ACCA 2012

Austin, TXOctober 11-12, 2012

Growing Your Service Business

Blast through the next plateau!

NATFH FMS Profit Enhancement Partnership Austin, Texas October 2012

Bill BernickDaimler Management Services25 years Carrier and Trane8 years as an entrepreneurEuropean Automotive Service Co.Business Consulting CompanyPCA Racer/Travel/Boating

NATFH FMS Profit Enhancement Partnership

Objective today

• A look at how to ‘Bust Through’ some very traditional Service Revenue and PBT Plateaus and improve your overall Service Business!

Profit Enhancement Partnership Austin, Texas October 2012

Agenda• Review Agenda and objective (5 min)

• Review Standard Plateau points (5 min) Why

• Compare and Contrast $2M, $5M and $8M (15 min)

• Discuss differences in a $2-$5M and a $5 -$8M.

Report GraphCatalog InputFields

Office CockpitAs of October 31, 1999

YTD YTD

J an Feb Mar Apr May J un J ul Aug Sep Oct Nov Dec Actuals Budget

Service Revenue 103,415 127,555 182,440 253,234 158,480 229,358 130,930 196,951 181,915 179,293 1,743,570 2,374,574

Cost of Sales 50,794 60,179 93,531 129,718 50,708 115,201 70,426 84,418 92,208 100,115 847,299 1,220,079

Standard Gross Margin 52,621 67,377 88,909 123,516 107,772 114,157 60,504 112,533 89,707 79,178 896,272 1,154,495

Standard Gross Margin % 50.9% 52.8% 48.7% 48.8% 68.0% 49.8% 46.2% 57.1% 49.3% 44.2% 51.4% 48.6%

Overhead Expense 60,582 55,212 51,408 40,010 51,860 56,541 66,945 34,232 45,628 49,498 511,915 605,341

Overhead Expense % of Revenue 58.6% 43.3% 28.2% 15.8% 32.7% 24.7% 51.1% 17.4% 25.1% 27.6% 29.4% 25.5%

Gross Profit (7,961) 12,165 37,501 83,507 55,912 57,615 (6,441) 78,300 44,079 29,679 384,357 549,154

Operating Expense 27,645 26,665 37,492 40,658 23,904 34,751 30,116 38,718 38,509 28,757 327,215 336,204

Operating Expense % of Revenue 26.7% 20.9% 20.6% 16.1% 15.1% 15.2% 23.0% 19.7% 21.2% 16.0% 18.8% 14.2%

Operating Profit (35,607) (14,500) 9 42,848 32,008 22,865 (36,557) 39,583 5,570 922 57,142 212,950

Revenue per Technician 9,401 11,596 16,585 23,021 14,407 20,851 11,903 17,905 18,191 17,929 161,442 202,955

Optng Prft per Total Service Prsnl (2,374) (967) 1 3,061 2,286 1,524 (2,437) 2,474 371 61 3,835 13,564

Prior Year ActualsMonthly BudgetMonthly Actuals

Contracts Gross Margin and Man Hours

0

0.2

0.4

0.6

0.8

1

1.2

0

5, 000

1 0, 000

1 5, 000

20, 000

25, 000

30, 000

35, 000

40, 000

45, 000

50, 000

Total Contract Technician Hours

Contracts Average Gross Margin YTD

Man Hour Analysis

0

0.2

0.4

0.6

0.8

1

1.2

Unapplied Technician HoursWarranty Technician HoursTotal Technician Overtime Hours

Overhead and Operating Expense % of Revenue

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

OverheadOperating

Backlog Analysis

0

0.2

0.4

0.6

0.8

1

1.2

0

0.2

0.4

0.6

0.8

1

1.2

Technician Backlog HoursOther Revenue Backlog DollarsPrior Year Backlog Dollars

Service Revenue

0

250,000

500,000

1999 Actuals

1999 Budget

1998 Actuals

Operating Profit

(250,000)

0

250,000

1999 Actuals

1999 Budget

1998 Actuals

Revenue by Service SalesPerson

-20,000

0

20,000

40,000

60,000

80,000

100,000

1999 Actuals

1999 Budget

1998 Actuals

Revenue by Technician

5,00010,00015,00020,00025,00030,00035,000

1999 Actuals

1999 Budget

1998 Actuals

Goal

Standard Gross Margin % of Revenue

30.0%

50.0%

1999 Actuals

1999 Budget

1998 Actuals

Revenue Streams

NATFH FMS Profit Enhancement Partnership Agenda

Agenda continued

• Plateau Buster Actions (30 min)– $2-$5Maus and grow profitably. (stress Personnel, management,

span of control, process, etc.)

