Author Jeffrey Scott, MBA, is an NALP consultant member and author, business coach, hall-of-fame consultant, and expert in growth and profit maximization in the lawn & landscape industry.
Every service company has to make an assessment of how much unproductive non-billable time their crews will have in a year, and this in effect becomes part of their overhead.
Do you track this? If not, you are not alone. Many if not most companies do not track non-billable time and are not aware of just how large it is.
Here is an example of the impact it can have. Recently, a member of one of my landscape peer groups emailed me and the group with the following discovery: “The last 2 years I started tracking all non-billable hours for our field labor to get the numbers for our new budgets this year. Last year we used 25% as non-billable and after running the numbers found out we are actually at 33.9%. That is a difference of 8.9%. The difference for us works out to $30,335 in missed opportunity…”
But the math shows that the opportunity cost is much higher! The gap in hours (the 8.9%) was 2159 hours. If you multiple that by the hourly wage that company charges out, you get $115,700. Imagine if you had an additional 115k 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 already 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.
How to Take Action:
• Measure your non-billable time, and start to manage it.
• Utilize incentives so your crews are constantly brainstorming on how to reduce their non-billable time.