The $1M Service Department Mistake Most Owners Make

Hosts Stephen Olmon and Collin Trimble tackle one of the most misunderstood parts of a security & fire-alarm business: the service department. Too many owners treat service like a cost of doing business—something you begrudgingly do to keep customers from canceling. That mindset is killing growth and lowering valuations.

In this episode, the Alarm Masters partners break down why service is actually the tip of the spear for customer experience, one of the most controllable revenue streams in the company, and a huge driver of enterprise value. They share real examples of how service failures cause churn, how tight process and communication prevent blowups, and why “see you tomorrow” has to be built into the DNA of your service culture.

They also get tactical on profitability: how to schedule tighter, keep tech utilization high, price service competitively without racing to the bottom, and actively create service demand instead of waiting for the phone to ring. If you’re buying companies, scaling one, or planning to sell, this is a playbook for turning service into recurring, predictable, high-margin revenue.

✨ What You’ll Learn

- Why your service department is the #1 driver of customer experience (and cancellations)
- How service can be more profitable than projects when run right
- The exact process + communication landmines that cause churn
- How to use non-customer service calls to win new monitoring accounts
- What to look for in a great service manager (and why the default picks usually fail)


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 Stephen Olmon

Collin Trimble

More Entry & Exit 

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Chapters

• 2:50 Common Service Challenges and Solutions
• 6:36 Enhancing Customer Experience Through Service
• 21:10 Maximizing Service Work Efficiency
• 25:03 Balancing Pricing and Customer Satisfaction
• 29:53 Building a Robust Service Department

Transcript

 Today we're gonna talk about service. We think that service can actually be one of the most valuable assets in your entire business. The single largest source of our leads in our sales department is our service department. 

This is something that you have to build in to the DNA and like culturally, so you can have to.

That marathon, not a sprint mentality. If you're 

looking at businesses to buy, ask them what their service rates are. If they're drastically lower than yours, buy your beware. 

A lot of owners view service as the thing that they have to do to keep the customers they've already sold to happy enough to stay under contract.

That is a broken view of service.

Welcome to Entry and Exit. My name's Steven Oman, and this is my business partner and co-host Colin Trimble. We run Alarm Masters in Houston, Texas by day and by night. We run this awesome podcast where we help you have, uh, practical tactical tips to grow your security company. And today. We're gonna talk about service.

Yeah. We're gonna talk about a thing that a lot of owners call unnecessary evil in their business. We talked to a lot of owners, fire alarm companies, security companies. We've talked to pa, PA in the past about how we spend a lot of time talking to owners of other businesses to grow our network because we're actively trying to buy other businesses.

And as a result of that, sometimes we talk to folks that are. Ready to sell, have just sold or about to sell, are never gonna sell. And we get to talk to them a lot about their business. And one thing that we hear so often is the service department is a necessary evil. They don't like it, they hate it, they don't have it.

They should be doing more of it. Uh, very rarely. Sometimes we hear from folks that say, no, we love service work. It's great. We love it. Um, one thing I don't hear though. I haven't heard yet is I love servicing customers that are not current customers. So, for example, you've never, you don't have any monitoring with them, you don't have any cameras.

You've done nothing. They just call you. They need a quick service call. A lot of folks don't love that. Um, we think that that's a mistake. I. Our position, and one of the reasons that we purchased a classic alarm business is we think that service can actually be one of the most valuable assets in your entire business, and should be something that you're investing in and spending a lot of time and resources on to improve.

There are three main points that we're gonna cover today, so if you don't hear anything else. You should hear these three main points. The first one is 0.1, customer experience is everything. And the tip of the spear for customer experience is your service department. So if you want to drive an amazing customer experience, you want to have an amazing service department, you can win and lose customers through your service department.

Tip two. Tip two service can actually be highly profitable. And in some ways it can be more profitable than even your project department if it's done well and it's done right. And Tip three, a strong service department actually increases the value of your business from a valuation, from an EV perspective, that is not from us, that is from private equity groups, family offices, consolidators that we have spoken to.

What do they look at? They look at not just recurring RMR revenue, they also look at reoccurring revenue, which is service work inspections, and repeat small projects. Those things are highly valuable. Remember, what we always talk about is predictability in your revenue is the most attractive thing to somebody buying your business.

