Most companies don't get a separate operating statement on their service department. But their thinking is "my flat rate pricing is set at $200/hour. I've got to be making money!" Unfortunately, that is not so!
Service labor has to be 25% or less to make good money in the service department. (12% to 15% net). Install labor for AOR has to be 12% or less to make good money in AOR. (12% to 15%)
When you get your operating statement and you have one lump sum for sales and one lump sum for labor, you can't tell what your labor is in either department.
The chart below will tell you exactly what the percentage should be based on 25% service and 12% AOR labor. All you need to know is about what percentage service is of total sales.
Enter the chart below on the left side at your service percentage and go across to the diagonal line. Go straight down and read the percentage. Let's say your total labor % comes out at 26% and you are doing 30% in service and $2,000,000 sales a year. If you can get it down to 15.9%, you will add $210,000 net profit to your bottom line. If your % is higher than the chart, call me. We can help!
