Quantcast
Jump to content


Recommended Posts



Joe, sounds like this shop is paying techs more hours than it is charging the customer. Effective labor rate is labor hours billed/sold to customer divided by labor dollar sales. 100 hours of labor sold/$10,000 in labor sales = $100 ELR. Production doesn't fit in the equation.

 

 

Sent from my iPad using Tapatalk

Edited by chasauto
Link to comment
Share on other sites

Production doesn't fit in the equation.

 

That's not true.

 

Effective Labor Rate is your total labor sales for a given period divided by the number of hour sold, that is true. Joe had it reversed but if you understand his mistake and that he does know what he's talking about, he is absolutley correct.

 

But the answer I read that Joe's friend was seeking was what his NEEDED labor rate was. That does involve producttion. The greater your production, the greater your ELR is and the lower your posted labor rate needs to be to cover just your expenses let alone provide a return on investment. So in determining your required posted labor rate, your production absolutley fits into the equation. Not just fits, but is required.

Link to comment
Share on other sites

I've found if you take the geometric mean of say 30 shops in your local area the number will show you where the shop needs to be. If it's $50/hr or $150/hr it doesn't matter. Customers like familiarity, if your shop is above their perceived average labor rate but do above average work it will be justified. Price yourself near the bottom percentile and you invite bottom feeders, towards the top percentile brings in better but more demanding clients. Price yourself above the franchised dealers and you might have empty bays.

 

With a target labor rate in mind that suits what the market will bear and where you want to fit in, one can reverse engineer the tech pay rates and work on production and overhead. When I first opened I simply took the total shop overhead (total of all expenses including officer salary, except depreciable assets), divided by 80 hours a week (total reasonable labor production we are capable of) and came up with a number. I added a percentage to keep the labor rate in line with my local expectations and provide the shop with labor profit.

 

Notice that parts are excluded from this calculation. Parts profit adds purely to the bottom line, and it works because I can't estimate or control what parts I'll sell in a future month/year/quarter/whatever. I can control labor.

 

So in a nutshell the labor dollars keep the lights on and provides paychecks for everyone, the parts matrix keeps the shop moving forward and adds a cushion.

 

I think my method is pretty good, it keeps me from cheating the techs out of labor and underselling our time because I need to keep the labor hours up near 100% productivity. It removes the idea of free diagnosis. If I'm paying a guy to work on a customers car the shop is billing for it, with few exceptions. If techs aren't keeping up they can't hide behind the parts profit, produce or get retrained at the donut shop.

  • Like 3
Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • Available Subscriptions

  • Have you checked out Joe's Latest Blog?

         0 comments
      It always amazes me when I hear about a technician who quits one repair shop to go work at another shop for less money. I know you have heard of this too, and you’ve probably asked yourself, “Can this be true? And Why?” The answer rests within the culture of the company. More specifically, the boss, manager, or a toxic work environment literally pushed the technician out the door.
      While money and benefits tend to attract people to a company, it won’t keep them there. When a technician begins to look over the fence for greener grass, that is usually a sign that something is wrong within the workplace. It also means that his or her heart is probably already gone. If the issue is not resolved, no amount of money will keep that technician for the long term. The heart is always the first to leave. The last thing that leaves is the technician’s toolbox.
      Shop owners: Focus more on employee retention than acquisition. This is not to say that you should not be constantly recruiting. You should. What it does means is that once you hire someone, your job isn’t over, that’s when it begins. Get to know your technicians. Build strong relationships. Have frequent one-on-ones. Engage in meaningful conversation. Find what truly motivates your technicians. You may be surprised that while money is a motivator, it’s usually not the prime motivator.
      One last thing; the cost of technician turnover can be financially devastating. It also affects shop morale. Do all you can to create a workplace where technicians feel they are respected, recognized, and know that their work contributes to the overall success of the company. This will lead to improved morale and team spirit. Remember, when you see a technician’s toolbox rolling out of the bay on its way to another shop, the heart was most likely gone long before that.
  • Similar Topics