So a lot of service work, which is very predictable and rateable and scalable, means that your business is more attractive. 'cause we know where that next dollar is gonna come from. Any thoughts, Steven, before we jump in? 'cause we're gonna go point by point. We're gonna give you some, uh, homework and we're gonna kind of share some of our experiences.

We're also gonna share some areas where we're not totally dialed yet. Areas where we're really trying to improve. Um, there are parts of our business that are really dialed, I would say our sales process, our sales team extremely dialed our customer success department. Very dialed elements of our project management department, very dialed service department.

We're still getting there. We're making big investments, we're trying to improve it. We'll never stop improving it. Um, but yeah. Before we jump in, Steven, what, what, what thoughts do you have? 

Mainly delicious fried chicken. And by that I mean, we decided a long time ago that a slogan of ours would be that we wanted to be the Chick-fil-A.

Of the security industry. Now, I don't know if I now owe like royalties or anything to Chick-fil-A, so if you're listening, please don't send me an invoice or cease and desist. But, uh, we want to be, we, we want to exude similar qualities like people freaking love, Chick-fil-A I, my family and I do, we participate quite often.

Um, and uh, the reason that is, is that it is abnormal. That's not what's normal. Uh, it is a quality of companies in our industry like you talked about. It's, it's kind of the redheaded stepchild sort of thing. It's the black sheep of the revenue profile. For most people, it is the necessary evil, like you said.

And so we decided early on we wanna flip the script and we want to be the Chick-fil-A of the security industry being known for that. That also ties back to another core thing that we say, if we'll see you tomorrow, we can't see people tomorrow if we haven't designed our. Business and specifically our service department to be able to.

Um, follow through on that claim and on that kind of slogan. So we'll dive into more detail. But, you know, those, those are a couple things that we like to say and we try to hold ourselves accountable to it. 

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Get started for free today@bigreputation.ai slash get started. Or check out the link below and unlock 15 free SEO scans today. Yeah, I think that's an excellent segue into 0.1, which is customer experience is everything. Um, this industry historically, um, being kind of a trade or a, a service-based business is not historically known for having phenomenal customer service.

And this is kind of an interesting philosophical thing, which is a little off script, but I think is a, a throwback to one of our other episodes, which is. A lot of customers want to work with local operators, and a lot of local operators are afraid that if they scale and their customers are afraid of this too, that if they scale, they're gonna lose that same.

Personalized touch that same, I've got a problem. I know that if I need to get ahold of the owner, I can pick up the phone and call the owner and, and that is a valid concern. I, I feel that way even like in my home, right? Like I use a, a mosquito misting company, that I have the owner's cell phone number and I would never switch to a national because when I have issues, inevitably I will, I text him and he comes and he figures it out for me.

We're good. Um, I think that you can solution for that, offer a great experience, have high levels of communication and still scale, but that starts with having an amazing customer experience, which is driven by your service department. How many times have we, in our early days, lost customers? Because of something that happened in our service department, I would, I would bucket customer cancellations into two buckets.

Number one, customers are moving. It's just natural attrition. Business goes outta, you know, out of business. And bucket two, something that's screwed up in the service department. The customer's unhappy about it. 

Yeah. I'm, I'm not emotionally available to talk about those examples right now. No, we can talk about it.

Yeah. It just hurts. Yeah, it hurts the thing, but it's like the, the artist is ashamed of their, you know, artwork from three and five years ago. You know, we have improved in this area. It's like, I'm ashamed of your 

Instagram photos from 10 years ago in college, you know? But now, well, I, I'm not. I, I was leaner then.

So there's, there's that too. I had more hair 

then. 

Yeah. 

You know, we're doing great. We're doing great. 

So I think that kind of back to the customer experience thing, um, your service department can help you win business. That's actually harder. That's like, that's. That's tier two, but it certainly can make you lose business super easy.

So the first thing you want to do is make sure you're preventing, um, the churn That's as a result of your service department. Let, let's go through some practical examples of that really quickly. I want to be, I wanna be practical 'cause I think sometimes we speak too high level just for the sake of.

Being clear and moving, fi moving forward, but that's great. Here's, here's some, a few examples that we've lost customers as a result of our service department. So we had a service call customer called in, Hey, I need a service. Call my keypads beeping. We went out, we fixed the problem, we left. Everything was clear.

We left. Customer calls us back two days later, Hey, my keypads beeping again, and I want you to come out here and I want you to fix the problem. We say, okay, great. We go back out there, it's a totally different issue, but nobody communicates that to the customer. It's kind of related to the keypad, but it's not really, it's actually a device that's causing the problem.

