In your dealership, do you track your Recovery and Efficiency Rates? If you are like some of our dealers, you are on the fence about putting in the work to pull these numbers together, but if you are willing to take the time, these numbers will give you great insight into how to get your shop performing at a higher, more profitable level.
The Efficiency Rate is the time that the tech is clocked into the work order vs. the time that you bill the customer for that work order. Top technicians strive to have an efficiency rate of 126% (or above). You calculate the efficiency rate by dividing the time billed to the customer by the time the tech was working on that specific job. So, for an example, let’s say the tech turned a wrench on a job for 45 minutes, but, based off the BCI flat rates, we charge 1 hour for that specific repair. Our tech was 133% efficient for that job.
If you were to expand to calculate the techs efficiency for the day, you would take the same calculation as above but use it for a full 8 hours of work. If your technician was turning a wrench for 8 hours and, based off the flat rates we follow, you charged 9 hours for those jobs, your tech would be 112% efficient. Now you are beginning to make some money from your shop.
The recovery rate is a number we use to determine how much time we are paying the techs for vs. the time we are billing customers for repairs. For example, if your tech is clocked in for 8 hours a day and we can bill 6 hours for that day, the recovery rate would be 75%.
You may be thinking that 75% doesn’t seem like a bad recovery rate. In school, 75% would be a C, which is passing but certainly not great! Let’s look at the 75% in terms of money instead of a percentage to time that a tech produced for you. If your labor rate is $75 per hour, a recovery rate of 75% means you failed to bill out 2 hours of labor, or $150 for the day. That would be $750 for the week, $3000 for the month or $36,000 of lost revenue for the year — and that’s just with one technician!
Your recovery rate is a valuable measurement that helps determine how effectively you are flowing work through your shop, your need or lack of need for an additional technician, how you are charging customers for the work you do and how well your manager is utilizing your technicians skills and abilities.
Keep in mind that if you have a low recovery rate but have plenty of work coming through the door, chances are you have too many technicians. If you have a high recovery rate and you have plenty of work, this could give you an indicator that it is time to hire someone new!