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$120 Chicago suburbs. I can see $130 by the end of the year.

I think in the near future we will be going thru a major industry change. I think labor rate will go up substantially.....like 30%. There is a major tech shortage out there and the ones who will win will be able to compensate their people properly and that's going to take a lot more $$$ and a change in how we currently compensate techs. (flat rate)

Of all the industry speak I hear all shops including so called good ones are having difficult times finding employees. Business has been really really good....but we can't keep up.

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I completely agree with the change coming. With a shortage of Techs the industry will need to raise wages to get people interested in the trade. I’m trying to stay ahead of the curve.  

Local dealer has an add out with a $10,000 signing bonus. I had seen $1500 - $2500 in the past two years and have had trouble finding 2 good tech's myself but things must be worse than I thought.

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I like seeing this, the industry has been low for years, our techs are valuable and we pay them well  

We are in Marin county our labor Rate is 155.00. The near by dealers are at 175.00,

i am considering a thee dollar bump because of recent expenses. 

Tony. 

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My experience in the past two years I went from $85 - $95 then $95 - $105 my car count has increased.  Industry standard is around 2 hrs per RO I think. So if you raise your rate $10 per hr the increase average is about $20. If a customer doesn’t come back over $20 either you don’t want that customer or you haven’t built enough value into your repairs or service.

 

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We are just outside of Pittsburgh, PA and recently raised our rate to $100. But we tend to adjust it down if the bill seems too high. Probably not a good practice on our part but we aren't in an affluent area so we try to take care of people if we can. The average rates in our area are $80-$110.

 

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I'm in Bakersfield CA and our rate is $126.57, $110 for first time customers, $96.50 for initial testing time, $189.86 is they bring their own parts. We are definitely the highest in town, by a long shot, and we pay our techs probably the highest in town. I actually want to pay the highest in town and I want everyone to know it.

We've struggled with parts margins and overall GP% and I wonder how you all hit your GP goals with such low labor rates. Not being sarcastic, I really wonder. I'd like to know what labor and overall GP percentage you're hitting with those labor rates.

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I’m really surprised to see a sub $130 rate in California and to hear it’s among the highest. You mentioned labor GP %. The cost of living and going rates for tech’s from each of our areas I’m sure is different so that will have an effect.

I like the fact you are paying top dollar for techs. I’m moving in that direction and the only way I can do that is to continue to raise my labor rates. I wont actively poach other shops, but I wouldn’t mind if word got out that we have a great place to work, good car count and we pay well. If anyone has looked for techs lately you know they are hard to find. I believe anyone who wants to survive in the coming years is going to have to raise their rates a significant amount to retain your current tech’s or attract new ones.   

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We're in the central valley of CA, so more of a midwest economy than SoCal and the bay area. We have among the lowest home prices in CA. We are the highest, the shop across the street from us has a $90 labor rate, a couple of my friends who own shops are at $98. I just decided I need to charge what we're worth regardless of what anyone else did. In the last few years we went from $89 to $126.57, and we've grown 30+% per year for the last 4 yrs. I'm pretty convinced that labor rate is a state of mind. If we're going to attract the type of techs we'll need in the future, we better make it an attractive, relatively high paying job, and to do that we need to charge enough for what we do. I learned that nothing bad happens by raising the labor rate. We had a strategy, we kept initial test time lower so we don't have to discuss a higher rate, and we avoid quoting rate...way too many ways to nicely and credibly side step the issue...and if we must quote a rate we quote our average rate (effective rate). We also price frequent services, like oil changes, brake jobs, trans service, etc, at competitive prices...what we call comparables. And, we focus on the customer having a great experience. I know every one of you could raise your labor rate $10 tomorrow and nothing would happen.

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When you say you've grown 30+% I'm assuming you mean in sales and not car count, hours billed or some other metric. It's logical that you would have a big increase in sales if you raised your labor rate 42+%. So your car count and hours billed might not actually change, you're just making more for the same work. And that ain't a bad thing.

