also being able to charge them significantly less on the total bill because of the savings on parts and bulbs.

(just thinking out loud, looking to the future)

David Gretzmier
07-11-2008, 12:53 AM
Our rebulb service is 10% of installed price of system. I think it will be a hard sell to convince folks to pay much if all you are doing is labor. Folks need to feel you are bringing something to the party other than yourself. and realistically, labor wise, you will not be able to charge much more than 100 bucks for that call if you are there an hour or less. whereas in that same hour if you install 20 bulbs and do all the aiming and cleaning you mention, people gladly pay 400-500.

Mark my words, although I Love LED's, and they will eventually be common in Landscape lighting, they will absolutely kill the value of your business when it comes time to sell it. a landscape lighting business that has 100-200k per year in rebulbs has tremendous selling value. an LED installing firm with 10k in "aiming/cleaning service" has very little selling value. but such is progress.

Chris J
07-11-2008, 01:22 AM
With all due respect David, it only takes about 10 more seconds per fixture to include a lamp change when servicing a luminare. I don't see how you can justify another $300-$400 for these extra few minutes. I think it will be all in how you approach it, and how you explain it to the client, that will make the difference in convincing the homeowner to purchase the service agreement at a reasonable price. If your having trouble realizing the value of this service yourself, then it will certainly be hard to sell the client on it.
Just my .02 cents.

NightScenes
07-11-2008, 08:49 AM
Chris, I think what David is trying to say is that if you can sell the client 20 lamps at $15 each, that's $300 plus $100 in labor. The labor stays the same but the material mark-up means that the overall profit is higher and revenues increase. Now we only do a complete relamp every other year once our maintenance plan begins so that's a whole other issue. I don't know why you would even consider doing a relamp every year.

Chris J
07-11-2008, 09:19 AM
I look at it like this: I offer the service contract as an added benefit for my client, and not so much as a revenue builder. Even though service contracts are an excellent way to provide cash flow on an even and consistent basis, I would make a whole lot more if I simply charged per visit. I provide service contracts as a way to stay in contact with the homeowner and help them protect their investment. If I were to lose the benefits of relamping, I would simply charge more for the service itself in order to maintain a reasonable profit. The customer has the choice, but if I explain it correctly the customer will benefit by having the service agreement even if I have to raise the charge for it.
As far as relamping annually, that is a contractor choice. Not all lamps have 4k, or 10k life. The long life 3156 lamps, for example, only have a 2k life span and are "theoretically" not designed to last two years. As far as MR16s, I would rather use the 4000 hr lamps and change them annually, than use the longer life lamps (at triple the cost). If I lived in a different region, I would probably consider using the LLs, but you should see what an MR16 reflector looks like after a year in this humidity.
There are several different ways to approach a service plan, but the one I have been using for the last 8 years seems to be working well. Like the old saying goes, if it aint broke don't fix it.

NightScenes
07-11-2008, 09:31 AM
I agree Chris, I don't even use those so called long life lamps. I seem to get longer life from the 4000 hour lamps than the 10,000 hour.

I guess it's all relative to how you perceive your business model that counts.

Lite4
07-11-2008, 11:06 AM
In our area, in the middle of summer our nights are the shortest at around 8 hours or so. In the winter it is dark from 5 - 8, nearly 14 hours. So if I average 11 hours of light on every night that is just a little over 4000 hours on those bulbs. I usually start seeing them go between 10 - 15 months. I had been using what was installed originally, Ushios, but have since been usuing only the GEs for my 16s and 11s. My customers tell me that the light looks so much brighter again after I relamp. So I have to believe there is some degradation of the reflector after a years time.
I usually have been charging time plus material on my annual service calls. I do relamp annually and my customers DO see the value in that, rather than waiting for onesy twoseys to replace. My costs do seem to be hovering around the 7-10% range of initial install, depending on how much time I spend removing hard water stains from the fixture bodies and lenses.

The Lighting Geek
07-11-2008, 03:25 PM
I change the lamps annually for the same reasons TIm said. The bulb still works but the reflector is sometimes almost clear after 12 months or so. I usually moving or adjusting fixtures as well as making contact with customer as Chris pointed out. I think you can increase the amount of referrals by keeping in touch with the customer. It is the service that most people comment about to me. It seems like my systems are the only item around the home that has a maintenance program and the customer really appreciate it.

NightScenes
07-11-2008, 06:13 PM
The thing that David is saying and I agree with is that when selling the business, which I'm sure all of us will want to do at some point, it will look much better to a potential purchaser if you have X number of dollars receivable annually in maintenance. This is income that the new owner can depend on without advertising and they will only have to work on getting new business. The more you can show, the better your business looks.

Another thing that David was saying is that people don't like to pay very much for labor. If you don't believe that, try breaking down your proposal to separate materials from labor and see if they don't try to talk you down on your labor price. People will however pay for materials so you charge less for labor and more for materials and make as much or more in net profit.

Chris J
07-11-2008, 06:39 PM
All of you guys have created profitable businesses, so I don't believe there is a wrong way to approach this as long as your approach is sell-able. I just don't agree with the concept that you have to provide "materials" in order to charge for your service. If that were the case, Doctors would not exist nor would attorneys or CPAs. The bottom line is that it is all about the way you look at it and respect your time and experience. Regardless if lamp changes are involved or not, the customer just wants their lighting system to look great every day. Either they pay what you need to receive for service contracts, or they "pay as they go". The latter, in my business model anyway, is more expensive for the client because I can not put it on a routine schedule. Because of the increasing cost of fuel and materials, I'm getting ready to increase my maintenance charges by as much as 50%. You may think this is alot, but I haven't had an increase in 8 years, and overhead is eating my lunch for the responsive service that we provide. Just today I drove 80 miles round trip to replace a $2.00 lamp for free! But that is the kind of service I provide, and that is what separates me from my competition.
I'll give it 6 months to a year, and I'll let you know if revenues go up or down. I'm betting anyone $100 they will go up, and the customers will be as happy as ever with our service.

