Overtime can be the deciding factor in finishing a job or missing a deadline. These extra hours can be beneficial in the moment but can also dig into your bottom line if not managed properly.
Like many aspects of business, having a system in place is key for healthy profit margins, and overtime is no exception. A common mistake is not knowing your numbers, which can lead to overreliance on overtime, especially after peak season. It’s easy to say “that’s just the nature of the business” while allowing overtime to become a routine part of your business model. One way to minimize profit leakage is to understand the numbers in your system.
“Having standard operating procedures around planning can help you schedule jobs more accurately,” says John Gualtiere, president of Hudson Landscape Contractors & Tree Care, based in Pound Ridge, New York. “Think about crew sizing, equipment, how long it takes to get materials, and how long the job takes.”
Those figures will gauge the overtime needs for your company during the busy season and help determine staffing. When planning is lacking, there’s a tendency to be reactive to the number of hours required for each job. As jobs are completed, keep records of the hours spent on each property.
“Track the types of jobs when overtime is needed, and document why,” Gualtiere says. “Look at how much of that overtime pay is cutting into your profit margin. By closely tracking, you will also start to notice patterns that can be used to adjust your SOPs so you can plan better in the future.”
It’s not just time on the job site. Examine the time spent at the shop and keep those hours separate to get an accurate picture of how they’re being used.
As you review the total labor hours each week, calculate what percentage of these hours are overtime. If you notice overtime hours adding up while margins are flat or shrinking, that’s a sign of extra hours becoming a problem.
Hidden costs can add up during peak season. A perfect example is windshield time, which can easily pile up if the schedules and site locations are not organized efficiently. When possible, cluster job sites in specific areas to minimize drive time. There are always a handful of jobs that run longer than expected or require changes from the original plan. While these situations sometimes can’t be avoided, knowing how to manage them can limit the damage to profits.
An overreliance on overtime will lead to costs that go beyond finances. Burnout can lead to mistakes in the field, injuries, and callbacks from clients. Cross-training provides the flexibility to spread out the workload and keep you from relying too much on certain staff. Trial and error is part of managing overtime, but being intentional will lead to improvements.
“Use every overtime as a learning experience,” Gualtiere says. “There will always be situations that are outside of your control, like the weather. But for the problems you can avoid, refine the process so the same issue is less likely to happen again.”
