Do You Know What EQ Means?

How many times have you seen the term “EQ” on your car radio or CD player, or your home entertainment system? If you are just learning audio production, no doubt you’ve been bombarded with references to different kinds of EQ (parametric, dynamic, etc.). But has anyone ever just broken it down for you in terms anyone could understand? Let me see if I can do that for you in this article.

Some people just take in information better if it is explained with very few technical terms, regardless of education or intellect. Heck, I have a bachelor of science degree and a masters degree, and I still hate reading overly-technical descriptions. So in that spirit, let’s talk about something that is bafflingly called “equalization,” or “EQ” for short. See, the name itself is not very descriptive, I don’t think. Here is what it really is. Ready for this?

EQ is turning volume up or down. That’s pretty-much it. Too broad? OK, let me add one more thing. EQ is turning volumes up or down on bass and/or treble knobs. I happily use those last two terms because you seen them on your car stereos all your life, so I am making an assumption you’ve played with them and kinda know the difference between bass and treble.

Wasn’t that an informative article? Oh, you need a bit more? Ah, you’d like to know why it’s useful, or at least why you should care. Oh, alright; if you insist. Let’s take probably the easiest example I can think of…your car stereo. The most basic EQ controls are bass and treble. If you’re listening to hip-hop, you may enjoy turning the bass knob (or slider) up because it will make the kick drum and bass synth or guitar much boomier. You can actually feel that bass now. On the other hand, let’s say you just want to listen to a basketball game on the radio. If your bass is turned up, the voice may sound muddy and hard to understand. Turn the bass back down and maybe bump the treble up a little bit. Bingo, you can now hear the voice much better. It will be more clear and easier to understand.

Are you getting the idea? Sometimes people turn both the bass and treble knobs all the way up. Well, this didn’t really accomplish anything except to do exactly what turning the “volume” knob up would have done! Now are you getting it? The difference between the main volume control and the EQ control is that the EQ adjusts ONLY the bass or the treble independently, while the volume turns EVERYTHING (bass and treble) up or down.

Now I sense you can handle a new term…”frequency.” When we say bass, we mean the sounds in the low frequencies of a song. Treble means the higher frequencies. More sophisticated EQs allow you to control more than just the bass and treble, adding a few more frequencies between the two, like “middle” or “low-middle” and “high-middle“. Obviously this gives you more control over what parts of the sound you turn up or down.

There is quite a lot to learn about EQ and frequencies. But for now, take this useful lesson: if you want to impress your friends with what an audio-geek you are, never turn all the EQ knobs or sliders all the way up or down at the same time, or else all you’ve done is turn the master volume up or down. Try turning one up and one down to see how that sounds. Or try moving just one control up or down and leaving the other one alone. That will make you seem much cooler;). In the mean time you can learn more about audio at Home Brew Audio. Come on by for a visit!

Business of Blacksmithing – How to Determine Your Hourly Shop Rate

How to Price and Charge for Your Work.

Blacksmithing like any craft takes a lot of thought when your price your work. We all struggle with what we think should be a fair price. Often we enjoy the work so much it seems hard to price the work at what it should be priced to make a proper living.

Let’s look at the reality of pricing your work when you work in a specialized, labor intensive craft. The numbers I will use may be a bit different for your country or location, but I am sure you will be able to adjust the numbers to your situation.

In my area minimum wage is about $8.00 an hour. This gives a bare subsistence in quality of living. So what is a reasonable wage for the type of work we do?

Let’s look at the nature of our business first. We use specialized equipment to create precision pieces of metal work. We assemble our creations into complex shapes and functional items.

There is a high degree of skill, and planning involved in many of our projects. We also have to deal with customers and suppliers on a daily basis. Solve problems and quote projects as well do your own accounting and bookkeeping. There are many hats that we have to wear as one person business operators.

The manual skills required in the blacksmithing business as well as the technical knowledge are closely related to the skills of a welder, or auto mechanic, or a machinist. There are some differences in each of these trades but the skill level is about the same.

In my area auto shops and machine shops charge $75.00 to $100.00 an hour. Individual mechanics and welders get paid $25.00 to $35.00 an hour.

So let’s take an average of $30.00 an hour over a 40 hour week. That gives $1200.00 a week times 50 weeks (remember that you should be able to take a two week holiday and this is paid). So 50 weeks gives a total income of $60,000.00. This is considered a good solid income in my country.