• Question and Answer (20 min)

booked volume as of 12/31/99

# of New Agreements

New Service

Agreement RenewalIncrease

IncreaseCoverage

Decrease Coverage

Agreement Total

January -$ -$ -$ -$ -$

February -$ -$ -$ -$ -$ -$ March -$ -$ -$ -$ -$

April -$ -$ -$ -$ -$

May -$ -$ -$ -$ -$ -$ June -$ -$ -$ -$ -$ -$ July -$ -$ -$ -$ -$

August -$ -$ -$ -$ -$

September -$ -$ -$ -$ -$ -$ October -$ -$ -$ -$ -$ -$

November -$ -$ -$ -$ -$

December -$ -$ -$ -$ -$

Total 0 -$ -$ -$ -$ -$

Lost Agreements by Category

# of Lost Agreements

Change Owner

CompetitiveService

New Trane Jobs

Owner Service

Time &Material

Lost Agreement

Total Net

Change January -$ -$ -$ -$ -$ -$ -$ -$

February -$ -$ -$ -$ -$ -$ -$

March -$ -$ -$ -$ -$ -$ -$ -$0April -$ -$ -$ -$ -$ -$ -$

May -$ -$ -$ -$ -$ -$ -$

June -$ -$ -$ -$ -$ -$ -$

July -$ -$ -$ -$ -$ -$ -$

August -$ -$ -$ -$ -$ -$ -$ -$0 -$ September -$ -$ -$ -$ -$ -$ -$

October -$ -$ -$ -$ -$ -$ -$

November -$ -$ -$ -$ -$ -$ -$ -$0 -$ December -$ -$ -$ -$ -$ -$ -$

Total -0 -$ -$ -$ -$ -$ -$ -$

# of contracts as of 12/31/99

Service Agreement Tracking ToolInput Worksheet

NATFH FMS Profit Enhancement Partnership Austin, Texas October 2012

• What does a Plateau look and sound like?

“We just can’t handle any more work” - Service Manager

“Sales are growing but profit is stagnant”! - Controller

“Sales are not growing because the darn ops group can’t do any more” - Sales manager or Sales people.

“You sure are losing a lot of people” - HR Manager

“You used to do a lot better job taking care of me” -Customer

“I could sell more but I don’t have any faith that Ops could deliver more” - Salesman

“It’s not as much fun as it used to be…..we were like family!” - Administrator

“We sure are working hard but I don’t see any additional profit!” - District Manager

“You used to give me enough time with my customers but now it is chaos” - Technician

NATFH FMS Profit Enhancement Partnership

Exceptions to the Thresholds

• Strong leadership can delay the effect….for a while

• Skimming (a potential $10m business only doing $4m)

Let’s Look at Trend for the representative business for a $2 Million Plateau

0

500

1000

1500

2000

2500

$2 Million Plateau

Revenue

PBT

ACCA Service Managers Conference Oct 2012

Profit Enhancement Partnership Austin, Texas October 2012

• Let’s Look at Trend for the representative business for a $2M Plateau Breaker

0

500

1000

1500

2000

2500

3000

3500

4000

$2 Million Plateau Breaker

Revenue

PBT

Profit Enhancement Partnership Austin, Texas October 2012

Let’s Look at Trend for the representative business for $5M Plateau

0

1000

2000

3000

4000

5000

6000

$5 Million Plateau

Revenue

PBT

Profit Enhancement Partnership Austin, Texas October 2012

• Let’s Look at Trend for the representative business for $5 M Plateau Breaker

0

1000

2000

3000

4000

5000

6000

7000

$5 Million Plateau Breaker

Revenue

PBT

Profit Enhancement Partnership Austin, Texas October 2012

• Let’s Look at Trend for the representative business for $8 M Plateau

0

2000

4000

6000

8000

10000

12000

$8 Million Plateau

Revenue

PBT

Profit Enhancement Partnership Austin, Texas October 2012

• Let’s Look at Trend for the representative business for $8 M Plateau Breaker

0

2000

4000

6000

8000

10000

12000

$8 Million Plateau Breaker

Revenue

PBT

NATFH FMS Profit Enhancement Partnership Austin, Texas October 2012

Like a FamilyOne Man Show

Strong Technical Leader10 Technicians1 Admin / Dispatcher1 Service Sales

Family RunMany Manual SystemsSome SpreadsheetsCompensation Driving Ind.

PerformanceGood Cust. Relations (All “A”

Accounts)

NATFH FMS Profit Enhancement Partnership Austin, Texas October 2012

Like a FamilyOne Man Show

Strong Technical Leader10 Technicians1 Admin / Dispatcher1 Service Sales

Family RunMany Manual SystemsSome SpreadsheetsCompensation Driving Ind.

