Quantcast
Jump to content


Parts/labor mix


Recommended Posts

I've been working on some yearly numbers for taxes - as many of you know we're a small shop just starting to expand. I've heard in the past the work mix should be close to 50/50 but we're finding ourselves at 64/36 with parts being the 64%. I've always struggled billing enough hours. Is this something I should try and adjust towards, and what methods should be used to improve this?

 

 

Sent from my SM-N910V using Tapatalk

Link to comment
Share on other sites










The reason you want to have your Labor sales higher than Parts is simply you make more money off labor. If you are shooting for a 70% GP on labor and parts is around 50%, which would you rather be your biggest profit center. Its damn good that you are getting 55-57% on labor because that probably helps compensate for the off ratio. What is your Hours Per RO?

Edited by mspecperformance
Link to comment
Share on other sites

Two easy ways to get your labor up is 1) raise your labor rate 2) start marking up your labor guide. If you're using mitchell manager, both are easy to do and takes less than a minute.

 

I personally mark up our labor guide 20% (16.67% GP). It's gotten me closer to 50/50, but I still run a little on the high side with parts, mostly due to me doing a poor job at selling diagnostic time

  • Like 1
Link to comment
Share on other sites

Something else you might consider is setting higher labor rates for higher labor jobs. This is something I just set up this week and I've used on a few cars so far. It's not much, but an extra $2-4 each hour at the end of the year adds up. This will also increase your GP on labor and effective labor rate. Just an idea

 

https://goo.gl/photos/MbWDGu9FHde3MNAx6

Link to comment
Share on other sites

Something else you might consider is setting higher labor rates for higher labor jobs. This is something I just set up this week and I've used on a few cars so far. It's not much, but an extra $2-4 each hour at the end of the year adds up. This will also increase your GP on labor and effective labor rate. Just an idea

 

https://goo.gl/photos/MbWDGu9FHde3MNAx6

Thanks Matt, that's an awesome management software you have!

With an option like that it'd make it easy to do!

 

Sent from my SM-N910V using Tapatalk

Link to comment
Share on other sites

Something else you might consider is setting higher labor rates for higher labor jobs. This is something I just set up this week and I've used on a few cars so far. It's not much, but an extra $2-4 each hour at the end of the year adds up. This will also increase your GP on labor and effective labor rate. Just an idea

 

https://goo.gl/photos/MbWDGu9FHde3MNAx6

I like that idea! Have you had any customer complain / question why there is a sliding scale for labor rate?

Link to comment
Share on other sites

Not at all. Granted I just started using it this week, but I can't imagine how anybody would ever find out that I'm using a labor matrix. My invoices don't print how many labor hours a job took. Also, almost all dealerships use a labor matrix. If a customer did somehow bring it up, I'd simply say I don't believe in charging our full labor rate for a job that only takes 0.5 hours to complete, so we have a lower labor rate for lower paying jobs. I'm pretty sure everyone on this forum doesn't use their shop labor rate for oil changes, so everyone is essentially already manipulating their labor rate, this is just a way to offset that. A job that pays 10+ hours is clearly a very labor intensive job that a C level tech is probably not going to be able to handle and is more prone to delays or mistakes.

 

Another benefit is when someone is price shopping and asks the dreaded question 'So, what is your labor rate?' Now I can honestly say we don't have a set, straight across the board, labor rate. This also happens with extended warranty companies.

 

Something else to keep in mind is that the math is compounding. So when you have a job that pays 3.6 hours, and you increase your labor rate by $4, your not just going to get an extra $4. You're actually going to get an extra $14.40 (3.6 X $4). This can really add up over the course of a year and have a pretty nice impact on your effective labor rate. In the grand scheme of things, The extra $14.40 is not going to sway a customer's decision on a $600 repair estimate.

  • Like 1
Link to comment
Share on other sites

Something else you might consider is setting higher labor rates for higher labor jobs. This is something I just set up this week and I've used on a few cars so far. It's not much, but an extra $2-4 each hour at the end of the year adds up. This will also increase your GP on labor and effective labor rate. Just an idea

 

https://goo.gl/photos/MbWDGu9FHde3MNAx6

I think this is a GREAT idea. What management program are you using, though? It looks a lot like Mitchell Manager, but I don't have the ability to use a labor matix in my version of Mitchell.

Link to comment
Share on other sites

Yes, I am using Mitchell manager. It'd been an option ever since I started using it 3 years ago, just never realized how to do it. Technically, it's not a matrix. You have the option to set different labor rates in the program settings. Mitchell says it's for things like diesel work/ fleet work, discounts, etc. I just thought one day, why not set it for labor hour totals and use it that way. So it's not automatic, but if you get in the habit, it's super easy.

