Abigail Chen of SGI Talks about the Importance of Managing Your Service Business by the Numbers

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And we get in the busyness of our day and we stop looking at the invoices and we kind of stop looking at different things. We just focus on that, that big revenue number.

Right.

And while that is so important, we can't really get to that big number if we don't get down into the details. And, you know, for me, it's, it's a fun game. I like math. So to me, there's a right and a wrong answer, right? There's, there's a goal. Let's hit the goal. You know, to have a roadmap is so helpful. In the coffee industry, I didn't have a roadmap. I didn't have anyone saying, you know, keep your coffee costs here and your labor costs there. I just had to figure it out, right? So, you know, we have a roadmap, uh, and it's just a, a really great puzzle and every KPI is a piece in that puzzle.

Welcome to the Successful Contractor Podcast powered by Success Group International, a show for residential contractors about residential contractors. We chronicle business journeys, share insights, and celebrate successes in this wonderful industry. I'm your host, Bob Houchin. Today you're going to listen to a great conversation I had with Abigail Chen. Abigail's owned her own business, ran a highly successful HVAC company, and now serves as SGI's Vice President of Operations. I sat down to talk with Abigail about a hugely important topic, and that's the topic of managing your service business by the numbers. So many business owners simply rely on getting their financials at the end of the month, if they're lucky in some cases, to judge the health of their company. What we know at SGI is that just doesn't provide you enough real-time information. We have daily reports, key performance indicators to measure those numbers against, to help our members truly manage their companies. Abigail will share with you all the finer details about fun words like DEMER and KPI, and we talk about how to use them in service businesses properly. I hope you enjoy our conversation and pick up a nugget or two.

Abigail, I cannot thank you enough for your time. I know it's a precious commodity with lots of members you're talking to and helping. For those who haven't had the pleasure of meeting you, could you please kind of share your name and what your position is with SGI?

Absolutely. Thank you, Bob. I appreciate you having me. My name is Abigail Chen, and I am the Director of Operations. Very good, very good.

And again, if no one's had the pleasure of talking to you before, can you kind of just share with everyone, you know, the Reader's Digest version of your story through business and ultimately what led you to SGI?

Absolutely. So initially, my husband and I were business owners in the coffee industry, spent about 13 years owning and running coffee shops. Loved that, it was great, but I had the opportunity of Selling those, moving north, and becoming a general manager of an HVAC company that was in central Illinois. This company happened to be a member of Success Group, and so I sort of grew up in the HVAC industry with this model.

Mm-hmm.

And after being there for several years, had the opportunity of moving to SGI in the operations department as a coach to be able to work with the members. So I jumped on that opportunity. I love working with the membership and Teaching others about this model and how successful it can be.

Yes, very good, very good. I'm excited to talk to you today about, really, it's probably the most important thing in business. You know, when we get new members, you know it better than I do, you know, contractors come to us and they think the idea of being successful is being busy, and they're always busy, and then they look up and go, I don't have any money. So, what we find out is obviously the most important thing is knowing your numbers. that directs everything. So, you know, remember our audience, it goes beyond just the SGI Group. So when we talk about numbers, what do we really talk about, Abigail?

Yeah, great question. So everything that we have in our model here at SGI has what we call a KPI, a key performance indicator. And basically those are benchmarks for all of the different areas of our business. And our goal is to have operational excellence by making sure we're running our business to these numbers. So now we have a roadmap and a goal of, you know, where we're trying to go so that we can end up with net profit at the end of the day, which is what we all want, right?

Absolutely.

Revenue is great, but if we have nothing to show for it at the end of the day, we're just sort of spinning our wheels. So running your business by the numbers basically means, first of all, you have to know what those numbers are in these various areas, these KPIs. And then once you have the access to those numbers and you know what they are, it's an opportunity to find, okay, where are we doing well? Where are we not doing well? What do we need to train on or tweak or fix as a result of measuring our numbers against these benchmarks?

Right. And, and we measure numbers at SGI using a certain type of report. Can you kind of share with everyone what that report is and how it's used?

Absolutely. So we call it the, the DEMER, basically, which is a funny little, uh, term, but it's Daily Manager's Essential Report, and this has several functions to it, actually. First of all, it will help a company create a projection.