You only get paid for the work you sell. The time you spend consulting with your clients you are not paid for. The time spent designing the gate or grill is not paid time. The time spent getting materials and supplies you are not paid for. If you do your own bookkeeping you are not paid for. If some one else takes care of your book keeping then you have to pay them.

There are many areas that you have to spend time on that you do not get directly paid for. Everything is paid for by what you sell so you have to take into account all the time spent other than smithing.

To calculate what your time is worth when you are working on actual blacksmithing you will need to at first keep strict records of how long it takes you to make your items. You must include the time to paint and finish your work. If you ship to your customers you need to include the time it takes to package it up.

You also need to keep a log of all the time spent that is work related but you can’t charge for. You will need to keep your log-book very detailed so you can isolate what proportion of time actually brings income in, and what proportion supports your income but that you don’t get paid for.

You also need to calculate all your consumable costs, electricity, rent, business insurance, vehicle costs, etc and add to your wage costs. This will give you the total that you need to bring in a year.

The next step is to calculate the number of hours used on non paying work. This includes the running around and consultations, or the sitting at the craft show selling your products. This should be part of your log book as well!

If you keep track of all the time spent on your business, and the time of actual making of the products you will probably find a 60 / 40 ratio. That is 40% of your time is actually working on salable products. 60% of the time is spent on related but unpaid work. You will have to determine this ratio from your own log book.

Let’s take a look at some sample numbers in the equation. These are rough yearly totals.

Wage $60,000

Shop Electricity $1200

Shop Rent $3600

Business Insurance $1200

Vehicle Costs $6000

Show Fees $2000

Advertising $2000

Equipment Repairs $1000

Total $77,000

You may have other expenses that you only incur since you are in business. These will need to be added to this list. Everyone is a bit different, and check with your accountant.

Our actual equation looks like this:

Hourly Shop Rate = (target yearly wage + business expenses) / (ratio of paid hours per week x 40 hours x 50 weeks in a year)

Now let’s plug into our time ratio.

0.40 x our a available paid hours (40 hours a week x 50 weeks in a year)

0.40 x 2000 = 800 paid smithing hours in a year

So $77000 / 800 = $96.25 per hour plus your material costs. This should be your shop rate. As you can see your actual wage is much less than what you have to charge.

Going back to the beginning of this article you can see why my local auto mechanic and machine shop is charging $75 to $100 an hour. Your blacksmith work is the same value!

Let’s add another twist to this scenario.

Suppose you hire an employee. Obvious expense is wages and deductions. When I was hiring employees it would take a month before they had been trained well enough that they were making me significant money. It took a week before they would break even and I could use the components they were making. If you pay $10.00 per hour, the first week they may just break even. The second week they may get up to $20 per hour in production for you.

After a month I found that they could bring in about $40.00 hour if I kept them busy. If you have the work rolling in this is when you start to make money. Remember you are still paying them $10.00 an hour. If your work dries up, paying employees is a fast way of going broke.

In short you need to start keeping a logbook of how much time you spend on each facet of your business. Time for everything. Then break it into time spent directly making your products and time spent on non-billable supporting hours. Do the simple calculations to find what you should be charging in your circumstances. It will probably be more than you guess.

What is That Noise? Automotive Sounds and How to Locate Them

Picture yourself riding through the desert and suddenly you hear a noise emanating from your car you never heard before. “What the heck is that noise?” you ask yourself over and over, or “Am I hearing it or imagining it?” Then you grapple with whether or not you should continue on to the nearest service station or stop the car to prevent any further damage. Without the proper knowledge to make this important decision, drivers may find themselves taking on a lot of stress at a very inconvenient time.

One of the things most car owners don’t realize is that cars, like people, can have many types of issues with them. As well, they make many different types of sounds, running well or not so well! The informed car owner can make a better decision on whether to seek the help of an automotive expert with simple diagnostic tests, using simple tools (or even no tools) and a bit of knowledge to assist them with this decision, lending them peace of mind along the way. In this article, I hope to offer you insight to some of this knowledge. After reading, you may find yourself thinking on a more simple level when dealing with your car’s issues.

Cars have the potential to make a wide range of sounds: clicks, ticks, pings, bangs and pops. Some are more serious than others. If that noise is driving you batty and you aren’t near a mechanic, pull the car safely to the side, taking all safety precautions into account. While still in the car and the car running, listen to see if your car is still making the noise. If it is, the sound is most likely related to the engine in some way. If not, then it is more likely the rest of the car. Either way, we have isolated the noise into two areas of importance, moving or not moving.

