End-to-End Profitability – The Ultimate Goal in FSM
Earnings – Costs = Profits
That simple formula has existed since money was first invented around 7,000 BC. For thousands of years, businesspeople have known they need to calculate profits and they’ve known how to do it. So why is profitability still a struggle for so many in field service?
Most providers know if they’re making money or not. The bank balances over time confirm as much. But knowing if you’re in the red or black says little about the actual profitability of the company. Profits are coming in. Where, when, why, and how remains a mystery. Field service businesses need to understand profitability in-depth, yet few actually do.
In this blog, we will explore the concept of end-to-end profitability in field service: why it’s so important and so hard to achieve. We will also draw on our own background in field service to propose a solution – one that has helped us understand and then maximize our profitability – that you can apply as well.
End-to-End Profitability Explained
The concept of end-to-end profitability helps illustrate the difference between profits and profitability. Profits imply the company is making money. Profitability implies the company is making money at every opportunity. When that company achieves end-to-end profitability, they are making money off every customer, job, technician, and aspect of service delivery. When earnings always exceed costs, it equals end-to-end profitability.
You have an obvious incentive to make the company more profitable, earning more money from more sources. This issue becomes extremely important as the field service industry undergoes consolidation, digital transformation, and competitive swings, all of which will make profitability key for survival. Unfortunately, numerous obstacles stand in the way.
It may take across-the-board adjustments to prices and policies to ensure a company makes money on everything it does. Before any of that can happen, however, you must understand the reality of earnings and costs – where they flow into the organization and where they flow out. Anyone in field service knows how tricky this can be.
Take a very basic example such as technician costs. On top of the wages a technician earns, you must account for benefits, equipment costs (work truck, fuel, etc.), safety equipment, overtime, and other expenses that contribute to the full cost of sending someone into the field.
The cost of parts can be just as complicated. If each part a technician uses (including those they must buy on the fly) is not recorded and accounted for, you can’t accurately calculate what a job costs to complete. Equipment costs can obscure things even further, along with numerous other factors that complicate earnings and costs alike.
Most companies think they understand profitability with reasonable accuracy. They may be much farther off than they realize, though, and visibility bears the blame. When you can’t see exactly what you are spending compared to what you are earning, the profit formula falls apart. Therefore, end-to-end profitability isn’t possible without a clear view – and ample data – into everything going on throughout the field service ecosystem and beyond.
Our First-Hand Experience
We are one of the only companies in the field service management (FSM) field with real experience sending technicians to job sites. Our company began within Headland, a leading distributor, installer, and servicer of industrial equipment throughout Australia.
Headland had adopted NetSuite to handle most aspects of business management. They also adopted an FSM solution to coordinate scheduling, parts inventory, and technician support. Seemingly, Headland had everything it needed to run an efficient, digital operation.
Upon using these tools, however, it was obvious that some flashy features and slick interfaces covered up some fundamental problems with the field service software. It couldn’t track key drivers of costs and revenue, making it uncertain how profitable each activity was. The software also didn’t integrate natively with NetSuite, meaning the business management system lacked key data about money moving in and out of the company.
The problem wasn’t NetSuite – one of the most robust ERP offerings on the market. It was an FSM solution that could make some superficial improvements but could not answer a fundamental question: are we profitable? To the decision-makers at Headland, that was an unacceptable oversight.
Reviewing other FSM options on the market revealed that most struggle with end-to-end visibility. They expose some but not all the picture, leaving major blind spots about what is profitable and what is not. Without an adequate FSM solution to rely on, Headland elected to build its own. Thus, NextService was born.
Key Features for End-to-End Profitability
Our own experience struggling to get a handle on profitability informed the features we built into our NextService product. In addition to all the core tools necessary for field service – scheduling, inventory, field mobility, customer engagement, etc. – NextService has a powerful focus on profitability.
There are two key features to that focus. First, complete visibility into everything a technician does before, during, and after completing a job. By capturing more of what a technician does in the course of a job, you learn more about what that job costs and gain the ability to bill for it correctly. Data takes the guesswork out of profitability, replacing assumptions and estimates with hard numbers about earnings and costs.
The second way NextService facilitates profitability is by running on-platform within NetSuite. As we learned firsthand, any disconnect between the FSM software and the ERP only makes profitability harder to understand. Software integration is not enough, either, because there will still be obstacles to how quickly or completely data can flow from field service to business management and vice versa. Since NextService runs on-platform with NetSuite, the two tools share common databases and an overlapping toolkit. Understanding profitability – in granular detail and with up-to-the-minute accuracy – becomes quite simple once field service data meets the powerful capabilities of NetSuite.
End-to-End Profitability in Action
Recognizing the growing need for field service providers to be obsessive about profitability, we worked to eliminate any obstacle standing in the way. That’s apparent when you get hands-on with the software.
The heavy lifting happens automatically. Throughout the service delivery process, which is now all-digital and fully integrated, the software captures and stores every relevant piece of data: technician hours worked, parts and equipment used, extra expenses incurred, penalty rates that apply, and more. All that data informs the complex calculations used to determine the total job cost along with the maximum billable amount under the service agreement.
NextService, backed by the capabilities of NetSuite, runs those calculations automatically and prepares a profitability report for each job with a clearly itemized list of costs and expenses, followed by the exact amount of profit. There is no question whether a job was profitable, to what extent, or why. There is also little to no input involved with answering that question. Understanding profitability is a foregone conclusion.
Superior visibility reveals the profitability of each job, but that is just the beginning. As jobs accumulate, you begin to understand the profitability of each customer, each service, each technician, or each equipment type. And once you have an end-to-end understanding of profitability, you have, for the first time, an accurate perspective on profitability company-wide. If a company only had the bottom line before, they now have a map of how every dollar spent or earned contributes to that final figure.
After Profitability Comes Certainty and Stability
Exciting things happen once you can track end-to-end profitability. Most immediately, you can start fixing whatever issues may be inflating costs, depressing earnings, or putting a ceiling on profits. With clear visibility into where problems exist and what they include, solving them becomes simple, and the results are obvious in the profitability figures. Visibility uncovers problems that may not have been apparent before. Likewise, it points toward unexpected solutions for intractable issues. Maximizing profitability depends entirely on being able to track it from end to end.
Growth and competitiveness are also closely related to profitability. Once you have an accurate, detailed understanding of what drives (or inhibits) profits, you can make more realistic plans for the future designed around what your company does best. All signs suggest that field service providers of any shape and size will need to adapt as the industry evolves rapidly and unpredictably. Big changes are coming. Responding in the right way, without hesitation, will be easier for any company with keen knowledge about profitability.
NextService – Unleashing End-to-End Profitability
NextService offers everything you need to make profitability paramount. What we don’t offer is a one-size-fits-all solution. The importance of profitability may be universal, but the path to get there and the challenges ahead are unique to every company. That’s why we customize each deployment to reflect how your company tracks earnings, costs, and everything in between.
If you already use NetSuite, upgrade to FSM software that works in perfect parallel. And if you are searching for new field service software, go with one that brings the impressive strengths of NetSuite to the table. With NextService, profitability is in your control. To learn more, please contact us for a demo today.