In Part 1
of our series, we analyzed the profitability challenge my business was facing at the start of 2014. In Part 2
, we looked at the structural and cultural changes implemented to address the challenge and make our business financially sustainable.
In part 3 of our series, we’ll look at the outcome of these changes, and I have some surprising news: things didn’t exactly turn out as planned. But that’s exactly what my business mentors prepared me to expect and to turn into success.
I’d hoped to come back to you with a rousing success story, but the results have been decidedly mixed. This means I still have work to do. But I promise not to leave you in the dark! Stay tuned in the months ahead for another update as we figure out what went wrong and how it can be addressed. I’m also happy to report that lots has gone right, so read on.
GOAL #1: INCREASE BILL RATE BY 5%
One cornerstone of our plan was to increase our effective billable rate by 5%. As a reminder, billable rate is calculated this way:
Bill rate = Total Amount Billed to Client / Number of hours budgeted for job
We were shooting for a 5% increase as part of our plan to solve our payroll % to sales issue. Here’s the breakdown:
Actual Increase: 6.5%
According to this sample, we’ve exceeded our goal by 1.5%. We’ll continue to analyze samples on this metric because it is an important one, and we can get the info we need by running a couple of quick reports from our scheduling software. But it looks like we’ve achieved a win in this area.
GOAL #2: INCREASE EFFICIENCY BY 7.5%
Another of the three major goals was to increase our efficiency by 7.5% by switching to 2-person teams. With this uptick in efficiency, we could minimize pay cuts and price increases. Let’s see how it went:
It’s always a great surprise when you exceed your base goal and get closer to your stretch goal, a key takeaway from my days in Foundations of Success! We thought we might go a little past 80, but to get over 87% was so shocking I had to check the data, then check it again, when I got the same result. Teams of two, rather than larger teams of 3-4 technicians, have made us so much more efficient for two major reasons:
This may not work for your business, as different geographies and scheduling methods effect efficiency as well, but for us it has worked incredibly well.
Teams of two are faster in the cleaning itself, with less overlapped work/downtime, and
We can schedule much more efficiently with teams of two, with teams often being able to not leave a neighborhood for an entire day.
GOAL #3: DECREASE PAYROLL % TO SALES BY 7.5%
This was the big number at the heart of our issue. We had calculated that a 7.5% reduction, combined with the other changes, would bring us in line with where a healthy cleaning business should be overall. It should be noted that these numbers include wages, taxes, paid time off, bonuses, benefits and workers compensation insurance. (In the previous installment of this series, I incorrectly reported that our goal was a 2.5% reduction as a percentage to sales, but it was in fact a 7.5% reduction). This is where things didn’t work out as planned. Here’s what we got:
Target Reduction: 7.5%
Actual Reduction: 2.7%
Missed goal by: 4.8%
This was unexpected. What went wrong? There are other numbers I’d been crunching and reviewing with others that should have guaranteed the expected result. Clearly we’ve missed something, and are in the process of breaking down just what it might beusing the measurement, tracking and analysis tools I developed through CBB’s Foundations of Success
coaching program. I have my suspicions, but will keep them to myself at the moment.
I’ve learned that with such an all-encompassing restructuring, there are things that can be difficult to predict, and that it’s not a situation in which you just “complete” the restructuring in one fell swoop and you’re done with it. Such a major change requires checking progress and making adjustments as needed. What we’ve got in front of us is just such a set of adjustments.
I’m excited about the changes ahead, and look forward to sharing them with you in what is now a 4-part series. One thing is for certain: my business is better equipped than ever to handle this kind of bump in the road. Expect the next installment in the Spring of 2015.
Joe Walsh started Green Clean Maine in 2007 to bring a truly sustainable and non-toxic cleaning service to Southern Maine.