How Much Production is Enough?

There’s an interesting debate that takes place in classrooms, conference rooms, and over coffee (or other beverages) and that is ‘How much production should I expect from my shop?’. The answers are of course many, and it all depends on what your end goal is. If you’re looking to make as much money as possible, or even just to grow your business into a second location then my answer is “you can never have too much”. If you want to just get by and have a job to go to everyday then you don’t have to worry much at all about production. Here’s what I mean. You make money in your shop with your production bays. This is where the work that customers pay for gets completed and where the parts that are needed for that work get installed. Therefore, if there is not a vehicle in that bay being worked on, you are not making money with that bay…in terms of labor dollars collected, or parts revenue. The minimum amount of production you need is that amount that allows you to keep your doors open. Generally about half of a shop’s total revenue comes from customer labor sales. Calculate all of your expenses, including salaries, parts, shop supplies, services, etc. When you understand how much you spend to keep the doors open, divide that number by two and then again by your hourly rate. This will tell you how many hours a week you need to produce for a “break even”. Of course, I’ve over simplified it a little bit, but you get the idea. If you understand how much you need to make, you’ll know how much production you can be okay with. Maybe it turns out you just need four hours a day from each technician to pay them all their eight hours and meet your other financial obligations. Maybe though you realize that if you are going to accomplish your bigger goals, then you need at least eight hours each day from them in return for the eight you pay each technician. You may also decide that the more production you get, the more parts sales you’ll have, and the more profit margin there will be. That additional profit margin can be used for renovations, investments, another shop, etc. If you’re a service advisor reading this, you may have a pay plan that is dependent on how much work the technicians produce. If you are, then you need to decide how much money you want to make! Do the math and set some goals!

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