CLIP's Tips

One of the most effective ways for you to improve your company in 2010 is to get direct feedback from your customers so that you can change the things that matter most to them.

Consider the following three ways that you could use a survey to get this feedback:

1.  Written survey mailed to customer – You could mail this separately, with the new contract, or with a greeting card.  To maximize response, include a pre-stamped, self-addressed envelope.

Click here for a sample survey in Microsoft Word format.

2.  Phone survey – Create a call list using CLIP and keep a log of survey answers to analyze later.  There are also services that will do this for you.  I was unable to find one that I liked (most were not very user friendly).  If there is a company that you use, let me know!

3.  Internet survey – If you are a DIYer (Do-It-Yourselfer) check out www.wufoo.com.  At Wufoo, you can very easily create customized forms for surveys or any other purpose.  You can then send the link to your customers or even add the survey to your website.  I just created this form within 15 minutes on wufoo.com:

- Example of what it looks like on wufoo.com:  Click here.

- Example of what it looks like embedded on our website:  Click here.

Very easy! You can create 3 forms for free and keep track of the results.  Additional forms can be created for a minimal charge.

If you are not comfortable creating it yourself, contact your IT support to develop a simple web survey to put on your website.

To notify your customers of the online survey you could include a note with a piece of mail you send to them, use a service such as Dial My Calls, or simply email them.

Application Action: If you haven’t surveyed your customers this year, choose one of the options above and get started!

How do you get feedback from your customers?  Let me know in the comments!

After you determine your dollar per hour goal for 2010, create a job costing report, and adjust prices as necessary; it is time to create and send out renewal contracts.

There are various ways to create renewal contracts.  Some people do it manually, typing up each contract.  Another option is to create a mail-merge in Microsoft Word using data from a CLIP report.

The easiest way is to create the contracts directly from CLIP using “Estimates in Jobs”.  This feature will enable you to create customized proposals and automatically add pricing and contract information from CLIP.

The following will serve as an introduction to the steps involved in creating a proposal using Estimates in Jobs.  At the bottom of the post, I will provide some other resources for further instruction.

Application Action: To best learn this process, I suggest that you create a test copy of CLIP and follow these directions step by step in your test copy of CLIP.

1.  In File Maintenance, choose a customer and a job.  From the Job Detail Screen, click on the small button next to the Estimate Code.

2.  Click Add/Edit Templates.

3.  Click Add.

4.  Type in a contract code, description, and file name.  If you want to use an existing file, click the small button next to the description field to choose the file.  Click Save.

Note:  If the file name does not exist, CLIP will ask you if you want to create it.  Go ahead and do so.

5.  Wait while CLIP creates the database necessary for the proposal.  Click OK to close any dialog boxes that open up.

6.  With the blank Microsoft Word document open, type or paste in your contract details.

7.  Next you will need to add the “Merge” fields.  This is the data that is transferred automatically from CLIP (i.e. price or number of visits).  To add a merge field, click on the place in the document where you want to add the field.  Next, click, insert merge field and select the data that you want to insert.  Repeat for each field you want to add.

8.  Preview the contract to make sure everything is correct by clicking the “Preview Results” button.

9.  Save and Close the document.

10.  In CLIP, click return twice to get you back to the Job Detail screen.  Click Create Estimate.

11.  Choose the proposal you just created from the list, then type in a description and click the button to the right of the description.

12.  On the next screen, select the job(s) you want to include in the contract by checking off the “Include?” and/or “Part of Contract” buttons.  Add any notes you want.  Add contract information such as number of months, discounts, etc.

13.  After you have ensured that all of the information is correct, click Continue.

14.  CLIP will ask you if you want to see the spreadsheet created.  Click NO.

15.  You will now have the contract created and saved in CLIP for printing or later viewing.

This contract can now be used for other customers as well.

While the process outlined above only creates a proposal for one customer, you can use Estimates in Jobs to mass produce proposals as well. See the webinar below for details on mass producing proposals with this feature.

Additional features of Estimates in Jobs include:

• Create Estimates for New Customers
• Mass Produce Estimates (File Maintenance > Estimates/Proposals > Estimates in Jobs > Create Mass Estimates/Proposals)
• Create estimates including multiple jobs.
• Include some jobs in contract and leave some as pay per visit.
• Track the status of estimates.