The first time it was the keypad. So we go out there, we fix that problem, and we charge the customer all one big bill for two trips, couple hours of labor, a little bit of wire, and the customer says, no, I'm not paying that. That second issue was a warranty issue and say, oh no, actually it was a totally separate deal.

And they say, well, how do I know that? Because you want to take our word for it. Okay, well prove it to me. Where are your pictures? Where are your notes? The tech didn't tell me anything. My keypad was beeping two separate times. I'm not paying this invoice, and in fact, this is a really bad communication.

I'm canceling. That's an example that happens and that has happened to us. And so we have to get crystal clear. We have a flow chart. And like a Excel chart of steps in our cust like to book a service call and all the steps around it. And I'm not joking when I tell you it's several hundred steps long to make sure we do things like.

Confirm pricing with the customer beforehand. The technicians are taking the appropriate pictures before we reschedule a return trip that we educate the customer on what was happened on the first trip. We bill, after the first trip, we explain, we use high levels of communication. We show them, Hey, we've got pictures of, this is what the issue was.

Broken device. Here's the second issue. Different device broken. Very easy, and if you deliver that experience. Your customer's gonna, a reasonable customer is gonna understand that and that's gonna be a good experience. 

Another example, uh, that a lot of this does actually, now that I think about it, come back to communication of, of different types, um, in different scenarios, but how many times.

Has someone on our team promised a trip, promised that we would be somewhere at a certain time, but that didn't get documented. It wasn't, you know, sort in our system. We've talked a lot already on the podcast about technology changes and investments we've made and are continuing to make. That's a, you know, it's human error.

It's apathy or laziness at times. It's holding our team accountable to a certain standard. And there's been many times where we created unnecessary pain from a poor customer experience because we just didn't show up at the time that we committed to. Um, and so those are things not, we're not perfect now necessarily, but those things have gotten cleaned up quite a bit.

That's a huge issue. That was a huge issue early on, especially when the business was small. Customers, you know, texting their favorite tech. The tech would forget they wouldn't run it through the office. They didn't show up. Customers upset, they didn't show up, and we didn't even know. Didn't even know.

Yeah. Another one I would say, uh, has to do with quoting in the service department. So it's this really weird mushy line that I'm gonna be honest, we still haven't totally defined yet, because it's a little nuanced of you go out for a fire alarm service call. It turns out the fire alarm panel is dead. It needs to be replaced.

The customer's like, wow, that's a couple thousand dollars, not a couple hundred bucks. I really need to get a quote for that. That has a scope of work. Who's doing that? Is that sales? Is that the service department? Is that who, who's doing that quote? And then it just kind of sits in limbo and the customer's like, yo, I've gotta get this handled.

I need a quote. Where are we on this? And you just like don't have an answer for them. And then they get upset and then you finally get 'em a price. But guess what? They've already shopped it to three other people. And those people want to take over their monitoring and the customer's gone. 

We tried in the past to maybe set like a.

A dollar floor where we would just shove it into service regardless of the circumstance. That also doesn't really work. It is nuanced. 

It is, it is nuanced. One thing that did help, so go check out our quoting episode if you haven't. Um, we hired a, um, a dedicated solution engineer that does all of our quotes, one for the service department, one and for the, uh, project department.

Now they kind of pool them a little bit, but there's one that really focuses mostly on the service department and our SLA on that's 24 hours. So we're getting that back to the customer within 24 hours. That has helped us. Tremendously. Now there is still some nuance where it's like, well, I also wanna like upgrade and add some stuff.

So there's still some stuff to figure out there. I'm not gonna say we have it perfect, but we have drastically reduced the number of complaints around customers waiting for quotes. Um, so listen, these are all issues that the customer service department, it that, uh, without great communication and really dialed process, um.

You could lose customers, and I'm just gonna say this out loud because I actually do believe it. You can't have a great service department if you don't have great process that's documented. 

Let's, let's, uh, let's celebrate a win. How about that? How about this month? All time low in cases. That's it. 

That was a huge win.

Uh, most of our cases that flow to our customer success department are results of something going on in the service department or billing, or billing discrepancies, and a lot of those billing discrepancies are related to the service department or lack of communication. Um, so now we have a really strong, um.

