One of the key performance indicators that we discuss with our clients in the construction industry, is how they maximise their return on investment in people.
Many construction firm’s will invest in their workforce and create one of their largest assets, so managing the effective working time is crucial in order to maximise profitability for the business.
Too often, income and wage costs are measured in isolation of each other. Is turnover as expected? Are we managing the wage cost as expected?
One metric, the Average Revenue per Hour Worked, considers how much revenue is actually being generated on average for each hour your workforce is committed to a project or job.
Breaking down your revenue in this way gives you a truer sense of job profitability and will provide you with useful data to be fed back into future pricing and your business strategy.
Jobs which appear to generate greater revenue for the firm may be exposed as less rewarding due to the time cost involved. For example, we were recently speaking with an air conditioning business that were considering ditching their servicing team in return for more installations. However, on analysis, although the perceived smaller projects require less time allocation. they were actually providing a better profit return and further opportunities for the business.
To calculate your Average Revenue per Hour worked, you will need to know your Income Revenue per Project / Job and the Hours worked on the Project / Job.
With good management recording and the use of your financial management software, you can establish these numbers to calculate Average Revenue per Hour Worked, by dividing the Revenue which has been generated on the job by the number of hours which were worked upon it.