Making More Money




 In my last blog I talked about setting your 2012 goals.  Maybe one goal was to make more money by making your business more profitable.  Towards that end, I have a suggestion.  Every retailer knows how much of a mark up they have on the products they are selling.  Many service providers that have no product other than their employee’s time have no idea how to determine what they should be charging for their employee’s labor.  Many don’t even have their employees track their time.  I continually see businesses quote service based jobs on best guess estimates on how many hours it will take to complete the job.  They never develop a system to compare those estimates to actual results.  How can anyone make money if they don’t know if their estimates are using the correct time or the correct labor rate?

 There are two issues involved with this problem.  How efficient are your employees with their time and are you using the correct billing rate?  The first step is to institute a time tracking procedure that will allow you to see how many hours a week are billable hours versus non- billable hours are for each of your employees.  Are you having too many office meetings?  Are you making your software engineer answer phone calls, take trips to the post office or bank? Are they taking too many long lunches?  If your highly paid employees are wasting their time on too many non-billable tasks then maybe it’s time to hire an administrative assistant or a part time college or high school student to help out.  Inefficiencies can cost thousands of dollars a year.  The only way you are going to determine this is to track time.

 The second issue of billing rates requires a little bit of work on your end.  You will need to be able to calculate an overhead rate that must be incorporated into each employee’s billable rate as well as a profit margin.  In addition you need to consider employer payroll taxes, worker’s compensation and fringe benefits cost for each employee.  The other item to consider is the number of actual work hours while taking into consideration vacation time, sick time and holidays and of course routine down time.  All of these items are factored together when you are trying to determine the proper billing rate. 

 These two steps should put you on the road to growing your business profits.


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