Approval process before a customer's gonna, uh, before we're gonna go out and on site and schedule where they have to approve various, um, rates and blah, blah, blah, blah, blah. So we're all on the same page about, Hey, this is what it, it costs. And so as a result of that, our cases all time low since we've owned the business.

Um, and the turn time on the cases that are coming in is significantly faster, and that's a result of good hygiene in the service department. Yep. And it doesn't just start with your service manager and your scheduler, right, Steven? Like it also, the technicians need to know. Hey, what's the process? What's expected of me?

What notes do I need to provide? And also, what am I allowed to communicate to the customer and what am I not allowed to communicate to the customer? 

It's also difficult if you change that a bunch, you know? Guilty. Guilty. And so, yeah, we've tried, and that's, that's. Tough because for people who are interested in continuous improvement like we are, yeah, you can overwhelm your team with too many changes too fast, too often.

So you do have to kinda, it's kinda like in marriage, you know, you kinda have to pick your battles, choose your spots a little bit. Mm-hmm. Might I say? Mm-hmm. Mm-hmm. Um, and you have to do that with your team in terms of. Process changes, so don't overwhelm them. 

I, I, listen, I saw a really great quote, uh, from Jeff Bezos who was saying that one of his right hand operational guys in the early years of Amazon said, Hey man, your best ideas are gonna be the ones that are gonna kill us because you have too many ideas and they come too fast.

And you're trying to roll all this out because all your thinking about is how do we improve and grow and change and everyone else that has to implement that it has a day job that they're trying to do with excellence. And I think that's a really interesting concept of like, hey, if you're an operator or an owner and you wanna change something, you've gotta be thoughtful and intentional about what are you gonna change and what is the priority.

Uh, and I think that that comes to a little bit of. The, the values and kind of the, the roadmap for your business. I don't think anybody can really answer that for you, unfortunately. Um, alright, let's jump back in. So another thing that I would say, um, that's really great about the, um, service department is that it can actually drive, um, more business to you.

So one thing that we have seen historically, and I'll be honest with you, this was something I didn't even really, I didn't even really. Agree with myself on this early years, which is when a customer that was, uh, non-monitored or a customer we didn't have any relationship with would call us and say, hi, I'm an a DT customer.

I'm monitored with them. Nobody will come out to fix my alarm system. I'm a residential customer. So they weren't even in our like, kind of core target, they weren't monitored by us and they wanted a service call. Most of my peers in the industry would handle that in one of two ways. One, sorry. We can't service you.

You gotta call a DT. Or Oh, I can service you. It's gonna be two weeks and it's gonna be $250 an hour and a $250 trip charge to basically scare the customer off unless they're really willing to pay that and they're desperate and then they would go handle it. Um, and early on I kind of took that approach too in the first year of our business because simply just resource allocation was my thought.

And we're gonna talk a little bit about that. But what I figured out was, uh, no. That is the way to generate more customers. When you say see you tomorrow and you price them and prioritize them just like your existing customers, more times than not you get their monitoring, you get extra work, and you are their hero because you just gave them a, uh, a scenario where they were kind of SOL and you solved that problem.

They really like you and they want to be, they wanna do more business with you. And so we prioritize those customers that call in. Um, so, hey, if you're listening Mr. Customer and you're not monitored by ALARM Masters, give us a ring. We'll take care of you. So I think that's just one other thing that kind of plays into customer experience.

Before we jump into 0.2, Steven, do you have any closing thoughts on why the service department, uh, influences customer experience or any additional information there? 

This is a long game. Um, it's not you, you can change. Process process. And that could maybe feel like something you could do suddenly. But I do think that this is something that you have to build in to the DNA and like culturally.

Um, so you kinda have to have that marathon, not a sprint mentality on this. Completely agree. You gotta do 

this intentionally. Uh, 0.2. Service work can and should be profitable for your business. Um, one thing that I think is underrated about this, so we have a lot of techs, um, we have technically 12 licensed technicians.

Everybody I talk to in the industry says, Hey, man, for y'all size, that's a lot of techs. While we're profitable, we're really profitable. And also the reason we love that is it delivers a great experience. Our techs are working. Full-time. We don't have any texts that are longing for hours, but what we love about that is if for some reason.

Um, we have a lull in service. We've got extra capacity that we can pull from from projects. And conversely, if there's a lull in projects, we can always, usually go find service work somewhere. And that's another thing that I think is kind of segues into the next really great point about service. You can control how much revenue runs through your service department.