  • Like 2
Link to comment
Share on other sites

It's easy to know if your labor rate is right. Simply take the flag hour wage of your highest paid tech and divide by .3. My techs make 31 an hour so the minimum correct labor rate is $103. We use coupons to attract new customers, so my rate is higher to compensate for the discounts.

If you're getting 55% on parts (part cost divided by .45) and your labor rate gets you 70% margin on labor, then don't worry about P/L mix. A 4.5 HPRO tells me you're not likely giving away much labor. It's probably due to selling lots of high dollar parts, which is a good thing at 55%.

  • Like 1
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
  • Have you checked out Joe's Latest Blog?

         3 comments
      Got your attention? Good. The truth is, there is no such thing as the perfect technician pay plan. There are countless ways to create any pay plan. I’ve heard all the claims and opinions, and to be honest, it’s getting a little frustrating. Claims that an hourly paid pay plan cannot motivate. That flat rate is the only way to truly get the most production from your technicians. And then there’s the hybrid performance-based pay plan that many claim is the best.
      At a recent industry event, a shop owner from the Midwest boasted about his flat-rate techs and insisted that this pay plan should be adopted by all shops across the country. When I informed him that in states like New York, you cannot pay flat-rate, he was shocked. “Then how do you motivate your techs” he asked me.
      I remember the day in 1986 when I hired the best technician who ever worked for me in my 41 years as an automotive shop owner. We’ll call him Hal. When Hal reviewed my pay plan for him, and the incentive bonus document, he stared at it for a minute, looked up, and said, “Joe, this looks good, but here’s what I want.” He then wrote on top of the document the weekly salary he wanted. It was a BIG number. He went on to say, “Joe, I need to take home a certain amount of money. I have a home, a wife, two kids, and my Harly Davidson. I will work hard and produce for you. I don’t need an incentive bonus to do my work.” And he did, for the next 30 years, until the day he retired.
      Everyone is entitled to their opinion. So, here’s mine. Money is a motivator, but not the only motivator, and not the best motivator either. We have all heard this scenario, “She quit ABC Auto Center, to get a job at XYZ Auto Repair, and she’s making less money now at XYZ!” We all know that people don’t leave companies, they leave the people they work for or work with.
      With all this said, I do believe that an incentive-based pay plan can work. However, I also believe that a technician must be paid a very good base wage that is commensurate with their ability, experience, and certifications. I also believe that in addition to money, there needs to be a great benefits package. But the icing on the cake in any pay plan is the culture, mission, and vision of the company, which takes strong leadership. And let’s not forget that motivation also comes from praise, recognition, respect, and when technicians know that their work matters.
      Rather than looking for that elusive perfect pay plan, sit down with your technician. Find out what motivates them. What their goals are. Why do they get out of bed in the morning? When you tie their goals with your goals, you will have one powerful pay plan.
  • Similar Topics