    • By carmcapriotto
      The Weekly Blitz is brought to you by our friends over at Shop Marketing Pros. If you want to take your shop to the next level, you need great marketing. Shop Marketing Pros does top-tier marketing for top-tier shops.
      Click here to learn more about Top Tier Marketing by Shop Marketing Pros and schedule a demo:https://shopmarketingpros.com/chris/
      Check out their podcast here: https://autorepairmarketing.captivate.fm/
      If you would like to join their private Facebook group go here: https://www.facebook.com/groups/autorepairmarketingmastermind
      In this podcast episode, Coach Chris Cotton from Auto Fix Auto Shop Coaching emphasizes the importance of seeking inspiration and innovation outside the auto repair industry. He challenges shop owners to break out of their comfort zones and learn from disruptors in fields like hospitality, retail, healthcare, and fitness. Chris discusses how adopting customer-centric approaches and technologies from these industries can transform auto repair businesses.
       
      For instance, he highlights how the hospitality industry's focus on exceptional customer service and personalized experiences can be mirrored in auto repair shops to build stronger customer relationships and loyalty. Similarly, he points out how retail's use of data analytics and customer feedback can help auto shops better understand their clients' needs and preferences, leading to more tailored services and improved satisfaction.
       
      Chris also explores how the healthcare sector's emphasis on transparency and trust can be applied to auto repair, fostering a more open and honest communication channel between mechanics and customers. Additionally, he draws parallels with the fitness industry's use of subscription models and community-building strategies, suggesting that auto repair shops could benefit from implementing similar membership programs to ensure steady revenue and customer engagement.
       
      He encourages proactive learning, attending conferences, and networking with professionals from other sectors. By stepping outside the traditional boundaries of the auto repair industry, shop owners can gain fresh perspectives and innovative ideas that can set them apart from competitors.
       
      The episode concludes with practical steps for implementing these innovative ideas to enhance customer experience and drive positive change in auto repair shops. Chris provides actionable advice on how to start small, such as introducing a customer feedback system or experimenting with new service packages, and gradually scale up these initiatives. He also stresses the importance of continuous improvement and staying adaptable to evolving customer expectations and industry trends. By embracing these strategies, auto repair shops can not only improve their operations but also create a more engaging and satisfying experience for their customers.
       
      The power of looking outside our industry (00:01:05)
      Exploring the importance of learning from disruptors in other fields to stay ahead of the curve.  
      Innovation at the edges (00:03:26)
       
      Discussing how innovation often occurs at the edges of industries and the benefits of looking beyond traditional practices.  
      Examples of disruptors in other industries (00:04:37)
       
      Exploring examples from healthcare, food and beverage, connected fitness apps, and education to draw insights for auto repair business.  
      Implementing ideas in auto repair shops (00:09:41)
       
      Strategies for implementing ideas from other industries, such as networking, adopting technology, experimenting with service models, focusing on customer experience, and empowering the team.  
       
       
      Connect with Chris:
      [email protected]
      Phone: 940.400.1008
      www.autoshopcoaching.com
      Facebook: https://www.facebook.com/
      AutoFixAutoShopCoachingYoutube: https://bit.ly/3ClX0ae
       
