Automotive & HD Business Management Articles.
Bob Greenwood. June 28, 2016. ( over 5 years ago ) 1,636 views
A lot of shop owners look at their productivity measurement as book time to completed time. It’s great to measure the proficiency of one technician and it can become an excellent counseling tool to help the individual improve.
The question I’m looking at is a very key ratio in the shop business to really measure productivity which in turn creates net income.
Do this exercise from your monthly payroll – add the following numbers together:
Total gross wages of all Management (Owner)
Total gross wages of all Technicians
Total gross wages of all Service Advisors
Total gross wages of all Administration Staff
Total gross wages of any other Staff not accounted for above
Total gross benefits such as group insurance and RRSP benefits the shop pays for the staff
Total Vacation Pay and Statutory Holidays paid
Total Employer Burden – CPP & EI the shops portion paid
Total Workers Compensation
Total of any other benefits paid to or on behalf of everyone listed above
These totals added together create your total “wage package” of the shop.
Once you have that number, divide it into the total labour billed/sold for the month. The key number that must be achieved today is a minimum of $1.20 in total labour billed/sold to $1.00 in the total “wage package” calculated above. If you’re not there, the shop has a serious productivity issue to address.
How much NET profit did you miss? Add the dollar amount required to bring the labour billed/sold up to $1.20 of the total “wage package” paid.