 

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Good point. One of the things we did to build car count was go to cheap oil changes, which dropped our ARO. We've worked hard to get ARO and GP up to where it should be, and we're finally having a very good year in GP and net. From 2013 to YTD 2017 we grew an average of 33.5% per yr in gross sales, 35% in car count, and 27.5% in hours billed. And at the same time raised our labor rate from $89 to $126.57.

I started my shop from scratch 7 yrs ago with me and a partner. I bought him out in 2013. I now have 8 employees plus me, and I don't work in the shop. I'm only saying this stuff to encourage others to not be afraid to raise your rates. When my partner left I was afraid to raise the labor rate, and I worked my ass off and didn't make any money. Then I was challenged to raise the rate and I did, then raised it again, and again, and again, in both big jumps and small jumps. Nothing happened, and we kept growing. If I can encourage some of you to just raise the rate then we're all better off. Friendly service and marketing matter, price is very minor.

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  • 4 months later...
  • Alex changed the title to Shop Labor Rate
  • 2 years later...
On 1/1/2018 at 10:33 PM, Silas Martin said:

When you mention paying your techs "well", would you care to share what dollar range that is? I think our highest paid tech non equity individual is paid "very well". Is anyone paying more than 80k a year?

That, in my opinion is "very well"!  I can't imagine how you pay a tech 80K/year with a labor rate as you stated of $74ish. How is there any left for you or expenses? Next question; Are you hiring? lol.

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All in, my guys get over $80k per year.  That includes the whole picture, salary, tool allowance,  health care, IRA contribution etc...  We're in Westchester County NY and the labor rate is 113 and going up.  I can't  seem to attract techs either.  Maybe I'm not looking in the right places, maybe not offering enough, maybe no one is out there...  I wish I had the answer.  One thing i do know... my labor rate will be higher this week and I'll be paying closer attention to parts margins.

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We're at $130 and on our invoices, I don't print the rate or hours (not required to).   We simply quote a labor charge for the job.   I have a shop near me with a labor rate of $99, but job for job, his labor charges are same or higher than mine - using additional labor hours.  We pad for our persistent negotiators to have room for them "to win".   If asked, we share the labor rate.   We start with a base diagnostic of $99.95 for the 1st hour.  While working on this, we fail to always charge for longer diags.  Sometimes it's lost and sometimes we factor it into the rest of the job when building the quote.      Even when we're asked the labor rate, we haven't received any negative feedback on it.  We build value / trust which helps on approvals.  If we don't close a deal, it is usually related to cost-of-job vs value-of-the-car OR cost-of-job vs down-payment on a new car.   I get more vitriol for having the audacity to charge for diag.   If I get a pure price shopper, I quickly dismiss them saying we won't be the cheapest.

 

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$110 to $120 depending on type of work done, northwest rural Seattle. Labor rate needs to be set by a lot of expense factors and I think you really need a variable rate for different types of jobs, most modern management system can do this.

One of the expense factors here is how much you pay your Technicians, I hear and read how hard it is to find good experienced Techs and most agree that low pay is a big factor especially when trying to bring up new Techs, I am sure there is shops out there taking good care of there top Techs, I have been Tech for over 40 years now and my pay has been stagnant for the last 20 years but I have seen labor rates at the shop's go up nearly 40% ????   I understand the cost of doing business in this industry and how its rising all the time, I started at 50% labor 10% parts at a gas station then went to a Dealership and it dropped to 40% Labor has dropped from there now around low 20%. When Looking for new Employees you have to show the cost of the position, insurance your retirement plan tool allowance ect. ect. now the employee can feel better about the base wage and why its not 50% labor any more. 

This is a good Podcast about how they are doing Business Down under  and there way of pricing.

 

       

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  • 2 weeks later...
On 8/17/2017 at 12:17 AM, Sandyolivo said:

I have also been dabbling with the idea of raising our labor rate. I'm just kind of worried about future customers not returning because of that.

Dabbling? Don't be worried. Here's a simple, easy and painless way to do this. 
First, just about every shop owner I talk to tells me that people "typically" don't ask what the shop rate is. If they do, don't be ashamed of your rate. 

But better than that, get a calendar out (yeah, one you can scribble on) and review your shop rate MONTHLY! I didn't say raise it monthly, but at least review it. If you start keeping track, you'll be surprised of how long it's been since your last price increase. 

