Note: This blog assumes you have a ticketing system of time kind. If you want to really see what your numbers are and how you can work with them, you need to put 100% of your hours in the PSA (professional services automation tool). You can only get reports out if you put data in.
Lots of people have told me that they need to figure out how to make their technicians as “billable” as possible. Somehow in our heads, we think we can get a perfect technician to bill 40 hours a week. However, unless the tech works 60 hours, you’re not going to get 40 hours billable out of him!
The best you can hope for is about 70% billable on a consistent basis. Technicians check email, sit in on company meetings, do training, watch webinars, etc. And if you don’t charge for travel both ways, then they spend time driving around unbillable.
I’ve heard people say their techs are 80% or 90% billable. But every time I hear that, I ask about how rigorous they are at tracking time. Does every technician account for every minute between 8AM and 5PM? The answer is invariably NO. So these folks have an impression that their technicians are super-billable, but they don’t even know how much time they are logging on the job every week!
If you track this very carefully, you will discover that it is extremely uncommon for a tech to be more than 65% billable. Now, as we move to doing more and more work remotely, this number increases. As a tech’s job moves from little jobs to big jobs, he becomes more billable.
What does “billable” mean?
If you are in the world of break/fix, this definition is easy: Billable work is labor for which you will invoice the client. In this world, there are really only two kinds of work. There is work you give away for free and work you bill for.
(Free labor includes rework or other work you intentionally do not charge for. There’s a completely separate discussion about all the labor you give away for free because you don’t properly track your time.)
In managed services, the discussion can be a little more complicated. “Project work” is just like break/fix above. You either bill for it or give it away. But with managed services, you have work that is covered by the service agreement. For example, all work to maintain the server might be covered. So checking the logs, applying fixes and verifying that there’s plenty of disc space is all covered work.
For our purposes, productive labor covered by a service agreement is considered billable. Rework and floundering around unproductively trying to figure something out should be considered un-billable here as well, but it’s very hard to track. The key point here is that “billable work” under an MSA (managed service agreement) includes work to fulfil the agreement. It is “time on task” and you will not invoice the client for it separately.
The above chart represents an example of how time can be divided in a week (your numbers will vary). We start with 40 hours. From here, 15 hours is “overhead” time; this represents meetings, training, driving, etc. as discussed above. This number will be larger for managers and smaller for dedicated technicians. Just remember that it can only get so small. So be realistic.
Another 15 hours is work on covered machines. This includes whatever you have in your MSA. Two hours are rework. Another three hours are otherwise unproductive. This unproductive work includes things like standing around waiting for another technician. Most commonly, it represents working on a problem and making no headway. This happens when you/your tech bang your head against a problem for an hour or more and make no progress toward the solution.
Finally, we have five hours of truly billable labor. These are hours spent on Add-Move-Change tickets and billable project labor. For MSA clients, this is work not covered by the MSA.
When I say we want to maximize billability, I mean we want to increase the time spent on Covered Labor and Billable Labor. These are at about 50% of hours for the week. This is a very realistic number.
The “overhead” time might be different for different roles in your company, as mentioned above. But it probably doesn’t vary much for an individual over time. So if Joe spends 15 hours a week on “overhead”, you cannot expect to squeeze much time out of this area.
That leaves two key areas for increasing billability: Reduce rework and reduce unproductive labor. Reducing these will be covered in a separate blog.
What do we do for a living? We implement, maintain and troubleshoot. Implementation can be very efficient with proper planning. But it’s not perfect. Maintenance should be very easy, but it’s not perfect. And troubleshooting is certainly not a perfect science.
Maximizing billability, therefore, is also not a science. It takes constant attention and effort. It takes proper training and a company-wide ethic of reducing unproductive labor. (Note that training is time spent in the “overhead labor” category.) This is not something you can implement and walk away from. Maximizing billability is a never-ending job.
It relies on excellent time tracking, excellent documentation, excellent planning, excellent training and excellent teamwork to support each other to eliminate rework and unproductive labor.
Summing up this blog post in three points:
- In order to calculate true billability, you need to define what is truly billable – and then track it rigorously.
- You may perceive that your team is highly billable when they are not.
- Rework is the worst kind of un-billable labor. It is generally eliminated by training and experience.
(Used with permission of Karl W. Palachuk, SmallBizThoughts.com)