Revenue productivity is lost daily due to several factors such as poor scheduling, excessive drive-time, techs waiting around for calls, disorganization, wasted time with parts pick-up, techs not billing correctly and a host of other issues. Knowing and charging the correct rates will impact your revenue and increase your bottom-line.
Many HVAC (Heating, Ventilating, and Air Conditioning) companies put in place systematic approaches to overcome the loss of billing time, and in the end most find it hard to keep a full-court press on due to a lack in manpower or just plain lack of focus. But in all the systems that are implemented and tested one huge approach is almost always overlooked – pricing. Electrical Design Principles Leed Building Design
It is clear that poor revenue for your HVAC (Heating, Ventilating, and Air Conditioning) business contributes to poor profit performance, but it is the linkage of poor revenue and improper pricing that makes it disastrous for your HVAC (Heating, Ventilating, and Air Conditioning) business. Poor revenue coupled with improper pricing leads to cash flow problems which creates a waterfall of other problems that can lead to business shut-down.
As stated in the opening, addressing revenue productivity is a critical factor for your HVAC (Heating, Ventilating, and Air Conditioning) business.
Simply defined, revenue is calculated by dividing the number of hours billed by the number of hours paid and showing the result as a percentage. Look at the below examples:
4 Hours Billed ÷ 8 Hours Paid =.5 or 50%
25 Hours Billed ÷ 40 Hours Paid =.625 or 62.5%
92 Hours Billed ÷ 160 Hours Paid =.575 or 57.5%
Industry data shows that the average HVAC (Heating, Ventilating, and Air Conditioning) company’s revenue productivity is below 50%.
Think about this: your billable hourly rate is $70, your technicians productivity is 50%, you pay him 8 hours for the day. This effectively drops down your hourly rate to $35 against the 8 hours paid.
$70 Hourly Rate x.5 or 50% Productivity = $35 Hourly Rate
Once you know what your revenue for HVAC business is you need to revisit your pricing to determine if your rates are right for your business. Choosing the correct hourly rate will overcome poor revenue performance for HVAC business, help produce positive cash flow and increase your profits from the opportunities you have and the work you do.