After interviewing over 20 experts in the Home Services Industry I learned alot about other areas to prevent losing profits. I asked these industry leaders what they considered the biggest profit leak from what they see out in the field. And wow – so many different answers.
The great news – you can use this as a checklist to plug those profit leaks in YOUR home service business. I also give the links to the episodes to listen to the whole conversation to glean even more insights.
Randy Sadler – Risk Management & Saying Yes To Additional Revenue Streams
Missing out on creating extra revenue streams (like Captive Insurance)
Missing out on creating extra revenue streams. Randy’s clients have used their captive insurance companies to cover the business interruption claims, such as COVID-19 and how you, as a service business owner, can profit from having your own. Having your own insurance company as a revenue stream is a powerful risk management tool and profit building tool.
Randy Sadler; Captive Insurance – Listen to this episode
Mike Michalowicz – Increasing Salaries Because of Time, Not Contribution
I think a common profit leak is I’m going to go with the increasing salaries because that’s just the protocol. A lot of companies haven’t grown in revenue, haven’t grown in a number of employees, but their expenses keep going up and the profit is flat. A common reason is that they’re increasing salaries and compensation representative of time, but not contribution. They say, well, you’ve been here for three years, so you’re going to get your 10% raise. But the reality is we need to start measuring contribution. Instead link people’s performance to a specific outcome that will correlate to your profit and revenue in the organization. You know, a salesperson, maybe it’s the conversion of prospects into clients or maybe it’s the number of cold calls. For an administrative person, like an assistant who schedules your travel, maybe it’s how many discounts they are getting off the standard travel costs that you incur. Are they negotiating better terms or are they finding a cheaper hotel to stay at? But link those metrics, that performance to their compensation.
Mike Michalowicz; author of Profit First & All In – Listen to the episode
Dave Sanderson –The Business Owner Trying to Do It All
Since this podcast is all about profit leaks and being profitable, I see business owners try and do everything. They’re trying to do the janitorial duties and they’re trying to do their own invoicing. They’ve got their hands in their QuickBooks file, they’re trying to do sales, they’re trying to be a checkout clerk, and even operate a truck. They’re just trying to do it all. Meanwhile, the world is crashing in around them. Unfortunately, they don’t realize the importance of identifying their area of genius and then learning how to stay there. This can be a huge profit leak!
Dave Sanderson; Leadership Speaker – Listen to the episode
Bill Black – Having The Wrong Retirement Plan
Many retirement plans, especially those offered by payroll companies or state-mandated plans, are not set up in a way to benefit the owner(s) of the company. Profits are leaking out because the plan may require additional employer funding that may not be needed. When a plan is set up correctly, it primarily benefits the owner(s), while still providing incentives for employees. A plan review is one way to determine if your plan is leaking profits.
Bill Black; Pension Specialist – Listen to the episode
Stephen Christopher – Ineffective CSR Team
How your CSR’s answer the phone and track data.
One of the biggest things that we see in home service companies is the CSR team and how they answer the phone. Because we go back in and we listen to thousands of our clients’ phone calls, mainly so that we can understand the quality of the lead and make sure that the leads we’re driving for them are really good. But as a byproduct, when we started doing that, we also started learning how many CSR teams are not very good, and unfortunately, many of them are not necessarily tracking the data accurately.
Stephen Christopher; Wit Delivers – Listen to the episode
Justin Wise – Thinking Content Creation Is A ‘Nice to Have’
Content creation is no longer an optional task for businesses; it’s as essential as paying taxes and maintaining clean records. It’s the ultimate tool that allows your business to narrate its story and draw attention from customers and prospects. Without investing time and effort into this necessary activity, businesses risk losing competitiveness and market share.
Justin wise; justinwise.net – Listen to the episode
Daniel Dixon – Not Marketing to Existing Customers
For service business owners, the most critical advice to prevent profit leaks lies in effectively marketing to existing customers. A customer list is a primary asset in a business. Neglecting to capitalize on this asset is akin to wasting resources, like buying a soda and only consuming a fraction before discarding it. By implementing strategies to engage and retain current clients, such as personalized marketing initiatives or loyalty programs, businesses can unlock untapped profit potential and safeguard against unnecessary losses. This proactive approach not only fosters customer loyalty but also maximizes the long-term profitability and sustainability of the business.
Daniel Dixon; Send Jim – Listen to the episode
Mike Disney – Lack of Financial Responsibility & Job Costing
Usually what we uncover is that they don’t have a financial responsibility to their business or they haven’t built one. And so that’s really important. Working with professionals on how to set up their accounts, how to do some routine accounting, how to do tax purpose accounting, how to do some things, that’s really, really important.
I think the biggest problem with most business owners is they don’t look at their numbers on a day to day basis. They’re not job costing. They’re not focused on the little things that really move the big levers. And so I think really defining who you are to your business and the highest, best use of your time is singularly the most profitable thing you can do for your business.
Mike Disney; Winding River Recruiting – Listen to the episode
Brigham Dickinson – Lack Of CSR Training
Neglecting to train your Customer Service Representatives to WOW customers
The reason why Power Selling Pros is so successful at training CSRs to book calls and to wow customers over the phone is because that department is the most neglected. It’s the one department contractors spend the least amount of time on. And as a result, it’s a very transient department. People stay there for an average of two years, tops, and they’re constantly rehiring into that department. And it’s because they don’t give it the attention that it deserves. It’s the department that never gets fixed. We just spend more money on advertising, get more phone calls and ignore it for as long as we can through efficiency as opposed to effectiveness.
Brigham Dickinson; Power Selling Pros – Listen to the episode
Ed Lyon – Tax Planning
Not using opportunities to minimize tax liabilities (legal ways to pay less tax!)
I’ve seen many home service business owners make common mistakes that lead to cash flow leaks, especially to income tax. Tax planning enables taxpayers to maximize their tax efficiency by legally minimizing tax liabilities through strategic decisions and actions. By taking advantage of available deductions, credits, and exemptions, taxpayers can reduce their overall tax burden, thereby preserving more of their income or profits. Additionally, tax planning facilitates better financial management and budgeting by providing a clearer understanding of future tax obligations and potential savings opportunities. Moreover, effective tax planning can help individuals and businesses achieve their financial goals faster by optimizing investment strategies and capitalizing on tax-advantaged opportunities such as retirement accounts or educational savings plans.
Ed Lyon; Tax Master Network – Listen to the episode
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