Retail Observer

RETAILOBSERVER.COM AUGUST 2022 64 S etting the retail price of products and services should be a straightforward calculation: Acquisition cost multiplied by either a markup or margin equals your retail selling price. Retail appliance dealers work on margin rather than markup, whereas appliance service companies work with a markup on parts sold during a repair transaction. In either case, without knowing the cost, it's impossible to determine the selling price. Determining the actual cost of a service call, however, is not that simple. When we look at the origins of many successful retail dealers, there was typically a service foundation that is often still part of the dealership. Many successful repair shops began selling appliances and soon discovered the significant profits that were to be enjoyed. Over time, appliance sales quickly overtook service and became the dealer's core business. The service component for many dealers became secondary but remained to satisfy customers who were unhappy with their new appliances. Service was considered by many dealers a necessary cost of doing business. Over time, lead service technicians turned into store and sales managers, and the service departments got lost in the shuffle. The cost accounting for service wasn't nearly as important as the budding core business of selling appliances. The result is that many prominent dealers today don't know or track the cost of a truck roll and consequently must set service rates based on their gut or what their competition is charging. Lack of cost understanding is a recipe for losses in service. To set profitable service repair rates, we must know our cost to run a call. In any service transaction, there are many costs to consider. We must calculate the technician and support staff's hourly wage, the rent and utilities, the technology to receive and record the customer's information, the vehicle, gasoline (!) and insurance to get the technician to the home. Don't forget the hours spent training the technician and the special tools and manuals to diagnose the customer's problem. Don't kid yourself; the microprocessors found in today's appliances require equally sophisticated technician tools and knowledge. Also, don't forget the waste removal and recycling costs, or the worker's compensation and healthcare costs. The list of the expenses behind every knock on a customer's door is long and must be factored into every service call. The manager or owner's salary is often left out of the calculation, but this cost is crucial, and a percentage of management salaries must be included. So too are the organization's shared expenses, such as the internet provider and HR and IT department costs. For many, the cost of a truck roll will be shocking when all these elements are factored in. But knowing the truck roll cost will allow you to make decisions based on numbers rather than the less reliable gut method. If your price after adding a profit margin is too high for your marketplace, you'll need to make some changes. Lowering expenses and wages will reduce your truck roll costs, but the most significant long-term gain will be improving your service department's efficiency. Completing more billed calls per day is not that difficult when you create a culture focused on first- call completion. Paul Mac.Donald Service Trends A TRUCK ROLL COSTS MORE THAN YOU THINK Take everything into account when calculating expense BrandSource service consultant Paul MacDonald ran his own 38-tech service business and is a past president of the UASA. He currently operates the Expert Service Program, which helps servicers run their operations more efficiently and profitably. For more information, contact Paul directly at (647) 500-7785 or paul.m.macdonald@pmdgroup.ca or visit www.pmdgroup.ca. RO

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