Service department efficiency is a simple measurement. For example, during an 8-hour workday, if a technician bills 4 hours of the day to customers, his/her performance efficiency rating is 50 percent. In many dealerships, a 50-percent efficiency ratio is not sufficient to break even when you consider the service department's fair share of applied operating expenses. Hard operating expenses include rent/ lease, property taxes, telephone, electricity, specialty tools and equipment, etc. We will discuss this in detail a little later. Of course, earnings are directly related to the shop's hourly labor rate charged to customers. Assuming an hourly labor rate of $65,
multiplied by 4 hours billed, the technician earned $260 in department revenue. Since there is no cost of goods related to earning $260, it's considered 100-percent profit. You can use all $260 to pay bills. The cost of your technician's wages is considered and tracked in the payroll section of operating expenses as referenced in the income statement. When considering the
department's share of hard cost, $260 may not be sufficient to pay his/her portion of operating expenses. More details will be discussed later. The good news is during the past 15
years, we've seen the average efficiency grow from about 40 percent to just above 50 percent. The industry is making progress.
In the next article in this series, we will
take a look at the Service Department Efficiency Analysis Ratio (SDEAR) chart. This chart was developed for the purpose of measuring and reporting service department efficiency because the more efficient the department becomes, the more profit it produces.
Jim Yount is the founder and chief executive officer of Jim Yount Success Dynamics LLC. For more than 30 years, he has hired, trained, managed, sold, marketed, and motivated. Extensive real-world experience in retailing, distribution and working with manufacturers, both domestic and international, has earned Jim the reputation as a trustworthy and knowledgeable professional in his field. As a results-oriented speaker, he is dedicated to inspiring groups of 30 to 3,000 to develop their talents and realize their full potential. As a business consultant, teacher and coach, Jim is experienced at challenging leaders to explore their operational procedures and change unacceptable practices that are producing poor results.
For more information, contact Jim at jimyount@hughes.net or (903) 796-3094 or visit his website at www.jimyountsuccessdynamics.com.
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OUTDOOR POWER EQUIPMENT APRIL 2012
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