Mike M
07-11-2008, 07:10 PM
2.00 lamp replacement for free, up 50%, is still free. How will your revenue go up?

I suggest you charge more for that lamp. Maybe look hard for a missing thumbscrew or something, too.

Chris J
07-11-2008, 11:58 PM
Mike, you misunderstand my service agreement. I charge $10 per light to service, plus the additional cost of lamps which is normally $7.50 for MRs and 4.00 for others. My typical service contract is for 30 lights @ $300 plus lamps ($150 - 200) with a total of 450-500 to renew. Being that I have several hundreds of customers on service agreements, I can group these clients by neighborhood and service ten or so on any given day. If I raise my price to compensate for the increasing costs associated with doing business, I will now charge roughly $750 per year.
My clients seem to appreciate this service, and I certainly like to check the mail box every day. For those who don't accept the additional increase, then I will gladly service their system on a per visit charge (makes me more money anyway). Keep working on that "perfect connector" project, and leave me alone.

klkanders
07-12-2008, 12:13 AM
This thread is an excellant read lots of things to contemplate. Some of our customers are reading it as well. Not sure if thats a good thing or a bad thing. I guess its how all service businesses operate so no secrets are being revealed here for the first time anyway.
Everyone has made great points which I intend on using to mold my own maintenance/service offering. An offering of pay me now or perhaps pay me more later.
Looking back Chris I bet you wish you would have gradually increased your fees along the way. I think you may lose a few but the ones who have seen the value of your customer service will stay on. Everything is going up in price its first impression and service after the sale that keeps them I believe.

Keith

Chris J
07-12-2008, 12:48 AM
Keith, like I said it's all about keeping the client happy while making a decent living. There are always those who will turn their nose up at the service contract, but these are the ones who just don't understand the value. They will all call me at some point, but it's much easier on their pocket books if they stay with me. The clients who have the service are the clients whose lighting systems look fabulous year after year. Those who think they know better are the ones that usually end up on the wrong end of the deal. I try to be fair to all, but it's simply more expensive to bring a lighting system "up to par" after a few years than it is to maintain it all along.

klkanders
07-12-2008, 01:10 AM
Chris I agree. What was missed earlier is your ability to group them together to save time and money. It all factors in. That $2 lamp might net you more work or a referral.
Thanks for all your info. I appreciate it!

INTEGRA Bespoke Lighting
07-12-2008, 07:18 AM
Here's a thought: led's can make us more money on service calls.

Fixtures will still need to be routinely inspected, cleaned, re-positioned, re-aimed, etc. Save time and resources by not replacing a bunch of bulbs. Charge the same for the first hour, and be out quicker. That, while also being able to charge them significantly less on the total bill because of the savings on parts and bulbs.

(just thinking out loud, looking to the future)

LED Lamps will certainly increase your profitability on service calls (my expereince is "real life" and not theoretical) but not in the manner that you suggest.

By introducing LED lamps into your existing systems you will recognize a much higher return per lamp installed then with incandescent. We all work on margin/mark up right? Would you rather sell a $5 item at 30% markup or a $50 item at 30% markup?

I could go on and on... but I won't. Too busy upgrading lighting systems to LED lamps! :)

Have a great day.

Mike M
07-12-2008, 08:26 AM
Chris, lighten up. You said you made 2 bucks and now you want to raise your rate by 50%. You didn't mean the two statements to go together, and I found humor in it. Heck, raise your rates by ten fold and make twenty bucks. See the humor? If you want, I'll stop with the jokes and be dead serious from here on in. Starting now. <---This is not meant to be funny.

Chris J
07-12-2008, 09:41 AM
I guess I forgot my smiley face. I'm not upset.

Mike M
07-12-2008, 06:08 PM
I don't like having to use smileys. Just assume I'm never really serious unless I indicate it "I mean it, I'm serious," or, "(seriously)".

steveparrott
07-14-2008, 09:23 AM
Interesting thread, several different approaches to service contracts - all have merit. The bottom line is that every contractor needs to develop an approach to service/maintenance contracts that makes sense from a profit standpoint and that will be perceived as providing a fair value for the price charged. If the great majority of your customers don't sign up for the maintenance agreement then you need to change your strategy.

A big part of my saying this is because I get numerous calls each week from homeowners trying to service their own systems. I always ask them, "Don't you have a maintenance agreement with your installer?" They all say no - either it was never presented to them or it was too expensive or they don't ever want to see their installer again (that comment always makes me cringe!)

On the bright side, I've met with many contractors who are like a part of the homeowners' family. Some even have keys to the house. They let themselves in, help themselves to a beer and are invited to their parties. These guys always get maintenance contracts. A big part of getting maintenance contracts is gaining the trust of the clients.

Mike M
07-14-2008, 09:46 PM
Good points, Steve. My business is still very young, but I learned from people here that the mindset is in having "clients." We design, install, and maintain lighting systems for our clients. This means establishing a rapport from the beginning, and developing a relationship and reputation. The best part is when they offer us booze.

INTEGRA Bespoke Lighting
07-15-2008, 12:11 AM
Even better.... when they accept that which you offer them! :)