Repair and service businesses often start out as a labor of love—for example, an inveterate tinkerer or natural-born fixer converts an avocation into a vocation that grows by word of mouth. Eventually, however, the repair and service business gets to a point where reaching its goals requires the ability to track and analyze sales and other key functions of the operation.
No business can reach its full potential without paying close attention to its financial performance. However, there are so many moving pieces to a shop’s operation that trying to determine which sales numbers and statistics to focus on can be overwhelming. To avoid this “paralysis by analysis,” repair and service technicians rely on the tools built into their modern cloud-based POS system to identify the most important sales metrics for their business.
While there are dozens of potentially telling sales figures that a repair shop can consider when analyzing its performance and planning for the future, these 10 have been shown to be particularly beneficial for repair and service businesses of all types.
The Sales Metrics that Matter the Most to Repair Shops
Ratchet and Wrench identifies the sales figures that help repair and service businesses gain greater insight into their financial performance:
- Total opportunity per service call compares the total amount of work done on each service call with the potential work that the customer declined. For example, if there is a big gap between the amount of work recommended in the estimate after inspection and the amount of work actually performed, it may indicate that the shop’s estimating process needs to be revised.
- Sell rate is the total opportunity for sales in a single transaction compared to the amount of the actual sale or work order. A large difference could mean that the shop’s marketing needs to improve or its service advisors are missing potential sales.
- Labor, parts, and sublet sales need to be broken out separately, along with the ratio of revenue generated by part sales versus labor charges. The total of all three categories is the total direct revenue the shop generates.
- Average repair order is calculated by dividing the total sales number by the total number of customer transactions. A high number indicates that the business is maximizing its sales opportunity per customer, and a low number could mean too much time is being spent on non-billable activities.
- Billed hours is the key sales metric for most repair and service businesses. Calculating this number helps the business determine optimal technician capacity and productivity.
- Number of technicians and productivity compares the number of billable hours each technician works in the equivalent of a 40-hour workweek. The more productive technicians are, the more profitable the business.
Other Measures of a Repair Shop’s Financial Performance
There are many ways to expand on the insight that sales figures provide to repair and service technicians. For example, analyzing the business’s performance makes marketing more effective and helps find ways to reduce overhead expenses:
- Discounts: Businesses need to track the total value of the discounts they offer to customers and categorize the total as a marketing expense rather than as a loss.
- Effective labor rate: A mistake many repair and service technicians make is to base their financial projections on their posted labor rate rather than on the actual rate after discounts, estimation errors, warranties, and returns requiring further work are subtracted.
- Cost and gross profit on parts and labor: Labor costs include employer taxes, benefits, and reimbursable employee expenses. Subtract the cost of parts and labor from total sales before considering other business expenses to determine gross profit on parts and labor.
- Net profit: Determine the business’s net profit by calculating total revenue minus total expenses. Any net profit that the business’s owners don’t reinvest in the business is subject to income tax.
POS Systems Deliver the Sales Metrics Tools that Repair and Service Businesses Need
The raw data that repair shops and other service businesses need to help them plan for the future is captured by modern cloud-based POS systems that generate detailed sales reports with just a few clicks:
- Sales by day, week, month, or quarter
- Lead conversion rate
- Sales per technician
- Average receipt value
Techniques for applying the insight gained from sales analytics to enhance your repair and service business include the following:
- Determine how sales figures are affected by the amount of time service technicians spend on administrative and other non-billable tasks.
- Let employees know how much progress they’re making toward their goals for the month, quarter, or year. You can also estimate how much bonuses and other performance-based compensation will cost the business.
- Use the information the POS system collects about the business’s clients to categorize customers based on their specific characteristics.
Taking full advantage of the analytics features built into your business’s POS system requires working with a vendor who has the knowledge and experience to understand the unique needs of your operation, and who works with you to tailor a system to those needs. Your POS system becomes the central hub of your business’s information collection and management. The system is customizable and powerful, yet straightforward to use; the pay-as-you-go cloud model means the solutions are affordable for businesses of all types and sizes.
Sales metrics don’t have to be rocket science, even if some of the devices your service technicians are working on would be right at home in orbit. Unlocking the power of sales analytics can be just as uncomplicated.
When you partner with talech for your repair and service business needs, we devote our time to identifying your company’s challenges. We use this information to work with you to apply an innovative POS solution that levels the playing field.
Want to learn more about using sales metrics strategically?