Let’s assume we can still hear the noise with the car running but motionless. We can further isolate the noise by simply walking around the vehicle once or twice listening for the sound and where you can hear it the loudest or most frequently.

Even though, in most cars, the engine is located in the front of the car, the engine’s exhaust travels the length of the vehicle so anywhere along that system, noises can be created through defect or vibration. The further to the rear you find the noise, the less serious the problem. A general rule of thumb for today’s front-wheel drive vehicles is any noise from the driver’s door to the back of the car (while the car is motionless) would not hinder you from driving to a service station, or home.

The noises you could expect to hear coming from an exhaust that has a hole or crack leaking exhaust somewhere throughout the system would sound both low-pitched and high pitched simultaneously, sounding similar to a snare-drum with a bit of a thump at the same time in a repetitive pulse (due to the opening and closing of the exhaust valves in the engine). If you looked under the car where the leak was emanating from it would be more pronounced. You can drive home, but get it fixed. Leaky exhausts only get worse and can diminish your vehicle’s fuel efficiency and performance, depending on the location of the leak.

If the noise is still in this area but is more of an occasional noise with a pinging, clang, or pop, then it might not be a leak. Clangs and pings are often related to cool or cooling tins that run along the exhaust system and between it and the floor of the car to keep those areas of the car from getting hot. They can ping just from the increase/decrease in temperature but a loose tin will also ping and/or bang. Again, this is not an emergency but not something that should not be left to further deterioration if you can help it. A popping sound coming from your car’s tailpipe is a signal that something isn’t exactly right with the engine. It could mean the car needs a tune-up; a sensor might not be working properly, and so on. Most of this is negligible and you can survive the drive to a service station but again, nothing to ignore. Allowing your engine to burn fuel improperly over a long period can cause damage to your engine’s components which can lead to significant repair expenditures.

So, let’s say that behind the front doors the sound diminishes and it seems most apparent toward the front. You’d move around and try to determine what side of the car as well as whether the noise came from the very front of the car or more toward the windshield. Most front-wheel drive cars have the engine belts and pulleys on the passenger side of the car with the transmission/transaxle on the driver’s side. Knowing this, you should hear more noise on the passenger side even in a new car, but it is a peculiar sound that you seek.

With all that noise coming from such a crowded area, what can you do to pin it down? First, be safe and absolutely certain you don’t have hair, jewelry, or clothing dangling into the engine compartment while it is running, the dangers are real when dealing with the belts and pulleys which usually are not covered very well! Once you have made sure you are clear to peer in, do so listening closely as you move along the engine compartment.

Still having trouble pinning it down? Do you have a newspaper handy, a folder; maybe you have a funnel in your trunk? Maybe you are getting the idea…something you can roll up to make a cone or megaphone shape. This will make a great listening device in a pinch. By pointing the wide opening toward the area of the sound and listening at the small end your ear will lead you into a rough area of the sound. Once you have found it you can flip the megaphone around and trace the entirety of the roughly defined area, with the small opening, to pin-point the offending component or location. This will give you great satisfaction, if nothing else that you have a rough idea what is going on with your car. This would also greatly aid a mechanic in confirming the problem, so you could save yourself a big repair bill and, give you peace of mind.

A variety of sounds can come from under the hood, some of which are listed below. Keep a list with you in your glove box so you can reference them:

-Ticking – Typically, low oil can result in a constant tick, tick, tick in rapid succession – Location: This noise is normally on the top of the engine unless your engine is a V-6 or V8 in which case, on front-wheel drive vehicles, it would be front or back of the engine. Trucks and rear-drive cars with V-type engines would have the noise on the left and right sides. Diagnosis & Prognosis: Check oil level and replace what is lost, if it is low. If it persists, consult your service professional. The actual ticking sound is from a lack of lubricant at the lifter/valve stem, rocker arm, push-rods (if equipped) and camshaft causing a slight delay in the spring return or the actual pushing movement resulting in a slight gap in the contact of a few of these components causing them to tap (or tick) against each other. Other sources of “tick”: Normal operation of A/C compressor (occasional tick or clack); Debris in electric fan, clear debris with engine and fan off (allow to cool prior to cleaning); Exhaust leak at engine, seek professional help but you are OK to drive.

