I don't mind watchers never have leaves nothing to question.

I take their mobile number,tell them to go get a brew and I will call them when I have finished. Works every time.

if a customer hangs around looking over my shoulder I stop working and just chat with him/if he wants to know how long it will take I tell him a lot less time if you are not in my way you choose you are paying by the hour and we can talk all day this usually gets the message across all customers are different.you sometimes need to alter this slightly depending on customer as I am retired now after 30 yrs.in all aspects of the business give it a try

Tom Sawyer method.
I like it ;-)
Have to try.

I usually offer them a wrench and greasey grease rag and when they get that overwhelming " i had a hand in repairing my forklift" mindset, they usually offer to buy my lunch.

Wow- all the answers are great- I'll have to try some of those- I personally don't mind watchers, I'll answer all of their questions, doing my best to show them what I'm doing- trying go gain credibility along the way. I find usually at some point they either become bored or the boss comes along & they scatter.

If it's the owner, I'll do the same. If they start to become annoying, I'll stop working & turn to talk with them- they know I'm getting paid by the hour, so they usually find an excuse to leave. If they don't, or if It's a quoted job I'm doing, I jokingly bring up "surcharges" -that always works.

We have equipped our technicians with "safety zone packet".
It consists of plastic poles connected with plastic chain.
It's all pretty light and painted red/white stripes.
It's arranged around the working place and efficiently isolates my guys from the audience.
Works pretty well.
From the other hand, sometimes the "observers" are really nosey.
So we decided to go for "get the advantage from difficult situation" rule. Other words: can't win them? Join them.
Simple marketing issue.
Let the customer, or his personnel, see how good we are, how skillfully we deal with their trucks, how good and sophisticated tools we use.
Generally - make the show.
Believe me, it works even better than isolating ourselves.
Of course - it requires skills and patience from the technicians, but it is worth it.

Things in the air tend to make people disappear too.
I work in a company fleet shop setting, so "customers" per se are not a problem, but when the wrong people otherwise want to congregate in my work area, for the wrong reasons......this is what I have done (been years since)
In the old shop I worked in (we have since moved to a different location), members of the "smoker's club" wanted to use my work area to congregate and smoke their cigarettes in inclement weather, including a supervisor who smoked. (shop rules and state law prohibit smoking tobacco inside buildings), and I am a non-smoker, so I was peeved at their actions.
Whenever they would attempt to "hide" in the back of my work area to light up, I would light up a forklift engine and squirt motor oil on the exhaust manifold and exhaust pipe.............then I would go to the restroom.
Exhaust components sure do heat up quickly when you push the tilt lever into bypass mode at governed RPM.

I find the approach of " please leave me alone to get on with my job OR I will leave & you can find someone else to fix your forklift " works pretty well.

I have "accidently" sprayed an annoying person with hydraulic fluid from a holed hose on the mast before, he soon went away & never bothered me again.

if they want to stand there and watch me, so be it
i have a job to do and i do it, if they want to watch and talk then i work and talk back. If i'm working on a tedious part that requires all my attention i usually just say i need to concentrate on this and i can't talk.. they usually understand and most of the time they back off. On occasion i have had to remind the customer or observer i'm charging by the hour and anything that delays me only delays the repair, that usually works too.
edward's idea about blowing off the truck is a surefire way to get them to back off, nobody likes breathing the dust and dirt that comes off these things generally.

I'm reminded also of one incident where i had a customer hovering over me and asking questions when i was working on a hydraulic system, i was testing the system looking for leaks, well it happened to be one of the auxiliary lines in the mast, he just happened to be standing in the wrong place when i pulled the lever. I told him to stand back but he didn't listen, well... he immediately got sprayed with hydraulic oil even after my warnings. Needless to say he never came around much after that and let me do my work.... hehe :)

But all in all, i do try and be nice to the customer and if there is any safety hazards that may put him in harms way i do inform them of this, they usually stay clear or leave me to my work. I don't mind if someone talks to me, i just continue on while i talk.
I've found some tech's dont mind conversation or others watching, and other tech's seem to be uncomfortable about it.

Just remember to keep safety in the forefront of the job, if your uncomfortable with them standing over you or talking to you? then tell them you need to be able to concentrate on the job but be tactful about it if you want to continue to work there. If you've done field service work very long you learn how to read people so just use your best judgement when dealing with them. Keep in mind though there are some customers out there that are just a pain in the rear and you just have to deal with it the best you can.

