I have an urgent public service announcement.
There’s a serial thief on the loose…
He’s scarier than a balaclavad 6’7” behemoth in the middle of your living room….
Sneakier than that unkillable cockroach terrorising your kitchen…
And nastier than Miss Trunchbull in a classroom full of kids…
His name… ‘Dead Time’
The #1 ENEMY of profit.
This little sucker is responsible for empty bank accounts all around Australia.
Let me explain…
Say you have a field worker costing you $400/day.
Over a typical 8-hour day, that comes to $50/hour.
If you wanted to make a 50% gross margin on this worker…
You’d just charge him out at $100/hour.
That would mean you make $800 in labour revenue per day.
Super simple right?
But wait… there’s more…
If you looked over an entire year, most field workers have a stack of dead time.
(research shows around 40%)
So, if we break that down into a daily average…
Your field workers aren’t charged out on average for 3 hours per day.
Meaning you only have 5 hours to cover their $400 daily cost…
Raising their hourly cost rate $80/hour!!!
That’s $30 more per hour than before.
Seriously.
Say goodbye to $800 in labour revenue at a 50% gross margin…
And hello to $500 in labour revenue at a 20% gross margin.
i.e. more work, less money.
That’s a BIG hit to your profitability, and an even BIGGER hit to your bank account.
And let me show you just how dangerous ‘dead time’ can really be:
You can see that a 5% reduction in billable time (from 70% to 65%) can reduce gross profit by nearly $8…
And a 20% reduction (from 70% to 50%) can reduce gross profit by nearly $40!
That’s a 55% reduction!!!
The kind of loss that takes him from a THIEF to a MURDERER if he gets away with it for too long…
BUT FEAR NOT…
Dead time isn’t invincible, in fact, he has an Achilles heel.
Her name… ‘Billable Time’.
The goddess of profitability.
She’s a real beauty. Everyone loves her.
And if you want to win in business, then you need to become her best friend.
Hot tip #1: Keep your schedule full of work
If your team is sitting around with not enough work to keep them busy, that’s a serious problem...
You’re making it all too easy for dead time to kill your profitability.
What you sold yesterday is old news.
What you think you’re going to sell tomorrow is a pipe dream.
If you’re schedule isn’t full right now, get out there and market/sell you’re a*se off!
Hot tip #2: Quote Half Days & Full Days Only
If you think a job will take 2 hours, quote it for 4.
If you think a job will take 5 hours, quote it for the full 8-hour day.
This ensures you’re covering dead time.
“But you can’t charge for 8 hours if you’re only there for 5 hours, it’s unethical!”
Lemme stop you right there… you’re NOT just TIME AND MATERIALS...
You’re a SOLUTION!
A client isn’t paying you for time on site, they’re paying for the solution you’re providing them.
If you’re a landscaper, you’re not being paid to dig up a property for 80 hours.
You’re being paid to transform a home with a beautiful new outdoor space.
As long as you deliver to scope, for the agreed upon price, it’s a fair deal.
Hot tip #3: Consider All 3-Phases Of The Job
When you're quoting a job, what costs are you working through?
Labour? Materials? Subbies? Equipment costs?
These are all obvious costs that need to be covered, but what about the time before and after a job…
Driving to site? Meeting with the client? Picking up supplies? Organising permits? Job admin?
This is necessary work that should be billed to the client!
If you're not accounting for this in your quotes, it’s going to kill your margin.
That’s why I encourage all my clients to consider three phases of every job…
Pre-Delivery: Time BEFORE you start a job.
Delivery: Time when you’re delivering the work.
Post-Delivery: Time AFTER you finish a job.
Whether you’re pricing a small 1-day job, or a 6-month long, multi-stage project...
There are always these 3 phases!
Hot tip #4: Deliver Per Pricing & Planning
A job is ONLY successful and profitable when…
(1) You price and plan properly; and
(2) You deliver the work as per your pricing and planning.
As long as (2) matches or is better than (1), you’re good.
If not, then you’ll have a dead time problem.
But this post has gone on long enough, so I’ll leave you with this…
Master billable time and you’ll maximise your profitability.
This is an often-overlooked area where all our clients unlock MAJOR wins in their businesses.
If you’d like help, click here and book in a call with our team.
