Unless every job your company does is flawless and you've never gotten a call from a homeowner requesting service on a product you installed, it would probably be a good idea to know what a service call costs your company. Do you?
For many replacement companies that install with subcontracted labor, the cost is easy to compute. And it's often zero. If a service request is made, the home improvement company simply defers to the installing sub, who either fixes it at his own cost or pays the home improvement company's cost to service. One advantage of that arrangement, contractors say, is that subs install with care, since theirs are the profits lost in callbacks. “We probably have far fewer callbacks because we use subs,” says Bob G. Priest, president of Burr Roofing in Darien, Conn. “Subcontractors are the ultimate in worker accountability.”
YOUR OWN EMPLOYEES It's different if your own employees return to the job. “We compute the cost based on the time it takes for somebody to do the service per hour per person plus the cost of materials,” says Steve Rennekamp, owner of Energy Swing Windows in Murrysville, Pa.
But those costs are just the beginning, says Charlie Gindele, owner and president of Dial One Window Replacement Specialists, Santa Ana, Calif. Gindele usually pays a project manager, who earns $20 to $25 per hour, and an installer, who earns $12 to $18 per hour, to make a service call. Add to that, he says, an estimated additional 35% to cover payroll taxes, workers' comp, and employee benefits. Then there's wear and tear on the vehicle used to make the call. “Those are the obvious costs,” Gindele says. “The not-so-obvious costs are how much you're diminished in the customer's eyes. You can lose face and the ability to sell them more work and get referrals.”
LOST OPPORTUNITIES The final cost of a service call, Gindele points out, is the time spent by employees who could be generating revenue. He estimates that, on average, a crew generates $6,000 to $7,000 in revenue per day. “If you have a 50% gross profit,” he says, “that could be significant.”
Rennekamp estimates his lost revenue at four to five times the actual cost of the service call. “When employees are out repairing something, they're not growing the business. You're either repairing or you're growing.”