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Posted

Everywhere I look I see that I'm supposed to target 60% gross profit.  Am I supposed to include tires in this?  I have no problem getting 60% on repairs, but when I include my tire sales then it just tanks it.  About 15% of our sales is tires.  Is anyone getting 60% GP including tires?  If so, I need to make some adjustments.

  • Like 1
Posted

While many trainers slice the pie differently the numbers at the end still come out the same. You should be tracking gp on all income sources. Parts @50% minimum, I think 55 should be the target. Labor at 70%, tires at 30% and sublet @50%. Blended you should end up at 60% overall at a minimum. From what I've seen tire gp is one of the harder ones to maintain unless you include the backside money. 

We have consistently achieved 62%average gp for years and years so it is attainable. 

Posted

IMHO, If you are selling a substantial amount of tires you should keep the numbers separate. Our mix is 55/45 service to tires in sales dollars. But our GP is 75/25 service to tires. Our GP in service is 78% vs 30% in tires. Remember though as I've stated on other threads, we state our GP the traditional accounting way which is sales minus the cost of the product, not including labor. No matter how you define GP though, you can see that including tire sales in your total GP calculation kills the numbers. Our total GP including both service and tires is 56%.

  • 2 weeks later...
Posted

I am struggling with GP. My master tech gets paid $28/hr plus bonus and he hits bonus every week. He is the only one that is really producing at my main shop - hit 72.25 hours last week. My labor rate is $80 but we have a $60/hr option for friends/family. Waaay too many people are becoming friends/family.... also with flushes and canned jobs, some equal out to be $50/hr labor rate. With some customers, we give $50/hr bc misquoted labor times and such or giving away discounts.

Started with my techs making $17/hr.... now minimum they make $22.50. I have to raise my prices.... again

Posted

Try cutting way back on your discounts first. There is no reason to give away work. $80 sounds more than reasonable. I would start with the friends and family. If they are really friends and family they should be coming to you regardless.

Posted (edited)
12 hours ago, Jay Huh said:

I am struggling with GP. My master tech gets paid $28/hr plus bonus and he hits bonus every week. He is the only one that is really producing at my main shop - hit 72.25 hours last week. My labor rate is $80 but we have a $60/hr option for friends/family. Waaay too many people are becoming friends/family.... also with flushes and canned jobs, some equal out to be $50/hr labor rate. With some customers, we give $50/hr bc misquoted labor times and such or giving away discounts.

Started with my techs making $17/hr.... now minimum they make $22.50. I have to raise my prices.... again

Like Joe said, more info would be needed to make a full diagnosis, but there are a few things we can glean from your post.

First, your labor rate on your master tech is low. If he's producing most of your hours, you need to base your labor rate on his pay. You should be targeting 70% GP on labor, so divide his pay rate by .3.

Also, I would be looking at what your Effective Labor Rate is with your current sales mix. Divide your labor sales into the labor hours flagged. Divide your ELR into your door rate to determine what percentage you're off. If your ELR is 85% of your door rate, then when you adjust your door rate to reflect your desired labor GP, increase it by 15% more to compensate for your ELR. This will compensate for the low labor rate on flushes etc. You might find this a little strong for your taste, but get something, a few bucks goes a long way.

Friends and family are a real problem. In my shop the only friends are my friends. And I mean friends. People I actually do things with on the weekend. I've found over the years that there are a lot of people who want to call themselves your friend when it's time to get their car fixed. Those are acquaintances, not friends. Your employees friends are not your friends. There's no reason for your employee's friends to get a discount from you. Family is family. Family includes your parents, and anyone who lives in your house. Cousins don't count. Sister in laws don't count. If they aren't your parents or they don't live in your house, they are extended family, and they get no discount. Been down that road way too many times.

Hope this helps.

Edited by AndersonAuto
  • Like 2
Posted
3 hours ago, Joe Marconi said:

There is a lot more information needed before I can really determine what is going on with your business.  However, we can draw a few general conclusions.  

It's not so much your prices or labor rate that is the problem, but how efficient and productive you are. In other words, how much labor is being produced per hour by your techs?  You could have a $150.00 labor rate, but if a tech only produces $300 in labor in an 8 hour day, that translates into $37.50 per hour for that day, for that tech.   

You need to look at production, the type of jobs you are selling, you customer base, your profit on parts.  And too much discounting is a sure way to go out of business.

By the way, EVERYONE of my customers are family and/or friends, but I don't discount a dime. 

