Increasing Shop Profitability Series (Part VII): Forecasting

Seventh article in a series

By Jim Yount

Forecasting for the technical service department is essential to your annual Strategic Business Plan, Two-Part Evidence Based because developing a forecast for the total business is like mapping travel plans for a vacation. It says:

“This is where I want to go and how I’m going to get there.”

Contrary to popular belief, forecasting is not giving it your best guess. The first step in the forecasting process is to research and chart historical performance of the company by department, including your service department. After charting sales revenue dollars, the cost of sales and/or cost of doing business, and analyzing the numbers to determine their meaning, only then:

“It is possible to develop a realistic forecast by making informed decisions.”

For an existing business, forecasting provides the owner with a planned vision of the future. And a service department forecast is an essential part of your business plan, but forecasting must be realistic:

TOO LOW, and we will not stretch and grow to improve management skills.
TOO HIGH or out of reach based on our belief system, and we’ll become discouraged.

Forecasting has many benefits when managing a business for profit and growth. Three major benefits are:

Forecasting for the service department provides the critical information that says: This is how many hours of labor we plan to sell/bill to customers, and how many revenue dollars we expect to generate.
Forecasting creates a sense of urgency for achieving a daily sales goal and profit objective, including service department labor revenue dollars.
Forecasting establishes the number of employees on company payroll, including technicians and other service department personnel.

One of the measures of company efficiency involves the total number of employees on the payroll. Too few employees, and customer service diminishes. Too many employees, and the bottom line will suffer.

Keys to forecast Technical Service Department

Forecasting for each technician, by name, is the first step in holding that person accountable for the number of hours billed to customers and the amount of labor revenue dollars generated during a payroll time frame and annually. I call your attention to the following chart. First is an example-model of an actual case history from our files. Names are not those of the actual technicians. Let’s review example-model.

STRATEGIC BUSINESS PLAN – Part 2 Evidence-based Planning
Forecast Technical Service Department (FTSD), by Technician


KEY POINTS: Read the chart for each technician from top to bottom.

Tech’s name. It’s a personal forecast and a service department forecast.
Total Payroll Hours. What is listed represents a standard 40-hour work week. Use company actual payroll hours.
Off Hours. Calculate annual number of hours for vacation, sick leave and holidays. Some have earned one-week vacation, while others have earned two or three weeks.
Tech Hours Assigned To Company. The amount of time assigned to work on company equipment, such as assembly of product for the sales department.
Hours Available To Bill. Number of hours available for billing to customers after subtracting lines 2 and 3 from payroll hours.
Forecast Billable Hours. Number of hours you expect this technician to bill to customers, based on a specific billing and performance efficiency.
Non-Revenue Hours. Acceptable level of non-productive hours for this technician.
Efficiency Rating. Efficiency ratio is number of hours billed, as they relate to number of hours available for billing.
Forecast: Labor Income. Projected dollars earned during the forecast year.
Company Total: The column on the right-hand side of the chart represents numbers added together, from left to right, by line item.

Consider: Annual Forecast: Technical Service Department and Comments

This dealer’s hourly shop labor rate is $75 per hour.
What is your shop’s hourly labor rate?
Let’s assume this is your forecast. If you’re actually billing 4,840 hours to customers, how much difference will it make if you raise your shop labor rate by $5 per hour?
The answer is an additional $24,200. Multiply 4,840 hours by $5.
We could say, “That’s an easy way to make $24,200.”

If you are willing to work harder by going beyond usual expectation, providing exceptional care, and solving customer problems as they arise, most customers will not challenge the total cost of service if it’s superior.

“Average” is not acceptable practice in this policy environment.

Annual Forecast: Additional Income.

If you are not charging up-to-date fees for sharpening, Environmental Protection Agency (EPA) and shop fees, you could be missing several thousand of dollars in profit. I would encourage you to work the numbers.

In my part of the country where I live, we often would say, “Let’s play with the numbers.” Playing with the numbers is one of the major benefits of developing a Strategic Business Plan.

At the lower right of the chart is: “Technical Service Department Earning Power Analysis.”

The well-managed, high-operating-efficiency technical service department can be a major contributor in gross profit dollars at the lowest factor of cost. This service department (featured in the chart) will earn $435,880, or 15.44 percent, of total company forecast sales of $2,938,775.

As a Percent of Forecast Gross Profit Dollars, the service department will earn $453,880, or 43.07 percent of total company forecast gross profit dollars of $1,053,780.

Invest the time to work/adjust the numbers until you are satisfied with the department’s income projections for the next 12 months. The service department is worthy of your full-time attention until it becomes a stand-alone, self-supporting, major profit center.

Hiring qualified, productive and responsible service technicians

At the center of a profitable service department is a staff of core technicians that is factory trained with extensive experience. Professional technicians are those who accept responsibility for personal productivity and efficiency. Inexperienced technicians cannot perform at an efficiency rate sufficient to produce equitable profits. Trainees should be hired and allowed to build experience for future growth and expansion.