PerformanceGood Cust. Relations (All “A”

Accounts)

Business is in Transition from “Family” to a Professional Business

Manager Tech & Business

2 Team Leaders

25 Technicians

2 Administrative

1 Dispatcher

3 Salesmen / 1 Sales Leader

Automated Service Accounting

Dispatch Board and/or Computer

May have Teams

Comp. May Drive Teamwork

Has “A/B/C” Customers

Not w/ Customers as much

Family Transitioning to Business

NATFH FMS Profit Enhancement Partnership

Like a FamilyOne Man Show

Strong Technical Leader10 Technicians1 Admin / Dispatcher1 Service Sales

Family RunMany Manual SystemsSome SpreadsheetsCompensation Driving Ind.

PerformanceGood Cust. Relations (All

“A” Accounts)

Business is in Transition from “Family” to a Professional Business

Manager Tech & Business

2 Team Leaders

25 Technicians

2 Administrative

1 Dispatcher

3 Salesmen / 1 Sales Leader

Automated Service Accounting

Dispatch Board and/or Computer

May have Teams

Comp. May Drive Teamwork

Has “A/B/C” Customers

Not w/ Customers as much

Family Transitioning to Business

Truly a Professional Business

GM of Service Operations4 Team Leaders40 Technicians2 Resource Coordinators2 AdministrativeSales Manager5 SalesmenPossible Project Manager

Many SpreadsheetsManagement by ExceptionCommunication Challenges“A/B/C” Customers layeredProjectsComp. Drives Teamwork

NATFH FMS PDrofhancement

DifferencesWe are a Business now. More

PoliciesNeed to think about changing

Is Service Manager the “Right Guy”?

Do we need Team Leaders?Enhanced Communications

Compensation must drive working together

Some sophistication needed

NATFH FMS Profit Enhancement Partnership

DifferencesWe are a Business now.

MOPP’s PrevailNeed to think about changing

Is Service Manager the “Right Guy”?

Do we need Team Leaders?Enhanced Communications

Compensation must drive working together

Some sophistication needed

DifferencesTask / People Management are equal

Meetings need to be more effective

Service Leader has P&L strengths over Technical

Communications extreme importance

Promote from within? Team Leader Service Manager, Admin?

Sales Management is a Force

Modular Teams are in place

Comp Plan fosters Teaming

PCT Dollars PCT Dollars100% $5M

(30%) 1.5M

(20%) 1M

(42.2%) 2.11M

7.8% 390K

PCT Dollars PCT Dollars100% $5M 100% $6.5M

(30%) 1.5M (30%) 1.95M

(20%) 1M (20%) 1.3M

(42.2%) 2.11M (34%) 2.21M

7.8% 390K 15% 1.04M

5 Key Service Measurements

• Non Revenue producing time

• S/A compliance• S/A renewal rate• GM deviation vs. est. for

S/A• GM Deviation vs. est. for

Quoted

What role does sales have?

• Productivity Bench Marks Total Sales Volume Per Service Sales person• 1-2 year 200-400K• 2-3 year 400-600K• 3 plus 750K and up

Productivity Measurements• Closure Rate/Calls per week-New /Existing • Quotes per week Do You know your number!

• Backlog Hours: 3 month minimum desired• New S/A’s Sold $125k-$175K per year!

Summary of findings

• Processes• Systems• People

All these must grow and develop for you to bust through the plateau

NATFH FMS Profit Enhancement Partnership Dallas, Texas September 2000

DifferencesWe are a Business now.

MOPP’s PrevailNeed to think about changing

Is Service Manager the “Right Guy”?

Do we need Team Leaders?Enhanced Communications

Compensation must drive working together

Some sophistication needed

DifferencesTask / People Management are equal

Meetings need to be more effective

Service Leader has P&L strengths over Technical

Communications extreme importance

Promote from within? Team Leader Service Manager, Admin?

Sales Management is a Force

Modular Teams are in place

Comp Plan fosters Teaming

Summary of findingsBy looking ahead, you can avoid the next plateau……

It is all about the people, processes and your organization…..

..and taking the time to work ON your business rather than in your business

What can you do?What can help you

manage through these Plateaus?

• Profit Enhancement Partnership

• Organizational Design• Make the changes that will

allow you to go to through these plateau.

