For those of you that did the Gross Margin test and found that there was a significant difference in your actual G.M. and what your G.M. could be: the problem is generally in the service department.
If you don't get a separate service department operating statement, of course, you don't know how your service department is performing.
The easiest way to get a good idea of the performance is to have your bookkeeper separate your service billings from your total billings on your combined operating statement. Additionally, separate your service tech labor from your total labor on your operating statement.
With these two numbers, you can determine your service department labor % as a percent of the service department sales: just divide labor $ by sales $.
In a well run service department, the labor has to be 25% (or less) of sales. For example: if your service billing for one month is $40,000 and your labor is $10,000, then your labor is 25% - that's good! But, if your labor is $15,000 then your labor is 37.5% of sales: that's very bad.
You can't make a decent profit (18%) in service when your labor goes over 25%.
There are a number of things that can cause high labor. Here are just a few.
- Flat rate price too low.
- Your hourly rate set up should be at least 10x your tech hourly pay. Tech making $25/hour flat rate should be $250/hour.
- Service tech taking way too much time for diagnostic. Diagnostic should be about 15 min or less.
- Example: No cooling call tech arrives and finds blown low voltage fuse - STOP RIGHT THERE! That is the diagnostic. You don't go and find the short and they bill the customer 15 min to fix it. You tell the customer they have a short and how much it will cost to find it and fix it. You should remove all the 15 min charges from your F.R. Book. Any time your tech goes on a no heat or no cooling call, when they leave the house and the unit is working and they only bill the diagnostic, they left at least $100 off the ticket.
I could go on and on - send me 20 or 30 tickets (don't cull the tickets). I want the good and the bad. I'll go through them, mark them and send them back.