In today’s human resources environment, most of us feel inadequate when trying to determine, as much as possible, if we are hiring the right person for the position. As a business owner, staffing — including hiring, training, and providing competitive wages and benefits — is one of our most challenging tasks. As we prepare to engage in the hiring process, it is important to consider that we are competing with automotive and heavy equipment dealers for the better technicians. Consider these existing conditions when you become concerned about the available qualified technicians.

When your service department generates exceptional profits, hiring the best technicians becomes affordable.
There are technicians who enjoy working on smaller equipment.
Many technicians will not live in labor camps or on off-shore rigs. They will not accept living away from their family for extended periods of time. It’s not a pleasant lifestyle.

First things first:

Always present and ask the person being interviewed to complete an employee application form. We suggest you ask a few leading and qualifying questions before you proceed with the application. Ask appropriate questions based upon answers.

Are you presently employed?
How long have you been working there?
Why do you want to leave?
Why did you leave?
Or, how long have you been unemployed?

Asking these questions up front helps eliminate wasting valuable time interviewing the wrong person.

The following is a list of questions to ask in conjunction with your company’s standard employment application. The objectives are to uncover any hidden talents and skills, as well as to keep you from hiring the wrong person.

Additional Interview Questions:

How many years have you been earning full-time wages as a technician?
Are you certified by recognized technical training institutions?
Describe your qualifications and experience with 4-cycle, air-cooled, gasoline engines (type of equipment, brand, engine sizes, and years of experience).
Describe your qualifications and experience with 2-cycle, air-cooled, gasoline engines (type of equipment, brand, engine sizes, and years of experience).
Describe your diesel engine experience (type of equipment, brand, engine sizes, and years of experience).
Describe the training classes you have attended during the past three to four years.        
Do you have experience using a computer in conjunction with your duties as a technician?

Important consideration

While discussing this subject with a classroom filled with business owners, I discovered this to be a very hot topic. The majority were convinced these activities should become policy and part of the hiring procedures.

Always ask for a drug test.
Ask about a commercial driver’s license.
Ask about driving record.
Complete a background check.
Don’t hire just to fill a position.
Don’t rush the interview.

Note: When applicants are asked to provide a drug test, about half will never return for the second part of the interview, according to a classroom of more than 100 dealership owners and service department managers.

INFORM YOURSELF with critical information relative to hiring employees.

I highly recommend stopping by your local State Employment Office and picking up a copy of the U.S. Equal Employment Opportunity Commission (EEOC) handbook or visiting the EEOC’s website at Spend time learning how to avoid employee conflicts.

Job description for qualified service technicians (experienced and factory trained)

The job position is for a full-time, qualified and experienced engine-driven power equipment technician. This person may be responsible for working with customers, performing the duties of a service writer, and providing assistance to customers as they purchase parts and accessories.

Technicians will be capable of completing a diagnostics test and making repairs to customers’ equipment as instructed on a clearly written work order. Duties include identifying the parts and accessories required, pulling the part, and completing the work order within a time frame congruous with industry standards. Must be capable of keeping track of time spent on a work order; identifying parts and accessories by part number, including the retail price; and completing the billing invoice to customers. Must be accurate when working with numbers. Responsibilities may include placing special orders and managing parts inventory.

Other duties include managing the parts and service desk and filling customer orders on a timely basis; maintaining service parts and pricing catalogs for each manufacturer; and taking telephone calls regarding the parts and service department. Must possess good administrative skills, as well as be organized and capable of completing reports and maintaining files.

Technicians may be required to perform the duties of a shipping clerk such as checking incoming freight by line item and restocking the shelves. Good housekeeping habits must be practiced.

Suggested newspaper ad for hiring a technician

“Looking for a change and an opportunity to grow?” Our company is (describe your company’s business in this space) equipment retailer, and we are in need of a full-time, experienced service technician. This person must be capable of using computer technology in conjunction with the duties of providing technical service to customer’s equipment. He/she must possess good customer relations, telephone and administrative skills. Management opportunity exists for the right person. Wage commensurate with experience and professional attributes. Call (insert appropriate contact person’s name) for personal interview.

 Jim Yount is the founder and chief executive officer of Jim Yount Success Dynamics LLC. For more than 30 years, he has hired, trained, managed, sold, marketed, and motivated. Extensive real-world experience in retailing, distribution and working with manufacturers, both domestic and international, has earned Jim the reputation as a trustworthy and knowledgeable professional in his field. As a results-oriented speaker, he is dedicated to inspiring groups of 30 to 3,000 to develop their talents and realize their full potential. As a business consultant, teacher and coach, Jim is experienced at challenging leaders to explore their operational procedures and change unacceptable practices that are producing poor results. For more information, contact Jim at or (903) 796-3094 or visit his website at


Leave a Reply

Your email address will not be published. Required fields are marked *