It doesn't just have to be you answer your phone. There are reports from your vendors. There is information about your customers. There are monitoring reports, there are health reports from your cloud software providers. Heck, you could just call your customers that you know you did an installation on greater than five years ago and ask them how their system is operating if everything is working okay.

Picking up the phone to ask how a customer's system is working is a valid way to go and get. Some additional service work. So I think it's really important to understand that like you are also in control of your destiny. You don't have to just wait for the phone to ring. 

Yeah. Our, our good friend, uh, John Wilson in the home service world talks about capacity marketing and basically trying to find equilibrium between what capacity your team has on a given day and the amount of leads or, or booked appointments that are coming through.

In a similar way, I think that we have been able to kind of spin up and down service work based on our capacity and, and project bandwidth. 

Yeah. Agreed. And I think having that defined is really smart. Here's what I would say, if you're going to do that, um, you need to make sure that you, uh, have a great process in place and your team is trained and ready for that work.

You don't want to go call a customer and drum up some demand and, and then deliver up. Kaka experience. Um, so that would be, is that a technical, 

is that a technical term? 

Technical term, kaka. Got it. Yeah. Technical term was not true. Yeah. Yeah. I, I got it from my MBA program. It was pretty sophisticated, so, um, 

that's awesome.

Is that on your LinkedIn? I can't 

remember. It's on my LinkedIn. Yeah. Is 

it okay. You have like, do you have like the Colin Truman comma BA, do you have that BA? Yes. Wow. I bet your mom's proud. 

Another thing that I think is really interesting about the service work and, and talking about profitability is. Is really this concept that profitability is also driven by efficiency.

And this is where I will say we are not nailing it yet. Um, full transparency, we're probably three to four service appointments a day per service tech, depending on the service call. Um, that's not. Enough. Um, sometimes that's enough if they're long appointments. So it's like, it's, it's truly minimized the downtime.

But what what usually happens is like we give, you know, an hour for lunch, but then we usually have at least a few more hours of drive time between appointments. That's not great and is a result of our. Inefficiency in scheduling, and it's something that we are really trying to improve going into next year.

We actually have the tech stack to solve for this problem, uh, and we have the bodies and the bandwidth that could follow that tech stack and give it the attention it needs. The simple truth is we just haven't prioritized it. That's the simple truth. We haven't prioritized it. We're getting, we're getting there.

We're trying. We really are. It's something that's really important to us. It's not as simple as telling your team, Hey, make sure they're in the same area, or assign this tech to these zip codes. If you know, and you've been in this game, you've got certain customers that have to have a certain tech for some given reason.

You know, and yeah, you can make some, you can make some judgment calls there, but sometimes you just, it, it just gets tricky. So we've gotta develop some. Flow process maps to really help define that, and then we gotta roll that out to our team and put in the technology. Another thing I think is important is I think generally speaking, people charge too much for service.

I know that it's market dependent. I don't think you should be the most expensive. I don't think you should be the least expensive. I think you should be right down the middle, and I think you should do some secret shopping to figure out what that number is. I do think you should raise your rates slowly if you've got great experience, but not over the top end of the market.

I just. My gut. I'm not trying to, you know, be cheap, but my gut tells me that if you want to attract customers in your service department, you have to be competitive and deliver a great experience. I would say be on the higher end of the spectrum if you're gonna be somewhere. But, um, I think a lot of people charge too much and they, it's just unreasonable sometimes.

Well. But sometimes people are charging too much because they're trying to price people out because they aren't That's right. Aren't focused on generating as much service revenue as they can. That's right. So there's, there's a bit of a, a trade off there. The other thing. That I'll say is that the funny thing is when we go talk with like potential add-ons in our local market and we see, we've seen both, we've seen people radically undercharging and people that have been in the game for decades that are charging 10, 20, 30% higher than we are.

That's right. Even, even sometimes for inspections or pricing, more aggressive, whatever it may be. I always like to see that because that makes me feel good. Yeah. Like, well, you know, I guess we're, we're not at the top of the market. Yeah. And that's, we kind of want to be in that, uh, middle. Middle plus.

That's a good m and a tip. If you're looking at businesses to buy, ask them what their service rates are, if they're drastically lower than yours. Buy your beware because you're gonna have a lot of issues. We have experience to this. Yeah. We purchased, and I'm not just talking about the customer, the accounts we purchased where the owner would just do stuff for free.

