Question 1

What is a good gross profit margin for a service department?

Accepted Answer

A healthy gross profit margin for a marine service department is typically between 40% and 50%. This margin needs to be high enough to cover all the direct costs (labor, parts) as well as the indirect overhead costs (rent, utilities, insurance) and still leave a net profit.

Question 2

How do I calculate my shop's labor rate?

Accepted Answer

To determine your hourly labor rate, first calculate the total cost of a technician per billable hour (wage + benefits + overhead allocation). Then, add your desired profit margin. For example, if a technician costs you $50/hour all-in, a rate of $100/hour would yield a 50% gross margin on labor.

Question 3

What is 'technician efficiency' and why is it important?

Accepted Answer

Technician efficiency is the ratio of hours billed to customers versus the hours the technician actually worked. An efficiency of 85% means that for an 8-hour day, the tech billed 6.8 hours to jobs. This is a critical KPI. Low efficiency can indicate issues with training, tools, parts availability, or workflow, and it directly hurts labor profitability.

Question 4

What's a standard markup for marine parts?

Accepted Answer

Parts markup varies widely. Commodity items (like oil filters) might have a lower markup (e.g., 30-50%), while specialized or hard-to-find parts may be marked up 100% or more. Many service departments use a matrix, with lower markups on expensive items and higher markups on inexpensive ones. The goal is to achieve a blended parts margin of 30-40%.

Question 5

How do I allocate overhead costs to a specific job?

Accepted Answer

A common method is to calculate your total monthly shop overhead (rent, utilities, insurance, support staff) and divide it by the total billable hours worked by all technicians in that month. This gives you an 'overhead cost per billable hour.' You can then add this amount to each hour of labor cost for a true 'fully-loaded' cost analysis.

Boat Maintenance Service Profitability

Revenue

Costs

Results

Understanding Service Profitability

Frequently Asked Questions

Need Help Optimizing Your Hospitality Business?