Who Is Your Go-To Tech?

by Tom Grandy, Founder

There are 30 seconds left in the game.  Your team needs a three-pointer to defeat your arch rival from across town. Coach calls a time out.  The question?  Who is going to take the last shot?  He could tell whoever is open to take it but more than likely he will ask Billy to try to take the last shot.  Why?  Statistics.  The coaches have been keeping records the entire season.  They know statistically who is the best three-point shooter.  As you might have guessed Billy has scored more three-pointers than anyone else and also has the highest percentage of made shots.  The choice was easy if stats are being kept.  Billy takes the last shot.

Let’s take a look at YOUR service techs.  Which one is the most productive in terms of dollars generated per billable hour?  Do you know?  If not, you should because it drastically affects the Service Department’s profitability.

The first step is to determine a goal.  How much “should” each service tech be bringing in per hour to hit your gross sales goals.  To determine that, you will need three pieces of information.

What is the current hourly rate you are charging the customer? Let’s assume it $145/hour.

What is the average cost of materials sold per billable hour? This varies by trade but for the HVAC industry, it’s about $20/hour in part sales (cost).

What is the average parts markup for parts in the Service Department? I realize it is sliding scale, but in general the average parts markup is usually around 100%.

Armed with the above information, we can now determine what each service tech should be bringing in per billed hour.  The number is $185/hour for each hour they bill the customer ($145 + $20 parts cost + $20 parts markup = $185).  Now we know what the goal is for each service tech. 

The question is, who is hitting that goal and who is not?  For this, we will need the gross dollars billed per tech for the month and the actual billed hours charged the customer. 

Note:  these are not the hours turned in on his time card, these are the hours he was able to actually charge the customer during the month.  Do the math.  Look at the gross dollars brought in for a period of time.  It might a week, a month or longer. Let’s look at a month for Sam, Ed and William.

Sam: 

He billed the customer $13,200 in gross dollar and he worked 77 billable hours. 

Note: these are not the hours he turned in on his time card, these are the hours he was able to charge the customer during the month. 

Revenue brought in per billable hour = $13,200/77 billed hours/= $171.43/billable hour

Ed:

Ed billed the customer $16,325 in gross dollar and he worked 83 billable hours. 

Revenue brought in per billable hour = $16,325/83 billed hours/= $196.69/hour

William:

William billed the customer $11,835 in gross dollar and he worked 74 billable hours.   

Revenue brought in per billable hour = $11,835/74 billed hours/ = $159.93/hour

Look at the three service techs.  Which one is the top performer?  Even though the number of billed hours varies by tech, it is pretty obvious that Ed is the Service Department’s top performer.  He is the go-to guy.

Armed with this information, what kind of decisions can be made:

If one of the service techs needs to be transferred to the Installation Department for a day, which tech needs to go? The answer is to send the lowest producing tech, which would be William. 

How would profitability be affected if Ed is transferred to Installation for a day instead of William? Ed bills out at $196.69/billed hour, while William bills out at $159.93/billed hour.  That is a difference of $36.76/billed hour.  If Ed is transferred and William is kept in Service, and 4 hours are billed out that day, it would have cost the company $147.04 ($36.76 x 4 billed hours = $147.04) in gross sales.  This doesn’t need to happen very often for the gross lost dollars to really mount up.

If one of the three techs needs to be laid off for a period of time, who goes? Again, the lowest producing tech needs to go which is William.  The last to go is Ed.

Once the goal is set, which in this case is $185/billable hour, it can be a pretty simply process of setting up a reward system based of productivity.  Keeping a few statistics to make decisions can scientifically affect the bottom-line profitability of the Service Department. 

Are you interested in being a better owner or manager?  If so, check out Grandy & Associates Online Training.  There are all kinds of programs designed to help you grow and prosper no matter what your job description is.  The modules are normally $39.95 each but the Website Special this month is only $29.95 per module.  Check out the Online Library and see what program best fits your needs.  Check out this month’s Website Special

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