Thursday, May 26, 2016

Before You Hire Your Next Tech, Make Sure You Do These Things

Hiring Technicians . . . Or Not

Too many IT companies hire a new technician just because they're too busy. Having a backlog is ONE indicator that you might need a new tech. But it's certainly not the only one. And it's not enough reason to make that hire.

First, you need to be super clear about the math. I'm going to throw out some numbers, but you'll need to plug in the real numbers for your company and economic reality. Let's look at three possible scenarios.

Option A: Part Time, Entry Level
Pay: $15/hr
Work: 20 hours/week
Total wages: $300/week or $1,290/month
Total cost with taxes, etc: About $1,600/month or $19,200/year

Option B: Full Time, Level I Tech
Pay: $18/hr
Work: 40 hours/week
Total wages: $720/week or $3,096/month
Total cost with taxes, etc: About $3,900/month or $46,800/year

Option C: Full Time, Senior Tech
Pay: $30/hr
Work: 40 hours/week
Total wages: $1,200/week or $5,160/month
Total cost with taxes, etc: About $6,500/month or $78,000/year

Consider your scenario and get realistic numbers here. Know what the true annual cost of a new employee is. THEN you can consider the following.

1. Determine your backlog and productivity rate.

Your backlog simply consists of all the work that is in your system. I assume you have a PSA (professional services automation) tool such as ConnectWise, Autotask, Tigerpaw, or LogicNow's Service Board. Every ticket should have a time estimate. The total of all outstanding time estimates is your backlog.

If you don't track this stuff, then you have to take a wild guess at your backlog. In my experience coaching IT service providers, your wild guess will be very wrong.

Your productivity rate is based on the overall billability of your team. Let's say you have five full time techs. One of them is also the service manager, so he's about 40% billable. Let's say the others are 60%, 65%, 70%, and 75% billable. "Billable" means the amount of productive labor they contribute toward closing tickets. It excludes spinning their wheels, rework, drive time, meetings, training, and other "overhead" labor that comes with having a job.

If you take (40% x 40 hours) + (60% x 40 hours) etc. you come out with 124 hours of productive labor per week. That's an overall rate of 62%, which is a VERY common company-wide billability factor. If you don't track this stuff, you probably think your company is far more billable than that.

OKAY, so now you can calculate how long it will take to complete all the labor requests in your service queue. But of course that's not your goal. When your backlog is zero, you are out of business and you don't need any employees because you have no work.

2. Determine your service labor turnover rate.

Realistically, you get new service requests all the time. Once you start tracking your backlog, you can begin to track the rate at which tickets (hours) enter your system. You know that you can knock out about 124 hours of backlog per week. Is your backlog growing or shrinking? If it's shrinking, it means that you are catching up or losing clients. If it's growing, then you are getting further behind. With luck that's because you're adding clients.

It is worthwhile to make these calculations for many reasons. You should always look at your service board as a living, breathing thing. Hours come in. Hours go out. Projects create bumps in the chart. Vacations do the same.

Don't guess at these numbers and then make decisions based on guesses. You will be wrong.

Don't hire a technician if your backlog is shrinking and you have temporary bumps in the system. Hire a temporary employee if you need to, or outsource some work to a member of your local SMB IT Professionals group.

"Fix" a temporary labor shortage with a temporary solution.

3. Push non-technical work to non-technical employees.

One of the most important roles in your company is your administrative assistant. Admins can do lots of things you are probably handing to technicians.

For example, setting up accounts with Microsoft, Rackspace, Intermedia, and other cloud providers. Once you have a form with the information you need (users, passwords, email addresses, etc.), an admin can log onto the dashboard for any service and create the users. There is nothing technical about this. In fact, a good admin will be very high on the Conscientious and Steady scales of the DiSC profile. So they will do this job perfectly - and enjoy it!

4. Weed your client garden.

IF you use your PSA and QuickBooks right, you should be able to determine the profitability of each client. Start with the total service revenue and calculate the cost of delivering that service.

Once again, this is only possible if everyone on your team uses the PSA/Service Board correctly and enters 100% of their time into the system.

Also, remember your billability rate. If there are 62 hours in the system for supporting a given client, remember that you had to pay technicians 100 hours in order to deliver that service.

I like to sort clients by total revenue. But it's also useful sometimes to sort them by overall profitability. This includes managed service labor, project labor, hardware, software, and services. Since services are bundled into managed service offerings, we really just have to track cost of goods (services) sold to determine the cost of delivering things other than labor.

Anyway, look for two kinds of clients that you may want to drop: Low revenue clients and low profit clients.

Low revenue clients are just that. Sort your total client sales by client. Export that to Excel and add a column with the total hours spent on each client in the last year. If you have 25 clients who paid you an average of $500 last year, that's only $12,500. And just for argument's sake, let's say that $500 represented five hours of billable labor. Overall that's 125 hours of billable labor. You had to pay your technicians 200 hours overall, at 62% billable. If your overall average technician costs you $25/hour, then you paid $5,000 in labor to collect $12,500 in revenue. Profit: $7,500. Not bad!

Except . . . It might make more sense to drop those clients than to hire a new technician.

If these clients have been at that level for a long time, then none is likely to suddenly grow, hire more people, and sign a $1,000/month managed service deal. Be realistic about that.

Cut from the bottom up.

Remember: You need to pay wages forever. Or at least that's the assumption when you hire someone.

Once you've sorted clients by profitability, start counting up from the bottom. How many clients will it take to pay for your new technician? The answer is usually a lot! This is the reason that many companies only work with clients of a certain size. One- and two-person clients are not very profitable.

And once you've paid for your technician, you've create no additional profit! How many hours are left over for this technician to generate new revenues for you?

5. Consider creative alternatives.

I always assume that everyone already has an RMM (remote monitoring and maintenance) service such as LogicNow, Kaseya, or Continuum. If you don't, then you should absolutely invest in one before you consider hiring another technician. If you have five technicians, you might just be able to cut back if you use an RMM properly.

With LogicNow, I can manage 500-1000 desktops per technician. Once patch management is in place, anti-virus is guaranteed up to date, and remote management tools are everywhere, support becomes much more profitable. I've seen it time and again at companies I've coached: a good RMM will dramatically increase your productivity (billability). The jump from 60% to 70% billable will take some time. But with good, consistent processes, it is very manageable.

Also consider outsourcing specific tasks. You might hire an intern to help you with the backlog, if you're sure it's temporary.

One time when KPEnterprises had twelve employees and added a couple of really big clients, we had to attack a sudden backlog in short order. We picked a handful of specific projects that could be done 100% remotely by entry level technicians. Then we documented exactly what we needed done. Next, we put out a Craigslist ad and hired seven very-temporary technicians to do the work. This took almost all of one existing technician's time to manage, but we beat down the work in short order.

It also gave us the ability to rate our temporary workers. Later, when things settled down, we offered one of them a job and hired him.

Another way to outsource is to work with a company such as Third Tier (see Throw them the really difficult jobs and you may be able to get by without that $75,000 super-tech on staff. That will free up money to hire a great $50,000 tech and train them up from there.

The bottom line is that hiring a new technician is an important decision. It's sad when you have to let someone go just because you didn't realize your labor shortage was temporary. It's worse if you didn't do the math right and you can't really afford them.

Many people don't consider that they might be able to cut some small or needy clients and make more money - without hiring a technician.


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