If the working week were really 40 hours long it might be thought that there were about that many billable hours in each week. But how many hours can actually be charged out?
Most managers overestimate the billable hours in their weeks. They forget or don’t realize how much time is spent sitting in meetings, doing administrative paperwork, attending training courses and industry seminars, and on other things like vacations and other holidays.
This non-billable time adds up. It’s typically about 25% to 30% of the total hours available, and can even get to a point near 50% at which time it’s pretty hard to earn enough to make a contribution to profits.
If you don’t believe it, deduct the following days from one year: 15 days for vacation, 9 days for holidays, 5 days for illness, 12 days for training, 44 days for marketing (one day each week), 104 days for weekends, and 28 days for administrative activities (one hour each day).
In a non-leap year this leaves 148 billable days, or a total of 1184 hours annually for working a typical eight-hour day.
For comparative purposes, business coach and author C. J. Hayden estimates that the national average for consultants is even less – just 22 billable hours per week. This is the reason so many professional services managers usually have to work exceptionally long hours including giving up their weekends.
Team members’ time is similarly affected. If you can charge out between 50% and 80% of their available hours you’re typical of most professional services firms.
Another time-related factor critical to the firm is the average length of engagements. This can have an impact on both your profitability and client relationships.
It might be thought that long engagements are best because they generate the highest fees. Unfortunately this is often not the case. Clients want an engagement to produce results in the fastest possible time and the longer it takes to get results the greater the chance for dissatisfaction, regardless of the cause.
It is sometimes the case that billable hours have to be reduced at the end of a long engagement to avoid overextending the client’s budget or the business relationship.
What all this means is easy to summarize but requires a lot of time (not billable, unfortunately) and some financial investment to implement.
First, billable hours need to be meticulously captured and recorded. There are many software products now available that are specifically developed to do this for professional services firms.
Next, managers need to do all they can to control the amount of time they and their team members spend on administration, training and other internally directed activities. The goal here is to reduce the need for working excessive overtime and on weekends as much as possible.
Work on your marketing so that it achieves the greatest possible ROI. Fine-tune every aspect and watch the time invested as closely as you do the money spent.
Finally, if an engagement is becoming overlong it’s up to you to raise the issue with your client and ensure that there is no perception of ‘dragging your feet’ developing. Keep things moving along and wrap it up as quickly as you can.
Time is always short, but it’s never shorter than when you try to charge for it or have to pay for it.
Copyright 2004, RAN ONE Inc. All rights reserved. Reprinted with permission from www.ranone.com.