Good luck and I hope this helps.

 

 

Thanks Joe! Love the way you put it about friends and family. Looking forward to seeing you in person in Sept!

  • Like 1
Posted
7 minutes ago, AndersonAuto said:

Like Joe said, more info would be needed to make a full diagnosis, but there are a few things we can glean from your post.

First, your labor rate on your master tech is low. If he's producing most of your hours, you need to base your labor rate on his pay. You should be targeting 70% GP on labor, so divide his pay rate by .3.

Also, I would be looking at what your Effective Labor Rate is with your current sales mix. Divide your labor sales into the labor hours flagged. Divide your ELR into your door rate to determine what percentage you're off. If your ELR is 85% of your door rate, then when you adjust your door rate to reflect your desired labor GP, increase it by 15% more to compensate for your ELR. This will compensate for the low labor rate on flushes etc. You might find this a little strong for your taste, but get something, a few bucks goes a long way.

Friends and family are a real problem. In my shop the only friends are my friends. And I mean friends. People I actually do things with on the weekend. I've found over the years that there are a lot of people who want to call themselves your friend when it's time to get their car fixed. Those are acquaintances, not friends. Your employees friends are not your friends. There's no reason for your employee's friends to get a discount from you. Family is family. Family includes your parents, and anyone who lives in your house. Cousins don't count. Sister in laws don't count. If they aren't your parents or they don't live in your house, they are extended family, and they get no discount. Been down that road way too many times.

Hope this helps.

Thanks, i will do some calculation tonight. But you are right. I have people coming out of woodwork calling me a friend when it's time to get their car repaired. You and Joe have been doing this a long time and I appreciate the advice on the discounting - might not be able to stop it completely but I will try and nip it where I can

Posted

For you to get 70% GP on your master tech, the way I figure it, take the 28x1.25 for payroll tax etc, then figure 70% based on that which comes out to a labor rate of $116.67. You can go lower than that because your other techs are a lower rate so it will average out, but your labor rate definitely needs to be higher. Don't be afraid to raise your rate, nothing will happen. I was afraid to raise mine for too long, then I raised it $10, nothing happened, so a few months later I raised it another $10, nothing happened. In an 18 month period I went from 89 to 125 and still grew by 30% each year. Don't be afraid.

  • Like 1
Posted

Family pay full price, no discount, they are time sinks that complain too much. "Friends" the same too, full price. Good customers? Yes, they get compted, once in a while.

 

I will give you my best tip that was passed on to me by my best mentor, -when you quote a job, quote it with the tax and eveything else, when they come to pay take a dollar and a few cents off, those customer will keep coming back to you. For example the whole job with tax is $108, quote $110 and when they come to pay charge the $108, leaving the customer $2. With practice you will come to master this, customer will choose you over the shop that quotes $99 and end up charging $108.

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  • Have you checked out Joe's Latest Blog?