For more information, check out these references:

Manuals:

Estimates in Jobs
Mail Merge Guide for CLIP

Webinars:

Step 1 – Prepare Data
Step 2 – Create a Simple Proposal for 1 Job
Step 3 – Create a Proposal for Multiple Jobs
Step 4 – Mass Mailing Estimates

More questions?  Email me or post a comment.

Stay tuned for parts 5 and 6.

End of Year Projects Overview:

1.  Revise our dollar-per-hour goal to account for any changes in the upcoming year.

Part 1 & Part 2

2.  Use CLIP to create a job costing report for this year.

3.  Analyze profitability of customers.  Adjust prices as necessary.

4.  Create and send renewal contracts.

5.  Survey customers for feedback from this year.

6.  Follow up in order to maximize contract renewals.

In addition to the End of Year projects we are working on, there are a few settings in CLIP which should be reset at the start of a new year.

Built into CLIP is the ability to reset these automatically.  To learn more about these features, please check out our newly updated manual for End of Year Functions.

Manual – End of Year Functions – Revised 12/21/2009

There is also a video tutorial available here.

Application Action: Check out the manual and/or the tutorial to make sure you are setting up CLIP optimally for 2010.

Stay tuned for the rest of the End of Year Projects.

If you followed the steps in year end project #2, you have a spreadsheet containing all of the job costing data from 2009.  We are now going to analyze that data and adjust prices as necessary.

First, a couple of words about adjusting prices.  Raising prices is certainly an art and a science to.  Raise prices too quickly or too often, and you will end up losing too many customers—Don’t raise prices enough, and you will end up forfeiting profits.  When you raise prices, it should be carefully done—like surgery with a scalpel rather than hacking with an axe.  Consider these ways you can be a surgeon rather than a lumberjack when raising prices:

A.  Only raise the prices of customers who are under your target $ per hour rate (we now have this information by using our spreadsheet and our job costing report).  If you only raise prices for those who are unprofitable, you minimize your risk.  If the customer decides to go elsewhere for a lower price, the only thing you have lost is an unprofitable customer.  By not raising the prices of those who are profitable, you won’t rock the boat or risk them going somewhere else for service.

B.  Consider special cases.  For example, at CLIP Lawn Care, we have one customer whose lawn we mow for much lower than our hourly rate.  Why?  He has enabled us to gain the profitable HOA contract for his community.  Another example would be a long time customer whose property was recently damaged by accident.  In this case, he is already perturbed, and if I think he has a chance of sticking with us long-term, raising his price would not be a wise decision.

Steps for Adjusting Prices

1. Open the job costing spreadsheet we created.

2. If it has not already been done, sort the spreadsheet by $ per hour including travel time.  Do this by clicking at the top of column H to select the entire column.  Then choose “Sort & Filter” > Sort Smallest to Largest.  If Excel asks you to “expand the selection”, go ahead and do it.

3.  Scroll down the list to find the point at which the customers are meeting your $ per hour goal.  For the customers below this point, we do not want to raise their prices, so we will leave them alone.

4.  Next, we will create a formula to determine what percentage we need to raise the prices for these customers.  We need to incorporate the following factors into the formula:

• • The maximum percentage that we will raise prices.  In our example, we are not going to raise anyone’s prices more than 20%.  You pick your number.
  • The $ per hour goal we have set.  In our example, $45.

Enter the following formula into cell K1, replacing the red numbers with your $ per hour goal and the green with the max percentage you will raise a price (in decimal format i.e. .2 =20%):

=IF(45/H2>(1+.2), (1+.2), 45/H2)

The result will be the percentage that you should raise this customer’s price.

Now, copy the formula to the cells below, stopping where the $ per hour goal is being met.  Check out the following short video on how to do that.

Finally, change the whole column to display in percentage format by clicking the % button on the top of the screen.

5.  Now, have those who are most familiar with these clients go through the list to look for any special exceptions as in point B above.  Make any changes necessary.

6.  Open CLIP and change prices as necessary.  In order to calculate the new price, simply take their current prices and multiply by the percentage.  i.e.  $30 x 1.2 = $36 as the new price.

If you got lost along the way, feel free to ask a question in the comments so that I can clarify.

We are now halfway done with our end of year projects.  See below for the next steps.

Application Action: Post a comment or send me an email describing the way you go about raising prices.

