provided by: 
Here is something you may or may not know: Nonbillable time is the single highest cost of doing business in your entire service department. The typical service tech is only able to "average" billing out about half their time each day. This means that when you look at the entire techs' year they "average" billing out about 4 hours a day.
I'll explain why:
Vacation. Let's assume the tech gets two weeks of paid vacation a year,which comes to 80 hours a year, or 3.8 percent of their total time (80 hours divided by 2,080 hours per year equals 3.8 percent).
Holidays. The average company pays six holidays a year, which accounts for 48 nonbillable hours or 2.3 percent of the tech's total time (48 hours divided by 2,080 hours per year equals 2.3 percent).
Sick pay. The average company provides five sick days a year, which is 40 hours or 1.9 percent of the tech's total paid time.
Shop time. This is a scary number. Most techs average at least 15 minutes in the shop in the morning and another 15 minutes in the afternoon, or 30 minutes a day at the minimum. After deleting vacation, holiday and sick days that leaves 239 days to "work." Thirty minutes of shop time for 239 days a year totals another 119 hours or 5.7 percent of total time that cannot be billed the customer. As you can tell, the nonbillable time is adding up.
Travel time. I realize some shops charge port-to-port, but the vast number of contractors still charge only for the time they are on the job. The typical tech runs five calls a day. If the average travel time between calls is only 15 minutes (which is probably low), that is another 75 non-billable minutes a day during the 239 days a tech works. That totals another 299 non-billable hours a year. Travel time alone accounts for 14.3 percent of their time a year (299 hours divided by 2,080 hours per year equals 14.3 percent).
Here is the total nonbillable time is for the year—so far.
Vacation.....3.8%
Holidays.....2.3
Paid sick days.....1.9
Shop time.....5.7
Travel time .....14.3
Total time = 28%
You may recall that I wrote that about half the tech's time was nonbillable and the chart indicates that slightly more than one-fourth of the time is nonbillable. So, what gives? Well, add callbacks, warranty work and company meeting time to the list. Furthermore, think about how much time is spent waiting on no show customers. And, did you ever have a tech come to the shop to help put up stock, do a small job around the office or perhaps work on a vehicle? All of that is nonbillable time.
Finally, good techs are hard to find. So, think about slow days when you have less than a full day's work for your techs. What should you do? Conventional wisdom suggests you send them home, but is it the right thing to do? Well, if you do this fairly often, some of those techs will begin to look for a new employer and you stand a good chance of losing good electricians. So, rather than risk losing any, you may be better off finding other work for them to do, which is more nonbillable time.
Work that is nonbillable work can vary, generally ranging within 20 to 30 percent of the time. Add that to the 28 percent previously calculated and you are at about half the time being nonbillable.
Nonbillable time dramatically affects what you need to charge per hour as well as the overall profitability of the department. Fifty percent of the 2,080 hours a year indicates the tech has 1,040 nonbillable hours. The cost of nonbillable time is $22,880 (1,040 hours x $22 per hour (for discussion) = $22,880). Your charges also should account for nonbillable time. Of the final hourly rate, whatever it comes out to be, $22 an hour of it will be the cost of nonbillable time.
Nonbillable time should include all the time the electrician is on the job as well as company overhead (rent, utilities, marketing cost, loans and equipment replacement costs). In addition, it should include any office salaries.
It's important to track nonbillable hours because if you do, then you can turn some nonbillable time to billable time, which could produce additional revenue. So, you see it pays to track and reduce nonbillable time.
author: By Tom Grandy