Increase Your Rates for Profit
Thursday, January 24, 2019
By Tom Grandy
It’s a simple process to increase your profitability immediately! We are going to “assume” you are on a flat rate pricing system. Your internal hourly rate is $140/hour which yields a 15% net profit or a profit of $21.00/hour. Let’s assume you have two service techs that bill out 50% of their time or roughly 1,000 hours per year. By doing some simple math we find out our projected profit per year is $42,000 ($21.00/profit per hour x 1000 billed hours per tech X two service techs = $42,000). This calculation obviously does not consider parts, sales, and the corresponding markup.
Want to make a bit more money? If so, bump your hourly rate by $10.00/hour. If you are on mobile devices like a laptop on smart phone, the formula gets changed at night and the next day the change is in place with no additional investment. The added $10.00/billed hour is all net profit.
What just happened to your projected net profit? Over night the net profit jumped from $42,000/year to $62,000/year. If it’s a one-hour call do you really think the customer in going to complain (or even notice) an additional $10.00. Absolutely not.
If there are no complaints after a week or two jump it again. You can always drop back down but think of what the company could do with an “extra” $20,000 to $40,000 in profit. Pipe dream a bit. What new equipment could be purchased, tech bonuses paid at the end of each month or year, additional benefits, etc.? As they used to say in the old TV commercials “Try it, you’ll like it!”