Seller Beware I often receive calls or emails from dealers seeking my advice on new staffing recruitments, additional parts and supply inventory levels and additional cross training that will be required for a new MPS client. Usually the inquiring dealer will send a simple list of equipment to help me understand their new customer’s needs. Unfortunately this inquiry comes after the deal has been signed and the problems have risen to the surface. In most cases it happens about 2 or 3 months into the deal when sales, service and the controller are fighting with one another. The owner realizes the MPS deal is losing money. Sales is concerned that the client is not satisfied with the level of service and support. The promise of 4 hour response time by factory trained technicians is not being met. Prior to the signing of the deal, the company did not even have any factory trained technicians for the majority of products being covered under the new MPS. The controller maintains there is not enough money in the deal to pay for parts, much less to hire more techs. The service department was forced to lay off one tech (who had been with the company for several years) to be able to afford to quickly recruit a new tech that was already certified on the very old equipment being covered on the new MPS agreement. Long time techs are upset that the new guy is being paid more than they are making after many years of loyal employment. The parts department is running over their monthly parts budget because they must buy parts for equipment they have never seen. Due to the fact this company is not an authorized servicing dealer, they have to buy parts from distributors or grey market importers. There is a lack of OEM technical support. The newly hired certified tech is technically pretty good, but he is so busy keeping the machines working, there is little time for him to cross-train other techs on the product. The service manager tried to get a group of his techs to come in on Saturday for technical training on the newly acquired products. The training would be taught by the newly hired certified tech. Even though all the attending techs will receive time and a half overtime pay for the Saturday training, there was a near mutiny caused over the newly hired tech being paid more than the current techs for the Saturday work. The controller wanted to have all the techs that came Saturday for training to not work one day the following week. By trading out the time no overtime is required. The sales manager was waiting for the newly trained techs to immediately get to work on the newly acquired equipment. He fought against the trade-out of time. After listening to the dealer’s tale of MPS woe, I said, “We need to work backwards. We need to calculate the total base revenue received each month and calculate the anticipated overages. Once we know how much money you are receiving, we can figure out exactly what you can afford to do. You may be able to hire an additional authorized tech, and pay for a little overtime to cross train. You may have to increase your parts and supply budget for a couple of months to cover the cost of ramping up your inventory. I need to see a list of all the equipment being covered including model and serial number, current meter count, and exact location, including a key operator contact.” At that point I heard a very big sigh. “We really don’t have a complete list yet. I do know after the first two months we are $47,000 in the hole. We lost over $25,000 the first month. Last month we improved, only losing $22,000. The equipment is all over 5 years old. The previous servicing company was an OEM direct branch. From what the newly hired techs says, the branch did absolutely nothing the past year knowing the 5 year lease was going to be up. As it turned out, the customer took advantage of the $1 buyout clause and now owns all the half-decade old equipment. Our sales rep convinced them we can keep the equipment going for half their former cost because they no longer have a lease payment.” I then asked the dealership owner to refocus on not having a list of equipment that is being covered. “If you do not have an itemized list of equipment and meter reads, how do you know what is being covered? How do you know how much to bill each month? How will you get beginning meter readings to have a point of reference for your billing?” This time the dealership owner’s sigh had turned into a moan. “Our sales manager felt we should move quickly on this opportunity. He was afraid if we took time to get a list together, another dealer might get in on the deal. He did not want a bidding war. I now completely understand the old saying when you make a decision in haste, you will have plenty of time to figure out what went wrong. We goofed; we know we did a lot of things wrong. What can we do now?” Those dealers who are just starting to make MPS agreements should consider learning from the mistakes of others. Make sure you do the tasks that are so basic that they might be forgotten in the excitement of closing a big MPS agreement. • Inspect every piece of equipment. Make a copy or print to make sure it works. • Get serial numbers, meter reads and date of original installation if available. • If there is a service history with the machine, make a copy of it during the inspection. • Note the exact location and appropriate key operator and their phone number, extension and/or email address. • Find out why the end user is considering changing their servicing company. • Always have a minimum base click count which is invoiced monthly in advance. • Overages should be collected and billed monthly or quarterly in arrears. • Verify in writing how long it will take to receive payment once the invoice is received. • Depending on your accounting system: Ask if invoices can be sent electronically. • Request electronic transfers when they pay your invoices. This can increase your cash flow by 5 to 10 days per month which amounts to increasing yearly cash flow by 60 to 120 days. • All machines are not the same. Just because your service department is well trained on one or two lines of equipment does not mean they can fix everything. • When calculating the cost of supplies plan on using a high quality non-OEM supply on monochrome printers. Do not use the lowest price vendor you find on the internet. • When dealing with copiers (especially color) make your calculations using the cost of OEM supplies. • Include the cost of freight from the vendor to you and from you to the end user. Once you get a feel for the customer’s needs, you may be able to transition into successfully using compatible copier and color products. But do not count on it. • Having exact equipment location and contacts can save the dealership thousands of dollars in field tech labor. • Don’t be in a rush to lose money. Make sure any signed MPS agreement does not require a technician onsite 8 am -5 pm daily. It is not necessary to have a technician assigned full time to any location. Familiarity breeds laziness, instant excuses and alibis. If a full time tech is requested, write your MPS agreements to include daily in person onsite coverage of field technician. This does not mean the tech must be assigned to work at a customer’s office from 8 am -5 pm daily. In fact, most techs who are paid for working full time at a single location rarely work 8 hours per day. Make a point of having the tech always start at another customer’s site which should be within a 30 minute drive. Have a supervisor drop in unannounced from time to time to see what the assigned tech is actually doing. In the words of Ronald Reagan, “Trust, but inspect.” When it comes to MPS agreements, an ounce of prevention is worth $100,000s of cure. Even a tiny pricing mistake, multiplied by millions of clicks can be disastrous. Don’t let the fox guard the hen house. Anyone who will directly make money on a new MPS deal should not be the sole person verifying the facts or calculating the cost. u Ronelle Ingram, author of Service With A Smile, also teaches service seminars. She can be reached at ronellei@msn.com.