For many specialized service companies such as handyman companies, pool and spa professionals, and HVAC technicians, jobs are generally divided into two categories:
Installation: Multi-day or even multi-week jobs requiring multiple technicians at one location for an extended period. These projects are planned with homeowners, parts are ordered ahead of time, and it’s relatively straightforward to provide an estimate for the project.
Service Calls: On-demand calls from homeowners to fix a problem. These calls are not scheduled in advance – for example, if your air conditioning breaks, you call for service. The technician on the other end has to check his availability and come to the site to diagnose the problem and provide an estimate.
In our experience at the 2017 Northeastern Pool and Spa Show in Atlantic City, New Jersey; we had the chance to speak with pool service companies large and small, learning about what makes their business successful and the challenges they face. Almost every company commented that they prefer installation-type jobs over service calls. In asking the same question to other customers – pest control, HVAC, and home repair companies – all of them preferred these larger-scale, scheduled jobs.
Installation generally comes with a higher margin
Less travel time and dispatching – they go from the office to the location, and back
Easy to forecast revenue, costs and labor for a project
Less customers to have to invoice and manage
In a perfect world, your service organization could just rely on large-scale installation work like home remodeling or pool installation – but for most service companies, there’s simply not enough of those jobs to maintain a full book and schedule of business. On average, for every installation job, there are anywhere from three to five service call appointments. And you certainly don’t want to be a company with a reputation for not servicing what you sell.
The reality is most companies have to deal with these service calls, and as a result of the inefficiencies of going to several locations for several jobs; service tends to be less profitable – to the tune of razor-thin margins or even negative revenue if you’re REALLY struggling.
The question becomes “how do I make service calls profitable?”. The answer: the right tools and procedures.
By far, the biggest issue with service calls is the dispatching component – going to and from each job. Simply going ‘by the schedule’ or randomly assigning job requests to technicians, inefficiency builds up quickly – and this is the primary reason service becomes unprofitable. So much time is spent driving between locations; getting information from central dispatch, that what should be half a day of work easily turns into a day or more.
To give you an idea of just how ineffective this process can be without the help of route optimization, let’s give an example. Let’s say you’re a pest control company in Chicago, IL; and have a contract with the Target stores in the area. You get calls from three locations – Schaumburg, Crystal Lake, Racine, and Orland Park. You drop these jobs into the system and assign them to your technician. Here’s what his schedule looks like:
Over 4 hours just driving between the locations, not accounting for any type of traffic. His total distance is 220 miles of travel. If each service call takes an hour – this is a day of work and possibly then some depending on any complications or traffic he encounters. A few days like this, and suddenly you’re looking at overtime.
Now, let’s revisit the same situation but let’s optimize the route between the locations.
By optimizing this route we now have a travel time of 2 hours and 42 minutes, and a distance traveled of 111 miles. That’s 100 miles less travel and over an hour of time saved. And this is just for four jobs on one day.
Let’s put it in real numbers. Let's do some 'napkin-math'. Your technician is paid $20/hour. His service van gets 20 mpg and gas is $2.75 per gallon.
In one day, route optimization could at least $25 in labor cost and $13.75 in fuel costs.
If you repeat this scenario over a week, it’s at least $125 in labor cost and $68.75 in fuel costs
In a month, it's at least $500 in labor cost and $275 in fuel costs
AND (!) these numbers don’t account for
Wear and tear on your vehicle
Overtime if the jobs run over schedule
Potential jobs you could be servicing with the additional 1.25 hours per day saved
Route optimization, a service dispatch program, and good scheduling practices, above all else, are the keys to making service profitable for your organization. It’s not just the time – it’s the fuel cost, the wear on vehicles, the labor cost, and perhaps most importantly – opportunity cost. Route optimization can not only save you money, but help you make MORE money by allowing your team to service more jobs in one day.
Customer Management and Billing
Another reason cited as a preference for long-term installation jobs over service calls is customer management.
Long-term installation calls, you’re dealing with one customer – and with this customer, you have planned out your project in advance, agreed on costs, everything is more or less set up in advance. As a result, there’s little confusion over billing, schedules and labor are mapped out in advance, and invoicing is a relatively straightforward process.
With service calls, you’re dealing with several customers, and often customers who you haven’t necessarily worked with before. As a result instead of managing one customer’s project over the course of the week; you’re now dealing with 30-50 customers on service calls. These customers are at different locations, with different needs and different personalities. Managing 30 to 50 different work orders and invoices with different payment terms take a lot of administrative time – from making sure the service was completed to handling any potential complaints, to invoicing and ensuring payment for each customer.
This is another area where service calls see already narrowed margins thin out even more, but much like with route optimization, the right tools can help make this process simple and save your margins on service calls.
By using field service management software, companies can easily document the work they’ve completed at a site and send the customer a work order containing videos and proof of work. In addition, many field service programs such as ServiceBridge integrate with QuickBooks Online – so that that once a job has been completed, it’s easy to generate and send an invoice to the customer for payment.
Again, a real-world example puts this into context:
Without field service software, the technician brings paper work orders back to the office. This takes half an hour for them to drive back. $10 in labor cost, $2 in fuel cost, $1 in paper costs.
Then, it takes office staff about 10 minutes to enter each order, create an invoice, and send it to the customer. For 10 work orders in a day, 100 minutes of time. The administrator is also paid $20/hour. Add another $1 in paper costs.
Between the administrator and the technician in this sample, we’re looking at $34 in administrative costs, $10 in technician labor, and $4 for fuel and paper. $48 total. $50 a day just in the costs for managing and invoicing customers. For one day of work.
With software, there’s no need to go back to the office with work orders since everything is centralized in a cloud-based system. Administrators can automatically send the work orders and invoices to customers with the click of a button. To invoice these 10 customers takes maybe 15 minutes of time, and there’s no paper involved. The cost of this process? $5 in administrator time. No paper cost. No added fuel or technician costs.
While most of the math laid out in this article is an estimation, the key point is straightforward: service margins are narrow, and inefficient processes make the margins almost non-existent. Many companies don’t realize the true cost of inefficient processes like not optimizing their routes, or using manual methods for building – but these costs do add up quite considerably and ultimately lead to smaller profit margins for service businesses.
We encourage you to do your own ‘napkin math’ on service calls – compare a day’s route against an optimized route, and see just how much mileage and labor cost is being lost by not optimizing your routes. Calculate the time and resources it takes for manual billing processes against an automated process in a program like ServiceBridge. Then multiply the daily numbers across a month – do those numbers add up to more than the cost of implementing a software program? Would that much money saved make service profitable?
Finally, there are the things you can’t do napkin math for that add to the cost of service calls:
Additional wear and tear on vehicles
Customer satisfaction – does your current process lead to confusion and complaints? How much time is spent on handling those complaints? How much time is spent chasing down unpaid invoices?
And finally, opportunity costs – with that saved money, you could invest in new equipment, a larger team, or more marketing. Route optimization can save hours, leading to more work orders per day. And the time spent invoicing and managing customers by your administrative staff could be better used on sales, marketing, and building your service business.
Service calls will never hold the same appeal as long-term installation projects – however, with the right tools and approach, business from the franchise to local contractors can make service work more efficient and profitable.
For many field service professionals, service calls come with thin margins and potential frustrations. Learn how ServiceBridge can help you make service calls a profitable part of your business.