End of Year Projects Overview:

1.  Revise our dollar-per-hour goal to account for any changes in the upcoming year.

Part 1 & Part 2

2.  Use CLIP to create a job costing report for this year.

3.  Analyze profitability of customers.  Adjust prices as necessary.

4.  Create and send renewal contracts.

5.  Survey customers for feedback from this year.

6.  Follow up in order to maximize contract renewals.

Whether you were connecting with relatives or just enjoying some downtime, I hope everyone had a great Thanksgiving holiday.

Now that you have had time to digest that Thanksgiving meal, we are on to Project #2 in my recommended End or Year Projects.  This project will give you a customer by customer, job by job analysis of your revenues per hour—one of you most important metrics for profitability.

This project will set the stage for knowing how to price our contracts for next year.  This can be used for any type of job for any period of time.  The example below, however, will be for our mowing contracts in 2009.

Here’s the step by step:

1.  On the top menu in the main screen of CLIP go to Reports > Job Reports > Job Costing

2.  Select which crews you want to run the report for (in our case, we want to see all of the crews so we select 0-999).

3.  Select customer range (we want to see everyone so we select 0-9999).

4.  Choose the job numbers that you want to analyze.  Keep in mind here that you may want to analyze the profitability of one type of job or multiple jobs grouped together.

For example, you may have a maintenance contract where you do not profit much from the mowing, but you make up for it in mulching and leaf removal.  In this example you would want to include all three jobs in the report and the report would show you an average $ per man hour for all of the jobs combined.  (In our example, we will use only job 1 – Mowing).  To type a combination of jobs, separate the numbers with commas.

5.  Choose the dates you want to report.  (I want all of 2009 year to date so I choose 01/01/09 – 11/30/09.)

6.  Choose which options you want on the right hand side of the screen (Show History, Contract Jobs Only, Only jobs under or over projected time, Include Jobs on Hold, Active Customers Only).  The only boxes I want checked off are Show History and Include Jobs on Hold.

7.  Click Prepare Files.  Wait for CLIP to prepare the files.

8.  Choose Sort Options.  I recommend sorting by Dollars/Hr Including Travel Time because this is the most important piece of information about these customers.

9.  Choose Detail as your print option.

10.  Print the report or preview it on your screen.

11.  Unless you are certain that your time entries in CLIP are 100% accurate, you should go through this report customer by customer to look for any data entry errors.   Two areas that I recommend you double check are “Actual Time” and “Travel Time.”  This is where most data entry errors will be seen.  Look for anything out of the ordinary.

In the example below, most of the travel times are under 1/2 hour.  In the circled time, it is over two hours.  I need to check to see if this was a mistake or not and then correct it if necessary.  (To correct the mistake, go into customer history, click the line item, then click edit.)

12.  After you have corrected any mistakes, repeat steps 1-8.

13.  This time choose “Summary” instead of “Detail” as your print option.

14.  Instead of choosing to print the report, click “To Excel” to export as a spreadsheet.  Save the file as “2009 Job Costing Report.”

You will now have an excel spreadsheet containing all of the job costing data, sorted by Dollars/Hr. including travel time.  The benefit of having this in spreadsheet form is the ability to sort, use and manipulate the data for any purpose.

Stay tuned for the next post on how to use the Job Costing Report to analyze the profitability of your customers in order to discern whose prices to raise and by how much.

Application Action: Follow the steps above to get your report ready, then try running the report with different options to get familiar with how it works.  I cannot emphasize enough how important this report is for running a profitable business.

End of Year Projects Overview:

1.  Revise our dollar-per-hour goal to account for any changes in the upcoming year.

Part 1 & Part 2

2.  Use CLIP to create a job costing report for this year.

3.  Analyze profitability of customers.  Adjust prices as necessary.

4.  Create and send renewal contracts.

5.  Survey customers for feedback from this year.

6.  Follow up in order to maximize contract renewals.

Photo credit: shutterberrry

In my last post, I described the general method for calculating how much you should be charging per hour.  In this post, I will describe how to use the spreadsheet we have created to make this calculation.

This is going to be a long one…so grab a cup of coffee and hang on.  Believe me, its worth it.  (Also, check out the links along the way for some explanations and also some humor.)

First Steps

First, download our spreadsheet here:  Per Hour Costing Spreadsheet.  Save this to your computer.

Second, look at the Instructions page on the first worksheet and read it carefully.  (You can navigate between the worksheets by clicking the tabs along the bottom of the worksheet as shown below)

Next, we will go through the four spreadsheets, step by step filling out what is necessary on each spreadsheet.