• Be ahead of the game for the next plateau!–

Report GraphCatalog InputFields

Office CockpitAs of October 31, 1999

YTD YTD

J an Feb Mar Apr May J un J ul Aug Sep Oct Nov Dec Actuals Budget

Service Revenue 103,415 127,555 182,440 253,234 158,480 229,358 130,930 196,951 181,915 179,293 1,743,570 2,374,574

Cost of Sales 50,794 60,179 93,531 129,718 50,708 115,201 70,426 84,418 92,208 100,115 847,299 1,220,079

Standard Gross Margin 52,621 67,377 88,909 123,516 107,772 114,157 60,504 112,533 89,707 79,178 896,272 1,154,495

Standard Gross Margin % 50.9% 52.8% 48.7% 48.8% 68.0% 49.8% 46.2% 57.1% 49.3% 44.2% 51.4% 48.6%

Overhead Expense 60,582 55,212 51,408 40,010 51,860 56,541 66,945 34,232 45,628 49,498 511,915 605,341

Overhead Expense % of Revenue 58.6% 43.3% 28.2% 15.8% 32.7% 24.7% 51.1% 17.4% 25.1% 27.6% 29.4% 25.5%

Gross Profit (7,961) 12,165 37,501 83,507 55,912 57,615 (6,441) 78,300 44,079 29,679 384,357 549,154

Operating Expense 27,645 26,665 37,492 40,658 23,904 34,751 30,116 38,718 38,509 28,757 327,215 336,204

Operating Expense % of Revenue 26.7% 20.9% 20.6% 16.1% 15.1% 15.2% 23.0% 19.7% 21.2% 16.0% 18.8% 14.2%

Operating Profit (35,607) (14,500) 9 42,848 32,008 22,865 (36,557) 39,583 5,570 922 57,142 212,950

Revenue per Technician 9,401 11,596 16,585 23,021 14,407 20,851 11,903 17,905 18,191 17,929 161,442 202,955Optng Prft per Total Service Prsnl (2,374) (967) 1 3,061 2,286 1,524 (2,437) 2,474 371 61 3,835 13,564

Prior Year ActualsMonthly BudgetMonthly Actuals

Contracts Gross Margin and Man Hours

0

0.2

0.4

0.6

0.8

1

1.2

0

5, 000

1 0, 000

1 5, 000

20, 000

25, 000

30, 000

35, 000

40, 000

45, 000

50, 000

Total Contract Technician Hours

Contracts Average Gross Margin YTD

Man Hour Analysis

0

0.2

0.4

0.6

0.8

1

1.2

Unapplied Technician HoursWarranty Technician HoursTotal Technician Overtime Hours

Overhead and Operating Expense % of Revenue

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

OverheadOperating

Backlog Analysis

0

0.2

0.4

0.6

0.8

1

1.2

0

0.2

0.4

0.6

0.8

1

1.2

Technician Backlog HoursOther Revenue Backlog DollarsPrior Year Backlog Dollars

Service Revenue

0

250,000

500,000

1999 Actuals

1999 Budget

1998 Actuals

Operating Profit

(250,000)

0

250,000

1999 Actuals

1999 Budget

1998 Actuals

Revenue by Service SalesPerson

-20,000

0

20,000

40,000

60,000

80,000

100,000

1999 Actuals

1999 Budget

1998 Actuals

Revenue by Technician

5,00010,00015,00020,00025,00030,00035,000

1999 Actuals

1999 Budget

1998 Actuals

Goal

Standard Gross Margin % of Revenue

30.0%

50.0%

1999 Actuals

1999 Budget

1998 Actuals

Revenue Streams

booked volume as of 12/31/99

# of New Agreements

New Service

Agreement RenewalIncrease

IncreaseCoverage

Decrease Coverage

Agreement Total

January -$ -$ -$ -$ -$

February -$ -$ -$ -$ -$ -$ March -$ -$ -$ -$ -$

April -$ -$ -$ -$ -$

May -$ -$ -$ -$ -$ -$ June -$ -$ -$ -$ -$ -$ July -$ -$ -$ -$ -$

August -$ -$ -$ -$ -$

September -$ -$ -$ -$ -$ -$ October -$ -$ -$ -$ -$ -$

November -$ -$ -$ -$ -$

December -$ -$ -$ -$ -$

Total 0 -$ -$ -$ -$ -$

Lost Agreements by Category

# of Lost Agreements

Change Owner

CompetitiveService

New Trane Jobs

Owner Service

Time &Material

Lost Agreement

Total Net

Change January -$ -$ -$ -$ -$ -$ -$ -$

February -$ -$ -$ -$ -$ -$ -$

March -$ -$ -$ -$ -$ -$ -$ -$0April -$ -$ -$ -$ -$ -$ -$

May -$ -$ -$ -$ -$ -$ -$

June -$ -$ -$ -$ -$ -$ -$

July -$ -$ -$ -$ -$ -$ -$

August -$ -$ -$ -$ -$ -$ -$ -$0 -$ September -$ -$ -$ -$ -$ -$ -$

October -$ -$ -$ -$ -$ -$ -$

November -$ -$ -$ -$ -$ -$ -$ -$0 -$ December -$ -$ -$ -$ -$ -$ -$

Total -0 -$ -$ -$ -$ -$ -$ -$

# of contracts as of 12/31/99

Service Agreement Tracking ToolInput Worksheet

NATFH FMS Profit Enhancement Partnership Austin October 2012

Questions and/or

Answers