Medical doctors address the physical being of your biological systems and assess the condition of your health. If needed, they recommend medications or procedures. When you go to the medical doctor for a checkup, the patient pays the doctor. After all, the doctor incurs costs for a staffed office to address patients’ conditions.
If you are lucky enough to have great health insurance, you might say, “I don’t pay the doctor for the checkup — my health insurance pays the doctor.”
If you are tempted to say that, keep in mind that you directly paid for your insurance through premiums or indirectly paid with sweat equity compensation from your business or employer
If you only have good health insurance coverage, you, the patient, will pay a co-pay. In this instance, the insurance company pays and you not only pay for the insurance coverage, but you also pay for the co-pay. If you have no health insurance, you pay for the checkup in totality.
Any tests or procedures the patient may need are charged above and beyond the fee paid for the checkup, according to the patient’s health insurance — or lack thereof.
Regardless of health insurance coverage, the constant factor is the doctor gets paid a fee to check you out. It’s probably a contributing reason the lifestyles of medical doctors and their families probably exceeds your lifestyle and that of your family.
It also is important to realize that for the doctor to check you out, you must travel to the doctor. As a PHC service contractor, you would be wise to recognize that you are a doctor of buildings who checks out the plumbing, heating and cooling systems of said buildings.
Not only do PHC service contractors incur the costs associated with being in business like doctors, but they also incur the expenses related to traveling to those buildings. After all, the buildings can’t come to the PHC service contractor.
More often than not, the owners of those buildings only call when a problem arises. They often insist their problems require immediate attention, which places additional stress on contractors as well as added expense in some fashion. The extra cost could be caused by having a tech constantly ready to answer the call. Or it could be losing a customer because the tech had to leave one customer to serve the so-called emergency of the other.
Either way, it costs the contractor — maybe not in actual dollars at the time but rather in the loss of future dollars from the opportunity of repeat business from the customer who was left.
Since doctors of people get paid a fee for checking out patients, it only makes logical sense that PHC service contractors (the doctors of buildings) be paid for checking out buildings as it pertains to the owners’ requests.
Traveling to your client is the only way you can get to their location. That travel costs you, the contractor, money. Once you are at the consumer’s location, the time you spend discussing their request costs you more money.
Only two sources are available from which your incurred costs can be paid — you or your client. Who should pay? The answer is simple. The legitimate business costs of successful businesses must always be paid by those who are doing the consuming. Medical doctors require their patients to pay directly or indirectly through insurance for their legitimate business expenses.
Since consumers are to PHC service contractors like patients are to medical doctors, logic dictates, as a PHC service contractor, you should charge your clientele a minimum service call charge. You can then recover those costs incurred to check out consumers’ requests and afford to service their needs.
Keep in mind that additional tests, procedures and medications prescribed by medical doctors cost patients more money than the checkup fee.
The tasks you perform for consumers are similar to the procedures and medications prescribed by doctors — and above and beyond the checkup fee is your minimum service call charge. If you like, your minimum service call charge can be waived if you get the job, as long as you include your travel costs in the price you charge for the job.
If you don’t charge your clientele, you eventually will run out of the resources necessary to deliver excellent service to your clientele. When excellence diminishes, mediocrity rises and the value consumers receive fades.
Then, your reputation as a contractor who delivers prompt excellence disappears. Consumers are left with less value for the dollars they spend on your services until they decide not to avail themselves of your devalued services anymore.
Your vehicular cost
Let’s look at the cost of a service vehicle needed to travel to the consumer. For example’s sake, let’s assume the following vehicular costs.
You paid $30,000 for the truck, inclusive of racks, shelving, tax and financing. It could be more. In which case, the costs of the example will be higher. The example will show you the minimum cost you incur.
The example vehicle lasts five years, which makes your vehicular replacement costs $6,000 per year. Your vehicular insurance expense is $2,000 annually. Registration, vehicular inspection, oil changes, tire replacement and other maintenance/repairs not covered by warranty cost an average of $1,200 yearly.
