How to increase profit margins

Profit Margins

We’ve got ten quick tips to help you get there.

1) The #1 way is to increase your prices – most home service companies price their services too low. All too often, prices are based on what the competition charges. Since most service companies go out of business because their prices are too low, that’s a terrible starting point for your prices.

Instead, price your services according to actual costs and desired profits.

Do the math with your accountant – what’s the actual cost to roll out a truck for a service call?

Include all indirect costs in your prices – like salaries, office, warehouse, insurance, trucks, employee benefits, vacations, profits, your salary, etc. This is discussed in episode #2 and our interview with CPA Meaghan Likes in episode #15.

If you don’t want to go through all of that, then consider just doubling your prices – as Meaghan said in that interview, you can do that and lose 40% of your business, yet still, be better off.

Use flat-rate pricing – customers prefer them, and you can’t compete on price as easily as your time and materials competitors.

Offer good, better, and best options when providing products. Customers love choices, as we touched on in our last episode.

2) Scale back coupon use and replace with limited-time specials that are carefully priced. Consider using combinations of services for limited specials.

Consider using limited-time special offers on jobs that often lead to bigger jobs.

Split-test specials to one-half of your email list or through ads. Which performed better? Did the special offer perform better than the non-special of the same service? Was it worth the discount?

3) Include financing options for high-ticket products and services, as we mentioned in our last episode. That will help you close more of those sales.

4) Get more sales from existing customers by staying connected. Use an email newsletter and automated referral program to keep connected to existing clients and encourage repeat sales and more referrals.

5) Streamline systems – improve sales processes and sales conversions with automation. Use a CRM and create immediate sales pipeline communications that go out the second you get a new lead.

Send a text, voice mail, and email saying your team will be in contact soon. Provide info about what the prospect’s interest is and about your team in those communications. Let them get a jump start on knowing, liking, and trusting your company before a salesperson or CSR even contacts them.

7) Make your brand better known through marketing. Provide helpful blog posts, videos, and social media posts. LinkedIn is a great platform where your organic posts can still get seen. Consider posting useful content in local Facebook groups.

8) Buy smarter – make better inventory purchases. Buy in bulk but based on real needs and not desires. Use inventory management software. Get rid of what’s not moving.

9) Improve system efficiencies – ask employees and customers how to create more efficient procedures & identify waste. Reward those that create savings, more efficient systems, and better customer experiences.

Check out our podcast episode #4 titled “The number one marketing tip of all time,” for more information on improving efficiencies and your customer’s experience.

10) Automate everything possible – sales pipeline, sales messages, accounting, reputation management, email marketing, and more. Take advantage of the 21st-century technology tools available and use them to you and your team’s advantage.

In summary, the answer to improving profitability is not getting more leads and prospects into your business but instead creating better pricing, becoming more efficient, and using automation wherever it’s potentially beneficial.