Feb 15, 2019

The Ideal Diesel Shop

The Ideal Diesel Shop

What does the ideal diesel shop look like? It could be very different depending on your point of view but, when it comes to profitability, there are key principles that hold true for all of them. Whether you’re an independent shop, a fleet, or a dealer, you need a winning mix of people, the right rates, and a place for your techs to do their job—even if that place is mobile.

1) People

The ideal diesel shop has eight technicians and three managers. They each have a job to do and your shop’s success hinges on everyone doing their part well. Your techs are the money makers. They generate revenue by turning wrenches. Their level of efficiency makes all the difference in how profitable your shop can be. The service manager, parts manager, and office manager are there to provide support so your techs can be as efficient as possible.

It’s worth mentioning up front how your people are compensated. In an ideal diesel shop model, each technician is paid a flat rate, and the managers are either salary or a form of flat rate. However, in a moment, we’ll talk more about structuring pay to increase efficiency and your bottom line.

2) Place

Your shop’s layout has everything to do with how efficient your technicians can be. The ideal diesel shop has 1.5 to 2 bays per tech so they can work on more than one truck at once. Without that kind of space, your techs will have to move vehicles in and out of bays while they’re waiting for parts. Also, assign bays to encourage techs to take ownership of their space. Dedicated bays tend to stay cleaner and more organized.

Layout is important, but the “place” factor is also about where you do business. If you add a mobile element to your shop, you’ll only need one bay per technician while increasing value for customers. Going mobile allows you to take your service to clients which usually means more business. It’s convenient for them and lucrative for you—everybody wins.

3) Prices

To create your ideal diesel shop, you need to charge a labor rate that fits your ideal customers. They’re the ones looking for quality work done quickly and with little hassle. Price is a secondary consideration because they understand how expensive “cheap” can be. You should also charge a parts markup that delivers the profit you’re aiming for. In general, the prices you charge for labor and parts should earn an average 45 percent profit before covering overhead.

You can play around with increasing parts and labor pricing to bring up your bottom line, but increasing efficiency is one of the top ways to increase profitability. Upping your techs’ efficiency game increases their billed hours and your profits will get a massive boost. For example, if you have eight techs and only half of them raise their efficiency by 5 billed hours per week, your monthly profit could shoot up more than $8,500 per month. We built a free repair shop ROI tool to calculate savings like this.

Having manager support for creating estimates and ordering parts is one way to improve efficiency. Another way is to implement an efficiency bonus, and this is where motivation compensation comes in. Set a minimum efficiency level for techs that’s required for earning their flat-rate wage, but use a graduated scale to pay bonuses to those who consistently perform well. For instance, techs might get a $72 bonus each week they bill 44 hours (110 percent efficiency). However, techs who are 115 percent efficient, billing 46 hours a week could get a $108 bonus. An additional $8,000 to $9,500 in your monthly profit pool from those extra hours more than covers the incentive.

Ideal Diesel Shop Principles Apply Across the Board

These rules work, whatever focus your business takes. The principles apply to standalone shops as well as fleet-owned shops. Whether you’re exclusively working on company vehicles or trucks for the general public, the shop must still run efficiently. The same can be said for dealership shops. Often, dealerships in big cities are in massive yards with very nice buildings. They have a baked-in stream of business just because they’re the dealership. However, guaranteed business can lead to taking customers for granted, and that can be damaging. It’s like a football team taking their foot off the gas when they’re up by three touchdowns. You’re never doing well enough that you can afford to get lazy or become inefficient.

From a Manager’s Point of View

If you’re a shop manager, the ideal shop is one where you’re working on the business but not necessarily in it. Fullbay facilitates that along with making every team member’s job easier. It does everything from estimates to job assignments to parts ordering to invoicing—plus it tracks data and puts everything you’ll ever need to know about how your shop is running right at your fingertips. What’s more, since Fullbay is Cloud-based, you can access all that info and manage your shop more efficiently from anywhere. Fill in the form below to test-drive Fullbay and see what your ideal shop looks like.