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Mastering Billable Hours in Your Trade Business

Want to learn how the Tradies Success Academy can help you optimise your trade or construction business for profit, growth, and time freedom?

Why do billable hours matter SO much? Is it just another accounting detail? Get ready to unveil the hidden power of tracking and maximising billable hours, and discover the difference it can make in your business. This week The Tradies Success Podcast is hosted by the incomparable TSA accounting coach Chantel who runs through how to make the most of your billable hours.

Podcast Transcript

Chantel Laird

Are you working harder and harder in your business and still not seeing the results you expected? Well, this podcast might be for you. Today we're talking about maximising profit through billable hours. Hello, everybody and welcome to the Tradie Success Academy podcast.

I'm Chantelle and I'm your accounting coach here at TSA. And today we're gonna talk about why billable hours matter so much in your business.

Is it just another accounting detail? Get ready to uncover the power of tracking and maximizing your profit in your business using billable hours, the rate that you charge times the hours that you're able to achieve.

And if once you take off the expenses, that's your profit. But understanding what goes into those billable hours and what you're missing in between is sometimes the difference between a profitable business and a business that's really struggling.

Money is always made during the billable hours that you're out doing business. But what happens to all those unbilled hours? It's in what we fail to bill for that. We lose profit in our business and not understanding the relationship between the hours that you bill, the costs that you have and the physical downtime that you actually have in your business.

Alright, consider this, you have your accounting program, you more than likely have a jobs management software program. What are we doing to maximise the value of that program? Not only out on site but in the back end because once you get to your accounting software and you're looking at the physical results of what's happened on site and what those billable hours have resulted in.

Are you actually seeing what you believed you were going to get to or are you seeing continuous losses, lacks of profit and not not being able to understand why? When we're talking about our billable hours, we're also looking at what does it cost you to be in business every minute of the day, whether you're making money out on site or not?

And what are the times that you are actually not available to work? We have annual leave, sick, leave, all of those other factors that come into play.

And if we're not maximizing and tracking all of that detail and putting in a budget for the costs that we have in our business, we're actually destroying the available chances that we have of making a decent profit. Many businesses that come to us are very much aware of what they're charging per hour. That's what all business owners are really good at. They know how much they charge, they know what it costs for them to go out on site in a very straightforward sense. But what are we missing in the background? What are we not covering?

What are we not factoring into that equation and looking at one month at a time and saying that was a really bad month, that was a really great month. But why are we looking at the why?

And then are we using those figures to go and find out what it is we can do to make sure that every job and every project has a chance of being profitable, not just for the hours that on site, but for all of the things that make up that job, whether that's travel, whether that is recall time, whether it's the efficiency of your staff.

And one of the major parts of that is knowing the efficiency of your staff and really taking into consideration that you as the business owner, whilst you might be taking calls, doing other things on site, you're never going to be as efficient as a fully qualified person out on site. That's just doing that task. You're forever interrupted, distracted doing other things.

What we need to make sure of is that that job is structured around the lowest level of efficiency within your team so that we have the opportunity nine times out of 10 without errors, things that go wrong on site nine times out of 10, we have the opportunity to meet that target or in a lot of cases exceed that target because it's not just about putting our pricing up, it's not just about charging more and increasing the value of that. It is about making sure that you're allowing enough space for you to achieve that.

Plus the profit is always made in the ability to do things more efficiently using that same structure. A lot of what I see when I speak to members is utilising their accounting software and then making a budget, looking at what can we do to foolproof or bulletproof our business to as much as we can to then look at how can we go out there and consistently achieve that. There's so many other factors that we're not considering and that we're not aware of that actually have a massive difference in the financial outcome of your business. And I always would say, utilize your accounting software, your job management software for anything project related.

And, and obviously, once you get to the stage where you know what those chargeable hours look like, building and structuring your pricing around those things, but make sure that basis is correct. And every time we look at our accounting software, it's telling us the reality of what's happening, but it also has a lot of other items in it that may not be the direct operational side of your business, but things that your accountant has made adjustments for.

So we're really looking at how do we grab the information that we have put in enough,, information into our spreadsheets and our, our calculations to ensure that we know exactly what boundaries we're operating in, being in business is tough enough as it is. And if we don't know whether we're making or losing money every time we go out on site, we're paying a game of Russian roulette. We've put our blood sweat and tears into our business.

