Carmona’s president Joe Heslin had the audacity to raise his service rates and lived to tell the tale.
By Alan Wolf, YSN
Three months ago, BrandSource Power Dealer Joe Heslin did the unthinkable: He raised his company’s service rates.
It was a calculated risk. Heslin, owner of Carmona’s/Redding Appliance Center in Redding, Calif., sits on the BrandSource Service Committee. For the past two years the committee has been forging new pathways to service profitability for the more than 80 percent of members who perform their own appliance repairs. Among the pain points they’ve addressed over that time are tech retention, training and compensation, fleet management, and inventory control.
But perhaps the most contentious issue of all is billing rates. As BrandSource service consultant Paul MacDonald noted during the group’s first-ever National Service Town Hall last month, the national average cost of running a single service call is roughly $104. For many members the rate is either at or below their break-even point; yet dealers are reluctant to raise their fees for fear of miffing customers, and most simply accept their service losses as a cost of doing business.
Not so Joe, who, with a break-even rate of $175 and a 100-mile travel range, was losing money on every call. Taking his cue from fellow committeeman Scott Bekins, and using the UASA’s Original Blue Book as his pricing guide, Heslin took the daring step of raising his COD labor rates by 30 percent, then stood back and held his breath. “I was worried that we’d lose customers,” he acknowledged.
But rather than losing business, Carmona’s service numbers increased dramatically. “There was no pushback whatsoever,” Heslin said. “We’re still backlogged, booking seven to 10 days out. I should have done this years ago.”
But Heslin didn’t stop there, and next turned his attention to his vendors. Vexed by covering their costs while manufacturers raised prices, he used his leverage as the sole accredited service organization within his trading area to ask one vendor each month for his due. So far, three out of the three companies he’s approached for fair compensation have acquiesced. Surprisingly, “There wasn’t a lot of resistance from vendors,” Heslin said.
Between vendor concessions and higher COD rates, Carmona’s service operation has moved from break-even to black. Heslin said he’s still one technician shy of real profitability, reflecting the industrywide scarcity of qualified candidates compounded by the current labor shortage. But employment issues aside, for far too long the calculus of the service business been “Just not losing money is making money,” he said, which is why Heslin is urging his fellow BrandSource servicers to “Raise your rates!” with profitability as the goal.
“Now’s the time to do it,” he said, as inflation heats up and dealer costs for everything from gasoline to replacement parts rise. “The customer is used to all prices going up and is more accepting” of a service rate increase.
Likewise, members shouldn’t be shy about raising the issue with vendors, Heslin added, noting that with Sears’ role as a national service organization rapidly shrinking, BrandSource is positioned to become the largest service organization in the country.
Spurred on by Heslin and his Service Committee colleagues, perhaps all servicing members can finally find profit in appliance repair.
BrandSource, a unit of YSN publisher AVB Inc., is a nationwide buying group for independent appliance, furniture, mattress and CE dealers.