Did your Service Department just lose $45,000?

As a Dealer Principal or General Manager, how would you feel if the Service Manager told you they had just lost $35,000 and would need to spend an additional $10,000 to fix the issue?

Not too happy, right?

Now imagine how you would feel if the Service Manager called to tell you it had happened again 3 months later?

And then again 7 months after that?

The scary part about these numbers is that they are the real costs every time a Technician leaves your Service Department. Lose one Technician, lose $35,000. Lose two Technicians, that’s $90,000 lost. You had 3 Technicians leave? – Well, that number is even too painful to type.

Because a Technician actually does the work that makes the money in a Service Department, when they leave, the harsh reality is the Service Department will suffer about $45,000 loss (typically) to their Gross Profit, and a further $10,000 will need to be spent in finding a new (and suitable) Technician and get them up to speed.

I appreciate that this might sound excessive, but I am not exaggerating.

Let’s look at the maths on losing a Technician as I step you through the details about these numbers.

Presuming your Technician had a productivity of 90% (productivity is the total time the Technician is at work, compared to, the time they are actually working on [clocked on] a job).

Let also presume their efficiency rate was 100% (efficiency is the time the job should take compared to, how long it actually took the technician – 100% means that the book says it should take 1 hour, and the tech did the job in 1 hour, so 100% efficient).

Now presuming that your Technicians work a 7.6 hour day and your workshop has enough Retail work to keep them busy for all of that time, at a Retail labour rate of $165 per hour, each Technician should earn the business about $1100+ ($1128 to be exact) Gross Profit per day.

The formula looks like this (you can use your own numbers – this is an example)

Now, according to a study done by the Department of Small Business and Labour in November 2017*, only 43% of Automotive jobs get filled in the first 6 weeks from when the job is advertised. This means that 57% of all jobs take 6 weeks or more to be filled.

At $1128 a day, the cost of lost income in 57% of workshops is at least $33800 from when the Job is advertised. (this doesn’t count from the day the technician left).

Even if you find someone straight away, they will usually need to give notice and may want some time off between finishing their ‘old’ job and starting with you – which only equates to more time without a Technician.

To find someone you have to recruit and recruiting costs money. Depending on how you recruit and who you use, spending $5000+ to find a Technician is not uncommon. Of course, efficiency and accuracy of the recruitment are vital, not only because your workshop is down $1100+ per day, but perhaps the only thing worse than not have a tech, is hiring the wrong person.

However, once you find someone suitable you then have to start them and unfortunately, your costs don’t finish there. With all but a few exceptions, very few Technicians will be consistently 100% efficient in their first month. This simply means that it will take the new tech some time to settle in.

During this time – about 2-4 weeks – the Technician will average about 80% efficiency. If you do the maths 80% of $1128 a day is about $902 – a loss of $226 per day.

Multiply this loss by 21.67 (the average number of working days in a month and you get about $4900 – which is the Gross Profit lost in the first month as the Technician settles in and finds their feet.

So, there it is – $33800+ in lost income and about $10,000+ in recruitment and ‘on-boarding’ – per Technician lost – a total impact of roughly $45,000. And that is being 'optimistic' with the numbers.

The two critical elements to take from this example are:

1. Staff turn is expensive and painful – but especially so for losing Technicians.
2. Customers don’t make you money – customers pay you money for the ability & time of your Technicians. Your Technicians are the ones who make you money.

Sure, you absolutely need customers and you need to look after them. This goes without saying. But your customers don’t work for you and won’t pay you money if the Technicians don’t deliver. This is why it is so critical to look after your Technicians. Your Service Department’s capacity and profitability hinges on the capacity of your Technicians.

If you want to retain your Technicians and at the same time boost the workshop output – the Workshop Capacity – the two best things that you can are:

• Remove the elements (the Friction) that reduces their capacity (and ultimately causes them to leave).
• Improve the capacity of each of your Technicians (help make them successful at their work).

Both need to happen – this isn’t an either/or option. If you are not doing both, reducing Friction (things that just make their job harder) and improving their ability, then it is just a matter of time until you see another $45,000 disappear from your Service Department’s income.

To find out how Friction is making your Service Department work harder for the same results and hurting your bottom line – click here.