In This Issue…
We have seen hundreds of CI companies and almost as many different ways of tracking and billing for time. Most are fixed bid companies, allocating hours to projects and hoping their crews successfully complete the projects in the allotted time. It’s not uncommon that jobs take longer than estimated.
To protect from this eventuality, others charge on a time and materials basis. Here, they must hope that their timekeeping is accurate and that the customer is in agreement, even if they run over the time they thought it would take. Here again, the CI might have to “eat” the hours the customer is unwilling to pay for.
Our general approach is different; instead of “selling time”, we advocate billing for the value of the work performed. “Solution billing”, as it were.
The natural tendency – and we have offered this as good advice for many years – is to track of on-site project hours. But what about
travel time, staging time, delivery and unloading time, planning time, phone support time, etc? Not to mention paid time off, training, company meetings? None of these are typically charged to projects. So seeing weekly productive (billable) hours at anywhere from 15 to 24 is very common for CI companies.
The LBU Opportunity
A full-time tech works 2080 annual hours. A $100/hour billing rate gives the tech a natural limit of $208,000 billed labor in a year. In actual practice, the average tech bills far, far less.
But when you move to “solution billing”, a tech could produce or install close to or even more than this “payroll hours” limit.
Example: two techs go on a job and install 24 pairs of speakers. Each pair has an hour of labor attached. But even with morning truck load, then unload, then unbox and install, then clean up, they got all the speakers installed in their 8-hour workday – and produced 24 hours of labor billing. This produces a vastly different result than two techs reporting 6 hours each on-site and charging for only 12 hours.
The trick is to understand that the act of installing isn’t just the install time itself, but requires a large number of other time-consuming disciplines both before and after the actual install activity. You know what they are but, if you’re like most CI’s, you don’t charge for them.
And that’s the opportunity. You can. You should! If you pay your techs 40 hours/week, why shouldn’t you get paid for all the hours you pay them? Or at least, a large majority of them?
Our advice: dive back in to that labor allocation database. To every hour currently programmed in, add a .5 to cover all the indirect costs you incur on EVERY installation. And stop calling them hours!
Instead, you might call them Labor Billing Units (LBU’s). You’re no longer selling time. You’re selling a complete solution.