With that said, my clients review every month and typically raise their prices every 2-3 months. I know, sounds crazy, right? But wait. 

Those increases are small. In some cases, just $2-$4/hour. 

Then look at your most recent RO's. If you calculated those jobs with that increase, would it have made a difference? I'm going to go out on the limb here and say "NO!".

With a typical RO being 2-3 hours of labor, raising it $4-$8 in total wouldn't make a difference. 

But here's where you win! Calculate the total number of hours you provide a year. That $3-$4 increase really adds up. With one of my clients, I asked him to raise his rates $6/hour. At the end of the year, he made an extra $22,000 and didn't work harder, come in earlier or stay later. 

Could you use that extra $22,000? 

Figured you said yes! But the best part... every shop I've worked with... and I mean every one of them... never had a complaint about the increase! 

And why the calendar? You should be planning/reviewing every month with small incremental changes evert 2-3 months. It really adds up at the end of the year. 

It's simple math - run your numbers and let me know what you find!

Hope this helps!

Matthew
"The Car Count FIxer"

P.S.: Your text message program can't do this! 

P.S.: Join me on YouTube at Car Count Hackers! FREE Help to grow your Car Count, Income and Profit! 

P.P.S.: Like and Follow Car Count Hackers on Facebook

P.P.P.S.: Have you registered in my FREE Training? "How to Double Your Car Count in 89 Days"
 

 

 

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Shop labor rate should be set off your shop’s fixed costs & hours of operation, not what somebody else is charging.  That’s what we do.  However, I don’t tell customers what we charge per hour, I simply tell them we charge by the job, not by the hour.  We are a transmission specialty shop and for most vehicles, we charge $1,750 labor only for the R&R and the build.  Some are less, some are more.  When calculating by the hour behind the scenes, we calculate it @ $125/hr but still tell the customer we charge by the job if they ask how much an hour, but that’s only perhaps >2% of all customers who ask.

In my experience, the subject of shop hourly labor rate virtually never comes up unless we mention it.  Most people only want to know the bottom line.

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The people that ask the labor rate are not normally good customers. We price by the job brake pads and rotors $335 plus tax for most cars just an Example but that's all they want to know how much to get my car fixed. Tell someone its $90/hr next thing you know they show up with half the bolts taken out and parts in the trunk "imma pay you 30 mins to put it together right now quick" so I just price the job so we can pay everyone to work another day. 

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  • Have you checked out Joe's Latest Blog?

         5 comments
      I recently spoke with a friend of mine who owns a large general repair shop in the Midwest. His father founded the business in 1975. He was telling me that although he’s busy, he’s also very frustrated. When I probed him more about his frustrations, he said that it’s hard to find qualified technicians. My friend employs four technicians and is looking to hire two more. I then asked him, “How long does a technician last working for you.” He looked puzzled and replied, “I never really thought about that, but I can tell that except for one tech, most technicians don’t last working for me longer than a few years.”
      Judging from personal experience as a shop owner and from what I know about the auto repair industry, I can tell you that other than a few exceptions, the turnover rate for technicians in our industry is too high. This makes me think, do we have a technician shortage or a retention problem? Have we done the best we can over the decades to provide great pay plans, benefits packages, great work environments, and the right culture to ensure that the techs we have stay with us?
      Finding and hiring qualified automotive technicians is not a new phenomenon. This problem has been around for as long as I can remember. While we do need to attract people to our industry and provide the necessary training and mentorship, we also need to focus on retention. Having a revolving door and needing to hire techs every few years or so costs your company money. Big money! And that revolving door may be a sign of an even bigger issue: poor leadership, and poor employee management skills.
      Here’s one more thing to consider, for the most part, technicians don’t leave one job to start a new career, they leave one shop as a technician to become a technician at another shop. The reasons why they leave can be debated, but there is one fact that we cannot deny, people don’t quit the company they work for, they usually leave because of the boss or manager they work for.
      Put yourselves in the shoes of your employees. Do you have a workplace that communicates, “We appreciate you and want you to stay!”
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