Labor

In this spreadsheet you will calculate everything involved with payroll and man power in your company.

1.  Enter the percentage of your company’s share of FICA (social security tax) for field and office employees (there probably will not be a difference).  This can by determined from looking at your payroll expenses.

2.  Enter your Federal Unemployment percentage for field and office employees.

3.  Enter your Workman’s Compensation insurance percentage for field and office employees (these numbers could be different for each).  This can be determined by calling your insurance agent or by looking at your P&L’s.  If you are given a total rather than a percentage, you can calculate the percentage using this formula:  total workman’s comp for 1 year / total payroll.

4.  Enter the amount you spend per employee on health insurance per month.

Employees

5.  Enter all your employee names in column A.  Include everyone who is on your payroll (laborers, managers, yourself, office staff).

6.  Enter their hourly pay in the next column.  For salaried staff you can calculate their hourly rate by dividing their annual salary by 2000 hours.  Ex.  50,000 / 2000 = $25/hr. This is based on a forty hour work week.

7.  Enter any paid vacation or sick days.

8.  Enter how many hours are paid for those sick days.

9.  Enter their regular week work hours (ex. 40).  If you used the method in step 6 for calculating salary, use 40 here.

10.  Enter average overtime hours per week.  Try to be as accurate as possible here, not hopeful—if you underestimate, it will hurt you.

11.  In the column titled “Work weeks per year” type the number of weeks each employee works.  Note that this may be different for each employee—a manager may work 50 while a seasonal may work 25.

12.  Enter T or F (true or false) for whether you pay health insurance for each employee.

13.  Check the totals on the top of the screen.  All should now be calculated.

Equipment

In this spreadsheet you will determine how much you need to collect to cover your equipment costs.

1.  Enter the current average inflation rate.  You can find this by doing a little google research.  I used 3% this year to be on the safe side.

2.  Enter your yearly auto insurance premium.

3.  Next, in column A, enter each piece of equipment that your company owns.  (i.e.  trucks, cars, mowers, blowers, trimmers, etc.)

4.  Enter serial numbers if you wish to keep track of which is which.

5.  Enter the purchase date.  If you haven’t kept track of this, try looking at your accounting records and receipts or call your dealer.

6.  Enter the purchase price for each piece of equipment.  Try not to guess unless you really have to.

7.  If you financed the equipment, enter the amount financed and the interest rate.

8.  Under “Years of Service” enter the expected life of the equipment.  Be conservative here so that you will not end up retiring equipment before you have recovered the cost.

9.  If you expect the equipment to be able to be sold after its life expectancy, enter its expected sale value under “Residual Value.”

10.  Enter how many miles or hours this equipment is used each week.

11.  Enter how many weeks out of the year this equipment is used.

12.  Enter expected gas price per gallon.

13.  Enter the equipment’s Miles per Gallon or Hours per Gallon.  FYI, I am using 1.5 HPG for mowers and 8 HPG for blowers and trimmers.

14.  Lastly, enter the anticipated lifetime maintenance costs for the vehicle.  If you don’t have any idea, try looking at your accounting records over the last few years to see how much you spent on these items for equipment maintenance/repairs.  FYI, we do most of our work in-house and our estimated repairs on a mower expected to last 4 years are $800.

15.  You should now be able to see what you need to collect per hour to recover your equipment costs.

Overhead

Here, you will enter in all other expenses such as advertising, rent, office supplies, internet, phones, CLIP, CLIP On Sites, etc.

1.  Go through your P&L’s for last year and collect all of your expenses that would not fit under Labor or Equipment.

2.  Categorize these expenses and enter the categories into the spreadsheet if they do not already exist on the spreadsheet.

3.  Calculate the average monthly expense for each category by taking the annual total and dividing by 12.  Enter these expense on the spreadsheet under “$ per month.”

4.  Add or change any expenses that will be different in the coming year.

5.  You should now be able to see your overhead total expenses and how much you need to collect per hour to recover these costs.

Totals

Finally, we must enter a few last details to complete the spreadsheet and get you on your way to making some profit!

1.  Enter the efficiency of your employees.  You can determine this from CLIP by printing an efficiency report (Reports > Employees > Efficiency Report).  The basic formula is this:

Budgeted Man Hours / Actual Man Hours = Efficiency

Ex.  If you employee has 10 budgeted man hours to do, and it takes him 11 payroll hours do do this, his efficiency is 91%.

