Non-chargeable time is the time spent
doing work you can't charge your customers for. Typically such
work involves writing proposals and quotes, making business contacts.
answering customer questions, doing your book-keeping etc.
In a service business, earnings are
tied to the number of hours devoted to income producing work. In some
small service businesses one-third or more of the total working hours each
week may be spent doing work that can't be billed to any client.
In fact, its not unusual for the business owner to work from early in the
morning until late at night without producing a cent of income.
Under such circumstances, time is a
commodity with significant value. For instance, assume you work a total of
40 hours a week in your service business and on an average you make about
$25 an hour on time spent on client work. If you spent 10 hours a week
doing non-chargeable jobs, you have only 30 hours a week left for paid
client work. Thus you are losing $250 a week in sales ( 10 hours
x $25) . If you normally charge $50 an hour for your time, those 10
hours of non-chargeable time will cost you $500 each week.
How do you factor the cost of non-chargeable
time into your fees?
Calculate what your expenses will be
for the month. This figure should include a salary for yourself,
plus all expenses including loan payments if any for the business,
allowances for equipment upgrades and repairs etc. Add in
an amount for profit (your own salary is not profit. Profit is what
the business makes over and above your salary and all other expenses)
Multiply this figure by 12 to
determine what the gross yearly income of the business should be (what you
need to make each year). Then divide the gross yearly income by
48 weeks to determine the amount of money the business will need to bring in
per week on average. The reason for using 48 weeks instead of 52 is
allow for holiday time, sick days et.
Once you determine the amount of
money you need to earn per week, divide that amount by your
For instance if you plan to work 40 hours a week, but will spend 10 of them
on non-chargeable work, divide the weekly gross income needs by 30 to get
the hourly fee you should charge.
For example, if you determine you
need to bring in $5000 per month to cover your salary and other business
expenses, here's how you calculate hourly fees:
$5,000 (monthly income) x 12 (months)
= $60,000 (gross yearly income)
$60,000 (gross yearly income) / 48
weeks = $1,250 per week
$1,250 (per week) / 30 hours =
$41.66 (per hour)