    • 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
      Recorded Live at MACS (Mobile Air Climate Systems) 2024 Training Event & Trade Show, Adam Kimmel discusses the refrigerant and thermal management industry. He highlights the significance of air conditioning technology in vehicles, the essential use of fluorine in refrigerants, and the evolution of refrigerants for environmental safety. Adam Kimmel, Koura, [email protected] Show Notes
      The importance of air conditioning (00:00:01) Discussing the significance of air conditioning in vehicles and homes and the commitment of industry professionals. Understanding fluorine in refrigerants (00:01:53) Evolution of refrigerants (00:05:16) Future challenges and developments (00:10:19) Regulations and alternatives (00:14:18) Safety and handling precautions (00:16:10) Engineer training and transparency (00:17:11) Understanding refrigerant nomenclature (00:19:47) Efficiency and GWP (00:25:38) Thanks to our Partners, AAPEX and NAPA TRACS 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/ Connect with the Podcast: -Follow on Facebook: https://www.facebook.com/RemarkableResultsRadioPodcast/ -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 carmcapriotto
      What if there's a fire in your shop? An oil spill? A natural disaster or God forbid, a death? How do you prepare for that? Well, This week, Hunt talks about preparing for the unexpected:
      Vision Expo: Hunt shares experiences and insights from attending the Vision Expo in Kansas City, emphasizing the importance of community and industry events. Importance of Preparedness: The significance of being ready for unforeseen incidents, such as theft or natural disasters, affecting auto repair shops. Insights from Roundtable Discussions and Classes: Valuable lessons from discussions and classes, including managing risks and implementing preventive measures. Understanding Insurance Coverages: The necessity of comprehending what business insurance covers, identifying coverage gaps, and making sure you have comprehensive protection. Preventive Measures Against Risks: Steps to minimize risks associated with fires, accidents, and other potential threats to auto repair shops. Contingency Planning: The need for having a solid contingency plan to tackle unexpected situations effectively. Financial Readiness and Strategic Planning: Emphasizes the role of financial preparedness and strategic planning in fostering long-term success and stability for auto repair shop owners.  
      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
      It’s time to hire a superstar for your business; what a grind you have in front of you. Great news, you don’t have to go it alone. Introducing Promotive, a full-service staffing solution for your shop. Promotive has over 40 years of recruiting and automotive experience. If you need qualified technicians and service advisors and want to offload the heavy lifting, visit www.gopromotive.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
    • By carmcapriotto
      Matt Fanslow explores the analogy between running a repair shop and the world of dating. He shares insights on first impressions, trust-building, and the value of substance over style in both customer relationships and shop management. Matt emphasizes the need for repair shops to maintain high standards of service and to view customer feedback as opportunities for growth.
      Show Notes
      Dating in Modern Times (00:01:15) Comparison of modern dating to historical dating and personal experiences with initial interactions. Physical Attractiveness and Shop Appearance (00:02:25) Reflections on interactions with physically attractive individuals, similar to the importance of a shop's appearance. Importance of Customer Reviews (00:04:54) Discussion on the significance of customer reviews, the impact of negative reviews, and the importance of backing up a shop's exterior with quality service. NAPA Auto Tech Training Sponsorship (00:11:34) Information about NAPA Auto Tech Training and its benefits for technicians and shop profitability. Constant Improvement in Customer and Employee Interactions (00:13:42) Emphasis on the importance of constant improvement in customer interactions and the parallels with employee relationships. Long-Term Relationships and Continued Accreditation (00:17:06) Discussion on the importance of continued accreditation and constant improvement to maintain long-term relationships with customers and employees. Shop Relationship Parallels (00:18:13) Drawing parallels between shop hiring and dating, emphasizing the importance of attracting and maintaining long-term relationships with employees. Attracting Talent (00:19:16) Encouraging self-reflection on what attracts and separates a shop from competitors, and the importance of perpetuating long-term relationships with employees. Promoting Training (00:20:20) Advocating for the importance of training.  
      Thanks to our Partner, NAPA Autotech napaautotech.com
       
      Email Matt: [email protected]
      Diagnosing the Aftermarket A - Z YouTube Channel HERE
      Aftermarket Radio Network: https://aftermarketradionetwork.com/
       
      Click to go to the Podcast on Remarkable Results Radio
    • 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 episode, Coach Chris Cotton from Auto Fix Auto Shop Coaching addresses auto repair business owners, focusing on revitalizing February's sluggish pace. He emphasizes the power of a goal-oriented mindset, offering actionable advice on setting objectives and adopting proactive strategies. Cotton's insights aim to help listeners transform typically slow periods into opportunities for profit and success, underscoring the significance of attitude and planning in business.
       
      The importance of mindset (00:00:04) Discussion on the significance of a goal-driven mindset to turn February around for auto repair business owners.
       
      Challenging the negative mindset (00:02:23) Encouraging shop owners to shift from a negative mindset about February and its impact on business performance.
       
      Analyzing February sales data (00:04:30) Reviewing sales data from February and questioning the mindset of shop owners who did not experience significant growth.
       
      Preparing for slow periods (00:08:05) Emphasizing the importance of long-term planning and preparation for slow months, such as February, to achieve success.
       
      Overcoming negative mindset trap (00:09:07) Discussing the negative mindset trap and how it affects the performance and attitude of the team.
       
      Adopting a positive mindset (00:10:16) Exploring the power of a positive mindset and proactive approach to transform slow periods into successful and profitable times.
       
      Setting ambitious goals (00:11:11) Encouraging shop owners to set ambitious but achievable goals and involve the team in brainstorming strategies to attract more business.
       
      Reinforcing the impact of mindset and goals (00:13:20) Highlighting the impact of mindset and goal setting on team performance and attitude, and its role in breaking the cycle of slow periods.
       
      Driving the shop to new heights (00:15:34) Empowering shop owners to use their mindset and leadership to transform challenges into opportunities and drive their shop to new heights.
       
      Coach Chris Cotton', '00:02:23', "I heard it like, 'Oh woe is me, February sucks, January sucks, it's always going to suck and there's nothing we can do about it.'" 'Coach Chris Cotton', '00:03:24', "If you tell all the employees, 'Hey, this is going to be the best month ever,' and you put your efforts towards that, then guess what? It will be the best month ever." 'Coach Chris Cotton', '00:09:07', "What would $25,000 have done for your shop? What would $50,000 have done for your shop in January, February, March moving forward?"
       
      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


  • Our Sponsors










×
×
  • Create New...