This is another area where being conservative is important.  If you over-estimate the efficiency of your employees, you will not be making enough to cover all of your expenses.

2.  Lastly, enter your target profit percentage.  You will be able to adjust this later if you find that your prices are too high to be competitive.

Whew!  You made it!  Good Job!  Now for the conclusion:

At this point, you will be able to see what you need to make per hour in order to cover all of your expenses and make the profit that you desire.  You can now tweak the spreadsheet to test what would happen if things changed in your business:

What if I could increase the efficiency of my employees 10%?

What if I could cut out this expense?

What if I hired a new employee?

What if I gave everyone a raise?

What if I bought a new mower?

The financial answer to these types of questions is now easy to answer.

Application Action: Set aside one day in the next week to work through the spreadsheet, at least to get comfortable with it.  Then, next week, spend another day fine tuning it and playing around with it (remember to make a backup copy of course.)

If you have any questions or comments, please feel free to post a comment or email me.

At CLIP Lawn Care, the first step in our year-end projects is to make sure that we have an accurate idea of what we need to charge in the following year.

Business is simple:  “you need to make more than you spend.” This simple, often quoted formula for running a profitable business comes from one of our CLIP customers.  The saying is somewhat ironic because everyone knows this—the problem is; many companies don’t know how this translates down into the every day realities in their business.  How do I ensure that I will make more than I spend?  That will be the subject of this post.

I am going to assume that the primary product that you are selling is time.  This is the case with any service company (as opposed to a retail store for example).  In exchange for their money, customers are hiring you to spend time at their property to perform a service.  Therefore, in order to be profitable, you need to know how much to sell your time for.

How Do You Know What to Charge?

Sadly, many companies in our industry have only a foggy idea of what they should be charging.  Usually, this idea comes from what they know that “the other guys” are charging rather than on their own business finances.  Many companies get away with this but I fear that the numerous businesses that close their doors every year, do so because of this mentality.

As I quickly demonstrated in a previous post, the basic formula to determine what you should be charging per hour is this:

Expenses (Overhead, Labor, Equipment Expense) + Profit / Production Hours

The equation says that in order to pay for all of my expenses and profit, I need to sell this many production hours at this rate.

This is certainly a simple formula—so why don’t more companies know this?  I believe the breakdown occurs because most people have not been taught how to work this formula out for their business.

Your Success is our Business

It is our goal to make your business succeed.  Therefore, in order to help you determine your expenses ahead of time and calculate what you should be charging, we have created a spreadsheet, which, when filled out correctly, should provide you with an accurate number for how much you need to charge.

This spreadsheet is what CLIP Lawn Care uses to calculate our dollar per hour goal.  Every year, we adjust this spreadsheet to account for any changes in labor, equipment, or overhead.  I just finished updating our spreadsheet for 2010.  We plan to add a new crew next year which will require a new truck and equipment.  We need to add that to our spreadsheet to make sure that our pricing is inline with our new set up.

This is a necessary first step in our end-of-the-year projects because we need to know if we need to adjust our prices at all for the renewal contracts.

Next week, I will be posting the spreadsheet along with step-by-step instructions for filling it out.

Application Action: Post a comment telling us if you use this method or not.  If you have another method you have been using to determine what you charge, let us know.

2009 is quickly coming to a close, and as green industry veteran Mike Rorie said a few weeks ago, we need to “load our guns” by looking ahead.  Now is the time to think about your 2010 season.

At CLIP Lawn Care, in order to position ourselves for another profitable year, we are focused on 6 projects over the next few weeks:

1.  Revise our dollar-per-hour goal to account for any changes in the upcoming year.

2.  Use CLIP to create a job costing report for this year.

3.  Analyze profitability of customers.  Adjust prices as necessary.

4.  Create and send renewal contracts.

5.  Survey customers for feedback from this year.

6.  Follow up in order to maximize contract renewals.

As I go through each of the projects, I will be sharing with you how I do it.  If you haven’t yet subscribed, I suggest that you do.  This way, you can follow these processes step by step.

Click here to subscribe.

Because these processes are so crucial, I encourage you to ask any questions that you may have by posting a comment or emailing me at editor@clipblog.net.  I would be happy to help!

Application Action:  Email me or post a comment about any end-of-the-year process that you would like me to cover on the blog.