-Squealing – Engine belts are considered a wear item. This is because they are attached to moving components (pulleys) and suffer a fair amount of friction over time. They also dry out and crack under heavy use or being left to the elements, particularly in dry states like Arizona. Location: Passenger side of engine compartment on FWD cars and Front of engine compartment on RWD cars and trucks. Diagnosis & Prognosis: Harder to pin-point to a small point with a makeshift megaphone. Shut off car and look to see if there are indeed cracks on the belt(s)…you can check by depressing the belt and looking for cracks as it flexes. If you can see cracks with or without this action then you should plan for a replacement immediately. Once confirmed, make an appointment with your service professional. An unusually dry belt can squeal for no other reason, for this you can buy a spray can of Belt Dressing to mitigate the noise. It helps to condition the belt for better grip. Other sources of a squeal: Or squelching would be low power steering pump fluid level, check and fill as needed, PS pumps can fail and cause a great deal of squelching. Seek a professional if you believe this is the cause; Water pumps have a bearing that can get worn and squeal, seek a professional; Idler pulley or wheel bearing, seek professional.

-Pinging and knocking – This can have a few sources but usually have to do with your ignition and fuel system. It could be as simple as the quality of fuel you pumped in the tank or an engine in need of a tune-up which is sometimes referred to as pre-ignition. This can happen from poor maintenance schedules or filling up at the wrong fuel station. Diagnosis & Prognosis: Start by fueling at another location. If the problem persists make an appointment for a tune-up (new spark plugs, air filters, etc.) and run a fuel injection cleaner fuel additive through your engine. In most cases, this will clear it up. Other sources of pinging and/or knocking: Poorly functioning EGR or computer sensors, seek a professional. Sometimes a clanging sound in the engine cannot be pin-pointed and this could be connecting rod bearings. This is significant and should be seen by a professional before serious damage to your engine occurs.

-Gurgling – 99 times out of 100 this is due to the cooling system not doing its job. Boiling coolant could be heard from the coolant reservoir and even through the hoses. Diagnosis & Prognosis: Be safe; NEVER remove the radiator cap or reservoir cap when the engine is hot. Allow engine to cool and check the reservoir’s level indicator to give you an idea if you need coolant. Add as needed. If there appears to be plenty, then there is a high likelihood that your thermostat is not operating as it should. One obvious indication of this is that your heater may not heat like it used to or maybe not at all. An inoperable electric fan while in heavy traffic can also cause the temperature to soar. Seek a professional for any of these repairs as needed.

Are there other areas of odd noises? Absolutely, maybe you hear noises when you turn on your heater fan. A mouse could have stashed some debris in your auto’s vent ducts. You may hear a squelch which may be the blower belt slipping due possibly to a bad bearing attached to the blower/electric motor. And while we are in the car, maybe you hear a noise as you drive, it could be something as simple as a door slightly ajar or a window open just a touch.

If the noises are heard only while the car or truck is in motion then you could be dealing with suspension or steering abnormalities (clunks, banks and pops) or possibly drive train issues such as bearings (grinding and vibration). Brakes will also make plenty of noise when they are going bad (screeching = built-in pad wear indicator), already bad (grinding when brakes applied = pad level significant with metal to metal contact) but also if brand new (slight squeak or squeal when vehicle is in motion = metallic/semi-metallic brake pads are guilty of this and is a result of a small burr or fragment hanging away from pads rubbing on the brake rotor. This is a defect of the design, not of the pads and is normal and not considered alarming. However, as with any noise you have any doubt about, check with a professional for advice, especially when it comes to brakes, steering and suspension.

Although there are many noises a car can make over its lifetime, hopefully this will give you an idea of some of them, and help you decide whether you should continue your journey of a trip to the store or a day away business commute.

Calculating Car Workshop Labour Efficiency

The clock is ticking

‘Time is money’ in bodyshops and service workshops. Essentially, these operations buy and sell the time of panel beaters, painters and technicians. A service workshop, for example, might buy one hour from a technician for £10 and sell it to a customer for £40, and make a profit of £30. (These figures are, of course, notional).

Buying and selling the time of productives is, or should be, the major source of revenue and profit in bodyshops and service workshops. Profits from the sale of spare parts; oils and lubricants; paint and materials; and sublet and sundry are all subsidiary to the buying and selling of productives’ time. If you don’t sell time, you don’t sell any of these other things.

Just as you would take great care when buying and selling a spare part, you have to pay equal attention to buying and selling productives’ time – or even more so, because you cannot ‘stock’ productives’ time. In other words, if you don’t sell their time today, you cannot sell it tomorrow.