Mm-hmm.

You know, a lot of us don't exactly set budgeted numbers, and so we need to, we need to know what that goal is. So it helps you take your former year's numbers and create a budgeted projection for revenue. But then once you have done that, it sort of trickles down into every aspect of the business and says, all right, in order to hit this Revenue goal. What do I have to do? How many calls do we have to have coming in? How many calls do we need to run? What should our average ticket be in order to hit this budgeted revenue number? Right?

Right.

So it helps create that projection for company. But then once you use this report daily and enter in the calls that you're running, the revenue that you've generated, it actually shows a daily budget to actual. a month-to-date, and a year-to-date. So you can track along and see, how am I doing? So this report has all of the main KPIs in it that we use in our model to see, hey, are we doing well? Are we hitting the operational excellence? And if not, where is the area in all of these different areas that's my issue?

Right. When do you tell people they should really be crunching that so they're ready for the next day? Is it in the evening? Is it like at the end of the day to set aside some time aside for it? Or what do you tell people?

Well, since some businesses have a lot of after-hours calls, we usually say take the next morning, try to get it done that day for the previous day by about lunchtime.

Okay.

Now, once the techs get out that morning and things get a little bit quieter, everyone's dispatched to their first job, you can focus on it, take a look at yesterday, how did we do, and start inputting those numbers into the DMR. So you're always going to be focusing today on yesterday's numbers.

Right, okay, very good. You went through some of the metrics that are captured in that report, but back in your day when you were the GM and you were looking at this report, what were some of the common red flags that you think you saw and that members often see? What are the big numbers that tend to jump?

So usually it has to do with average ticket and closure rate frequently, and also our labor percentage.

Mm-hmm.

When it comes to closure rate for technicians, we usually think closure rate is a sales call, right? But really, anytime we are in the home, if we are not generating revenue in such a repair or some type of service in the home, we're going to have a low average ticket and a low closure rate. So oftentimes companies don't track that closure rate. When we have service-only calls or zero-ticket calls, that's definitely a red flag. You know, why are people not buying from our technicians? So that's something we want to take a look at, those 2 things, but then also our labor percentage.

Right.

We call this the rule for profit. When you can keep your labor in line with our KPI goals, then you're going to end up with net profit at the end because it's the largest item on your profit and loss statement. It's pretty much where the biggest chunk of your revenue goes. So labor is a huge thing to take a look at as well in this report.

Sure. How do you just, you know, So once you see those certain numbers are off, you know, close rates off, uh, labor— let's, let's tackle labor because that obviously is the big one. What— so you're like, holy cow, our labor is really high. How do you, uh, how do you respond to that? What do you kind of coach members through how to respond to that labor number?

That's a great question that actually has several questions that go along with it. So, you know, obviously when you look and see, okay, my labor, for example, let's say it should be 20% in the field, if we're at, uh, 30% in the field You know, where do I start looking? How do I start figuring out where the problem is? And so there's a lot of questions that go along with that. It could be, you know, inefficiency. We're just not training our technicians to be efficient. Maybe they're milking the clock a little bit. It could be that our average ticket is low. And, you know, if your goal is 20% labor in the field, then pretty much a technician needs to generate every single day what you're paying that person. for the week.

Right.

And if we're not generating the revenue in the field, then obviously our labor's going to be high. So it could just be ineffective management as well. Sometimes we don't set the appropriate expectations with our field teams on how long a job should take or the processes we want them to follow. So we have to start looking at a lot of different things, but a lot of times it really does have to do with we're not generating the revenue and we are not using our time wisely.

Right, right. How about close rates when you get those people that are just getting, you know, service fee onlys and stuff like that? Is it just a training issue? Is it— how do you coach people through working with technicians that are running into that issue?

Yes, I see this a lot and it's a huge red flag because number one, we're not generating revenue. And number two, something's going on in the home that's preventing the customer from either trusting us or wanting to go with us for some reason, right?

Sure.