         0 comments
      The Technician Shortage Is Our Fault, And It's Time We Own It
      Nearly every day, I hear shop owners complain: "There's a technician shortage. We can't find qualified people. There's no one out there." If that's true, then who's to blame?
      The industry? The schools? The government? I don't know how you feel, but who promised us an endless supply of qualified technicians?
      Another common complaint is that young people do not want to work in the trades. Well, if that were true, then why are other trades such as HVAC, electrical, and plumbing growing? What are they doing that the automotive industry is not? 
      Here's the reality we need to face: We do have a problem, but we shouldn't look for someone or any entity to rescue us. Not the government. Not the trade schools. Not the recruiting companies. No one owes us a workforce. If we want great people in our industry, it's up to us. At some point, we need to own up to the truth: Building a pipeline of qualified technicians is our responsibility.
      In this blog article, I will break down the key reasons we are in this situation today and what we, as an industry, can do to solve the technician shortage. Are you ready to look in the mirror?
      Have We Pushed Technicians Away?
      Let's take a look at flat-rate pay. True flat rate, which pays a technician only for the hours they produce, is a controversial pay plan that emphasizes high production levels and creates a competitive work environment that, if not properly controlled, can lead to increased mistakes and a decline in morale and team spirit. Additionally, the stress and physical demands placed on technicians as they age are not favorable to long-term employee retention. What do we do with technicians as they grow older into their fifties and begin to slow down? 
      I have heard all the arguments and pros and cons of flat-rate pay, and I am not going to judge any pay plan. Let the facts speak for themselves. True flat rate has changed in most areas around the country and has evolved into a pay plan that gives technicians some pay guarantee.
      Many shop owners have learned that team morale, along with the opportunity to earn income, is important to technicians and to the company's long-term success. But let me ask you: how many technicians have left or been pushed out over the years because of the old flat-rate pay system?
      Another issue is the workplace environment. I remember being grateful to be hired as a young technician at a local repair shop. While very thankful, the work environment was not ideal. The shop owner kept the bay doors open year-round (I am from New York) unless it rained or snowed. He felt that if the bay doors were closed, customers might think we were closed for business. We had no heat and no hot water. Many of the jobs were done outside, year-round,  in all types of weather. The starting pay was minimum wage, with no benefits, sick days, or vacation pay. 
      Now, again, I need to point out that I was truly grateful for the opportunity this shop owner gave me. I learned a lot working there, and the experience was pivotal in my career. But looking back, I wonder how many people were discouraged by these working conditions?
      While the physical demands of the repair workplace are daunting, perhaps even more critical is the culture. Too many of my generation shop owners preached the mindset of "my way or the highway." We were the business owners, after all. We started our companies, took all the risks, and provided jobs. Why shouldn't we be the ones to set the ground rules our way?   
      Many of us found over the years that the "my way or the highway" mentality was a sure way to isolate employees and make them more likely to look over the fence for greener grass. In other words, it led many technicians to seek employment elsewhere, where they felt they could be appreciated and recognized for their hard work. The issue, however, was that there wasn't much green grass around. Disappointment after disappointment, bouncing from repair to repair shop, eventually led to despair. So, I ask you: were workplace conditions a contributing factor in today's technician shortage?
      Another factor that we are all well aware of is the complexity of the modern automobile. When I started, the work was mostly physical, and you were required to master essentially three vehicle models: General Motors, Ford, and Chrysler. Let's fast-forward to today. The evolution of automotive technology, along with the extensive training and tools required, has outpaced the typical technician's pay compensation, with no clear career path. Again, leading to frustration and insecurity about the future.
      Here is the bottom line: people don't leave their job; they leave their experience. We must do a better job. 
      The News Isn't all Bad; Your Next Steps to Fix the Technician Shortage
      To fix the technician shortage, it will take a combined effort from everyone in the automotive industry, particularly automotive shop owners. Shop owners are in the perfect position to make the greatest impact, not only on their businesses but also on the future automotive workforce.
      First, shop owners must become better leaders and understand that their ultimate success is directly dependent on the people they assemble around them. Any shop owner who mistakenly believes they can build an empire solely on their abilities is destined for serious disappointment. Business owners who think like this will eventually plateau. Without the collective contributions from a team of qualified people, your business will stall; it will not continue to grow.
      Create a workplace that attracts top talent: a clean, professional, well-equipped facility designed to support productivity, teamwork, and a career, not just a job. Build a great reputation in your community by getting involved locally. Become the auto repair shop that people take notice of as "the" place to work.
      Next, shop owners must become more financially knowledgeable. Knowing your numbers and what you need to achieve for a strong bottom-line profit is essential to paying technicians the money they need and deserve. Profit will also allow you to compete with other trade industries by providing a benefits package that has real take-home value and security.
      When it comes to culture, this is where the rubber hits the road. People crave recognition, praise, and a sense of purpose. Despite what you hear, people are not just money-motivated. Once people feel secure in their financial situation, retaining and motivating technicians can only be achieved by connecting with them on an emotional level. You cannot show enough appreciation. Give out praise for a job well done as if your business depended on it, because it does.
      As technicians age, we need to have a place for them. Expecting a 58-year-old to perform like a 35-year-old is unrealistic. We need to be more focused on career pathing. Provide training, skill development, and coaching to develop leaders and mentors within our older workforce. While their bodies may have slowed, the knowledge they have gained is priceless. 
      Our future is dependent on young people entering our industry. We need to give more young people opportunities. Every shop owner across the country should consider hiring an apprentice, then build an apprentice training plan and career path for them. If every shop did this, we could solve the technician shortage within five years. Get involved with the trade schools and high schools in your area. Look into the NAPA Apprenticeship Program. Don't sit on your hands with this one. Do it today.
      Lastly, don't get left behind. Commit to ongoing training for all your employees. Keep up to date with tools and equipment tailored to your business model. Don't try to be all things to all people and all vehicles. Identify your core profile customer and the vehicles they drive, and become an expert on those vehicles and the services you offer.
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