That's sort of normal. I'm talking about just run rate. You know, we were charging 120 bucks an hour and they're charging 85 an hour. And the customer's like, no possible way we're doing that. We're not paying that. And so just be careful about that whenever you're looking. Um, just, you know, we're always thinking about m and a.

So if you're looking at m and a, ask about that service department and what are those rates, because I think that that's really important. I think another thing that I wanna highlight in terms of profitability is service work smooths out the troughs in your business where you have a lot of up and down really.

Reoccurring revenue in general does that, right? So when you combine RMR and you combine reoccurring revenue, um, that's, you know, that's, that should be able to help smooth out and cover the, the majority, if not all of your overhead. That is our goal, and this year we're going to be there where our RMR and our service revenue will cover our entire, uh, overhead.

And be, you know, significant enough to any projects we get will just be, you know, margin additive for us. And so we think that that's an important thing just for financial health instability and just security. And it's just kind of a philosophical thing with us. It's also something that, you know, private equity companies and buyers care a lot about.

The focus on RMR in this industry sometimes is to a fault. I think that, um, e even some of the brokers out there, like, I think there's just too significant of a focus or, or maybe that it's just a undervaluing and, uh, e even there's been, um, deals that we've looked at or even bought where they probably could have justified a bit of a higher value.

Yeah, I agree. But they weren't really promoting. The service revenue necessarily. I agree. Um, if it was an EBITDA based deal, then that would've been captured holistically from a financials perspective. Yeah. But just a call out on the reoccurring side. Um, you know what? Is, you know what we say multiple times, where's the next dollar coming from?

And yes, RMR makes you sleep well at night, that's great, but you also want to see regular repeat revenue coming from your customers. And that's especially true on the commercial side. 

I think that's a great point. I think that's a good segue into 0.32 because, um. You, if you're listening to this podcast, you're probably listening it to, to do it for one of two reasons.

Likely, you either want to grow and scale your business to make it more profitable so you can put more dollars in your pocket, which is great. Or you are trying to increase the value of your business so that when you inevitably sell. In a shorter, medium term time horizon, you get more dollars for your business and you, um, you know, have a more valuable business.

And I think the service department solves both of those things for you. I think the service department provides you more dollars, makes you more profitable, makes you more secure, allows you to hire without fear. Um, how scary is it to know when you're bringing on a net new headcount that. Man, I gotta make sure I can support this salary.

Uh, at least that's something we think a lot about and I think the service department, um, helps drive that value. I think the service department should be held to the same standard the sales department is. So I think a lot of times, unfortunately, and I think this, again, this is not on script, but I do think it's important to cover.

I think a lot of times people put. Very, they put, I see two, I kind of see two people running service departments. Generally speaking, I see a, a woman who was an administrator, that's kind of the brains and tribal knowledge of the whole, you know, business who maybe started as an EA and then an accountant.

And she's just super smart. She's been there for 10 years and she runs that service department, uh, and she does all the scheduling, all the billing, and she kind of wears all the hats. Then I also see the technician that was a senior tech, a lead tech, maybe a project supervisor that kind of got promoted to being into the service department.

That's right. And I don't think there's necessarily anything wrong with either of those, but I think that what you should look for is. Somebody that is highly capable and purpose-built for the service department. What I mean by purpose-built is somebody that understands customer experience and has a high level of like customer acumen and also has enough technical understanding in the business to be able to know when a customer calls and says, you know, my panel says it's in runaway, whatever.

They understand that and know the ramifications and how to prioritize that. And generally how long is that service call gonna take? Um, that person doesn't have to necessarily be a unicorn, but I think a lot of times these service managers are, are, uh, promoted from within, I think actually majority of the time, and they're not recruited externally like a salesperson would be.

Um, and so I would, I would spend the time. Either identifying the folks in your business that kind of meet that archetype of who could be a good fit to run that department, or I would go get a really tight job description and go find that person because they are the keeper of the playbook and they should also be hungry and, and have a carrot for generating more levels of service revenue.

Yeah. We put up a dashboard that has. All of our service revenue to, uh, to date all of our service revenue for the month, all of our pending revenue that needs to be converted. We don't close out a month without closing out every single invoice, uh, or sorry, every work order and convert it to invoice. Um, so we are really tightly following that metric and I think you gotta find the right person that can kind of understand that and kind of comprehend the importance of that.

Do you have anything to add to that? 