Time for sale

So once time is gone it’s gone, whereas a spare part will still be in stock. So it is a good idea to know how much time you have for sale. This would seem pretty simple. If you have six productives, and they are there eight hours every day, surely you have 48 hours for sale? Well, no, you don’t.

For a start, productives might be in the workshop for eight hours every day, but they don’t work on paying jobs for eight solid hours. For example, a customer could come back with a car that you serviced yesterday and complain that it keeps stalling. It will then be necessary for a productive to rectify the problem, and of course you cannot charge the customer for that. If it takes two hours, then you only have 46 hours left to sell, in our example.

Time sold

To complicate things further, you can actually end up selling more than 48 hours. Imagine, for instance, that a vehicle manufacturer’s standard time for a major service is two hours and you quote the customer on this basis. If your technician completes the service in one hour (unlikely, we know) then you will still charge the customer for two hours.

If this happened all day long, you could sell 96 hours less the four hours you could have sold if one of your technicians hadn’t spent two hours spent rectifying the engine stalling problem. (It’s four hours because you are selling two hours for every hour worked in this example.) So if your productives could halve the standard times all day, that’s 92 hours sold rather than 48 hours.

Three measures of time

What we are talking about here is the three kinds of time available in a bodyshop or service workshop:

Attended time – this is the time that panel beaters, painters or technicians are in the workplace available to work.

Work time – this is the time they spend actually working on jobs that, at the end of the day, a customer pays for. Clearly ‘work time’ does not include any time spent rectifying problems, or anything else they do that does not have a paying customer at the end.

Sold time – this is the time that you charge customers for. It could be the time quoted on an estimate for an insurance company, or a menu-priced service.

You could say that ‘attended time’ and ‘work time’ are both ‘real’, because you can almost see them. You can see when a productive is in the workshop, and you can see a productive working on paying jobs. What’s more, you can measure ‘attended time’ and ‘work time’ using a clock.

On the other hand, ‘sold time’ is not ‘real’. You can’t see it, and you can’t measure it using a clock. But at the end of every day you can add up all the time you have sold to customers from your job cards or invoices.

How fast and how long

If you measure attended time and work time, and add up sold time at the end of the day, you can then see how fast and how long your productives have worked during the day.

How fast they have worked is sold hours divided by work hours. In our example, that’s 92 hours sold compared to 46 hours worked, or 200% expressed as a percentage. That is, your productives are working twice as fast as the standard time.

How long they have worked is work hours divided by attended hours. In our example that’s 46 hours compared to 48 hours, or 95.8% expressed as a percentage. That is, your productives were working on paying jobs for 95.8% of the time.

Labour efficiency

What we have just worked out as percentages are two ‘labour efficiencies’:

Productive efficiency tells you how fast productives are working compared to standard times, or the estimate in the case of a body repair job – how many sold hours they produced compared to the work time it took them to produce these sold hours.

Labour utilisation (sometimes called ‘selling efficiency’) tells you how long productives worked on paying jobs compared to the time they attended the workplace.

As formulae, productive efficiency and labour utilisation are calculated like this:

Productive efficiency = (Sold Hours/ Work Hours) x 100%

Labour utilisation = (Work Hours/Attended Hours) x 100%

Overall labour efficiency

There is one other measure of labour efficiency and that’s called overall efficiency. This is a simple combination of productive efficiency and labour utilisation, and comes from multiplying them together:

Overall Efficiency = Productive Efficiency x Labour Utilisation

Or, another way of looking at overall efficiency is as sold hours divided by attended hours:

Overall efficiency = (Sold Hours/Attended Hours) x 100%

How labour efficiency affects profit

Obviously you will make more profit if you can squeeze more sold hours from the hours your productives attend. We have already said that if you buy one hour from a service workshop technician for £10 and sell it to a customer for £40 you will make a profit of £30. But if you bought one hour from the technician and then sold two hours, you will make much more profit – £70.

It is equally obvious that if you buy one hour from a service workshop technician for £10, and then the whole hour is expended rectifying a come-back job for which you can make no charge, you have lost £10. Less obvious is that you have lost the opportunity to sell two hours (in our example), and thus lost the opportunity to make a profit of £70.

So the reason for measuring time in a workshop, and then calculating the labour efficiencies, is very clear. It’s all about profit. And if you don’t measure time and calculate the labour efficiencies, it is absolutely certain you will not maximise profitability because you will not know:

How fast your productives are working as a team and individually, and whether they could work faster if they were better trained or had better equipment

How long your productives are working as a team and individually, and how much time they are wasting on work that customers aren’t paying for.

