The number that decides everything.
WHAT TO CALCULATE FROM
Total annual cost of running the workshop Billable hours realistically available
WHAT COSTS TO INCLUDE
Technician wages Your own time Premises and rent Power, water and fuel Tools and equipment, including replacement Consumables not charged separately Insurance and licences Administration Waste disposal
WHY CONSUMABLES
Cleaner, rags, lubricants and fasteners are consumed on every job and rarely charged.
HOW TO ESTIMATE BILLABLE HOURS
Paid hours, less leave, less realistic non-billable time.
WHAT REALISTIC NON-BILLABLE TIME IS
Substantial, and workshops consistently underestimate it.
WHAT TO ASSUME
Well below the paid hours.
WHY
Assuming full utilisation produces a rate that cannot cover costs.
WHAT THE CALCULATION GIVES
Cost per billable hour.
WHAT TO ADD
Margin.
WHAT TO COMPARE IT AGAINST
What the market charges.
WHAT TO DO IF YOUR COST EXCEEDS THE MARKET RATE
Reduce cost, improve utilisation, or serve a different segment.
WHAT NOT TO DO
Charge below cost to compete.
WHAT TO ESTABLISH SEPARATELY
Rates for different work: diagnostics, mechanical, electrical, bodywork.
WHY
They require different skill and equipment.
WHAT TO REVIEW
The rate annually, and whenever costs move materially.
