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Make Splitting Revenues With Your Technicians Easier

Make Splitting Revenues With Your Technicians Easier

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In the Smart Repair business, there are quite a few ways you can pay your technicians. Whether it’s commission, hourly, or salary, there are perks and drawbacks for each one. So, what is the best way to split revenues with your technicians?

According to BodyShop Business’, Hank Nunn, It’s important for your payment method to be legal and in-line with the labor laws in your state – which can require quite a bit of back-office work. Afterward, you’ll have to look into its potential impact on your PDR business’ gross profit margin. Outside of typical PDR business expenses, you’ll have to consider things, such as benefits, workers compensation, taxes, and paid vacations. Once you’ve done that, you should set your target labor gross profit margin to a minimum of 60%.

Unfortunately, not all businesses do this. It’s common for owners or operations executives to provide 40% commission at a flat rate and expect it to create a labor gross profit percentage of 60%. However, that doesn’t take into consideration the employee benefits and taxes that we talked about. So, you’ll often end up with a percentage that’s much lower than the ideal 60%.

Regardless of how you decide to pay your technicians, there will be a lot of back-office work involved to carefully calculate the numbers and make sure it never goes beyond 40% of your labor sales.

In two examples by Nunn, he created one scenario where your door rate is $50 per hour. With that, your total labor expense should not go beyond $20 per hour. If it’s any higher, you won’t hit 60%.

However, the table we created below shows how Nunn’s simple scenario presents risks when calculating it yourself because of benefits. It begins with the understanding that each employee may be paid annually for 2,080 hours. This includes paid benefits that could be 10 paid holidays, 10 paid vacation days, and 3 paid sick days:

AnnualMonthlyHourly
Wages:
52wks x 40hrs/wk
equals 2,080hrs
Pay $41,600 annually
Wages:
2,080hrs/12mos equals 173.3hrs
Pay $3,467 monthly
Wages:
2,080hrs divided by
260 work days equals
8hrs per day @ $20 per hr
Holiday:
10days x 8hrs equals 80hrs x $20/hr =Benefit Pay $1,600 annually
Holiday:
80hrs/12mos equals  6.7hrs x $20/hr =Benefit Pay $133.34 monthly
Holiday:
80hrs divided by 260 work days equals 0.31hrs per day
Vacation:
10days x 8hrs = 80hrs x $20/hr =Benefit Pay $1,600 annually
Vacation:
80hrs/12mos = 6.7hrs x $20/hr =Benefit Pay $133.34 monthly
Vacation:
80hrs divided by 260 work days equals 0.31hrs per day
Sick Pay:
3days x 8hrs =24hrs x $20/hr =Benefit Pay
$480 annually
Sick Pay:
24hrs/12mos =2hrs x $20/hr =Benefit Pay
$40 monthly
Sick Pay:
24hrs divided by 260 work days equals
0.09hrs per day
Paid Hours of 2,080hrs minus benefit hours
equals 1,896 available for Door Rate
Available Hrs:
173.3hrs minus benefit hours equals 158 available for Door Rate
Available Hrs:
1896hrs divided by 260 work days equals 7.3hrs per day
Productive Yield:
100% Annual Billable Hrs @ $50
1,896 hours per year
Productive Yield:
100% Monthly Billable Hrs @ $50
158 hours per month
Productive Yield:
100% Hourly Billable Hrs @ $50
7.3 hours per day
Annual Billable Time – 1,896hrs x $50.00 Door Rate = $94,800
Annual Labor Time – 2,080hrs x $20.00 Pay Rate = $41,600
$41,600/$94,800 = 44% assuming 100% of available hours fully billable or
$41,600/$85,320 = 49% assuming 90% of available hours fully billable

As you can see, there’s a lot to account for hitting a gross profit margin of 60%. Even if it seems like it would reach 60%, there are many things to consider and keep track of when figuring out how much you charge customers and pay your technicians.

In another scenario, Nunn sets us up with the same $50 per hour. The key difference is that it’s $15 hourly now. This provides $5 an hour for things like benefits and taxes to reach your target labor gross profit margin of 60%. In this situation, each PDR technician would get a percentage of the flat rate to compensate for the entire team’s work.

You can pay your technicians differently depending on skill and seniority, but it’ll take a lot of back-office work to make sure everything adds up. You’ll want to make sure your lowest -paid technician still receives at least a minimum wage. Basically, this means the more time your technicians are working together as a team, the more money everyone, including you, makes.

You can pay your technicians in a variety of ways– whether it’s all hourly or all commission, a mixture of hourly and commision, or even salary. It all can work, but it’ll also require you to be diligent and accurately calculate and keep track of all variables so you can remain at 60%.

There’s a lot of factors to consider when looking at how you should split revenues with your technicians. It can be time-consuming and will require a substantial amount of back-office work. However, If you want a simpler solution, there is PDR software out there that can help make your life easier. The better offerings can track anything from accounts, orders, commission, invoices, and technician activities on your desktop or mobile devices. Good PDR software can calculate salaries, commissions, and hourly payment methods– all while keeping track of expenses, such as benefits, workers compensation, taxes, and paid vacations. All you need to do is type in a few numbers, and the PDR software solution will calculate the rest. You can do it from anywhere with or without internet connection and it can take back-office paperwork that used to take several hours, and turn it into just a few minutes a day.

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