What are continuous signals?
Last time I gave you the first continuous signal to watch – tracking Accounts receivable to Accounts payable every Friday. This is something little that takes almost no time (assuming your receivables and payables are up to date) and can show the trends of your business.
Here’s the second signal – do this weekly:
Track your billable hours every Friday (or the day of the week that you do payroll). This is something the person who does payroll should do as part of the payroll process. Email me if you want a template to track billable hours (rking@ontheribbon.com).
Why billable hours? It’s because it’s how you generate revenue in this industry. No billable hours, no service. No billable hours, no project or replacement work. You get the idea.
So, where should your billable hours be? On average, service should be somewhere between 60% and 80%. On average, project and replacement somewhere between 70% and 90%.
In slower times the billable hour percentage may drop and it may be 100% or close to 100% in busier times.
The maximum billable hours percentage – for a year – is 91% unless you are a union company. Why? If we assume that a field employee works 40 hours a week, that is 2080 hours. There is vacation time, holiday time, meeting time, training time, and warehouse/callback time that is not billable. This subtraction makes total billable hours about 91%.
Union companies have close to 100% billable hours because they take care of holidays, vacations, etc. in their compensation package for the field team.
Warehouse time kills billable hours. How much time do your field employees spend each day in the warehouse? It should be less than 15 minutes. And, wherever possible, include warehouse time in job estimates.
Travel time, unless billable to your customer, is not billable. Callback and warranty time kills billable hours too. Track your billable hours to really see how productive your field personnel is.
Next time – another continuous signal.
Want a financial statement review?
Every business, large and small, can benefit from taking a closer look at its numbers. We’re happy to do a quick review – showing you what appears to be good and some areas you might want to pay attention to. (This is where Financially Fit Business can help too). Click here for more information.
And, pass along this offer to your business friends and colleagues who could benefit from this review too!
Ruth King is well known as “The Profitability Master.” She is passionate about helping small business owners become profitable and stay profitable. For over 40 years she has coached, trained, and helped contractors and others achieve the business growth and goals they wanted to achieve.
Contact Ruth by emailing ruthking@hvacchannel.tv.
