Torque Precision Auto Business Plan — How a Workshop Actually Makes Money
A workshop sells book hours and buys clock hours. Profit is the product of bay utilisation, efficiency against book time and the rate actually collected.
How a Workshop Actually Makes Money
Jump to section
- Overview & contents
- i. Important Notice and Basis of Preparation
- 1. Executive Summary
- 2. Market and Opportunity
- 3. How a Workshop Actually Makes Money
- 4. Accreditation and Compliance
- 5. SWOT and Competitive Position
- 6. Operations and the Bay Build
- 7. Route to Market
- 8. Management and Governance
- 9. Financial Plan
- 10. Break-Even and Debt Service
- 11. Investment Analysis
- 12. Sensitivity and Scenario Analysis
- 13. Risk Analysis
- 14. Implementation Roadmap
- 15. Key Performance Indicators
- 16. Key Assumptions
- 17. Conclusion and Recommendation
- A. Appendix A: Consolidated Financial Summary
- B. Appendix B: Capital and Operating Schedules
- C. Appendix C: Funding and Debt Schedules
- D. Appendix D: Risk Register
- E. Appendix E: Glossary
- 3.1 The three ratios in this plan
- 3.2 Labour, parts and sundries
South African workshops quote from standardised repair-time databases, so a job carries a book time regardless of how long the individual technician takes. A technician who consistently beats book time is described as running above 100 per cent efficiency, and is the most valuable asset in the building. The three ratios compound: a workshop at 70 per cent utilisation and 95 per cent efficiency invoices two-thirds of the hours it pays for, while one at 81 per cent and 110 per cent invoices nearly nine-tenths.
3.1 The three ratios in this plan
|
Ratio |
Year 1 |
Year 5 |
What drives it |
|---|---|---|---|
|
Bay utilisation |
46% |
81% |
Booked work in the diary. A function of marketing, reputation and fleet contracts, not of technician skill |
|
Efficiency against book time |
90% |
110% |
Technician experience, tooling, parts availability at the bay and workshop layout |
|
Effective labour rate |
R739 |
R739 |
Posted rate less discounting, goodwill adjustments and rework. Managed by the service manager, not the price list |
|
Book hours sold as a share of clock hours paid |
41% |
89% |
The three ratios compounded. This is the number that decides whether the workshop makes money |
|
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|
|---|---|---|---|---|---|
|
Bays |
4 |
6 |
8 |
9 |
10 |
|
Clock hours paid at 1 960 a bay |
7 840 |
11 760 |
15 680 |
17 640 |
19 600 |
|
Bay utilisation |
46% |
63% |
73% |
78% |
81% |
|
Efficiency against book time |
90% |
98% |
104% |
108% |
110% |
|
Book hours invoiced |
3 245 |
7 260 |
11 904 |
14 859 |
17 463 |
|
Book hours as a share of clock hours |
41.4% |
61.7% |
75.9% |
84.2% |
89.1% |
|
Effective labour rate, R |
739 |
739 |
739 |
739 |
739 |
|
Labour revenue, R |
2 400 000 |
5 368 000 |
8 801 000 |
10 987 000 |
12 912 000 |
In Year 1 the workshop pays for 7 840 clock hours and invoices 3 245 book hours. By Year 5 it pays for 19 600 and invoices 17 463. The gap closes through utilisation and efficiency, not through additional technicians — which is why the plan slows bay expansion behind demonstrated utilisation rather than ahead of it.
3.2 Labour, parts and sundries
|
Year 5 |
Revenue (R) |
Gross profit (R) |
Gross margin |
Share of gross profit |
|---|---|---|---|---|
|
Labour |
12 912 000 |
8 521 920 |
66% |
66% |
|
Parts |
14 719 000 |
3 974 130 |
27% |
31% |
|
Sundries and consumables |
803 000 |
491 950 |
61% |
4% |
|
Total |
28 434 000 |
12 988 000 |
45.7% |
100% |
Parts revenue of R14.72 million generates R3.97 million of gross profit; labour revenue of R12.91 million generates R8.52 million. The parts business exists to support the labour business, and parts attachment is measured as a ratio to labour rather than as a target in its own right — 1.14 at Year 5.
