“Forecasting Service Net” - #2 Daily Clock Hours

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.