As a service contractor, you have a general idea of your expenses. Most likely, expenses include items like rent, wages, insurance, equipment and utilities among others. Yet, have you considered what unapplied time does to your overhead?
What Is Unapplied Time?
Unapplied time refers to the hours field staff is on the clock but aren’t able to bill a customer for their time.
This is all that time spent driving, picking up parts, and performing callbacks. Naturally, most companies offer employees paid time off, which also needs to be added to that unapplied amount.
During a regular work day, a field person is able to bill about four hours of repairs, also known as wrench time. However, the business still has to pay its employees for a full eight hours.
Since you can’t bill customers for every hour of the day that your tradespeople are on the job, this additional expense factors into the business’ overhead costs.
After all, keeping a business running includes tasks that must be done internally. For example, team meetings, cleaning the shop and washing the vans.
How to Account for Unapplied Time
The key is including the cost of that additional time in your hourly rate.
Our example above notes that you pay your staff for eight hours but can only bill customers for roughly four. So, if you estimate that charging $70 per hour makes a 10% profit while your staff is on the job, you likely need to double your labor rates in order to maintain the same profit margin for the entire day.
Remember, adding that extra cushion of profit within each job will help cover the cost of your business’ daily unapplied time.
But, you might ask, how can one increase labor rates without getting blowback from customers?
The answer may include switching to flat-rate pricing. Since flat-rate systems focus on total repair price instead of hourly rates, customers may be less likely to push back on the prices.
See how the FieldEdge Flat Rate rate tool can help you account for unapplied time and simplify your pricing. Book your FREE personalized demo today!