So you want to get a better idea of your bottom line, your field service profit, and where on earth all your money goes?
To get this down to an exact penny is nearly impossible, that is what accountants are for, right!? They show you money in vs money out and will often give you a few categories to work with.
But what if you had a better picture of this simply by gathering a few numbers to determine your overhead costs, and therefore your estimated field service profit for each job?
Let’s take a look at how to do this so you’ll have a better idea of how much dough you’re really making. The first thing we need to do is to calculate fixed costs.
Fixed costs are an expense that neither increases or decreases, regardless of how many sales you made or “widgets” you produced. Here is a basic chart to determine our overhead based on fixed costs such as:
Monthly rent or mortgage
Utilities, Elect, H2O, Gas
Marketing and Advertising
Basically, these are costs that your business pays out every month, no matter what! Now that you have these numbers, what’s next?
Simple. You need to calculate your total or “available” man hours. To do this, you’ll need to take the number of employees you have and multiple that by the number of working hours in a month that your employees’ average. So if you have 14 employees that work 5 days a week for 6 hours a day, that’s approximately 30 billable hours in a workweek. Multiply that by 4 (for the monthly average), and you’re looking at 120 billable hours per month per employee.
So with 14 employees you have:
120 x 14= 1680 total available man hours per month
Next, we’ll take our monthly costs and divide by the billable hours per month.
$49,000/1680 hours = $ 29.16
So our estimated hourly overhead is $29.16. We’ll just round it up to $30 per hour.
Now that we have nearly done with all this super fun math, we can get down to the more serious business of estimating a true amount of field service profit.
Knowing your true profit can be quite fun right?!
Considering that we are using an estimate based on 14 employees in the field then we can take that number by the hourly rate you charge your clients minus the hourly payroll to get your estimated hourly revenue. So if we take $35 per man hour minus $14 an hourly in estimated payroll, we have $29 per hour per employee in estimated profit. Now multiply that by 14 employees = $406 minus $29 for a total of (drumroll please…)
$377 in estimate profit per hour!
Remember that when you start out, your overhead might seem like a ton of money, but as your business grows, there’ll be certain items that you won’t ever need to purchase again and some expenses that won’t increase that regularly – such as your rent and electric bills.
So while it is nearly impossible to have a business with no overhead, knowing how it relates to your profit can help you to reign in costs to keep your profit margins where you want them…BIG right?
It’s all a numbers game….and it CAN be FUN!
Ready to see how you can reduce your costs with a better way to manage your business? Check out Fieldd our all-in-one software to manage and grow your business: and start your Free Trial today. Gain control of your field service profit.