No, I love. Highlighting the person behind the department, because you can talk about all this, you can talk about it theoretically, but you have to have, you know, it's, it is not the owner, you know? Right. It's not Mr. Owner running the service department. Yeah. Seen that too.

Bad idea. Yeah. I mean, unless you're really small. I get it. But yeah, don't recommend and. Technical enough, understands the consequences, ramifications the urgency, or lack thereof while also still having a burden for the customer and, and wanting and desiring them to have a, a great experience. And it's, yeah, I wouldn't say it's a unicorn, but you do have to really work to find that person.

And you're right, a lot of people, just because they've been around long enough, they have trust internally. They just get placed in that seat. That's right. Not typically not gonna go super well. 

I also, I think this is an interesting point to drive home. That's, that's kind of, uh, maybe shocking, but the single largest source of our leads in our sales department is our service department.

Yep. 

We have a, a lead dashboard. We do a lot, get a lot of leads from coffee drops, which we've talked extensively about here a lot. We do a lot of volume there. We get a lot of leads inbound from some of our digital marketing efforts. But our highest quality, meaning the ones most likely to close at the best margin with the best customer experience, and really just the highest number of actual opportunities coming through, come from our service department.

If you looked at our dashboard, that would be the highest one, and those are just the ones that we're flipping from. The service department into sales, right? Not just the ones that the sales department keeps. So there's obviously some additional revenue that's captured there. Um, so we make this, we make this a really big deal.

I don't think a lot of people make it a big deal because I don't think that they care a lot about it, and I think they think, oh, I just want more. I either want more RMR, just gimme more RMR, or I want more projects. And I think there's a, a really big gap here that if you're looking to buy a business or get into the industry, uh, in any, in any, in, in any industry, you want to find a company that has several sources of revenue, the more sources you can find, the healthier that business is and the higher valuations you will get.

And generally speaking, our business has three recurring revenue, RMR monitoring fees, whatever. Service, work, inspections, et cetera, and net new sales or project work. And whenever you have three sources of revenue, you've got a really healthy staple. Business. 

A lot of owners, like we said earlier, view service as the thing that they have to do that's typically not very profitable or they lose money on to keep the customers they've already sold to happy enough to stay under contract.

Yeah. Like that is a broken view of service in this industry. 

I wanna, we've kind of covered 0.3, between both points one and two, and I've got one more thing we covered before we go into homework. But to recap, 0.3, which is your business will be more valuable, the higher amount of reoccurring revenue you have, the higher valuation you're gonna get, particularly if you're gonna be sold on an EBITDA basis.

But even if it's an RMR basis, that's still something sophisticated buyers are going to look at. They also wanna look at the profitability of, uh, that revenue, obviously. Um, and they wanna look at what type of creative value you get. Is it, is it pushing, is it creating, uh, stickier customers? Is it helping with retention, et cetera, et cetera.

So, uh, we've said this multiple times. You can support more techs if you can support a lot of techs. Like, I just, just as a quick note, like if you've got a business that's, you know, whatever, $10 million of top line revenue, but you have. The technician count for a business that's $15 million, but you're still profitable.

Extreme like health, very healthy profitability, north of 15%, north of 20%. From a net income perspective, that is viewed as more valuable because what happens is the. Buyer's gonna say, they're gonna recognize that. They're gonna say, oh, for a business of your size, you should only have this many techs. You have double that and you are still very profitable.

That looks great to a buyer. So these are just all things, like if you're looking at this, at looking at selling, looking at buying businesses, I'm all, 'cause we look at that, right? So when we look at buying a business, if it's a $4 million business and they've got two technicians, we're like. That's not a business we're interested in or we've got major concerns, um, because we know we're gonna have to add headcount.

Yeah. I'd rather you be overstaffed. How about that? Um, a couple things that I wanna talk about, like to get before we transition into homework is, is really just some like practical. Uh, you're not gonna do all things these things for, for homework, but you may do some of them, some practical steps on like how do you create a robust, uh, service department.

And what I would tell you is go to your favorite whiteboard. 'cause if you listen to the show, you know, I love whiteboards and I would draw some various categories. The first thing I would draw is, um, what is the archetype of the service manager you want? Even if it's that person you have today and you wanna give them a shot, what is it that you think is going to drive the best service manager for me, that is somebody that is a.

