The Real Math

What does it cost your business when employees don’t do their jobs? You won’t believe it.

Many shop owners look at operating expenses and attack that topic as the main cost-reduction plan to increase their bottom line. The fact is, most business expenses today are either noncontrollable or common sense expenses.

That being said, I think it’s time to actually look at the most serious problem in every business, which is what unproductive staff really cost the business and calculate that cost as a real bottom-line loss.

For example: If a technician is averaging 5.3 billed hours per day but is being paid for eight, that means 2.7 hours per day are a cost to the business. If you’re paying the person $25 per hour then $25 times 2.7 equals $67.50 per day times 20 days per month which equals $1,350 per month before payroll taxes and benefits are added on. That equates to a total off the bottom line number of $16,200 per year minimum from one person.

If you were charging $1i ,to that Add per hour labor rate on that individual, then $100 minus $25 basic wage cost equals $75 per hour lost in gross profit contribution from lost labor billings, times 2.7 hours equals another $202.50 loss per day times 20 days per month equals $4,050 lost additional gross profit per month, which would also be net profit. Total cost to the business from one person being unproductive and unaccountable ($1,350 + $4,050 equals $5,400 per month, or $64,800 per year).

If the entire team were averaging this as a group, and you have four techs on the team at $25 per hour, per tech, that works out to a monthly cost of $5,400 per month each. Times four equals $21,600 per month before taking payroll taxes and benefits off the bottom line. In total, this works out to a minimum of $259,200 per year net profit lost from the total tech team.

That is scary. That is serious money! That is where management should be spending their time: fixing accountability within the business.

Remember that a competent licensed technician should be billing eight to 10 hours per day and an apprentice should be billing four to six hours per day. If they’re not achieving these numbers, then investigate fully. Ask, “Why not?” Don’t guess, don’t listen to rhetoric, find out the facts. That’s management’s responsibility to the company.

It’s time and absolutely necessary to focus on accountability by embracing all of the processes and management education you’ve been shown/taught/exposed to from the various management classes you’ve attended. If you “cherry pick” the processes or what you were taught, then it won’t work. If you “assume” the processes are being followed without verification, then it won’t work. Every owner/manager must “inspect what you expect” and determine why something happened or did not happen or why that member of the team is not performing his/her position properly and focus on fixing it. This will be the quickest way to turn any business around.

Stand your ground and make every single person in the company accountable. I’ll guarantee you one thing: When you improve accountability throughout your company, it will have five to
10 times the effect on your bottom line than trying to save money picking away at individual operating expenses.

Do the math and follow the math. Math doesn’t lie. And then you’ll be working so much smarter instead of harder.