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Analyzing your business correctly is time well invested

Wednesday, August 3, 2016 - 07:00
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Too many shop owners spend all their time working “in” their business and not “on” the business. There really is a difference. One method is well known as working hard, and the other method is known as working smart.

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Each month a good operator will sit in his/her office and really analyze his/her business. This time spent will make the shop money if the information is prepared in a fashion so that the owner/manager can compare the operation to targets set to maximize the profits of the shop.

The question that many people are asking these days is what should I be measuring in order to ensure I am maximizing productivity and profits of my shop?

The following is a list of items for consideration to be measured each and every month. Keep in mind that if you can’t measure it, you can’t manage it. Get focused, measure your business properly so you can make competent management decisions to move forward and achieve what you want to achieve. 

1. Labor rates — maintenance rate, diagnostic rate and re-flash rate. What multiples are you achieving between the amount paid hourly to the technician and the rate charged to the customer/client?

2. Effective Labor Rate — what are you really achieving in your labor rate after it is measured against the shop’s potential?

3. Number of Invoices/RO’s written each month — Are you controlling your volume or are you missing potential revenue because the shop is too busy?

4. Average Labor Hours Billed per Invoice —  Are you measuring productivity or just sales?

5. Average Sales and Gross Profit per invoice — What are you really making on that average sale in your shop? Is it growing or shrinking?

6. Average Labor produced per technician — Are your people above or below average? Are they improving as their knowledge increases?

7. Daily Operating Expense of the Shop — What does it cost to turn that key in the morning? Are you giving more thought to the “common sense” expenses of the shop?

8. Current Ratio — Is the business getting more liquid? Can the bills be paid in full when due?

9. Age of the Receivables — How long is it taking to collect the average receivable from the customer/client? Is progress being made to eliminate receivables? What is the true net profitability of each account? Should this account be retained or fired?

10. Age of Payables — Are you paying all bills when due and taking advantage of discounts offered for prompt payment?

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