CHAPTER 5
Setting a Path to Maximum Profitability
To understand where you are and where you need to go to truly influence the bottom line requires an up-to-the-minute knowledge of your financials. It also requires a financial plan that leverages that data for profitability and growth.
SECTION 2 OF 7
Labor Rate to Cover Overhead Costs
To start on the path to assured profit, business owners first need to know what their company spends on overhead each year. This total does not include any costs related to materials or equipment, and should not include technician payroll (we’ll tackle how to calculate labor cost for techs next). Â
How to calculate overhead
Average annual overhead costs take into account all fixed and variable assets required to operate the business, including:
Rent
Insurance
Office staff payroll
Utilities
Number of technicians on payrollÂ
Next, figure out how many revenue-generating techs you plan to employ over the next 12 months. Be sure to include any expansions planned for your tech team, as well as any foreseeable job reductions. Enter that number into the labor cost calculator.
Projected billable hours
Before you calculate a billable labor rate, determine how many billable hours each technician works each year. Read on to learn how to project billable hours per technician.
