Are you recovering the true cost of your time?

There are several industries where time is money, and the building industry is one of them. How many hours have you given away this year? Either your own or your team’s? How many costs did you not pass on?

Chances are you have no idea, or maybe it’s one of those areas you want to avoid because you know it’s a problem. In what ways could you be giving away your time? There are two areas in BuildaPrice reporting that builders are often surprised to see they are under recovering – Supervision and Cleaning.

Supervision

Have you calculated how to recover this time across your business? This could be your time or a supervisor’s time spent on the job when you are not on the tools.

Imagine you are being paid $120,000 a year salary (not unreasonable). Remember, this is before you earn any profit, so in a 2,000-hour year (the working hours I normally allow annually for the average person) you should be recovering a minimum of $60 an hour for every hour of your time.

You have two choices: you can either price in your expected work across the entire job, including non-tool functions, or you need to increase your time on tools rate to recover the difference. For example, if you lose 20% of your time to non-productive work, then you need to be recovering $75 an hour. If you are losing 50% of your time, then you need to charge $120 an hour just to make a salary. The time you spend talking to an architect for a job or handling a customer query on-site is real-time and has a real cost to you, so you need to allow it when you price the job. Other areas of supervision you should be recovering are:

• Time spent coordinating your sub-trades

• Off-site and on-site supervision

• Procurement/purchasing

• Resource management

• Inspections

• Client meetings.

These are reasonable costs to recover, and when explained to a customer you may be surprised how easily they accept these legitimate charges.

Let me tell you a story that has become part of our office folklore. One of our builders had always charged a flat rate of $8,000 per job for supervision time (his time in this case). After recording his time against the job on his first BuildaPrice job he had incurred $17,500 of actual time. He rang us to check if he had this right because he realised he had been under recovering for years. He said, “I can’t charge my client that amount, they will have a heart attack.” But he took his next client through the calculations in the software and the client accepted it, so he realised it was possible to recover his true cost of time on any job.

Cleaning

I can think of several examples where builders have been blown away by the real cost of keeping a site clean. They may be allowing a flat cost of $3,000 per job for cleaning and when they put the real-time against it, it works out to be $10,000. That is a real $7,000 loss in cost recovery. We see, in several cases, where no cost is allowed in the price for cleaning and site maintenance, which is giving time away! You have to timesheet against categories to really understand your time costs and where they are going. BuildaPrice’s timesheet app does this for you.

What other areas can you give away time and cost?

Other common categories we see builders forget to include in their pricing are:

• Picking up materials from merchants – are you allowing for this?

• Health and Safety preparation and talks. Ensuring everyone is safe on-site has real-time and cost involved, so you should be recovering this cost. At BuildaPrice we understand the need for good health and safety standards, which is why we have incorporated our integrated Health and Safety solution to help protect the builder. There is a cost to managing this area, so why wouldn’t you recover it?

• Cost for pricing the job. This is becoming the common practice where a client is asked to pay for the original quoting of the job before the builder will price the work. It is a real cost of time to prepare a price and it is likely the customer has chosen you to work with so it is reasonable to charge for this service. If this is done well for the customer it can remove a lot of stress and issues before the job starts.

• Customer interaction. How much time do you spend dealing with your client? We have all had difficult clients and it is reasonable to set the expectation with the client at the start as to how you will communicate and interact with them during the project and what this will cost. More importantly, what happens when the customer starts to soak up too much time? Having good processes in this area and communicating these before the job starts will save you giving away time during the job. When I had my accountancy practice and handled several builders, it always concerned me that several of them only made a salary and, in some cases, barely this. The stress and risk don’t go away, so the expectation should be that you make a good salary and then you make a profit on top of this for the risk and pressure of running your business. As a builder running a business, I don’t believe it is unreasonable to expect to make a reasonable base salary plus a profit.

If you aren’t doing this, it would not surprise me if you are giving away time and margin in the above areas. Take a moment to look at last year’s financials and work out what you actually made for the year. Did it meet these levels of remuneration?

At BuildaPrice, our software is designed to help get a return on the time and cost you and your team spend in the business. We want you to make the right returns as well as give you back your weekends and family time.