How do these numbers stack up
when compared to the lowest, average and highest performance in the example Service Department Efficiency (SDEAR) chart featured in the second article in this series? Using 1,800 available hours for billings to customers, the efficiency ratios from the SDEAR chart are as follows: LOWEST service department,
working at 15.31-percent efficiency, billed 276 hours at $70 per hour and generated $19,320 in annual revenue. These earnings would not pay the technician's wages and mandatory benefits or address an equal share of department operating expenses. As a stand-alone cost center, the department is deeply indebted to the rest of the company. AVERAGE service department,
working at 52.90-percent efficiency, billed 952 hours at $70 per hour and generated $66,640 in annual revenue. A 52.90-percent efficiency rating usually is about breakeven, perhaps a point or two above payroll and expenses. It's better than losing money, yet not sufficient to
sustain healthy department and company growth.
HIGHEST service department,
working at 86.82-percent efficiency, billed 1,563 hours at $70 per hour and generated $109,410 in annual revenue. An 86.82-percent efficiency rating represents outstanding performance. It's sure to provide a healthy financial return to owners when all other factors are managed equally. Do we believe the department manager of the highest-efficiency shop had a profit-centered mindset? Of course, we do. I'm sure department process and policy was mandated by the president of the company. Carry this thought forward, service
department revenue is directly related to the process and policy used to manage department assets and people. No exception. In the fourth article in this "Increasing Shop Profitability" series, we will discuss "Determining service department's share of applied hard cost of doing business."
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,
OPE
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.
OUTDOOR POWER EQUIPMENT JULY 2012
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