Disciplined financial measuring is a necessity for your shop's success

July 4, 2018
Times have changed and measurements have changed. So many measurements still being embraced by shop owners, quite frankly, just do not work anymore.

As a shop owner, do you spend all your time working “in” their business or “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.

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

The question that many people are asking these days is what should I be measuring now in order to ensure I am maximizing productivity and profits of my shop? Times have changed and measurements have changed. So many measurements still being embraced by shop owners, quite frankly, just do not work anymore. They are outdated and the old business measurement method is broken. The new aftermarket requires specific measurements that allow management to focus in on the right area to grow the business and build net income.

The following is a start to an up-to-date list of items for consideration to be measured each week in some cases and definitely every month. Keep in mind what I have said many times before: 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.

Total shop gross profit percentage (Monthly)
What total GP percent are you achieving for the shop when all commodities and all labor is accounted for? (Total Gross Profit dollars divided by Total Sales Dollars). Are you meeting the required standard?

Total labor sold to total wage package ratio (Weekly and Monthly)
What are you really achieving in your total labor sold to total wage package paid? The wage package includes management wages at a professional pay scale, all technicians, service advisors and administration wages, as well as state payroll taxes, workers compensation and staff benefits totals. Divide that total into total labor sold. Are you measuring “activity” or true “productivity” in your business?

Keys To A Profitable, Productive Shop

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Total maintenance hours billed per day and per month
Are you achieving the right number of billed hours per technician in your shop? Are all vehicle inspections being professionally done?

Total diagnostic hours billed per day and per month
Based on your vehicle mix are you capturing the right number of diagnostic hours available and billing it accurately?

Total re-flash hours billed per day and per month
Are the front counter processes in place to ensure re-flash opportunities are captured and the professional service is being performed on behalf of the client?

Site efficiency (weekly and monthly)
Many shops are measuring proficiency, which is the measurement of an individual but are you measuring the measurement of your entire team collectively working together? Are you achieving the correct site efficiency number that drives net profit and allows the shop to pay above average wages to the team?

Total average billed hours per R/O (weekly and monthly)
Based on your vehicle mix, are you achieving the correct average billed hours per R/O which tells you that you actually are professionally serving your clientele?

Number of R/Os per day and per month
Based on your average billed hours per R/O are you booking correctly the number of vehicles to service each day or are you over booking the shop which forces the team to rush and therefore do not have the time to properly inspect the vehicle and serve the client?

Average minimum labor dollars sold per technician (weekly and monthly)
Do you calculate how much labor dollars each technician should be billed for each day and each month? Is each technician meeting the correct total labor dollars sold each day and each month based on their competency?

Cost per billed hour (monthly)
Do you calculate the true cost per billed hour per month using year to date numbers always and make sure that the service advisor is given that number each month and understands how to use it before an R/O is closed off? Are you still using old methodology and measuring average sales per R/O or are you now measuring average net profit per R/O?

Cost to turn the key in the morning (monthly)
This is a critical number to know and should be calculated each month using year to date facts and based on the actual days the shop is open.

Maintenance labor rate
What is the correct maintenance labor rate for your shop based on your shops facts. In the new aftermarket this rate is a percentage of your cost per billed hour. If you are inefficient your cost per billed hour will be high which can cause you to price your labor rate out of the market and if you don’t know how to use the cost per billed hour you may have too low of a labor rate which means you will only be creating activity instead of profitable productivity that creates NET profit.

Diagnostic labor rate
Have you got the right diagnostic rate for your shop? This also is now a percentage of your cost per billed hour. But it is a different percentage than the maintenance rate.

Re-flash labor rate
Is the right re-flash rate in place for your shop. This is a different percentage of your cost per billed hour than the diagnostic rate.

Average door rate (monthly)
This is an important measurement to see if the shop is achieving every labor hour available at the right labor rate. Is your shop’s average labor rate slowly increasing every month and based on your opportunities what should your average labor rate objective be?

These are a sample of the key measurements that must be embraced in this new profession. The new aftermarket is exciting and the amount of income that can now be made is greater than the last 10 to 20 years, and the future looks even brighter. Are you on top of your business or are you one of the many shops who do not embrace an ongoing learning culture?

Have you bought yourself a job, or are you enjoying a fantastic career?

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