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The Business Burden of Bubbas

10 Aug, 2007 By: Jack Duncan imageSource

The Business Burden of Bubbas

Burden (aka overhead) is all the “stuff” that adds up to make business
possible. It also highlights areas that have become  unproductive or
non-performing, depending on circumstances. You can think of burden as the cost
of doing business, and though for some it feels like it should be an exact
science, often it isn’t. This is why you need to continually look at those areas
that could be draining your business of profit, including the hidden Bubbas that
you might not have even considered.

What is a Bubba?

Many years ago when I had not been at a dealership all that long, we began
to monitor technician productivity. We found that we were losing just over an
hour a day of productive time for each of our technicians. It was time just
“Falling through the cracks” by virtue of standing at the parts room window,
mulling around, talking to other techs, leaving their last call at 3:45, etc.
When we added this time up, we had the equivalent of a full time technician that
was lost. We called this phantom technician Bubba (yep, we’re located in
Texas!). Actually, we could make it an acronym for “Bothersome Unseen Brother’s
Big Additional-costs.” You get the idea.

The service meeting

About this same time, our technicians were also about due for evaluations
and, what they were really after, Increases! We called a service meeting and in
the middle of the room was an empty chair with a window envelope in it. In the
window of the envelope was the name “Bubba.” The meeting started with everyone
wanting to know what this crazy new service manager was up to now.

The explanation

The explanation was that we were not sure that we could offer any increases
because we had to bear the burden of paying Bubba for not working and that there
was a good chance that Bubba got their increase. Maybe they should look in
Bubba’s envelope to see if their new pay raise was there. Obviously we did this
to prove a point; lost time was costing us the equivalent of a service
technician in nonproductive hours that should have been spent traveling to calls
and fixing customers’ machines.

The financial impact

The actual impact of lost time comes in the cost of hiring additional
technicians beyond what is really necessary to support the population. It also
comes in increased burden rates in the service department. The impact of lost
hours can have a far greater impact on burden rate and eventually cost per copy,
than their actual compensation. When we really take a good look, we will see
that the expenses for a technician (direct & indirect compensation, travel and
G&A expense) do not really change much from month to month. The largest impact
on burden rate comes from the number of customer hours you have to spread these
expenses over. This cost is traditionally only spread over customer hours
excluding travel because we very rarely charge for travel time.

The Burden Rate Formula

The formula to calculate burden rate, or wholesale labor cost, is to total
direct and indirect compensation which includes social security, retirement or
profit sharing, insurance and other costs borne by the company on the employee’s
behalf, travel expense (mileage reimbursements or company vehicle expenses) and
general and administrative expenses (service department B&A divided by the
number of bag carrying technicians) and then divide by the average number of
customer hours a technician produces in a month.

The formula would look like this:

Now, let's see what happens when a technician is able to give us 100 customer
hours instead of 80:

That 20 additional customer hours (1 hour per working day) returned a burden
rate that was almost $15 per hour less!

The goal

The goal for a technician’s productive time (travel & customer) on a monthly
basis has long been approximately 140 hours. We can start this with 2,080 hours
in a year and then subtract time lost for vacations, training, sick leave etc.
When this is done, divide that number by 12 months and you will arrive at
approximately 140 hours out of the 168 hours available in a month. From that
140, we must subtract travel time to arrive at our goal for customer hours.
Depending on the geography that a technician covers, this final number will
vary, but the total hours for travel and customer should add up to the 140 hour
goal to insure that we are getting reasonable productivity per technician. The
impact of losing 1 hour per technician per day would be about 20 hours per
month, or, as in the example above, a $15 per hour increase in our burden rate.

The compensation issue

Let’s now assume that our technician is giving us that magic 100 customer
hours per month and it is time to give him that increase and maybe a promotion –
what impact would a $500 per month increase have on our burden rate? Remember
that our fringes will go up as well for additional social security that we must

Imagine that! We were able to raise his compensation over $500 per month and
we were still almost $10 per hour below our burden rate when he was only getting
80 customer hours per month.

Productive time is critical for financial survival!

We must insure that our technicians are not letting hours fall through the
cracks and that we are not paying any Bubbas if we are to maintain control of
our expenses and not hire to our level of inefficiency.

The impact of travel time

Remember also that as a technician must travel more to cover rural areas, he
will not be able to return that 100 customer hours per month either. If you do
not have increases in your maintenance prices to cover this additional cost we
will surely lower our profitability.

So now I ask you, are you paying any Bubbas?

Jack Duncan is the President of JDC-Jack Duncan Consulting, an organization
that specializes in helping dealers become more efficient and profitable in the
service and supply arena as well as educating service managers in the business
aspect of service. To learn more, visit
or contact him at
or (469) 287-2605.

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