DMS providers have done wonders over the years at taking information that would once have taken hours, days, weeks or even months to gather, and put it at our fingertips with just a few keystrokes. Unfortunately they have also taught us to focus too much on some of the numbers, which although important, don't tell the whole story.

One of those numbers is Labor Sales. This is probably the primary focal point of most DMS reports. Using phrases like "You don't take hours to the bank, you take money" they have taught many dealers and managers to look only at the total labor sales dollar amounts. But until you know what makes up your labor dollars, you don't truly understand your operation.

In every service operation we are really selling time and time alone. That time sold results in labor sales. But the sale amount can be easily skewed by other factors. For example, your shop has technicians that are both productive and efficient, and you have those that are less so. I am you have at least one tech who can do a large flat rate job in half the time.

So let’s say he performs an 8.2 hour flat rate job in 4.5 hours and this is the only work he does all day. Lets also assume that your effective labor rate is $60/per hour. At the end of the day if you were to look at your labor sales for this technician you would see an amount of $492.00. If you have 10 technicians, each producing the same amount then at the end of the day you would see labor sales totaling $4920.00, or $103,320.00 over a typical 21 day month.

On the surface that may appear to be a good number, but at this rate these 10 technicians are standing around doing nothing for 3.5 hours per day. In other words, there is only enough work in this shop for 4.3 technicians working at the same efficiency and a mere 100% productivity. So if you employ 10 technicians capable of 182% efficiency, the truth is that these are horrible labor sales numbers.

In fact the labor sales number that one should expect in a shop of this size is $220,147.20 at a solid rate of efficiency. To put it more bluntly, you didn't sell that which you were more than capable of selling or an additional $116827.20.

Even at a rate of only 120% efficiency, you could earn substancially more than the original example (10 technicians X 8 hours available time X 1.2 productivity factor X $60 effective labor rate X 21 days/mth = $120960).

So as you can see, labor sales alone tell you nothing of your capability or your actual performance until they are measured against other factors. Rather than measure the total labor, measure the labor hours, the productivity and efficiency, and the effective labor rate independently and in turn you will begin to understand your service numbers and be able to act upon them more effectively.

At Auto University, our Fixed Operations specialists will work with your Service Team to understand and work through these challenges ensuring your operation is successful overall, and not just an operation with seemingly high labor sales!

Click here to find out how to understand more about the Service Numbers.