Every service company has to make an assessment of how much unproductive non-billable time their crews will have in a year, and this in effect becomes part of their overhead.
Do you track this? If not, you are not alone. Many if not most companies don’t track non-billable time and are not aware of just how large it is.
Last week, a member of one of my landscape peer groups emailed me and the group with the following discovery: “The last 2 years I started tracking all un-billable hours for our field labor to get the numbers for our new budgets this year. Last year we used 25% as un-billable and after running the numbers found out we are actually at 33.9%. That is a difference of 8.9%. The difference for us works out to $30,335 in missed opportunity…”
But the math shows that his opportunity cost is much higher! The gap in hours (the 8.9%) was 2159 hours. If you multiple that by his hourly wage he charges out you get $115,700. Imagine if you had an additional 115k in revenue, and the labor was already paid for? How much of that would fall to the bottom line? If those became productive hours, all you would have to pay for would be the materials, and some other variable costs. Your fixed costs are covered, and even some of your variable costs would already be covered. The rest would be profit. Even if you could recover just half of that, it would be a nice lift to your bottom line.
The total opportunity gains are even higher: Because the more productive time you spend at a client’s property, the more customer satisfaction and goodwill you create, the more you build your brand, and the more you avoid your clients from hiring someone else to service their needs. To protect your clients from shopping elsewhere, the best defense is a good offense.
And there is more: Even if you charge your clients for travel time, you can still aim to decrease travel time and increase productive time spent at a client’s location. This will make you more money and make your clients even happier!
Jeffrey’s Breakthrough Idea: Stop the madness, your non-billable time may be killing you unless you focus on it directly. How much profit is leaking out of your company?
- Measure it, and start to manage it.
- Utilize incentives so your crews are constantly brainstorming on how to reduce their non-billable time.
- Join me at one of my all day workshops (listed below) to learn which incentive systems work best, and how to motivate your team to work more efficiently.