How time is measured

The most basic way of measuring time in a workshop is by using a ‘clock’ which stamps time on a ‘clock card’ for attended time and on the job card for work time. The times are then correlated manually on a ‘daily operating control’ sheet, and the labour efficiencies calculated.

However, computers have largely superseded this basic method, with the ‘clocking’ carried out using barcodes or magnetic swipe cards. The computer then completes all the correlations and calculations instantly.

Typical labour efficiencies for the Top 25%

In recent years, the labour efficiencies achieved by bodyshops and service workshops have fallen from what would have been considered the ‘norm’ a decade ago. The reasons for this are complex. However the top 25% of franchised dealer bodyshops and service workshops are still achieving reasonable levels of performance, typically:

For a bodyshop, productive efficiency averages 106%, utilisation 88% and therefore overall efficiency is 93.3% (106% x 88%)

For a service workshop, productive efficiency averages 115%, utilisation 92% and therefore overall efficiency is 105.8% (115% x 92%)

For 40-hour attended by a productive in a week, these translate as:

For a bodyshop – 40 hours attended, 35.2 hours working on paying jobs, and 37.3 hours sold or invoiced to customers

For a service workshop – 40 hours attended, 36.8 hours working on paying jobs, and 42.3 hours sold or invoiced to customers.

Why service workshops are usually more labour-efficient than bodyshops

bodyshops are clearly less efficient, but why? Firstly, jobs move between productives in a bodyshop – starting with strip, then panel, then preparation, paint, refit and valeting. Usually this means moving the vehicle physically around the bodyshop, which is far less efficient than the straight in a bay, job done and straight out situation of a service workshop. The result for bodyshops is a lower labour utilisation than for a service workshop.

Productive efficiency in bodyshops used to be higher than for service workshops, because sold hours were negotiated with insurance assessors – so-called ‘opinion times’. A bodyshop might get 20 hours for a job and the productives would finish it in 15 work hours, achieving a productive efficiency of 133%. Nowadays, the times in a bodyshop are set by computerised estimating systems with virtually no room for negotiation or ‘opinion times’.

service workshops, like bodyshops, have seen standard times fall, too. But their customer base is millions of motorists rather than a dozen insurance companies, so service managers can set whatever times they want – within reason, and of course, subject to competition.

Lost time

Obviously it would be great if you could get away with just paying technicians when they are working on paying jobs, but you can’t. What you actually pay them for is attendance, or ‘attended time’, and they don’t ‘work’ on paying jobs all the time they are attending.

The difference between attended time and work time is ‘lost time’, which is also called non-productive time – the few hours every week that technicians are paid for when they are not working on paying jobs. Three common things that make up lost time are rectification of faulty work (‘come-backs’), collection and delivery of cars, and cleaning and maintenance.

In addition to paying for lost time, you might pay bonus and overtime, and you pay for technicians’ holidays, sick leave and training. Then there is the employer’s contribution to National Insurance, and the cost of any perks technicians receive such as pension or health insurance contributions.

It’s tempting to throw all of these payments into the cost of buying the technician’s time in our example and calculate what you might see as the ‘real’ profit. If you did, the cost of buying the hour would probably be around £13, and therefore the profit falls to £27.

Accounting for time

The facts presented so far would seem to make calculating the profit when buying and selling technicians’ time quite simple. Apparently all you have to do for any period – a day, a week, a month or a year – is add up all your labour sales and subtract all your technicians’ costs (including basic, bonus, overtime, holidays, sick, training, perks and National Insurance) to arrive at your profit on labour.

You can, but it is far better to identify all your technicians’ costs separately in your management accounts, because you can then see how much you are paying them for not working. And by separating these payments to technicians, you can look more closely at the effects of labour efficiency on your operation, whether it is mechanical servicing and repair or body repairs.

The following example shows the traditional format for the management accounts of a service workshop or bodyshop. Here we have taken the results for one technician over 12 months, assuming basic pay of £12 per hour and hours sold out at an average of £60 per hour. Additionally, we have assumed that the technician attends 44 weeks per annum and 40 hours per week, working 37 of those hours with lost time of 3 hours. As a result of the technician’s efforts, the workshop sells 42 hours per week (or 1,848 sold hours per annum from 44 weeks x 42 hours), and this is achieved without any overtime or bonus pay.

