Automotive & HD Business Management Articles.
Bob Greenwood. May 7, 2014. ( over 4 years ago ) 807 views
Here is a very simple measurement tip for your business.
Add up the shop’s TOTAL wage “package” for the month. The wage package includes the gross wages of all technician wages, service advisor wages, management wages, administration wages, tire tech wages, casual wages and any other wages paid plus all employer burden (business portion of CPP and EI paid), group insurance and workers compensation.
The total amount of labour billed should equal 120% of the total wage package. The ratio is $1.20 in labour billed to $1.00 paid in total wage package.
If the total wage package is $32,000 for the month, the shop should have billed $38,400 in total labour for the month.
When the shop’s total labour billed does not cover the total wage package, it’s pretty simple… no net income is made. You’re busy creating “activity”. If any net income is made, it’s because Management does not take a professional wage from the company, therefore they are “subsidising” the business. That is a smoke and mirrors show management does not want to admit to.
Start by making sure FIRST that the shops total billed labour covers at least the current total wage package each and every month, then move forward from there. When the total wage package is not covered, the shop has a site efficiency problem that must be addressed by management.