Both billable, and unbillable hours, are equally as important to the function of your business, but you can’t be adding £10 onto a customers invoice because you swept the floor whilst waiting for them to collect their van.
Whilst you may choose to work 8 hours a day, or 18 hours a day, a proportion of those hours will fall into the unbillable category. If you’re producing “free designs”, or” “free surveys”, this time will need to be accounted for.
Once you’ve got a good handle on your costs, and your split between billable and unbillable hours, and a realistic estimation on how many hours/days you actually do billable work, you can then start to make informed decisions. Remember realistic, it’s always best to air on the side of caution!
Hourly & daily rates
Taking your fixed monthly costs, including any wages, you can then use your estimated ‘billable hours’ to determine a cost per hour, day or week. This is the golden number!
If you estimate a job will take 2 hours to fit, use this golden number in the pricing, along with your standard material markup.
When you’re asked to match a low price, use the golden number to determine if it’s worth undertaking, or you’re better off declining. Spending several hours on a design, to produce a low value job doesn’t appear so appealing. Even if you’re outsourcing work, making small profits that barely contribute to the running costs don’t seem so appealing.
It can also be used to aid selling products or items. By identifying your costs, and what it costs per day, week, or month, you can take a simplistic look at the profit on your items or products and determine how many you need to sell in that period to generate sufficient income.
This isn’t signage specific!
This isn’t unique to the Signage industry – This is how many businesses operate, particularly the trades people, some of whom operate on a ‘day rate’ basis.
If you’re still not convinced, or the ramblings above don’t make sense, check out this video on YouTube that explains with practical, real world examples how to calculate costs and price accordingly.