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