You put on 15,000 miles a year, get 12 miles to a gallon of gasoline and pay $2.50 a gallon. (Remember, gasoline is an extremely unpredictable expense; remember when gas used to cost more than $4 a gallon?) At $2.50/ gallon, your annual fuel expense is $3,125.
Your annual vehicular expense for one service vehicle, under those circumstances, would be $12,325.
If your costs were more, the number would be greater. Although any of these expense items may vary individually, I don’t believe the minimum costs in totality will be less.
You might keep your truck longer or buy a used truck. But then, repairs and maintenance costs would increase dramatically.
When you consider downtime due to repairs, which will not allow you to bring revenue into your business as long as the vehicle remains disabled, your costs will further escalate since you will have less time to perform tasks.
To determine vehicular costs per hour, you also must realize that each technician has only 1,708 maximum sellable hours in a 40-hour/52-week year. This calculation considers two weeks for vacation/personal time, six holidays and one nonrevenue-producing hour/tech/day.
Then you must ponder the fact that no contractor sells all available tech hours all the time.
So, if your cost is calculated based on your maximum available tech hours (which it should be since it is the only constant you have when determining your operational costs/tech hour), your cost is greater on a per-hour basis, dependent on the number of hours actually sold.
An employee dispatched to a consumer’s home or business to address the request for a repair, replacement, maintenance, service or estimate — which takes one hour, inclusive of travel time — you have minimally incurred a vehicular expense between $7.22 and $14.43 (see Figure 1). That’s just for the vehicle.
The figure does not include your other related expenses for labor and overhead, which must be added to your travel expense to truly determine the amount it costs you to initially address a consumer’s request.
Your labor/overhead expense
In the United States, it minimally costs service contractors between $100 and $250 per tech hour for labor and overhead, inclusive of vehicular costs, to have one qualified tech in a properly equipped service vehicle if 100 percent of available hours are sold.
The average travel time to your client is minimally 15 minutes. It could very well be, and probably is, more. Speaking with your client regarding the service request is minimally 15 minutes. If those times are greater, your cost will be higher.
Figure 2 shows the minimum cost to send yourself or an employee to a customer’s home or business to address their request for a repair, replacement, maintenance, service or estimate when only 30 minutes is expended for labor and overhead, inclusive of vehicular costs.
It costs you $50 to $250 at a minimum to travel to, and speak with, your customer, dependent upon your true cost of labor and overhead for one tech hour.
If you are a contractor who gives free estimates, wake up and smell the coffee. There is no such thing as a free estimate; somebody has to pay!
If you don’t charge the consumer for window-shopping habits, you pay for the habit and your flawed business practice
The money you lose
By not requiring a minimum service call charge, you shortchange your business, yourself, your family and your employees.
The least annual amount of the shortchange — at the aforementioned minimal costs — if you did not charge consumers the cost you incur for one “not-so-free” free estimate per workday, based on 244 tech workdays per year, is shown in Figure 3.
The annual shortchange to you, the contractor, for one not-so-free estimate per tech ranges between $12,200 and $61,000. If you give more than one not-so-free estimate per day, the amount you shortchange your business will be greater than the numbers in Figure 3.
Would you rather spend that amount or bring it into your business?
You must decide whether you or your customer pays for the cost you incur to check out the condition of their building. As a coach who shows contractors how to attain their Contractor Profit Advantage, I know you should charge a minimum service call charge. Not charging one is a disadvantage to your business.
If you don’t charge a properly calculated minimum service call charge, don’t moan and groan about your lack of funds or that you are not maximizing your revenue potential.
Instead, proceed to the nearest mirror and ask the person you see why your business isn’t charging a legitimate fee for the recovery of resources spent on behalf of consumers.
If you have any questions, need my business coaching assistance or want me to show you how to properly calculate your true cost and arrive at properly profitable selling prices that can allow you to get where you want to go, give me a call at 845-639-5050.
If you are afraid to call (I don’t why — I don’t bite), keep reading my articles in this fine publication and listen to my podcasts on iTunes, IHeartRadio or Spotify. I write these articles and spend time on my podcasts to help you in your business.