Every service company should assess how much unproductive, unbillable time its crews will have in a year. This, in effect, becomes part of your overhead. But most companies don’t track non-charge time and aren’t aware of just how large it is.
In the last two years I worked with a company to uncover more than $400,000 in profits. This week we found $50,000-plus in their non-charge time. This company is a member of my landscape peer group. A company leader emailed me and the group with the following discovery: “The last two years I started tracking all unbillable hours for our field labor to get the numbers for our new budgets this year. Last year we used 25 percent as unbillable, and after running the numbers found out we are actually at 33.9 percent. That is a difference of 8.9 percent. The difference for us works out to $30,335 in missed opportunity…”
But the math shows that his opportunity is much higher! The gap in hours (the 8.9 percent) was 2,159 hours. If you multiple that by the hourly wage he charges, you get $115,700. Imagine if you had an additional $115,000 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 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 opportunity for gains are higher than that. Why? Because the more productive time you spend at a client’s property, the better 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.
But wait, there is more. Even if you charge your clients for travel time, you can still aim to decrease travel time and increase productive chargeable time spent at a client’s location. This tactic will make you more money and make your clients even happier!
Stop the madness. Your non-charge time may be killing you.
Jeffrey’s Breakthrough Question: How much profit is leaking out of your company?
Take Action: Measure it, and start to manage it. Use incentives so your crews constantly brainstorm how to reduce their non-charge time.
Photo: ©istock.com/BartekSzewczyk