Mr Fix-it, you sound just like me. I cant get much done with some `watcher`over my shoulders. How many of us can even read a newspaper with someone looking over your shoulder.
When i`m diagnosing a complicated electrical fault, i need privacy to think. If you pause to to think any problem through, Someone will immediately say `why dont you check this, why dont you try this`
Those are the worst! The know it alls who look who think they can do a better job.
There were some good suggestions from other techs like the fellow who set up a work zone. Yes...i`ll get about 15 safety cones and set up a perimeter with a sign that says `Work zone, do not enter`
And the suggestions from EdwardT would be a big help...but i dont have his wit and improv to come up with that stuff!
Our Employer should provide us with warning signs stating insurance regulations and work space policy, dangers to other workers from hazardous dust and fumes. Then we just have to point to the sign....

Good rule edward t.
Kind of like on Jeopardy where the answer line must be phrased as a question. Rules are rules.

This is a really good question.
I often use the line; "I love work, I could watch it all day long"
I usually start with asking if they are waiting for the machine, and let them know about how long it will be before I am done, and then I also always make sure I blow the machine clean with compressed air, before I work on it, making sure anyone around knows they may not want to be there as I blow the dirt off.
I also try to act as if I want to teach them everything there is to know about their forklift, (it works in a 'reverse psychology' way, I -want- to tell them, so then they don't want to know, and they seem to have more important places to be), and I am willing to go into all sorts of useless {to a forklift operator} details about any forklift component, all the way to remembering going fishing, to a hockey game, or rodeo with someone that works manufacturing forks, chain or racks.
I am in a part of the world that has very few unions, so I also tell people that I am not really in any union, but 'my union rules' say that if they have to watch or sing near by, then they have to listen to my bad jokes, and I promise them my bad jokes are worse than their bad singing. I also tell them the 'union rules' say they have to apologize if they are going to interrupt me in any way, they are welcome to interrupt me, but they have to apologize first, just an "i'm sorry, but I don't care about interrupting you, etc..." is fine, as long as it starts with an apology.

I have had some jobs, in other countries than the USA, where the work permit law made them have a "sponsor" to be able to hire someone from out of their country, who had to be paid the same as I was charging per hour, and who had to stay with me while I worked. they were always glad ($) to have me around, and never made themselves a problem.

I guess I'm not the only one with this problem. I have one customer where the boss is always away on Wednesdays and one particular employee will hang around and always asks "Is it broken?" I've got the machine apart and spread out and he has to ask me that! I've got another customer whose employees will stand around watching me work, that's when the air hose comes out and I air clean the machine. Works every time.

The worst ones are the ones that follow me around. I'll be on one side and they'll stand back and watch. So I move over to the other side and they walk around to that side to watch. I like to think they've never seen anyone work before and it fascinates them!

Oh man this drives me nuts as well
they put you off and then you make a mistake and it's your fault
I try and get the fork in between the service van and the building and lay out some withes hats so it's really obvious this is your work area and nobody is allowed inside
explain due to safety regulations you cannot continue if someone is inside your work area

Heh heh. Patience, patience.
If it is the guy who owns the truck, and pays for the service........not much you can do other than try to establish some basic rules of how you operate.
You can tell the owner that your insurance policy does not allow for persons other than you (and perhaps a helper who is on YOUR payroll) to be in the work area while you are actually performing a service task.
If it is a bunch of the owners paid employees that want to show up and hang out, the owner might want them to get back to work as they are loitering on his dime.
If it is any other kind of persons hanging out, you can tell them yourself to vamoose.
Aside from some obvious dangers of potentially spraying onlookers with fluid, or something falling/tipping and hitting them, you have to understand that some people (especially the bill payer) consider that the entire property belongs to them and that they have an inherent right to watch what you are doing to their property while on their property.
Some may be just overly curious, others may not trust that you are spending your time efficiently (over billing for wasted time, as if they could actually be the judge of that).
The concept of "sidewalk supervisors" is nothing new.
If I were in your position I might say "If you want to watch me, do it from over there (point to wherever) and don't interrupt me with conversation and the job will go more efficiently. I don't want to have to worry about you getting injured because you're too close to the work I'm doing." Or something to that effect.

jajaja,... is not a strange situation.

Here in Spain we have some customers where I am in the same situation. Personally for me it is not pleasant, and makes work uncomfortable. But what we can do??.. stand and do our jobs to disappear sooner than later

Regards