To get to the bottom of that. Are we not spending enough time in the home? Are we not being thorough? We have very specific inspections or reports for all of our trades that we recommend the technicians use that'll help them be thorough. And based on that, helps them create options. We recommend creating options because, you know, we don't know how much money the customer wants to spend that day. And if we don't offer something, they can't say yes to it. So we want to look at that as well and see, are they using the correct forms? Are they creating options? for the customer. You know, especially in a breakdown situation, the customer already feels on the defensive. They're gonna have to spend money they weren't planning on spending today.

Sure.

Put that back in their control of being able to say, how do I wanna spend my money today? Which option is best for me and for my budget and my comfort level? So if the technicians aren't doing that and they're just, you know, kind of showing up and not explaining things well, not educating the customer, not providing options that make sense to the customer, then they don't feel comfortable. And so they don't trust that tech and then therefore don't go with the repairs.

Right, right. When we talk numbers, you know, the thought is to always talk about budgets and talk about demers. I also think of it as evaluating invoices, the numbers that are on those invoices. So when you were a business owner, how frequently, or when you're managing the business, how frequently were you looking at the invoices that came in and the inspections that were tied to it and the option sheets that were tied to it? Did you look at them as they came in, at the end of the day, or? What did you do?

I did look at them daily. My process was that our bookkeeper handled the DMR. She prepared it for me and then emailed it to me each day. So once she reviewed all of those to enter into the DMR, she handed me any paper items. Now, you know, a lot of things right now are digital. So either way, whether it's a digital or a piece of paper, I would review yesterday's invoices each morning. So I review them as, as you know, Every single invoice, every single system performance report, inspection report, and take a look to see, you know, do we have service fee only tickets or $0 tickets? Why? The inspection form filled out and all of that. So I did it every single day for the previous day as the DMR was being completed.

That's great. That's great. And I mean, I know a lot of people go, oh, that's so much work to look at every ticket. I'm like, well, if you're a smaller company, you should be able to do it. I mean, I know And, you know, Milestone, Baker Brothers, these giant companies, they have managers that are looking at every single piece of paper— well, digitally now. You know, they're evaluating every job. So, it is definitely possible. You just have to be intentional with it.

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Welcome back to the show. In the first half of my conversation with Abigail, we talked about the Demer and KPIs and your labor percentage. And in the second half of this conversation, we're going to dig into how to manage performance based upon the results you're seeing in those daily reports. So let's jump back into the conversation and learn a bit more.

So after you evaluate the inspections and the invoices and all that good stuff, and you start noticing, you know, say you start noticing different issues or patterns with certain technicians, how do you kind of manage that issue? Does it become a training topic where you just don't call anyone out specifically? Do you pull that person aside and have a kind of a private conversation, or how do you coach people through You know, performance issues?

That's a great question. And you really want to praise in public but criticize in private, right? So what I would do is take sort of the stellar tickets, the ones that looked great, all the options were there, the customer went with one of the options, everything was in line, and we would talk about that and high-five, you know, that technician in our morning huddles. But if I had some invoices that were not handled well, I would pull that technician aside and have a quick one-on-one. You want to do this As it happens, because it's fresh in their mind, they remember the call. And so really, I would do that on a daily basis or just whenever it was happening. But you definitely want to pull them aside and go over it with them.

Mm-hmm.

Now, the reason these things are happening can be a core training issue, but I wouldn't, you know, point out the technician in the morning huddle directly. Just maybe, hey, this is a pattern I'm seeing overall. Let's talk about how to correct this moving forward so that everyone can benefit from that. But definitely I would do the one-on-one in private as it happens.

Right, right. Also, you know, thinking of numbers, I always think of the great way of motivating kind of passively is with scoreboards. For, again, for the audience that may not be, you know, know the SGI model, kind of share with them what your scoreboard was at Castle, kind of what things you would put up there and the psychology behind the different colors of marker and stuff like that.

Absolutely. So we had what we called scoreboards, like you said, in our training room. And these were just big, huge dry erase boards that we had marked out with the items the KPIs that we wanted to see.

Right.

So a lot of people do this digitally as well, depending on, you know, software and different things that you have in your training room. But for ours, we focused on each individual technician's revenue that they generated for that day, and therefore for that week. We set a goal for each one of them, and then they jot down, you know, what they did in revenue that day, along with what their average ticket was, if they signed up any club members, If they flipped a replacement lead, etc., right? So each morning they would come in from the previous day and they would tally up their numbers, and I had them actually put it themselves.

