| If you're in a business where you have to charge an | | | | customers are greeted, their requests for service |
| hourly rate for services, you'd better be certain that | | | | logged, how the services are delivered, checklists to |
| hourly rate is accurate. Make sure you include the | | | | ensure all steps have been completed to how |
| following:o Your actual costs of providing that hour of | | | | communications are recorded. |
| labouro Include the gross payments you make to your | | | | Guarantees |
| employees or contractorso Include the hidden costs | | | | Why not add certainty to your service offerings and |
| attached to employing your labour hire outso Factor in | | | | delighting the customer? Guarantees are a powerful |
| your level of gross profit that, after overheads, returns | | | | inducement to potential customers and help |
| you a reasonable profit (that's profit after all other | | | | differentiate you from your competition. |
| expenses of running the business are taken into | | | | Follow-up And Support |
| account) | | | | Once the sale is made, or the service delivered, show |
| When it comes to setting your labour charges I know | | | | the customer you still do care by following up with a |
| you worry about what your competitors are charging | | | | post service phone call. Establish and maintain a |
| and about how your customers will react. The fact of | | | | relationship with your customers, this is worth more |
| the matter is that unless you achieve reasonable | | | | money to you in the long run. |
| profitability for your labour, you will not be around in the | | | | Even if you only charge $2 more per hour for each of |
| future to compete anyway. | | | | the above service factors, that's an extra $10 per hour |
| Sometimes we calculate what we think the customer | | | | you can charge. |
| will not object to, rather than calculating what we | | | | Increasing The Amount Of Hours Charged |
| should be charging and then ensuring we get that rate | | | | To increase the number of hours that you charge out |
| per hour for all of our work. Say you have three | | | | within a fixed time frame, for a fixed number of |
| employees you hire out at an hourly rate. Let's further | | | | employees, you must look at: |
| assume that out of the paid hours they are only | | | | Accurate timekeeping - you need to track all time |
| working for 22.5 hours on chargeable time. This | | | | expended in delivering services. In many service |
| equates to a 60% productivity ratio (37.5 divided by | | | | industries the total time expended in delivering a |
| 22.5x100). | | | | service is grossly underestimated. Ensure that all time |
| At a rate of $60 per hour your three employees are | | | | taken including rest periods, time on the job, sourcing |
| making around $59,400 each ($60x22.5x44), or | | | | materials, travel, is accounted for. |
| $178,200 per year. If you could make just five dollars | | | | Increase productivity - so that the time required to |
| more per hour per employee this could make a huge | | | | produce a defined output is minimised. Productivity can |
| difference to your bottom line. Based on a 37.5 hour | | | | be improved by a human factor modification such as |
| working week, and a 44 week year the figures would | | | | employee training, incentive schemes, behavioural |
| look like this: | | | | modification. |
| $5 x 22.5 x 44 = $4,950. | | | | Technology - can also play a part in improving |
| With three employees that equals $14,850 extra each | | | | productivity. New equipment or software systems to |
| year. Now let's look at what happens when we | | | | track work flow are some uses of technology to |
| improve productivity by around 10%. By that I mean | | | | improve productivity. |
| you increase the amount of chargeable hours per | | | | Systems - to ensure rework and waste is reduced. |
| employee compared to the paid hours they are | | | | Results-Based Charges (flat rate) |
| working (37.5). The new figures now look like this: | | | | If you operate on a flat rate principal, and establish |
| $65 x 25 x 44 = $71,500 - by three employees equals | | | | standard times for tasks, then apply a price based on |
| $214,500. That's $36,300 more for you per year | | | | this time by your hourly rate, there is the opportunity to: |
| without a huge increase in overheads. | | | | - motivate your staff and yourself to become more |
| How to Charge More Per Hour | | | | efficient |
| Your Premises | | | | - multiply your time using human skill and technology |
| Do they convey an air of professionalism which sets | | | | this is leverage |
| you apart from the competition? Clean well presented | | | | It is worthwhile putting in place training and equipment |
| premises whether they be an office or workshop, | | | | needed to ensure that you and your staff can |
| communicates a lot to a customer. | | | | consistently complete the tasks in less time than the |
| Your Employees | | | | standard time. For example, if you charge a flat rate of |
| Is the manner of your staff professional? Are they | | | | $400 for a particular service (as it is estimated out at |
| uniformed and well presented? Are they courteous, | | | | five hours at $80 per hour), then by completing that job |
| thoughtful, and focused on the customer? | | | | in half the time, not only do you make more profit you |
| Your Processes And Systems | | | | also can pay the employee a performance bonus for |
| Systems will help you save money and improve | | | | finishing the job more efficiently. This situation will lead |
| productivity. Document everything from how | | | | to higher productivity from your staff. |