Management accounts

Labour sales 1,848 hours sold @ £60 = £110,880

Less Technician’s pay for 1,628 work hours @ £12 = £19,536

Technician’s bonus pay (all bonus pay entered if earned) = NIL

Technician’s overtime pay (all overtime entered if earned) = NIL

Gross profit on labour sales (Labour gross profit) = £91,344

Direct expenses

Technician’s pay for 132 hours of lost time @ £12 = £1,584

Technician’s pay for hols, sick & training (40 days of 8 hours) @ £12 = £3,840

Technician’s National Insurance and perks = £3,744

Direct profit on labour sales = £82,176

Labour gross profit

In this traditional form of management accounts, then, the cost of the technician is divided up into no less than six lines. The first three lines appear straight after labour sales, and consist of all pay made to the technician for actually producing work that is then sold to a customer. This includes pay for ‘work time’, and all bonus and overtime pay. Accountants call these the ‘cost of sales’.

By subtracting these three lines from sales, you end up with the gross profit made from buying and selling the technician’s time – usually called the ‘labour gross profit’. The labour gross profit is often expressed as a percentage of labour sales, which in this example comes to 82% (£91,344 divided by £110,880 expressed as a percentage).

The remaining three lines appear in the direct expenses section of management accounts along with the cost of non-productive salaries, apprentices, consumables, courtesy cars, advertising, etc. The idea, as we have said, is to identify what you pay technicians for not working. In this example, the total cost of the technician is £28,704 per annum, and £9,168 is for not working. That is nearly one-third, and a far from unusual proportion!

Dividing up the technician’s pay

The way some of the technician’s pay is divided up is self-evident – bonus, overtime, holidays etc, and National Insurance and perks. That just leaves the technician’s basic pay, which is divided up according to ‘work time’ and ‘lost time’:

In our example we know the technician attends 40 hours each week and works 37 of these hours, which means that the technician works for 1,628 hours in a year (37 hours x 44 weeks), which at £12 per hour is £19,536.

That leaves three hours of lost time each week, or 132 hours per annum (3 hours x 44 weeks), or £1,584 at £12 per hour.

In fact, this split corresponds to one of the measures of efficiency we discussed earlier – labour utilisation. Labour utilisation is ‘work hours’ divided by ‘attended hours’ expressed as a percentage, or 92.5% in this case (37 hours divided by 40 hours). The split in the management accounts allocates 92.5% of basic pay as the cost of doing the work. The remainder (7.5% of basic pay) – corresponding to the technician’s pay for lost time – is allocated as an expense.

It should now be clear that labour utilisation has a direct bearing on how much gross profit is effectively produced from selling the technician’s time, and what is paid to the technician for not working.

Calculating labour sales

In our example, the workshop sells 42 hours per week as a result of the 37 hours the technician actually works out of the 40 hours attended. We have already seen that the labour utilisation here is 92.5% (37 hours divided by 40 hours). The productive efficiency can also be calculated as 113.5% (42 sold hours divided by 37 work hours), and the overall efficiency is 105% (42 sold hours divided by 40 attended hours). All these formulae were covered earlier.

The labour sales in our example are calculated by multiplying the sold hours in a year (1,848 hours) by the labour rate of £60 per hour. In full, this calculation is as follows:

Annual labour sales = 1 technician x 40 attended hours per week x 44 weeks attended per year x 105% overall efficiency x £60 per hour labour rate = £110,880

Increased productive efficiency

Now we can have a look at what happens to the profit on labour sales if labour efficiency increases. Let’s say our technician still works 37 hours out of 40 hours attended, but works faster (i.e. is more productive) and achieves 43 sold hours. The utilisation is still 92.5% (37 work hours divided by 40 attended hours), but the productive efficiency has increased to 116.2% (43 sold hours divided by 37 work hours) and the overall efficiency has also increased to 107.5% (43 sold hours divided by 40 attended hours). The effect is as follows (and we have assumed again that bonus and overtime are ‘nil’):

Labour sales

1 tech x 40 att. hours x 44 weeks x 107.5% overall efficiency x £60 per hour = £113,520

Less

1 tech x 40 att. hours x 44 weeks x 92.5% utilisation x £12 per hour = £19,536

Gross profit on labour sales (Labour gross profit) £93,984

Direct expenses

1 tech x 40 att. hours x 44 weeks x 7.5% lost time x £12 per hour = £1,584

Technician’s pay for hols, sick & training (40 days of 8 hours) @ £12 = £3,840

Technician’s National Insurance and perks = £3,744

Direct profit on labour sales £84,816

A small increase in productive efficiency – just about three percentage points – has resulted in an extra annual profit on labour of £2,640.

