In tough times or starting a new home service contracting business, you need to be a lean, mean fighting machine. That's where Lean thinking comes into play. Our previous article focused on external business operations; here, we will focus on what you can do internally to improve efficiency, encourage best practices, and reduce costs.
Lean thinking generally gets a bad rap. Most people think Lean is about being cheap or just being ruthless with reducing costs. When you talk about cutting costs, your employees are going to believe it's them being reduced! Lean thinking is more about looking for an opportunity to create more value for your customers with fewer resources.
People
Don't forget about your people. If you are running a crew, actively encourage your employees to look for ways to help improve your business. This is a great way to get their feedback and keep them engaged. Engaged employees that understand your predicament will help you be successful since, ultimately, their jobs depend on it as well. Collaborate with your whole team when reviewing your business practices; you would be surprised how a different set of eyes can see things you can't see. Engaging your team is also an excellent way to help them grow both personally and professionally.
Test your business activities for added value
Think about all the processes you have, then think about all the areas where waste could be hiding. We have written a guide to help you understand and identify waste, and you can find it right here. Waste comes in a lot of different forms, and I can guarantee you have it in your processes. Look at each part of the process and ask the question. Does this add value, and are my customers willing to pay for it? If the answer is no, then its waste. To reiterate, in lean thinking, a value-added step or process is something a customer is willing to pay for.
Sometimes it's worth sitting down with you and your team (if you have one) and map out all of your critical business activities on a whiteboard. This helps visualize the "value stream." By mapping out your value stream, this will help in eliminating those activities that don't add value or help you see where there's waste in a process.
There is, however, one area where you can't get rid of non-value-added tasks, and that is known as business non-value-added tasks. These are tasks that are required by your company to be able to execute value-added activities but have no real value for the customer. Customers may not want to pay for your record-keeping requirements for managing refrigerants, but you have to do it nonetheless.
As an example, do you or your techs spend a ton of time driving around looking for parts? What's the downtime associated with this? This is more waste, and it's costly. This is a perfect example of waste in the form of Transportation or Motion. And, if you're at a wholesaler waiting for parts, that's also waste. Find a way to remove those types of waste from that business activity.
Luckily in this area, apps like Phyxter can help you reduce that downtime that would be better spent on completing revenue-generating activities.
Standardize business processes and workflows
Standardizing your processes and workflows makes a lot of sense. We have touched on this in a previous article about using standardized work. Feel free to read about it in more depth here. Where you have a commonality of work, you should standardize it, so it's the same over and over again. This is to ensure the customer is getting a high-quality product or service, and you did it with minimal waste.
Do you do a lot of one specific type of install? Do you have a checklist for yourself or your techs every time you do one? Maybe you should. That's called standardized work. Standardizing ensures less variability in the job, so it gets completed on time and budget. It also makes it a lot easier to quote on the front end.
Depending on your business model, focus on what your business is naturally good at. Maybe your offering is too extensive, and you're not efficient in some areas or products. Narrow it down and only offer what you can do efficiently and what makes sense. If you're a Carrier guy, then that's your offering for AC. Keep it simple for the customer and yourself. Remember, are you adding value? Because that's what gets you paid.
Review all of your business expenses.
One of the most substantial expenses in a small business is inventory. Inventory is also one of the hardest things to manage in a small business. HVAC techs aren't exactly inventory specialists. That's awesome if you are, but most are not! Too much stock equals waste, and waste equals dollars that could be better deployed somewhere else.
One way of managing inventory more efficiently is by employing the 5S system. 5S is a method of improving workplace efficiency through simple workplace organization. No need to get fancy, stick with the basics. 5S can help you in all areas of your business, how you manage your home, place of employment, or your van if that's all you have.
5S, in its most basic form, is about sorting out everything you have and only keeping what you need. Then arrange it in a way that promotes efficient workflow. The next step is cleaning your workspace and everything in it. The final two stages are about standardizing all your activities to ensure a consistently organized workspace and then focusing on sustaining that momentum until it's embedded in your daily operations. We also have an article to help you better understand 5S, and you can find it here.
Look at every expense that comes out of your pocket, whether it be for business or personal. Remember, every expense you have needs to be reviewed. Are you wasting too much fuel driving around? Use Phyxter to reduce your fuel bill. Office supplies, tools, equipment, advertising, and vehicle maintenance are all areas where you can reduce your cost.
Do you need to update specific tools this year, and can you do your vehicle maintenance? You know your business the best, look hard enough, and you will find it.
Also, you need to identify your needs from your wants in your personal life. If you are a one-person business, where are you wasting money? Maybe it's that cable subscription or that lawn mowing service you use. Unless you need it, get rid of it. The only things you really need are shelter, food, and water for you and your family. Everything else is waste. Tough times call for tough measures.
Maintain your "Front Stage"
Your front stage is what customers see. Your front stage is both your physical and online presence. Cutting costs on these will be detrimental to your business. Acquiring and maintaining customers is always a costly exercise. These are smart investments that don't require a mountain of overhead. Does your website need updating? Do you keep your service vehicles clean? Do you and your techs have professional looking uniforms that they keep clean? If you have a shop, you have to apply the same rules. Reception areas for customers also need to look and feel clean and professional. Don't forget these costs are also tax-deductible, so they are an excellent lean investment.
Maintain a vision of continuous improvement
You would be surprised how well you can get by with minimal resources that you were overusing before. Set aside even 10 - 15 minutes a week to discuss continuous improvement with your team at the end of a shift. Keep a tracking list up on a whiteboard to show progress. Don't forget to reward an employee on an improvement idea that was successfully implemented. Rewards don't always have to be monetary. How you reward your employees is up to you, but make it worthwhile. You want your employees to be continually engaged in the success of your business.
Finally, customers love a smooth operation. Providing a quality product and service will make them feel good about their purchase. Use these savings to pass some benefits on to your customers. We always try to avoid lowering our rates, especially if your rates are market competitive. Maybe add value to a customer another way, like providing free emergency service for a limited time as part of their warranty. Ensure you are providing a quality product and service, and you can ensure repeat business.
If you would like to read more about lean management and how it adds value to your business, then click here.
This article is part 2 of 2
Contracting during COVID-19 - Part 1 <--- Previous Article
Author: Russell Jones | VP of Operations @ Phyxter
