A Key Performance Indicator - Sold Hours
“If there is one thing I could change from the past seven or eight years, I’d do things more efficiently,” he said. “Efficiency is how many sold, billable hours you get based on the total number of hours worked.”
Brasington said that the sold hour goal is a simple calculation: the number of sold hours a company needs per day to meet profit goals. “For example,” Brasington said, “multiply the number of hours budgeted per day times company efficiency. If you budget eight hours and multiply by 50 percent efficiency, you come up with four sold hours per day. If you don’t have your numbers to begin with, choose a starting point, i.e., 50 percent efficiency, and go from there.”
Brasington gave a case study for attendees to calculate and then asked them to recalculate the totals if some of the technicians quit. “You don’t want to look at it as ‘how much money am I going to lose?’ ” he said. “You can calculate hours lost or recalculate your goal and set your prices where they are supposed to be. Budget more than what you need in case of changes, like losing a tech.”
He added that it is OK to make changes as long as the changes don’t run counter to what an owner or manager has told the service techs. “Once you set a goal for techs, don’t go cramming more hours on them and setting them up for failure.”
“Weave your goal into a culture,” he said. “Everyone within the company needs to know what sold hours represent, and what the daily goals are. Create and understand accurate financial reporting. It is imperative that the financials are correct so that you can set an obtainable goal based on your correct selling price, to ensure desirable profit percentages.
“Set the goal, post, and monitor the goal. Make staff aware of any changes. Communicate and acknowledge. Have techs call in sold hours after each call and acknowledge when the goal is met. And reinforce the goal. Everyone should be able to state the goal when asked.”
He said contractors should be able to track their efficiency goals on a daily basis and in some cases, make it a friendly competition between techs. One company at the seminar said they have their computer hooked up to a large flat screen monitor in the office and techs could view their tracking each day.
Brasington noted contractors need to track the sold hours goal, monitoring the goal with a business-like approach. He suggested contractors be open to changes but resist the changes to selling price - or the goal may wind up costing big money.
He also suggested looking closely at accounts receivables and collecting money that is past 30 days due.
“If you aren’t a C.O.D. company you need to get there as quick as you can,” Brasington said. “Understand tracking and do the math backwards. Figure out how much money is going out of your pocket - you won’t like it.”
Publication date: 12/04/2006