The Hours You Can Actually Sell

The painful truth

You pay for 2,080 hours a year. You sell far fewer. And if you build your prices on the hours you pay for instead of the hours you sell, the labor component of every job in your price book is underpriced by roughly a third in the example below.

Most owners who guess at this number guess high. Hope is not a measurement.

Why this happens

Nobody is doing anything wrong. The hours leak in ordinary, defensible ways: a technician sits at a supply house counter, drives across town, restocks a van, attends a Monday morning meeting, goes back to a job that failed, or waits an hour because the ten o’clock cancelled and the two o’clock cannot be moved up.

Every one of those is a legitimate use of time. None of them produce an invoice. Added together across a year, they are usually the single largest hidden number in a small HVAC company.

Unlike overhead, these hours do not arrive on a statement. Ridgeline’s 688 annual unrecovered drive hours cost about $26,400 at $38.35 per paid hour, before vehicle expense, but no vendor sends a bill with that label.

The core idea

Paid hours are hours you compensate someone for. Billable hours are the smaller number of hours you can genuinely recover through customer work. Billable efficiency is billable divided by paid, expressed as a percentage.

Note the word recover. An hour is not billable simply because a technician was working. It is billable if a customer pays for it, directly or through a flat-rate price built on it. Drive time you do not charge for is real work and unbillable time at the same moment.

One warning before the numbers. Billable efficiency is a planning input, not a performance target to wave at technicians. Turn it into a stick and you will get faster jobs, worse documentation, and more callbacks, and callbacks are counted as non-billable, so the number you were chasing gets worse. This is a metric for the owner, used on the schedule, not a scoreboard for the field.

Worked example: where Marcus’s year goes

Fictional company, illustrative figures. Marcus is paid for 2,080 hours a year at Ridgeline.

Dale had been assuming Marcus billed “most of” his 2,080 hours. He billed two-thirds of them. That single assumption was making every price in Ridgeline’s book about a third too low on the labor component.

What two recovered hours a week are worth

Now the part worth your attention. Suppose Ridgeline recovers 100 additional billable hours per technician per year, about two hours a week. The potentially recoverable pool is 492 hours per technician (shop and van time, drive time, callbacks, and unfilled schedule time), so this assumes a 20% improvement in those buckets, not the elimination of legitimate PTO or training.

Ridgeline’s net operating profit in Lesson 1 was $36,960. Recovering two hours a week per technician can more than double the profit of the company without another hire or price increase, provided enough existing demand is waiting to fill the hours.

Three assumptions are doing real work. Demand must exist, no new overhead can be required, and the recovered hours must be filled with work near Ridgeline’s average revenue and materials mix. In a shop turning work away, the opportunity is substantial. In a shop with a half-empty schedule, demand is the constraint; use Lesson 7 and the future marketing track before treating utilization as the problem.

How to actually measure it

Most small shops cannot produce this number, because nobody has been recording it. You do not need a system to start. You need two weeks.

1. Give each technician a simple daily log: time on site per job, time driving, time at suppliers, time at the shop, time waiting. The free HVAC Technician Daily Report covers this.
2. Explain honestly why you are doing it. “I am pricing wrong and I need real numbers” gets you accurate logs. “I am checking up on you” gets you fiction.
3. Run it for two full weeks: one busy, one normal if you can.
4. Total the hours you could genuinely invoice against the hours you paid for.
5. Extrapolate carefully and adjust for seasonality. Two weeks in July does not describe February.

If you already capture job start and end times electronically, you can produce this from your existing records instead. If you do not, the two-week manual version is worth more than another year of guessing.

What changes the result

• Job mix. Replacement crews often run higher billable efficiency than service technicians, because they spend a full day at one address instead of driving between six.
• Service area size. Drive time scales with geography. A shop covering ninety minutes in each direction has a structural efficiency problem that no amount of coaching fixes.
• Van stock. Every supply-house trip is roughly an hour of paid, unbillable time plus fuel. Truck stock is a utilization decision, not just an inventory decision.
• Dispatch quality. Geographic clustering, realistic job durations, and a plan made the night before are usually worth more recovered hours than anything the technician can do.
• Callbacks. A callback consumes return time and can displace other work. Lesson 7 shows full-cost and opportunity-cost views without adding them together.
• Seasonality. Efficiency in peak season tells you almost nothing about the annual figure. Use the year.
• Whether you charge for travel. If you have a trip or diagnostic fee that genuinely covers drive time, some of those hours move into the billable column. If the fee is $59 and the drive is an hour, it does not.

Common mistakes

1. Assuming instead of measuring. If you have not measured this, assume your estimate may be optimistic and test it against real time records.
2. Using peak season to set annual assumptions. This is the most common way a labor rate ends up too low.
3. Counting an hour as billable because it was worked. Billable means recovered from a customer.
4. Turning the metric into a technician scorecard. You will get speed at the expense of quality, and callbacks will eat the gain.
5. Cutting training to raise the number. Training is 60 hours. Callbacks caused by untrained technicians will cost you more than that.
6. Chasing efficiency when the real problem is an empty schedule. Unfilled schedule time is a demand problem wearing an efficiency costume.

Check yourself

1. Why is an hour of unpaid drive time both real work and a non-billable cost at the same time?
2. Your billable efficiency is 55% and your schedule has visible gaps most afternoons. Is that an efficiency problem or a demand problem, and how would you tell?
3. You raise billable efficiency by pushing technicians to finish faster. Name two costs that are likely to appear within ninety days.
4. A technician makes four supply-house trips a week. Roughly what does that cost per year in paid, unbillable time at your loaded cost per paid hour?
5. Why does measuring billable efficiency in July and applying it to the whole year make your labor rate too low rather than too high?

Next lesson

You now have loaded cost, overhead, and real billable hours. Those three numbers produce a labor rate, and for most shops running this for the first time, the answer is uncomfortable.

Lesson 5: When the Math Says Your Labor Rate Is Too Low →

Sources and assumptions

All hour allocations shown for Marcus are illustrative assumptions created for this lesson to demonstrate the method. They are not survey data and should not be used as benchmarks. Measure your own. The 2,080-hour figure is the conventional full-time year (40 hours × 52 weeks) and does not account for overtime. Overtime and recordkeeping obligations are governed by the Fair Labor Standards Act and by state law.

Disclaimer

Educational content only. Not accounting, legal, or employment advice. Before implementing time tracking, confirm your recordkeeping obligations for non-exempt employees under federal and state wage and hour law.

Editorial status

Published by ClimaCall. Independent technical review is pending. No outside reviewer is attributed to this lesson.