Retail Observer

RETAILOBSERVER.COM FEBRUARY 2022 56 RO R etail appliance dealers work on margin rather than markup, whereas appliance service companies work with a markup on parts sold during a repair transaction. In either case, without knowing the true cost it's impossible to determine a fair selling price. Setting profitable service repair rates can be especially difficult, as there are a plethora of costs associated with running a call. We must calculate the technician's and support staff's hourly wages; the rent and utilities; the technology to receive and record the customer's information; and the vehicle, fuel and insurance to get the technician to the customer's home and back. Let's also not forget the hours spent training the technician, and the special tools and manuals needed to diagnose the customer's problem. Then there are waste removal and recycling costs, and workman's compensation and healthcare costs. The list of costs behind every knock on a customer's door is long and must be factored into every service call. So how can we do that? Unfortunately, most servicing dealers don't know how and consequently go about the business blindly, hoping there'll be enough money left over not only to pay the bills but contribute to the bottom line. The trick to profitable appliance repair is knowing the hourly cost to run your business and how efficient your operations are. Efficiency is determined by how many first-call completes you can achieve in a day – essentially, how many of your technician's hours you charge a customer for each day. Begin the equation by determining how many technician hours you have available to sell. Three hundred sixty-five days, less vacations, weekends, statutory holidays and sick days, multiplied by work hours each day is how many hours you buy from your technician in a year. Then calculate the gross hourly wage – not the net wage, but fully loaded and spread across those hours you can resell. Remember, you still must pay when your tech is on vacation or home sick. To determine your hourly operating cost, divide the service department's overhead less the tech's wages by the number of available technician hours. By adding the gross hourly wage and the hourly operational cost, you'll know the hourly breakeven amount. Add a modest profit of 20 percent to 30 percent, and you'll have determined the gross billable rate per hour. What happens next is the magic or the downfall of all service companies. It's impossible to resell 100 percent of all available technician hours. Much unbillable time is spent pre-screening and pre-diagnosing calls. The time it takes to research, order and receive parts, and to drive to and from service calls, is hard, if not impossible, to charge for. Minimizing this non-billable time is referred to as the efficiency of your department and must be applied to the gross billable rate per hour to determine what your average service invoice price needs to be. Once you understand this number, you can set your service rates accordingly. Sound complicated? It is! If you're a member of United Appliance Servicers Association (UASA), you can get help with the calculation by downloading the group's Cost of Doing Business Calculator at www.unitedservicers.com/codb-calculator/. It provides an Excel spreadsheet specially designed to calculate your service rates based on your cost of doing business and efficiency. Just fill in the yellow highlighted cells and then set service rates that deliver profits. Paul Mac.Donald Service Trends STOP LOSING MONEY ON EVERY SERVICE CALL BrandSource service consultant Paul MacDonald ran his own 38-tech service business and is a past president of the UASA. He currently operates the Expert Service Program, which helps servicers run their operations more efficiently and profitably. For more information, contact Paul directly at (647) 500-7785 or paul.m.macdonald@pmdgroup.ca or visit www.pmdgroup.ca. RO

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