by Dick Harshaw
The biggest killer of otherwise healthy HVAC businesses is labor that is out of control. And I don’t mean installers and service techs acting like drug-crazed maniacs. I mean labor that is not properly and efficiently used by management.
I use a rule of thumb to bring home its horrible cost. I call it the UT RULE (which stands for unbillable time rule) and it goes like this:
If you have typical unbillable time in your company, it could be costing you 2,000 times the net hourly pay (with benefits) of your field people!
For this rule, typical means that 15% of the installer’s day is unbillable, while 30% of a service tech’s day is unbillable. (These figures come from ACCA and other trade groups who annually survey their membership.) The complete proof of this rule is not complex, but it takes up more space than I can devote to it here.
Let me take a holly stake and drive this point home to your heart. Suppose you have 6 installers (making, on average, $20 each) and 3 service techs (who average $30 each). Benefits normally run about 1/3 of the wages, so you are looking at $27 per hour for installers and $40 for service techs. If your shop runs the typical unbillable time rates, your total costs could be $27 x 2000 x 6 people or $324,000, plus $40 x 2000 x 3 people or $240,000, for a combined hit of $564,000 a year. Got your attention yet?
So how do we trim away some of the unbillable time?
Here’s a laundry list to get you started:
- cleaning the shop— charge to janitorial account or to the job which created the mess
- cleaning the truck— charge to vehicle maintenance
- running errands— charge to the job errand is for; charge to office supplies account or other special function accounts; if personal, do it on your own time
- helping unload equipment/supplies/materials— charge to the job shipment is for; for general inventory, charge to warehouse account or unapplied time
- labor for robbing parts from another unit— charge job the part was for; charge to the parts labor account (if you have a parts department)
- labor for chasing down out of stock parts— improve inventory; otherwise, charge to the job part was for; have parts delivered by delivery service
- “customer not at home” service trip— review dispatching procedures; bill customer a minimum charge; get credit card numbers up front and bill card
- callback caused by technician not fixing it first time— this is a legitimate cause, especially with less-experienced techs; bill such time to training account and log the problem so training can be done on that issue; if a 3rd call is needed, service manager goes with the tech as a tutor
- shop time when there are no calls to run— market service so you stay busy; sell and do service agreements; send men home when there are no calls
- have service techs wear tool belts or carry a small tools briefcase—then when they go to the equipment, most of what they will need will already be there
- have installer trucks loaded the night before or pre–dawn hours by a part-time worker—this can save ½ hour or more per installation crew (that’s one man-hour a day) in wasted time
- have service techs run their first call from their homes—lots of time is wasted when they come to the shop in the morning to fill out paperwork, replenish parts, and chat
Finally, use daily time cards that have codes for the type of work being done, one of those codes being “U” for unapplied. Explain that the tracking of “U” time is not to discipline the men but to wake management up to wasteful practices. If the shop does better economically, all the people who work in it do too!