Highly organized person and an extremely strong communicator. Those would be two of the very most important things. And then I would say their technical prowess is kind of a third thing. Anything you wanna add Steven on? Like what they should be looking for for an archetype of a service manager? 

No, I think that's good.

It's, and it's on the communication like that is. Two customers, two team, all the way around. 360 comms. Yeah. So if you're thinking about that, don't just think in, in one of those elements of communication, they've gotta be strong kind of in all areas 

and, and they need to have an ownership mentality, meaning they need to have ownership of that department and understand the why.

Like if you're not sharing financials with your service manager, it's gonna be tough for them to get bought in. Like, and not just revenue, like costs. Like do they understand what the break even is For the rev, the service department needs? Our source manager knows, he knows very acutely what the break even is to be able to support the salaries in his department.

It doesn't just affect his bonuses, it affects discussions he would have to have if he didn't meet those minimums. 

Yeah. What you measure improves. Um, I, I love how we scoreboard it. Um, there's. Ever increasing goals on the service side. It's not like we set it once. I mean, we're continuing even looking at next year, like trying to push Yeah.

That even further in terms of an average monthly service revenue. Um, so I think, uh, you. Some owners have been burned in the past sharing too much information with employees, so you have to be thoughtful about that. But I think there's a way to do this well without oversharing. We're not saying you have to sit down with like your entire p and l if that makes you nervous, but at least categorically, like in this department, they need to understand how that business unit is functioning and what is actually happening from a profit and loss perspective in the service department into, yeah.

Hold them accountable to goals, not just top line. 

Yeah. SLA goals. That's, that's the great segue to the next point, which is set your goals, set your KPIs, write down on the board what are your KPIs, financial KPIs like gross profit, average, and um, you know, top line revenue. Also SLA goals, turn time, uh, goals for levels of communication.

Uh, so that, that would be kind of step two. Step one is draft your archetype of a service manager. Number two would be what are your goals for that department? And number three is map out in a linear way. What is the. Service process today. And what do you think it needs to be to knock the socks off of your customer and map out all the little various touchpoints, you know, map the process out in black, and then in blue add, here's all the various, uh, communication touchpoints that we need to add to deliver an amazing experience.

If you can write that out on a whiteboard, you can then document roles and responsibilities that tie to those goals. And tie to the actual process. That's just the way that my brain thinks. You may have another way of doing it, but I think that that's kind of a really important thing to, to, to do, to really start driving a great service department.

Do you have anything to add to that before we jump into homework? 

Nope. 

Then I would say the homework ties to that, which is map out your service, uh, process, um, and try to get it as standardized as you can, and then try to start framing out what a net news service process can look like and where the communication expectations are.

And I would also try to map. In red, where are the various issues you have within your service process? You know, are you not quoting pricing enough on the front end? Does that need to be a KPI that your team holds? Because then at the end, they're surprised by the price. Like there's various steps that you need to be thinking about.

So I would get on a whiteboard, I'd spend 30 minutes. The homework would be map out the process. And let's, let's get a future. It's called gap analysis. We used to do this all the time. It's like, what's your current state? What's your future state? How do you get there? What's the gap between the two? 

Yeah.

The other thing I'd add is you might be able to glean some things from doing like a postmortem on frustrated customers, uh, and let's say last 60 days, like what are some of the, uh, ohs and the oopsies that you've had internally, and just go learn from those and then kind of bake that into this homework.

Yeah, totally agree. In fact, uh, I. Couldn't agree more with that because I think that having that sort of look back is really important. It's gonna be the, it's gonna be the compelling event. You're gonna start to find a lot and you're gonna start to realize, dang, I knew there was issues, didn't know there was this many.

So, uh, yeah, I would say do the homework. We are extremely passionate about the service department. We hear from, uh, listeners all the time, in fact. Today we have a listener that is, uh, looking to acquire a business in the department. His first acquisition in the security industry. And I set up 15 minutes with 'em.

So I'm talking with 'em this afternoon. We're gonna chat. They reached out, said, Hey, can I bounce some ideas off you? I said, absolutely. Here's my calendar. Grab 15 and let's talk. So I'm always open. Uh, hit me up on LinkedIn. Hit us up on the email info@entryandexit.co. Don't forget to subscribe. Leave us a review, hit the like button, watch our shorts.

Truly we do this because we love to help and we enjoy it. Um, the more engagement you can give us helps us, um, and we'd really appreciate it. So thanks for listening. Hope you guys have a great week.