I like it.

It just gives them some ownership. I think if we do it for them, they may or may not pay attention, right?

Sure, sure.

So it's something they did every single morning, and then if we hit or exceeded the goal, we put the the ending total in green, and if we didn't, we put the ending total in red.

Right.

It's something that we discussed every single morning in our morning huddles. It definitely can be a little bit of peer competition, and as long as you're keeping culture healthy with that, it works really, really well for some technicians to see, hey, I'm not quite hitting the mark and the others are. I need to do something about this. So it really was effective for us and something that we would focus on. But, you know, if you're going to have the scoreboard, Hosted, you have to talk about them, right? Otherwise, it's put it on there and forget it, and it doesn't really help you in the day-to-day.

Right, right. And you guys made it fun too. Kind of share with everyone some of the competitions. You know, Lead Lotto, I think, is, uh, something that you guys, uh, originated, um, or at least, uh, you know, used. Could you kind of share with everyone the different competitions? You had to make it fun, you know, so it wasn't such a heavy kind of thing, you know, and people could benefit from it.

Right, absolutely. So we, we always did some type of contest and it would be focused around what we needed. So, you know, you mentioned Lead Lotto. When we are in the slower times and we really needed replacement leads for HVAC, we focused on, you know, that game and generating leads. And this was for any technician that was on a service call that had the conversation with the customer of, hey, would you like to consider replacement? So if they were able to flip that lead to our salesperson, then they got to put a ticket in the box. And so for every lead that they got, they got a ticket, they put their name on the back of it and put it in our box. And we usually would do this for maybe about 6 weeks, 8 weeks, depending again on the timing and what we were needing. And then had 3 big prizes. So one was a week off with pay. We had, you know, a big, huge flat-screen TV. We had a gift card to Lowe's, et cetera. So then at the end of the time period, we would draw. The winner got, you know, first place. And then of course we did second and third place as well. Wow. So it was a lot of fun. Of course, we also fiffed them for those leads in, you know, dollar amount paychecks, but the contest kept it fun. And obviously the more tickets you had in the box, the higher your chances were of winning. So everyone wanted the ticket.

Right. Absolutely. That's great. Yeah. And it makes it fun. And, you know, everyone's, you know, you're drawing the names, everyone gets excited and stuff like that. That's really cool. You know, we talked, you know, just a few minutes ago about How to handle, you know, uh, you know, if numbers are— if certain people aren't performing and doing different tasks based on the numbers you're, you're watching. But how do you sell, in addition to like the, the scoreboard and talking about the numbers and having the competitions, how do you celebrate those successes when you got a guy who's just— maybe he closed out a huge replacement deal? Um, you know, part of that is celebrating those as well. So is it— what, what are certain things you do? Is it just Was it calling those individuals out and praising them in public at your meetings? Is it a group text thread? Or what are different things you did to keep the momentum rolling and keeping everyone kind of excited about work?

Yeah, we did several things. I mean, you mentioned the text thread. We did have a text thread that was going, and anytime somebody sold an indoor air quality item, for example, we were always texting the group thread technicians, and everyone was congratulating and high-fiving. Of course, in our morning huddles, we would do the same thing. Definitely rewarding. rewarding and recognizing those. Of course, we incentivize them and spiff them and all sorts of things. So it was fun to hand them checks and/or gift cards or whatever in the morning and make a big deal out of it. And then we would frequently have company picnics or bowling nights and different things along those lines where we would recognize and award those who have been hitting their goals, hitting their KPIs that we had set in place for them. So we spent a decent amount of time and money focusing on culture.

Sure.

It's such an important thing. That's a whole, whole entire other podcast on culture. But yeah, we would definitely make sure that they got the high five, the appreciation individually, and then as a group as well, because that's very important in front of their peers.

Right. Just as a follow-up to that, I should have asked earlier, but when you, when you're talking numbers with your team, how did you, you know, did you have individual goals? Everyone knew specifically what was expected of them and How was that communicated? Was it through one-on-ones or, or, you know, was it just set team goals? Hey, we all have to hit this number. Or did each person have a certain number?

