NATDA Magazine Sept/Oct 2018 NM_Sept2018 | Page 10

D oes this sound familiar?  It’s mid-season. Your service department is running behind by several weeks and your daily goal is to keep your customers and employees happy. If you’re like some of our dealers, you just can’t seem to find the time to pull your numbers. However, if you make it a priority to track your  recovery and efficiency rates, yo u will gain an in- depth insight to how you can have a higher-performing and more profitable shop. Do we have your attention? The efficiency rate is the time that the tech is clocked into the work order vs. the time that you bill the customer for that work order. You calculate the efficiency rate by dividing the time billed to the customer by the time the tech was working on that specific job. As an example, let’s say the tech turned a wrench on a trailer for 1 hour, but, based off your flat rates, you charge 1.5 hours for that specific repair. Your tech was 150% efficient for that job. Top technicians strive to have an efficiency rate of 126% or above. If you were to expand and calculate the tech’s efficiency for the day, you would take the same calculation as above but use it for a full 8 hours of work. If your technician was turning a wrench for 8 hours and, based off your flat rates, you charged 9 hours for those jobs, your tech would be 112% efficient. Now, you are beginning to make some money! The recovery rate is a number we use to determine how much time we are paying the techs for vs. the time we are billing 10 customers for repairs. For example, if your tech is clocked in for 8 hours a day and we only bill 6 hours for that day, the recovery rate would be 75%. You may be thinking that 75% doesn’t seem like a bad recovery rate.  In school, 75% would be a C. It’s passing, but certainly not great!   Let’s look at the 75% in terms of money. If your labor rate is $75 per hour, a recovery rate of 75% means you failed to bill out 2 hours of labor or $150 for the day. That would be $750 for the week, $3,000 for the month or $36,000 of lost revenue for the year — and that’s just with one technician! Your recovery rate is a valuable measurement. It determines how effectively work is flowing through your shop, your need for technicians, what to charge customers and how to utilize technicians’ skills and abilities. Keep in mind that if you have a low recovery rate and have plenty of work coming through the door, chances are you have too many technicians. If you have a high recovery rate and have plenty of work, this could be an indicator that it is time to hire someone new! Whatever your case, taking time to understand your numbers will help increase efficiency and cash flow. Join us at the NATDA Trade Show on Thursday, September 6, 2018 in Room 140 from 1:10 – 2:10 PM to learn more about this and other topics through our seminar, Understanding Your Numbers in Service, Parts & Sales. NATDA Magazine www.natda.org