|
There are seven things you control that directly influence your Service bottom line.
1 Calendar Utilization 2 Daily Clock Hours 3 Number of Technicians 4 Proficiency 5 Effective Labor Rate 6 Gross Retention Rate 7 Expenses This installment deals with Daily Clock Hours. Why is it important? Making decisions that effect the lives of your employees can be difficult and can cost you great people if you are not careful. The hours you are open need to align with the hours your customers are shopping and buying. In addition to those pressures, you need to make a profit or everyone could be out of work. Luckily, service departments are not normally servants to the same demands as sales departments. Unless you are competing in the Express / Quick service market customers are accustomed to “normal” work hours in exchange for expert work. There are choices that need to be made to capitalize on demand, especially in cyclical businesses like marine or power sports. In the busy season do you extend hours, hire more people, both? Where do you find a qualified person? In the “off” season will you be able to afford to keep them? Can you find one that will work part of the year? Maybe you can do something creative to provide for demand without overworking your people, like installing a four-10-hour day schedule. In a team of 5 technicians, going from 40 hours in 5 days to 40 hours in 4 days lengthens your day by 2 hours and allows room for an additional technician where work bays are at a premium. These are all questions you may be considering. It is good to know how they will impact your bottom line ahead of time. As an example, plug these numbers into the “Forecast” tab of the Numbers Worksheet to experiment with your choices. Let’s take a look at a service department that is open 8 hours, 24 days in a given month with 5 technicians. This hypothetical store is netting $10,669 currently. Without changing anything else, adding a technician will take their net to $19,202. If this employee is full time, about 25% of their pay needs to be added to the expenses. Paid $20 an hour that would be about $40 a day or $3,840 a month in additional expense. Their net will now be $15,362. How about if they just extend their work day by 1 hour without hiring another tech? Assuming there would be little or no additional expense their net would go to $16,002. How about if they had 2 technicians come in for a half day each Saturday? That would add another $1,422 to the bottom line before subtracting any additional semi-fixed expense they might incur. When adding additional hours don’t assume that the choices you make will provide the same net result. Next: Controllable #4 - Proficiency. Now that you have considered how many work days are available and how many clock hours you may be able to extract from those days, my next post we will look at two things you control that determine how much of that time you will actually bill a customer for.
0 Comments
There are seven things you control that directly influence your Service bottom line.
Why is it important? Especially in a cyclical business like the boat or power sports industry, it is important because you need to be able to make decisions about hiring, scheduling and shifting optional days off to match your varying work load. I was recently talking with a store owner who told me that at the end of their busy season her service manager used valuable technician time to do extensive work on a boat they had already brought in for winter storage and would have on site for months. Customers who only needed a small repair to keep boating were put off (lost business). Customers who already had their boats scheduled were delayed (lost trust and loyalty). Work needed to keep techs productive in the winter was no longer available (lost revenue). Consistently having technicians available to match customer demand is the foundation you need to make money and loyal advocates. This year there are 22 weekdays in December. Because Christmas day is on a Sunday, you could theoretically work all 22 days. 22 days x 6 technicians = 132 work days. If they all show up for work every one of those days your calendar utilization would will be 100%. You may decide to give everyone Friday off to spend at home getting ready for Christmas morning. They will work 126 days and your calendar utilization is now 95%. You may be slow between the Holidays and your are considering letting 2 technicians take off the entire week between Christmas & New Years to be with their families that live far away. Your team will work 116 days or 88% utilization. Plug these numbers into the “Forecast” tab of the Numbers Worksheet and you will see that the difference in NET profit between 100% utilization and 88% is about $7000. Anticipating this before your month begins lays the groundwork you need to make other decisions that impact your profitability. When tracking it in the “Daily Input” tab start by identifying the available work days in the top row for each technician. Each day when you insert the number of jobs they work on the spreadsheet will calculate your calendar utilization in the “Daily Performance” tab. Next: Controllable #2 - Daily Clock Hours. |
Ed AlosiThoughtful observer of actions and results in the Retail environment. Archives
February 2022
Categories |
RSS Feed