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Labor rate from $115 to $150 car count down 1/3 revenue up 6%


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Great Tire Deal

Yep, I'm getting ready to make a raise myself. When I took over for my grandpa it was $55 and that was in 2009. You can only imagine the type of customers that brought, I'm up to $70, about to go to $75 soon. Thats getting upper end for our area.

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Labor rate from $115 to $150 car count down 1/3 revenue up 6%.

 

Going on the third month that we raised our rates. Our best customers have stayed, trouble nickle and dime customers seem to have disappeared. ARO from 380 to 628.

 

Did you offset the labour rate increase with a reduction in your parts margins at all?

What was the reason with such a large increase all at once? Even some of your good customers might be turned off by the big jump.

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Did you offset the labour rate increase with a reduction in your parts margins at all?

What was the reason with such a large increase all at once? Even some of your good customers might be turned off by the big jump.

1. No.

2. Shopped around, new dealers service departments are running 2 to 6 weeks wait times, several of my competitors have gone out of business, and after a careful study, we knew we could pull it off.

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I don't think you are high enough for your area. I have been over $90 for at least 6 years now in Dayton, Ohio. It is not what you charge, it is the value of the service received for the price.

In my City of Piqua, The dealer is only $85, the highest shop I know of is $77/hr. I understand the value of the service but I don't want to price myself out of a job either.

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I understand area does have a lot to do with labor pricing. I also know that it is perceived value to the customer when they leave your shop after paying for the service you provided to them that will ensure they come back for future service or repair. Unless required by your area your customers may not know your hourly labor rate. Just strive for excellent customer service, backed by your warranty. Always take the time to go over the invoice with the customer and even show the parts removed when they come for their vehicle.

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One can often make more money charging what you are worth on fewer cars than giving your work away and hoping to make it on volume. IMO No skilled customer service driven shop should be charging less that $125.00 per hour and less that 75% mark up on parts, period. On higher cost parts it should be the shop owners decision on the mark up. Alway's give the customer their car back with the complaint fixed, washed,vacuumed and a discount card with a $2.00 bill under the fuel fill lid.

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Frogfinder you make some great points. I know pricing can be regional, but the idea is solid to charge what you are worth. Folks want great service and they are willing to pay for it. Think about one of your favorite restaurant. Why do you go there? Probably you love the food, great service, good atmosphere, etc. Price is not the primary driver of good clients. They will gladly pay for a great experience.

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  • 2 weeks later...

The labor rate is interesting. My experience is that we get a handful of inquires each year regarding our rate. A guy once told me "if you don't have people complaining about your rates you aren't charging enough". Typically when someone asks about the rate the 1st thing that goes through my head is this is not the customer I want.. When I was writing service I would just tell the customer "I can make the rate as low as you want, just tell me what rate you want. It's just going to take us a lot longer to fix the problem. Don't get wrapped up in a published rate" and then would go to let them know of the value we offer. I don't recall ever losing a job.

I do like the $2 bill idea in the fuel door.. I could see us making a small card with something along the lines of "have a cup of coffe or drink on us".

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We moved our rate from $120 to $132.50 this year and have had no complaints or loss of customers. The dealers in are area are $160+. Wait had one complaint from an online shopper who said I was the most expensive of the franchise shops he surveyed. Guess I will take that as a compliment.

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Labor rate from $115 to $150 car count down 1/3 revenue up 6%.

 

Going on the third month that we raised our rates. Our best customers have stayed, trouble nickle and dime customers seem to have disappeared. ARO from 380 to 628.

What do you contribute the 65% increase in RO dollars? Using estimates, if your labor was $115/hour and just to make the calculation easy, lets say your parts were $75/ hour, that would be an $190/hour parts and labor x 2.0 hour = $380 ARO [your stated previous ARO]. So if you raised your labor to $150, the calculation would be $150 + 75 = $225 x 2 = $450 ARO. That's a long way from $628. Did getting rid of the bottom feeders mean you upped the average job from 2.0 hours to 2.80 hours? I could see that because the better customers are more willing to approve more work. Plus, with 33% less vehicles you can spend more time with each customer. Lastly, you might be able to sell more premium parts. Did I answer my own question?

Edited by tyrguy
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Usually when someone asks the labor rate its followed by a request to install their parts. These cats are smart. They get an estimate from someone then figure out how to save money. They buy the parts, then shop around to pay the cheapest shops labor rate to get it done. I'm not for hire by the hour. I work by the job. Yes, my invoices have parts/labor itemized because it's the law but I only sell the total job.

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  • 2 years later...

My answer to the what is your rate question:

We bill fairly for each job depending on how difficult the issue is to repair. Please stop by and let my ASE certified technician take a free look at the vehicle so we can build you an accurate quote."

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Interesting topic. Thought I would chime in. 

First of all, do you understand that a lot of the industry (independent auto repair shops) are looking at rates close to $200/hour?? It's a fact and partially because the cost of parts. Can't tell you how many times shop owners tell me that as they prepare a quote - the customer is on Amazon looking up the part pricing. You can't stop that- but you CAN charge accordingly .

As an alternative, anyone ever consider pricing tiers?? As an example; Our shop rate is $XXX/hour. 
For SPECIFIC JOBS... the rate changes. SPECIFIC could be anything from difficult electric work, high end import work, bring your parts work or whatever. 

It's not about WHAT SPECIFIC work is... you decided... but your rate doesn't have to be the same rate as a tire rotation. 

Secondly, I do this with all my clients - every 3 months, the shop owner reviews the labor rate. I didn't say change it or increase it - but reviews it. In most cases, the increase is somewhere between $2-$5 per hour. So think about it. Over the course of the year, you increase your shop rate $8/per hour or $15/per hour... or whatever. But in every case, the increase is small and incremental. 

From what most have confirmed (and I know it to be true) most people don't know or ask about your shop rate. 

Hope this helps!

Matthew
"The Car Count Fixer"

Get Car Count Help at YouTube.com/CarCountHackers
Like & Follow Car Count Hackers on Facebook

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      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.
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