Understanding Gross Profit Per Person Day
Possibly the Most Important KPI you could ever use.
The Quick Answer
Indicates how well you are applying available field labor top producing gross profit dollars (as opposed to merely sales). This is the number of full business days available to perform work per billable person. It is important because you only have so many days to generate sales to overcome fixed costs (overhead). The calculate Available Person Days, multiply the total number of billable technicians by the total number of available days they can work. Subtract weekends, holidays, vacation, sick days, etc. Most companies have 240 person-days per employee per year.
Formula: Gross Profit / Available Person Days
Approximate Industry Average: Varies Widely by Segment
Our Recommendation: $600 and Higher (depending on department)
Person Days Explained More Fully
For those of you who want all the details, the rest of this article is for you.
Number of Available Days
This is the number of full business days available to perform work per billable person. It is important because you only have so many days to generate sales to overcome fixed costs (overhead).
Every day or partial day lost must be made up through additional sales and or labor hours. That can be very hard to do and many companies don’t.
One Person Day
Work completed in one full regular day of uninterrupted effort by an average worker.
How to Calculate Person Days
- Multiply the total number of billable technicians by the total number of available days.
- Do not consider Saturday, Sunday, or recognized holidays.
- Do not consider overtime, unless it is regular and mandatory.
- Be sure to adjust for any part-time employees (if any).
- Subtract for vacation and other paid time off.
- Estimate sick time and personal days.
- Most companies have 240 person-days per employee per year.
Person Days Formula
Available Person Days = ((Eligible Employee * 240) * X)
Where X =
If employee is “Full Time” then multiply that employee’s Person Days by 1.0.
If employee is “Part Time”, then multiply that employee’s Person Days by 0.50.
Note for Total Office Manager Users (www.Aptora.com)
This calculation is performed automatically. The value can be overridden by going to Employee List | Employee | Payroll Item Setup
Gross Profit Per Person Day Goals
- The amount of gross profit dollars that each person or crew must generate per day depends on your own company’s situation.
- Your product mix has a lot to do with it. The brand, efficiency, and accessories that you sell affect your numbers. You will need to carefully make these calculations for yourself.
- There are a lot of videos explaining this process at www.egia.com
- I am offering the following numbers to give you something to consider. Your actual numbers may be higher, but it is unlikely they would be lower.
Gross Profit Per Person Day Goals
- AOR Installers: $650 per day or $1,300 per day for a two-person crew.
- NC Installers: $700 per day or $1,400 per day for a two-person crew.
- Trac Home Installers: $450 per day or $800 per day for a two-person crew.
- Commercial Design-Build: $600 per day or $1,200 per day for a two-person crew.
- Plumbing Replacement: $650 per day or $1,300 per day for a two-person crew.
- Residential Service Techs: $750 per day
- Commercial Service Techs: $500 per day
- Residential PTU Specialist: $200 per day
- Commercial PTU Specialist: $225 per day
Maximizing Your GP$ Per Person Day
- Create business practices designed to get your company’s Gross Profit Dollars per Person Day, as high as possible. Here’s how to get started:
- Study the market you serve and create a list of matching departments
- Use a proper chart of accounts designed for a departmentalized business
- Train the accounting department on the new chart of accounts
- Train the staff to associate a department with all income and COGS.
- Use the proper pricing method, specific to each department
- Implement inventory control and recover unused materials
- Create incentive compensation plans that motivate and reward employees