Skip to main content

Financially balance your service business


For me, a service business is made up of obsequious hoop jumpers on one side (service) and a contract based annuity stream (maintenance) on the other side. While many may agree, the act of building a strong annuity-based business is not a walk in the park. Imagine selling something every day that was completely intangible. Add to that a layer that in many cases your end-user has no idea whether you have performed the service or not. Yet as many studies have shown performing preventative maintenance on equipment is well worth the investment in the long run if your objective is to preserve the value of your assets. Years ago on one of my first trips to the Middle East I clearly remember having this discussion with our local representatives. They looked at me in pure bewilderment as they had no idea what I was even talking about because at that time when a building got 5 to 7 years old they would simply tip it over and build it again with all new equipment. What is the value of maintenance if the asset is not going to survive for multiple years?



You can take that to the bank. Building an annuity-based service business is a direction that can only yield positive benefits. Like many things it is a balancing act. Depending upon your financial situation odds are you will need to maintain a revenue target for the short term and long-term and continuously dedicate yourself to building a strong financial foundation (contract based annuity business). Project work is always good to bring in revenue; however, can be a very slippery slope as when not managed properly can end up being high revenue and single digit margins.  So a healthy service business, from a financial perspective, is really a good mix of all project, service, and contract based maintenance. If you agree than consider these directives and look at your own businesses;

  1. each project sold should have a maintenance contract tied to the project
  2. every service call made should be looking for opportunities to sell and promote maintenance
  3. all maintenance visits should be looking for opportunities to pull through additional service (unless full responsibility contracts) and project work.

A service organization which embraces this "financially balanced" way of thinking and propagates this logic through the ranks, field, office, sales will be successful.  The trick is to take the time to step "out of the business" and assess the level of balance within your operation.



-----

Next post:  how can I differentiate myself?

-----
Labels:

Comments

Post a Comment

Popular posts from this blog

Speaking AI (artifical intelligence)

You're talking but I can't hear you.   Everyone can certainly understand this condition; the "Peanuts" parents who sounded exactly like your own, your significant other while you watch your favorite game on TV, or most importantly a work colleague or partner which you are attempting to communicate a thought or vision.   All of these, and many other examples, have plagued our organizations long past the childhood game of telephone (passing your words to another, and on to another, etc.).   So what?   What has changed?   Besides the velocity of products hitting the market, the requirements that we have for our business now needs to be interpreted by data scientists, yet another abstraction layer from the field conditions.   Think about this example; TODAY :   we often think in binary terms, if "x" happens do "y" …   take a sales person seeking potential leads by searching a system for the last time we made contact TOMMORR
Post a Comment
Read more

Are "mistakes" good or bad?

One of the attributes that make a great technician is the fact that they have made a lot of mistakes. Our biggest challenge is recalling those mistakes ourselves and as importantly sharing them with others on our team. Every single day we go out and fix things, many of them are routine and may not require any form of documentation or sharing; however, there are those instances where we have discovered gold. The trick is to make sure that we can learn from our mistakes in a systematic manner and have the ability to spread the information throughout our organization in a useful and relevant way. Corrective action, an integral part of a quality system, is the absolute best vehicle to put in place for your organization. Some of you may have been turned off by the words "quality system", don't worry you can still deploy a corrective culture without having to understand completely how corrective action and quality management systems work. The process is very straightf
Post a Comment
Read more

months to aquire, moments to lose

It is just hard to imagine that one of the most common reasons maintenance contracts are lost is because people don't show up and don't pay attention to the details.   In many cases maintenance is an investment to keep the life of your asset running for a protracted period of time. However the length on many maintenance contracts is not even close to the life expectancy of that equipment, so if you don't really have any idea what maintenance is being performed then how do you really know if it's being done to your specification? Thus, it really boils down to business elements, assuming that you are actually performing the work, our focus needs to be on how you are differentiated. Let's take a look at a couple of the most common business-related reasons why people lose maintenance contracts. Not showing up ; managing contracts can be complicated between the sites, number of assets, and the frequencies at which items need to be maintained, can a
Post a Comment
Read more