      #autofixautoshopcoaching #autofixbeautofixing #autoshopprofits #autoshopprofit #autoshopprofitsfirst #autoshopleadership #autoshopmanagement #autorepairshopcoaching #autorepairshopconsulting #autorepairshoptraining #autorepairshop #autorepair #serviceadvisor #serviceadvisorefficiency #autorepairshopmarketing #theweeklyblitz #autofix #shopmarketingpros #autofixautoshopcoachingbook
      Click to go to the Podcast on Remarkable Results Radio
    • By carmcapriotto
      Thanks to our Partners, AAPEX, NAPA TRACS, and Automotive Management Network "Research has shown that people forget 90% of what they "learn" in 30 days unless it's reinforced. But reinforcement isn't enough. Today's Class training uses forced recall, a method that creates pathways in a learner's brain, helping them retain information more effectively." David Boyes, from Today's Class, discusses how daily gamification on Today's Class' app can enhance engagement and learning through individual and team-based competitions, rewards points, and prizes. “It’s microdosing of training. It’s a set of daily questions on a daily basis." David Boyes, President of ‘Today’s Class”  An online learning organization that has been supporting the automotive industry for more than 20 years. David's previous episodes HERE Show Notes
      Daily Dose of Top Tier Training: Today’s Class [THA 371]: https://remarkableresults.biz/remarkable-results-radio-podcast/a371/ Today’s Class: Adaptive Learning Technology [RR 879]: https://remarkableresults.biz/remarkable-results-radio-podcast/e879/ Training Platform (00:01:52) David Boyes talks about his training platform, Today's Class, and its relevance in the industry. Gamification and Engagement (00:02:08) The discussion on how gamification can be used to encourage engagement and learning in the automotive industry. Gamification Features (00:03:03) The various forms of gamification and its role in enhancing the overall learning experience. Rewards Points and Competition (00:04:01) The use of rewards points and individual/ team-based competition as default gamification features. Customizing Gamification (00:05:15) How Today's Class can be tailored to fit the unique needs and culture of each organization. Incentives and Prizes (00:09:06) The potential for using awards, prizes, and bragging rights to drive desired behaviors. Team-Based Engagement (00:07:13) The power of team-based engagement and how it can benefit the overall team dynamic. Training Platform Overview (00:07:54) A brief explanation of Today's Class as a training platform with a different approach to traditional online training. Variety in Gamification Goals (00:09:06) The importance of variety in gamification goals to keep the learning experience fresh and engaging. Innovative Gamification Ideas (00:10:55) Creative ideas and examples of gamification rewards and incentives used by different groups. Leaderboards and Competition (00:12:36) The visibility of leaderboards and the inter-competitive play between different shops. Collaboration and Contributions (00:17:16) The involvement of parts providers or tool trucks in providing rewards and incentives for gamification. Duration of Competitions (00:19:10) The duration of gamification competitions, whether they typically last monthly or quarterly. Gamification Reset Frequency (00:19:31) David explains the importance of resetting the scoreboard monthly for a fresh competition. Setting Up Gamification Groups (00:22:46) David explains the process for onboarding new shops into gamification groups and the 90-day training cycle. Gamification as a Benefit (00:24:16) David emphasizes that gamification is a benefit but not enough to drive the platform's usage, highlighting the importance of learning and development. Thanks to our Partners, AAPEX, NAPA TRACS, and Automotive Management Network Set your sights on Las Vegas in 2024. Mark your calendar now … November 5th-7th, 2024. AAPEX - Now more than ever. And don’t miss the next free AAPEX webinar. Register now at http://AAPEXSHOW.COM/WEBINAR NAPA TRACS will move your shop into the SMS fast lane with onsite training and six days a week of support and local representation. Find NAPA TRACS on the Web at http://napatracs.com/ Get ready to grow your business with the Automotive Management Network: Find on the Web at http://AftermarketManagementNetwork.com for information that can help you move your business ahead and for the free and informative http://LaborRateTracker.com Connect with the Podcast: -Follow on Facebook: https://www.facebook.com/RemarkableResultsRadioPodcast/ -Join Our Private Facebook Community: https://www.facebook.com/groups/1734687266778976 -Join Our Virtual Toastmasters Club: https://remarkableresults.biz/toastmasters -Subscribe on YouTube: https://www.youtube.com/carmcapriotto -Follow on LinkedIn: https://www.linkedin.com/in/carmcapriotto/ -Follow on Instagram: https://www.instagram.com/remarkableresultsradiopodcast/ -Follow on Twitter: https://twitter.com/RResultsBiz -Visit the Website: https://remarkableresults.biz/ -Join our Insider List: https://remarkableresults.biz/insider -All books mentioned on our podcasts: https://remarkableresults.biz/books -Our Classroom page for personal or team learning: https://remarkableresults.biz/classroom -Buy Me a Coffee: https://www.buymeacoffee.com/carm -The Aftermarket Radio Network: https://aftermarketradionetwork.com -Special episode collections: https://remarkableresults.biz/collections                    
      Click to go to the Podcast on Remarkable Results Radio
    • By carmcapriotto
      Thanks to our Partners, Shop Boss, and 360 Payments By setting realistic expectations, providing necessary support and training, fostering a positive work environment, and maintaining transparency and honesty, business owners can create a more productive and harmonious workplace. Implementing these actionable tips from Kevin Eckler can help reduce turnover, improve employee satisfaction, and ultimately lead to a more successful business. Kevin Eckler, Foreign Car Specialists, Poughkeepsie, NY. Listen to Kevin’s previous episodes HERE. Show Notes
      The challenges in the automotive industry (00:00:06) Discussion about the struggles and shortcomings in hiring and managing employees in the automotive industry. Setting up employees for failure (00:01:01) The tendency to bring in new employees without realistic expectations and necessary support, leading to repeated failures. Lack of support and training for new employees (00:02:43) Failure to equip new employees with the tools, support, and training needed for success in their positions. Creating a toxic work environment (00:03:40) The impact of avoiding confrontations and failing to address issues on creating a toxic work environment and setting employees up to fail. Self-awareness and accountability (00:06:34) The importance of self-awareness in how one's actions and words influence the atmosphere and attitude in the workplace. Honesty about the challenges and vision of the business (00:08:08) The importance of being honest about the difficulties and vision of the business when bringing in new employees and setting realistic expectations. Thanks to our Partners, Shop Boss, and 360 Payments Shop Boss – Shop Management Software built by shop owners, for shop owners. It works the way you need it to, right out of the box. Find on the web at https://shopboss.net Connect with the Podcast: -Follow on Facebook: https://www.facebook.com/RemarkableResultsRadioPodcast/ -Join Our Virtual Toastmasters Club: https://remarkableresults.biz/toastmasters -Join Our Private Facebook Community: https://www.facebook.com/groups/1734687266778976 -Subscribe on YouTube: https://www.youtube.com/carmcapriotto -Follow on LinkedIn: https://www.linkedin.com/in/carmcapriotto/ -Follow on Instagram: https://www.instagram.com/remarkableresultsradiopodcast/ -Follow on Twitter: https://twitter.com/RResultsBiz -Visit the Website: https://remarkableresults.biz/ -Join our Insider List: https://remarkableresults.biz/insider -All books mentioned on our podcasts: https://remarkableresults.biz/books -Our Classroom page for personal or team learning: https://remarkableresults.biz/classroom -Buy Me a Coffee: https://www.buymeacoffee.com/carm -The Aftermarket Radio Network: https://aftermarketradionetwork.com -Special episode collections: https://remarkableresults.biz/collections  
      Click to go to the Podcast on Remarkable Results Radio
    • By Joe Marconi