Improving labour utilisation and productive efficiency

So far, we have explained how to measure time in a service or body repair workshop, how labour efficiency is calculated, and how management accounts are designed to highlight the sources of labour profit. We have shown how productive efficiency affects profitability. Next, we look at the effects on profit of improving labour utilisation, and then both productive efficiency and labour utilisation at the same time.

Increased labour utilisation

Taking the same example discussed earlier, let’s improve labour utilisation by assuming that our technician manages to work 38 hours out of 40 hours attended instead of 37, while leaving the productive efficiency the same (113.5%) as in the original example. This means that utilisation goes up to 95% (38 work hours divided by 40 attended hours), and even if the productive efficiency is the same at 113.5%, then our technician will produce 43.1 sold hours (38 hours worked x 113.5%). That is, the technician’s overall efficiency has increased to 107.8% (43.1 sold hours divided by 40 attended hours).

The effect on labour profits is then:

Labour sales

1 tech x 40 att. hours x 44 weeks x 107.8% overall efficiency x £60 per hour = £113,520

Less

1 tech x 40 att. hours x 44 weeks x 95% utilisation x £12 per hour = £20,064 Gross profit on labour sales (Labour gross profit) = £93,456

Direct expenses

1 tech x 40 att. hours x 44 weeks x 5% lost time x £12 per hour = £1,056

Technician’s pay for hols, sick & training (40 days of 8 hours) @ £12 = £3,840

Technician’s National Insurance and perks = £3,744

Direct profit on labour sales = £84,816

The improvement, from one extra hour worked per week, is £2,640 in a year.

Do both!

But what would happen if both utilisation and productive efficiency improved at the same time? That is, the technician still attends 40 hours, but works 38 hours at the improved productive efficiency of 116.2% (from Part 2) thereby producing 44.2 sold hours (38 work hours x 116.2%) and hence an overall efficiency of 110.5% (44.2 sold hours divided by 40 attended hours). The calculation looks like this:

Labour sales

1 tech x 40 att. hours x 44 weeks x 110.5% overall efficiency x £60 per hour = £116,688

Less

1 tech x 40 att. hours x 44 weeks x 95% utilisation x £12 per hour = £20,064

Gross profit on labour sales (Labour gross profit) = £96,624

Direct expenses

1 tech x 40 att. hours x 44 weeks x 5% lost time x £12 per hour = £1,056

Technician’s pay for hols, sick & training (40 days of 8 hours) @ £12 = £3,840

Technician’s National Insurance and perks = £3,744

Direct profit on labour sales = £87,984

The improvement is £5,808, multiplied by (say) seven technicians is a sizeable £40,656 extra profit per annum.

This shows how significant for profitability only relatively small increases in labour efficiency can be. However, labour profits can also fall just as significantly if labour efficiency falls by an equally small amount.

Hidden lost time

If small improvements in labour efficiency translate into big improvements in labour profits, but any slight reduction means big falls in profit, then you need to know what levers to pull to make sure you are on the side of big profits. So what’s the secret? Or is it about managing the minutiae?

There’s no secret. The trick is managing every aspect of a workshop. Managers have to do everything they can to make sure technicians, panel beaters or painters are working as fast as possible for as long as possible. In other words, you must do everything to minimise lost time, and provide your productive staff with every means to support faster working like training, power tools… and even placing certain jobs with productives who are the most experienced. If you have a clutch job, then give it to the clutch expert.

But there is one secret worth knowing, and that’s ‘hidden lost time’.

As we have shown, lost time is a killer. But then lost time, if it’s measured at all, is usually about the most obvious elements such as rectification of faulty work, collection and delivery of cars, and cleaning and maintenance. However, there is a lot more lost time hidden away within jobs. Technicians may seem to be working hard, but too often they may be waiting for spare parts at the back counter of the stores. Or a technician may be waiting in line to use a piece of equipment like a wheel alignment rig.

The outcome of ‘hidden lost time’ is a fall in productive efficiency, but labour utilisation is unaffected because you haven’t measured the losses. But, as you have seen, the effect on profits can be huge. So apart from attending to the obvious and direct influences on labour efficiency, which affect how fast technicians work (productive efficiency) and how long (utilisation), workshop managers must also attend to anything that can slow them down when they are supposed to be working.