How One Hour a Day is Costing You Thousands
And we’re getting the tools out [waves wrench around] because we’re going to take something apart and put it back together.
What I’m talking about is the concept of divide to multiply. Sometimes when we’ve got a challenge, let’s say a profitability challenge in the service business, we need to break it down and try figure out what is the exact scenario that’s leading to the profitability challenge that we might have.
So let’s make the assumption that we’re a service business; we have people that go out in a vehicle perhaps, and they’re delivering service.
Either they’re installing things or fixing things, or even doing projects, and we need to track their time. They’re billing by the hour, or they’re billing by the project and we want to be able to track their profitability in each project.
We need to make sure that we know how much time are they actually billing, as a percentage of how much time they have available to bill.
If we find that that percentage is a little bit lower than it should be – at least about 80% – then we want to say “ok, what’s happening with that time? Where are the lost hours going?”
I want to help you understand what the profitability loss might be if you’re losing billable hours each week with a team.
Let’s say, for instance, in our service business, we’ve got two technicians and each of them is missing out on billing let’s say 1 hour per day each.
Their average billing rate is let’s say $60 an hour.
So 2 technicians, each missing an hour a day, that’s 2 missed hours per day. That’s $60 each. In that day you are going to miss out on an opportunity of $120.
That doesn’t seem so bad, but it gets a little bit worse.
In a week, that’s going to be $600 lost.
And in a month, it’s not $2400 because there’s 4.2 (approximately) weeks in a month. It’s actually $2600 a month.
nd in a year, it’s going to be $31,200.
That lost hour didn’t seem like a lot, but at the end of the year…$31,000. That’s an awful lot of money. And by the way, that goes right to the bottom line. There’s no profit margin on that. It’s full profit because your technicians are already paid for.
So what if we had three technicians? Let’s run that:
3 technicians, missing an hour each at $60 an hour.
That would be $180 per day.
It’s going to be $900 a week.
Wow. $3900 a month. And – wait for it –
$46,800 a year.
If that’s not enough to reason to check out your technician utilization, and look for those lost hours, I’m not sure what is.
So the next steps are: Find a way to make sure you can measure how much time is available to be billed for your techs, and how much time is actually being billed. If you find there’s large gap, now you know how to quantify exactly how much money you’re losing because your technicians are missing out on their hourly billing.
If you have any challenges around this, or any questions, please, drop me an email or give me a phone call. I’m happy to take you through it with your own numbers.
Click here to download the worksheet to run your own numbers!
So that’s it for this week! Looking forward to hearing from you about what you find in your numbers, and see you next time!