A Service Bench that Earns. Part two

By Bill Doran

 

A service bench is a necessity for a great many of us. But is it a burden or benefit? The answer lies with whether you are making money from it or not. Let us take some time and look at your service bench in some new ways.

 

Have you ever considered what it costs you and what you make from it? In this article, we will do just that.

 

Let us begin by looking at another industry: restaurants.

 

How do owners in the restaurant business figure out their costs and how much to charge? In their field, they use a per table or per foot cost to calculate their costs for their restaurant; they consider the total cost of running the restaurant, including rent, utilities, ingredients, salaries, and other overhead expenses. Once you have the total cost, they divide it by the total number of tables or the total square footage of the restaurant to get the cost per table or per foot. Next, they calculate the profit per table or per foot by subtracting the total expenses from the total revenue generated by the restaurant and dividing that by the total number of tables or the total square footage of the restaurant.

 

Suppose a restaurant owner wants to calculate the cost per square foot of the kitchen in a restaurant. In that case, they need to consider the total cost of running the kitchen, including ingredients, staff salaries, equipment, utilities, and other overhead expenses specific to the kitchen. By dividing the total cost by the total square footage of the kitchen, they would now have the cost per square foot. To calculate the profit per square foot, they would then subtract the total expenses from the total revenue generated by the kitchen and then divide that by the total square footage of the kitchen.

 

Be honest. How many of you can say you use that in your store and for your service bench? There are few, so it is time to look at a scuba business.

 

If you have a retail store, you should use a formula to calculate the cost and profit of a square foot in a retail store. You need to consider the cost of the lease or rent for the space, the cost of utilities, maintenance expenses, inventory costs, insurance, and any other overhead expenses. Once you have the total cost for the space, you can divide that by the store’s total square footage to get the cost per square foot. To calculate the profit per square foot, you need to subtract the total expenses from the total revenue generated by the store and then divide that by the total square footage of the store. This will give you an idea of the profitability of each square foot of space in the retail store.

 

Have you done that? For some, yes, while for others, no. But the big question in this article is, have you ever calculated the cost and profit per square foot for the service area?

 

It is pretty simple. Do the same calculations! It is simple to say, but often, this is one of those items that people put off or avoid. But are wages and profit what you entered the business to achieve? To calculate the cost per square foot of the service area, consider the total cost of running the service area, including rent, utilities, staff salaries, inventory costs, parts and equipment, insurance, and overhead expenses. Subtract this total from the total sales from service. Take the balance and divide this total cost by the actual square footage of the service area to get the cost per square foot.

 

Now what? Is the cost per square foot cost and profit of the service area compared to the cost per square foot of your store? Are those profits enough?

 

In my research, the odds are that you are not making nearly the same profit from your service. If you have done the calculations, you will likely see a loss. Why? Most people are not billing for their time and expertise.

 

So, how do I know how much to charge per hour or half hour for my service bench time?

 

I want to point out that your air fill/gas fill station and fills are not part of your service bench. They are a part of your production and sales.

 

It would be best to determine your service hour cost to determine how much to charge for your service bench time. I break mine into 30-minute billable time slots. You need to achieve your cost per square foot and then add a profit margin on top of that cost to determine the final price to charge for your service bench time. Compare your competitors and other local businesses that are in different industries. Recently, I talked to someone who charged $35 per hour plus the cost of parts. They thought that was a reasonable fee, and it covered the hourly wage they paid their technician. They were shocked when I said, “You are losing money.” If you want to make money, it simply is not enough.

 

Let us take some time to do a quick calculation; I will have to make some educated guesses on numbers to make the point, so forgive me if they are not entirely correct. This will demonstrate the point. In their case, they were paying $25 per hour for their tech, so they figured they were making $10 per hour from the bench. He worked part-time in service, around 10 hours per week. That is not true.

 

Calculation – this is a simple calculation and does not include all costs.

 

 

As they are losing money, should we even calculate the square-foot cost? So, their profit per square foot is approximately -16 cents. YIKES! That is nowhere near what the guy thought, as he figured he was making at least $10 weekly on his service bench. What would happen if he doubled the hours worked at the service bench? What would happen if he doubled the time to 20 hours per week? Then, he is making 55 cents per foot, and we are not even adding in all the costs!

 

What does this demonstrate? He is not charging enough for his service bench time. So, what are you going to do now?