We don't know what those boundaries are. How do we know whether that is a profitable job or whether we can afford to change something within that job for a greater purpose? I work with our members every day to have a look at those finances now. Whilst a lot of people would say, yeah, finances, it's not that exciting businesses are made or lost in the finance and it's the profitability and the cash flow.

The combination of those two that will either help you succeed or will pull you under. And a key component of that are your billable hours.

If you are not out on site, doing billable hours enough to satisfy the size of your business right now, then it doesn't matter how much your hourly rate is or what your structuring of your pricing is. You're not giving yourself the best chance to succeed as you grow.

We look at all those factors, the variables as one thing changes, another thing can change and that gradual process of not being on the tools and then jumping off the tools, but that gradual process of growth has a very large component of that. That is financial, that you need to really be aware of.

And if we know what we're looking for a profit and loss is not just a report, your accountant looks at at the end of the year or at the end of the quarter when they're doing your financial reports and taxes, it's actually something that is a working tool for you. And if you learn how to read that correctly and understand the true cost of running your business, then we're not looking at the bottom line.

We're looking at all those pieces of the puzzle and we're reverse engineering it, we're working backwards, we're working out what it needs for us to be in business. What is the main goal? And then from there, how can we go about achieving that with our clients, with the value of work that we're doing with the number of invoices that we issue?

And all of that is around what is the key component of billable hours that we need to maintain at this point in time to draw that line. And the more exciting part of that is getting to a point where firstly, we understand our pricing. Secondly, we've structured our price around that baseline and we know what our team can achieve. Thirdly, we then go out there and we achieve that budget, the budget of hours, the budget of time, the budget of costs. And lastly what we get to create, which is the exciting part that's when we get to look at.

Ok. Do you want this business to provide you with a certain outcome? Whether that's a number, whether that it's a dollar value, whether that's a specific amount of freedom and being completely off the tools, those levers are pulled the whole way through business. And if we know what your goal is, then we can work backwards to start achieving that goal. And then it becomes so much more exciting, we're going to your accountant at the end of the year or close to the end of the year and saying, I've created this profitable business.

Now, what can we do to make sure that we're maximising from a tax perspective? So the billable hours component isn't where you lose your money. It's the non billable component that you may not be covering for or the team component that you may not be covering for, that's actually going to pull us down. We know that you're giving your all to your business for the purpose of creating a financial future for both your family and a product and service for your customers.

And what we want you to be able to do is hold on to that grab onto that, maximise it, create a business that's not only profitable for you and providing a great level of service. But that also allows you to make those plans for the future. You might be thinking, how do we minimise that gap of billable hours or non billable hours? Some of the things that we may be able to consider are travel fees, service fees, things like that.

They may not be specific fees. But how can we incorporate some time into our quotes into our jobs and work on a system that is going to provide an outcome for our client? The best thing that we can do is create a buffer for ourselves and that might be quoting a job to a degree of time that you know, you can do that job in.

But then having the ability to finish the job sooner, do it more productively, find your systems and processes and improve those to give you a better outcome. It's not necessarily a pricing point. It is how we structure those jobs, how we account for the time in between the travel time, the time off site, the recalls back to site sometimes could even be in a revisitation process for those of you who are in project work where your delays are held up by outside parties, having something structured into your pricing that allows you all of the ability and the buffer to get that job done within the budget of time.

And whether you have a team or you're just starting out in business and you're creating that team. What happens when you go out on site could be very different from what happens when your staff go out on site. So as you grow your business, consider that the structure that you put in place needs to be there and available to motivate those team members and to also be used potentially down the track as an incentive. This is our budget, we have these hours to work within.

We know that we can generate a profit working within these hours that gives you space to create those better processes and better systems and then motivate your staff to do the same. I really encourage you all to start tracking those billable hours and then more importantly, start tracking the non billable hours. When you realise how much time you're actually spending physically able to charge, you may see that there's a gap there and that might open up a whole new world of what else can we do and what can we start implementing?

I encourage you to start implementing something straight away. And if you'd like to reach out and get some valuable tools, resources and assistance, that's what we're here for. Thanks so much for listening today. I hope this has been really helpful for you and that it starts you on the journey towards learning more about how your business operates.

Thanks for joining us and I look forward to seeing you next time.