Increasing Profits Through Add-On Sales
Many factors enter into computing actual profit, but to put it simply, profit is the difference between what is charged for a product or service and what it costs to deliver it. The greater the difference, or margin, between those amounts, the more profitable the product or service becomes. There are two general ways to increase profitability: reduce costs or increase income.
Let's look at costs. There are two general types of business costs, fixed expenses and variable expenses. Fixed expenses occur regardless if any revenue-producing sales or services take place. Fixed expenses include, but are not limited to, building expenses, telephone, insurance, yellow pages, equipment payments and salaries of non-production employees. The common term for fixed expenses is overhead.
Variable expenses are those related directly to revenue-producing activities. Variable expenses include truck fuel, cleaning chemistry, production (technician) labor and the like.
Now let's examine income. One of the best ways to significantly increase income in the cleaning business while keeping costs under control is through add-on sales. Add-on sales are products or services added to the original job ticket that can be provided during the same service call. When an additional service or product is sold on-site, the income can be added to the job total. Variable expenses may increase, but the overhead does not; therefore, the margin increases.
Some examples of traditional add-on services include: carpet protectors; deodorization; carpet repairs; color repair; grooming tools; anti-static treatment and specialized spot removal. Another option is to increase the job size by selling more of the same service, e.g. cleaning an extra room or another chair.
The key to using add-ons to increase profit is scheduling; they must be done immediately and not on a subsequent trip. The scheduling department needs to allow a little flexibility in the schedule so that when the opportunity to offer add-on sales arises, the technician has the time to provide them. Experience says that a good working number for carpet cleaning is 400 square feet per hour. In other words, an 800-square-foot job should be scheduled for two hours. This does not mean that the technician will only clean 400 square feet per hour; that would be much too slow. It means that setup, cleaning, breakdown, collections and add-ons will all be completed in two hours. In reality, the carpet is probably getting cleaned at a rate of 600 to 700 square feet per hour, allowing time for selling and implementing the add-on and finishing the paperwork.
The primary sources for add-on sales are the company sales people/estimators and the on-location technicians. However, office telephone staff can also be effective in adding services to the job ticket if they have a good script to follow. All of the people involved in the chain, from answering the initial telephone call to collecting the final payment, should have a written list of all the company's services and how they are priced. Take time to train and educate everyone in the advantages, features and benefits of the company's services and products. Remember, it's hard to sell out of an empty basket.
Make sure your team has the tools they need to sell add-on services. Many businesses provide a small commission or sales incentive to those who sell add-ons, and find it to be a good investment. Sometimes all it takes is a simple offer to the customer, but other times a little extra effort is required. Unless the person doing the selling is motivated, this extra effort may not materialize.
Add-on sales result in increased gross income without increasing overhead. This means higher profit margins and more money that goes straight to the bottom line. Customers are getting everything they want and need, leading to a rise in their satisfaction. Increased customer satisfaction, in turn, can lead to repeat and referral business, helping you to realize the second goal of business…to stay in business.