I’ve written about the first two steps: Know how you generate revenue and make sure you have profitable revenue. Here’s the third step:

Track your monthly profitable revenue per unit, i.e., your billable hours.

Track billable hours every week. Assign this task to the person who does payroll.

Your timesheets, whether paper or electronic, should have the following categories (in addition to the standard ones):

•    Training/meeting
•    Shop time
•    Warranty/callbacks

This way you can easily see the nonbillable hours.  Once your field personnel have to “report” shop hours, they magically become smaller because what gets monitored improves.

In slower times of the year, some contractors have their field personnel work on their homes, the office, and other noncustomer activities to give them enough hours each week.   You should track these hours as other or shop time.  

How to get started tracking billable hours

First, how many billable hours do your field personnel have now?  Calculate it and post it. 

Post the percentage on brightly colored paper where everyone can see it.  

Your team will ask, “What does the percentage mean?”   

Answer with, “I’ll explain in a few days.”

Then explain why it is important, and why it is essential – without billable hours, the company doesn’t generate revenue.  The company needs to keep it as high as possible so that you can track and post it every month.  

Note:  Make sure that the billable hours are profitable … make sure you are pricing correctly.

Where should your field personnel’s billable hours be? Service should be 75% billable or higher.  Install should be 85% billable or higher … as a whole, the company’s billable hours should be higher than 75% and preferably 80%.  Of course, if someone is on vacation, there is a holiday that week,  the billable hours will be lower for the week.  However, the monthly results should absorb the holiday hours.

Give bonuses

Some contractors give bonuses for maintaining billable hours at a certain level.  For example, if your company’s hours are initially at 50% billable, a bonus might be $50 per person for bringing billable hours up to 60% or more each month.  Then, when billable hours reach 70%, the bonus might be $100.   If the company achieves an 80% or higher billable hour percentage for three months, the bonus might be $250 per employee. Every quarter, everyone in the company gets a $250 bonus (in a separate check or electronic deposit) for maintaining the billable hour percentage higher than 75%.

Can you afford this bonus?

Assume:

•    10 field personnel
•    18 total people in your company
•    60% initial billable hour percentage
•    Standard 40-hour workweek
•    Net profit per hour is $50 an hour

60% billable is 24 hours a week.

80% billable is 32 hours a week.

8 additional billable hours a week

Additional net profit is $8 x 50 or $400 a week per person or $4,000 a week.

Additional net profit per quarter is $42,000 (assuming 13-week quarters)

Bonus paid out is $250 x 18 = $4,500

Yes, you can afford the bonus.

When establishing the bonus, posting the weekly and monthly percentages is critical. Everyone sees where the company is and can track their bonus payments.  You’ll also get suggestions from the field for making the office more efficient.  Likewise, you’ll get suggestions from the office for making the field more efficient.  Implement the suggestions (or say why they are not feasible).  Everyone will know that you are serious about keeping billable hours up.

What about posting individual billable hours? Some owners and managers do post individual results.  Some don’t.  If all field personnel are nearly at the same percentage, seeing who is on top becomes a competition.  If there are fewer field personnel, help them get their billable hours percentage higher before you post the results.  Tell them you will post results in three months and don’t want them to be at the bottom.

Keeping your field employees profitably billable means more net profit on your bottom line.

I have an Excel spreadsheet template that HVACR Business readers can use to track billable hours. Just send me an email if you would like to receive it.

Ruth King has more than 25 years of experience in the HVACR industry and has worked with contractors, distributors and manufacturers to help grow their companies and become more profitable. Contact Ruth at ruthking@hvacchannel.tv or at 770-729-0258.