What is your Project Sales to Service Contract Revenue Ratio?
Do you track it? Should it be better? How could you improve it?
Having spent the past 11 years working closely with mechanical contracting and controls sales teams, I’ve always been perplexed by the lack of evident proactive harvesting of equipment upgrades from our clients’ hard won base. Well run commercial contractors track their ratio of “add on” business to service contract business so they are aware of the importance of this segment of revenue. While many clients that we work with seem to be relatively satisfied with their results, it’s interesting that the bulk of that revenue comes from a highly reactive, run-to-fail, repair and replace business model.
Three years ago, we embarked on a company mission to study and find ways to flip the paradigm from a reactive to proactive equipment/controls upgrade sales model. I plan to document our findings as a dedicated thread in this blog hoping that our industry will begin to recognize the latent revenue and client development opportunities locked in thousands of accounts.
As we undertook this project it was apparent that there were several long-time embedded reasons “Reactive” seems to be the predominant method of harvesting from the base. Let’s take a look:
- Our industry is interrupt driven. When stuff breaks people get uncomfortable and critical systems may be placed in jeopardy. So, by its nature it’s tough to schedule emergency calls in advance, hence the interruptions.
- This is especially true during the height of cooling and heating season. No one can wait.
- Account Managers and Project Sales can be buried by inbound requests from customers and technicians during peak seasons.
- This part of the industry is filled with “reluctant” salespeople who may have never thought they’d be in sales. Many come from technician ranks and may have never been trained in selling or may be uncomfortable in that role.
- In addition to being inherently uncomfortable, the demographics of this group is aging and reluctant to changing the way they have operated for years.
While this list may not be exhaustive (and I welcome your thoughts), it lays out a pretty good case for why transitioning from a Reactive to Proactive sales model may be challenging. But the industry challenge is one thing and your company is another. Making the transition starts with management’s commitment to change. It starts with vision, leadership, training, coaching and accountability. What else is new?
So, I plan to walk through our experience in the field, engineering change and driving a better business model when it comes to harvesting from your contract base. Hope you can join me. In my next post I will posit some of the key strategic elements you need to think about in evaluating this opportunity.