We did a little bit of both. We definitely had team goals depending on what it was. When it came to daily revenue generation though, you know, when you have a maintenance tech versus a service tech that's on demand calls, they're not going to have the ability to generate the same amount of revenue. So a maintenance tech Revenue goal, of course, different average ticket goal for the service technicians. And that's typically because you're playing to their strengths and most likely your service techs are getting paid more. So it's a privilege, right, to be a service tech. So we did, we would sit down with each one of them and talk about, okay, how are we doing? What do we think is reasonable? And set their goals for them. Of course, they did go onto our scoreboards in the training room as well.

Sure.

But I'd sit down with them and then meet with them regularly to see, you know, how are we doing? Obviously I'd have the one-on-one if we weren't doing well. But then we also would meet once a month just as a 30-day check-in to see how we're doing. Are you comfortable? Can we bump these up? Man, you're really surpassing our goal. Let's just, let's stretch it and make it a little bit harder as a challenge, right? So again, some things were the same depending on what it was, and then there were definitely individual tech goals as well.

I love that. I love that. Just kind of in wrapping up, is there anything that, you know, we missed or we should point out to people listening about, you know, just the importance of managing your business by the numbers and knowing Knowing your numbers and referencing them throughout the day? Anything in particular you point out?

Yeah, I think just again, it's such an important thing to focus on and we get in the busyness of our day and we stop looking at the invoices and we kind of stop looking at different things. We just focus on that, that big revenue number.

Right.

And while that is so important, we can't really get to that big number if we don't get down into the details. You know, for me, it's, it's a fun game. I like math. So to me, there's a right and wrong answer, right? There's, there's a goal. Let's hit the goal. You know, to have a roadmap is so helpful. In the coffee industry, I didn't have a roadmap. I didn't have anyone saying, you know, keep your coffee costs here and your labor costs there. I just had to figure it out, right? So, you know, we have a roadmap and it's just a really great puzzle and every KPI is a piece in that puzzle. So I just really encourage everyone to, to know your numbers, but then look at them, right?

Right.

What?

Tell you so much about how your business is running, how effective your techs are, how efficient your processes are, and whatnot. So, um, it can seem daunting at first, but we're here to help as coaches for those who are members of SGI. And just, just don't neglect it. The hard thing is, is when we, uh, don't look at them for a while, it piles up on us and then it gets overwhelming. So if you do a little bit every day, it's not overwhelming. Right.

And I think that the beautiful thing of the report and having those numbers daily is, you know, if certain things are trending the wrong way and you didn't realize it till you saw it, you can address it right away versus letting it fester for weeks or months. And then all of a sudden you're like, holy cow, how did we get to this point? So it's a great check in that way as well.

Absolutely.

Yeah.

If we just wait until we get our P&L the next month to see how we did last month, it's You have to be able to direct it every day, and you take a look at what happened on the field yesterday and go, okay, based on that, we're going to make some adjustments. It's no different than on a football game, you know, they see what the defense is doing, they change up the offense, right? We have to do that every single day.

Yep, much easier to hit goals that way too when you can, you can adjust. And, you know, I, I would imagine, uh, not being in the business myself, but just talking to enough, it's, it's a lot easier to hit goals when you keep changing and tweaking things. And it's not you're down to the last week, you're like, oh my God, we're way down. You know, you're able to, to at least get yourself in a good spot, you know, daily instead of just getting stuck, you know. So anyway, all right. Well, Abigail, thank you so very, very much for your time. This is really insightful. I mean, this is just such a huge topic for, you know, for, for our industry. So I appreciate your insight.

My pleasure. Thank you so much for having me, Bob.

Oh, my pleasure. We'll have to have you on again sometime soon. So have a great day.

Thanks so much. You too.

That's Abigail Chen of Success Group International. Thanks for listening to the show. If you feel like you have a great story worth sharing that would also help other contractors, email me at bhouchin@yoursgi.com. Also, if you enjoyed today's episode, please Give us a rating and remember, friends give fives. You've been listening to the Successful Contractor Podcast powered by Success Group International.

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