How to calculate the true cost of facilities maintenance
January 10, 2017
In this post you'll learn that in order to calculate the total cost of ownership of a facilities maintenance management program, you have to analyze and consider the overhead because that is where there is an opportunity for improvement.
You're Asking the Wrong Question
To the untrained eye, the facilities maintenance arm of a business appears to be a black hole of cost. The costs of these FM services add up, and unless discrepancies arise, that is where most of the business analysis ends. However, facilities maintenance managers, who are privy to all of the nuances that make up each work order, understand the complexities and overhead involved in this sector of business. There are a multitude of variables that affect the total cost of each service like trip charges and materials, in addition to the other direct and indirect operational costs associated with facilities management.
When senior executives across many industries try to determine the most economic way to handle the “black hole of cost,” they often ask us the same question that only addresses a fraction of the equation: "What are your hourly costs?"
Unpacking the Black Hole of Cost
Total cost of ownership is not a new concept, but it is often overlooked in the facilities maintenance sector. Adding up rate cards for trip charges, hourly wages, and materials does not accurately reflect the total cost of ownership of a facilities maintenance management program, yet historically these factors have been the predominant focus. This level of analysis only provides you with a partial view into the complexities of facilities maintenance. There are many additional variables that impact the total cost of a service other than direct costs. Shining light into the “black hole” requires analyzing and quantifying the additional factors. Overhead and the costs associated with each work order need to be accounted for, in addition to the direct cost of the ticket.
What Indirect Operational Costs Affect Your P&L
Indirect costs are often overlooked and are not applied back to direct ticket costs because they are less tangible than hourly rates and trip charges. This makes them harder to calculate for the total cost of ownership. Without evaluating these indirect costs, however, you lose transparency to accurately calculate the financial impact on your business.
Download the second installment of our Thought Leadership Series, How to Calculate the True Cost of Facilities Maintenance, to learn more about the indirect operational costs that are impacting your bottom line.