The
strategy is simple: Add a 2% install parts surcharge to every job you do, starting now.
You don’t
have to invoice this as an additional line item – in fact, I would recommend blending it with some of your other charges.
But even if you do list it separately, so what? It’s a measly $200 on a $10,000 job. As a percentage, that’s less
than the $2 “shop parts & disposal” you get charged on a $30 oil change. And it’s WAY less than the
$80 a car stereo store tried to charge me for speaker wire on a $400 car stereo install.
Here’s
what you do for install parts…
NOTE: You need to do a little work to set this up. Just
remember it’s worth $10,000 for every $500,000 of business you do, this year and every future year!
1) Create an income account for install parts (that way, you can keep track of install part revenues,
separately from equipment).
2) Create a COGS account for install parts (by tracking monthly purchases, you’ll know exactly
how much you’re spending on install parts. This is way less work than costing your install parts per job. Those numbers
are never accurate, anyway.)
3) Decide which items in your item list will be install parts and assign them to the newly-created
income and COGS account. (My definition of “install parts”: low-cost items you typically purchase in bulk that
are used for most jobs and are difficult to accurately count. Plates, cables, wire, connectors, etc, etc)
4)
Every time you quote a job, increase
the price by 2% and make sure those extra dollars are tracked in your new income account.
That’s
it! Now, every month, your P&L will show you how many dollars you paid for install parts, and how many dollars you charged
customers. Watch the 2% add up!
It doesn’t matter if you are already charging for install parts elsewhere
in the bid. Even if you line-item the charge and customers challenge it, it’s easy to wave your hand and say, “That’s to cover all the screws, staples, nails, cable ties, miscellaneous
wire, connectors, and pieces/parts needed for a job like this.” How can they argue?
BONUS
“MAKE MORE $$” ADVICE
This strategy WON’T WORK if you bill T&M. But you
should be doing fixed bid proposals, anyway. Customers like to know what a project might cost; but they are more
inclined to buy when they know what it will cost. Take the risk off them, put it on you, and charge a little more
parts & labor than you think you will need. You’ll come up short on some jobs but win on most others.
Then,
stand back and count the money!