      Premium Member Content 

      This content is hidden to guests, one of the benefits of a paid membership. Please login or register to view this content.

    • By carmcapriotto
      Thanks to our partners, NAPA TRACS and Promotive
      In this episode, Hunt Demarest, CPA with Paar Melis & Associates, discusses the importance of regularly analyzing your financials. Learn how to effectively use daily and monthly reviews to drive your shop’s profitability and productivity.
      Key Takeaways:
      Daily Reviews: Focus on productivity using shop management software. Monthly Reviews: Focus on profitability using financial statements. Key Metrics: Track productivity, profitability, and parts gross profit. Scientific Approach: Identify problems, hypothesize solutions, test, and analyze outcomes.  
      
       
      Thanks to our partners, NAPA TRACS and Promotive
      Did you know that NAPA TRACS has onsite training plus six days a week support?
      It all starts when a local representative meets with you to learn about your business and how you run it.  After all, it's your shop, so it's your choice.
      Let us prove to you that Tracs is the single best shop management system in the business.  Find NAPA TRACS on the Web at NAPATRACS.com
      Paar Melis and Associates – Accountants Specializing in Automotive Repair
      Visit us Online: www.paarmelis.com
      Email Hunt: [email protected]
      Get a copy of my Book: Download Here
      Aftermarket Radio Network
      Click to go to the Podcast on Remarkable Results Radio


  • Similar Tagged Content

  • Our Sponsors



×
×
  • Create New...