Costing is more complex in the service business.
You are charging customers a specific fee per hour. When you subtract your cost per hour you arrive at your profit. Or do you?
“That depends upon whether you’ve fully burdened your cost of that hour.” states leading industry expert Howard M. Cohen. “It’s not just the salary of the technician. There’s also their training, their tools, their benefits, insurances, travel costs, rent and utilities on their office, telephone and other expenses.” The best resource for fully burdening your particular company’s costs is your accountant. But you’re not done!
Some of those costs are spent directly on the technician. Others, like rent and utilities, must be apportioned among all of your staff so they are each assigned the part of those expenses that are attributable to them. Again, your accountant will calculate these for you. Still not done.
The last but most important variable in the cost calculation is utilization, expressed as a percentage. If the technician performs billable services for every hour they are working, they are 100% utilized and your cost calculation is finished. But if they have any unbilled hours, you’ll need to apply the percentage.
The simplest example is the technician who is billed out for half their hours. 50% billable. Dividing that into your cost doubles it. You must recapture your entire cost in only half the hours, so your cost per hour doubles. If it was $100 per hour, it's now $200.
Achieving 100% Utilization
The effect of the utilization percentage on your cost calculation is significant so many service management professionals spend considerable time figuring out ways to keep utilization at 100%.
100% utilization is possible through Labor-as-a-Service™ contingent professionals. Just like the cloud, you only pay for what you use.
One way to assure 100% utilization at all times is to use a virtual team of contingent Portfolio Professionals™, that is, people you engage specifically for a given project. They do not become your employee and you are not paying them a salary. Just like the cloud, you only pay for what you use.
Even better, you don’t have to perform burdening allocations and calculations. You are not paying for their training, their tools, their benefits, and they do not utilize your facilities. They are independent contractors for whom you are charged a simple hourly fee. Another phrase for that hourly fee would be “your cost.” Yes, this is fixed cost service. For every hour you bill to a customer simply subtract that hourly fee you pay and you will arrive at your profit. As a result, leveraging a non-employee workforce as a driver of corporate value has emerged as a new standard.
Finding the Right Portfolio Professional™
Starting with a quick definition of terms, a Portfolio Professional™ has a variety of skills and experience that they have amassed over the years while working in many different environments. The first thing you want to look at when considering engagement is their portfolio. What certifications do they hold? What companies have they worked in from which industries? What recommendations have they received?
Then remember that this person may encounter your client while performing work on your behalf. You’ll want to determine if you feel comfortable with them interacting with your clients. Beyond that you must make sure that you have a written, signed agreement in place in which they assure that:
- They will not disclose confidential information about you or your clients
- They will not interfere with your business in any way
- They will not seek to hire your employees,
- They will not persuade any of your clients to use their services directly
It would be foolish for them to do any of these things as it would ultimately cut them off from enjoying any more contingent engagements, but it must be expressed clearly in a signed agreement.
There are many ways to seek and find portfolio professionals. Many agencies provide not only employees for hire, but contingent personnel as well. Each of these builds a database of resumés, curriculum vitae, and profiles they have received. In some cases, some of these people are interviewed by the agency, but this is often accomplished by someone with little or no experience in the IT industry and often no experience managing a service delivery event.
Online interfaces have become popular over the past several years. Here you get to peruse profiles and recommendations about each candidate. You are then expected to select your person based on that information. You have no real way to determine the veracity of any of the information, or follow-up with whoever actually wrote the recommendations.
The Techadox Difference
A new model has emerged from the evolution of the IT industry that blends the best of human interaction and partnership with the efficiency of online systems to support information transfer and transactions. The Techadox platform is used to convey information about the wide array of pre-screened Portfolio Professionals™ available. You have professional evaluations that are far more incisive that anonymous recommendations, detailed history, and confirmed credentials. But unlike other contingent labor platforms that are purely cloud-based self-serve marketplaces, Techadox brings the ‘human factor’ back into the Labor-as-a-Service™ marketplace by offering both the traditional self-service option and a robust coordinated dispatch service option as well.
How To Begin
To start working with Techadox begin by learning more about us at www.techadox.com. Then call to speak with our people about your needs, your projects, and your desire to optimize your business at 100% personnel utilization.