Shop Labor Rate

[Guest]

$148 in Austin

[bantar]

Northern suburb of Dallas....  We bumped our labor rate to $149.99 (from $130) at the beginning of August.    It's been 4 months.  No one noticed, nor complained.   We're staying busy and have more work now than before.

[Joe Marconi]

This is all great news.  Labor rates around the country are increasing.  A much-needed increase. 

[Guest]

Dang, you got me by $1.99.

[bantar]

3 minutes ago, Old and Tired said:

Dang, you got me by $1.99.

No, you misread it....   It was a challenge for you to beat.   You deserve a pay raise!

[bracketracer]

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[JerryK]

We are in the Dallas area... Our labor rate is currently $175 for domestic, $195 for European and $245 for pre-1971. We expect to raise rates again in January 2022.

[CTC]

Base these numbers on the math not on what everyone else is doing. Each marked is different 

[Joe Marconi]

16 hours ago, JerryK said:

We are in the Dallas area... Our labor rate is currently $175 for domestic, $195 for European and $245 for pre-1971. We expect to raise rates again in January 2022.

This is great to see.  One point I want to make; we are seeing more multi-tier labor rates with shops across the country. For many aftermarket independents, they do a variety of different makes and models and skill levels. As you can see in this post, EURO and pre-1971 cars command a different labor rate.  

Shop owners, you need to look at your business model, do the math and ensure that your labor is in line with what YOU NEED to earn a profit. 

Amazing posts! Let's keep this going! 

 

[Hands On]

On 12/12/2021 at 3:01 PM, JerryK said:

We are in the Dallas area... Our labor rate is currently $175 for domestic, $195 for European and $245 for pre-1971. We expect to raise rates again in January 2022.

I need to make this a regular thing for myself. We do a "pre 1971" about 6 to 12 times a year. I have a 1960 Nash metropolitan in my shop, I set at I think at 229 an hour. Customer balked at first, but Noone else wants to work on it. He begrudgingly approved the work, then told me his wife is making him sell it now.

The 1966 mustang that was in at the same time had no issue at all with his bill, he was prepared financially for his hobby.

I just bumped to 144.95 at the end of the year. I think I will go for the $149.95 on Monday. It 8s way easier to find customers then employees. If I can get up to $175 an hour I will put out an add offering $55 an hour for technicians. Maybe I will find one.

[Joe Marconi]

It is amazing to see that so many shop owners are increasing their labor rates,. Long time overdue. 

One thing I want to bring out: When it comes to the customer, we need to focus on value, not price.  We need to bring the attention to what we are doing in terms of value the customer receives. 

In my experience, whenever a customer questioned the labor price or price on parts, it was due to either it was the wrong customer, or I did not do a good enough job a conveying the value for what I was doing. 

One last thing, in the sales presentation, promote the benefits, warranty, and value.  Price is the last thing the customer hears. And don't break up parts and labor, one total price. 

 

[Robert Williams]

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[Joe Marconi]

4 hours ago, Robert Williams said:

We just raised our rate January 3rd. Our former rate was $129. As of December 12th, current US inflation rate is 6.8%. Just to maintain past profitability, we needed to raise our rate by a minimum of 6.8%. Add to that rising costs from suppliers, the need for new equipment for diagnosis and repair of new vehicle technologies, and the ever growing cost of hiring, training, and retaining techs. So $129.00 x 1.068= $137.77 to cover inflation. The additional cost increases are a little more difficult to quantify, so we rounded up to $141.00 for the moment. We'll revisit this in six months once we have some historical data on which to base our decision.

Wow, you  did the math! Nice, great job! 

[JerryK]

We are in Plano, Texas and our shop labor rates are $175 for domestic, $195 for Euro and $225 for 1975 and older cars.

[Guest]

On 12/1/2021 at 1:26 PM, Old and Tired said:

Dang, you got me by $1.99.

Raised it again to $158.  

[risingsunmotors]

We are in College Park Md, labor rate is 126.63 and will go up 4.00 per hour each quarter as we did last year

[Joe Marconi]

3 hours ago, risingsunmotors said:

We are in College Park Md, labor rate is 126.63 and will go up 4.00 per hour each quarter as we did last year

Many shops have adopted that same strategy; small raises throughout the year. It's a great way to keep pace without a huge impact. 

 

[Jerrys Auto Center]

Happy new year all!

Browsed through this almost 4 year old thread and very happy to see rates trending in the correct direction.

Located in a working middle class in Long Island, NY…

1/1/22 raised labor rate from $137 to $153. 

[Joe Marconi]

On 1/23/2022 at 12:45 PM, Jerrys Auto Center said:

Happy new year all!

Browsed through this almost 4 year old thread and very happy to see rates trending in the correct direction.

Located in a working middle class in Long Island, NY…

1/1/22 raised labor rate from $137 to $153. 

Nice to see! $153.00.  And I agree with you, it is great to se that rates are trending in the right direction. Long over due.  

[Rich Young]

Hello everyone! Essex Maryland here. Currently $109 and going to $114 on Feb1.  Still probably too low, but we are incrementally moving northward. 

[Joe Marconi]

On 1/24/2022 at 4:19 PM, Rich Young said:

Hello everyone! Essex Maryland here. Currently $109 and going to $114 on Feb1.  Still probably too low, but we are incrementally moving northward. 

I think to increase labor rates incrementally is a solid strategy. It gives time for your employees to get adjusted, and won't make a big immediate impact on your customers.  The main thing is to do the math, and charge accordingly. 

[Guest]

Do any of you smart successful people look at the percentage of gross sales that your cost for parts is? If so, what's the goal and do you raise labor or parts prices to the customer to achieve the goal? 

[Jerrys Auto Center]

I aim for 60%-63% overall GP on parts except batteries and tires which are both usually in the 30%-35% GP area. 
I don’t look at parts and labor relationship to each other but if parts are limited more labor is charged, such as diagnostics which is billed at 1.5 times our regular labor rate.

[Joe Marconi]

14 hours ago, Old and Tired said:

Do any of you smart successful people look at the percentage of gross sales that your cost for parts is? If so, what's the goal and do you raise labor or parts prices to the customer to achieve the goal?

Let me lead first by saying that success is subjective. We all strive to be our personal best. 

With that said, every repair shop is different. A heavy truck shop will work on different margins than a general repair shop.  A quick lube is also a different business model.

I was in the general repair business, servicing and repairing mostly Asian cars, domestic cars, and light trucks/SUVs. For MY model, my goal was 50% to 55% on parts, overall, 28% on tires.  My labor goal was 70%, which became more difficult when we extended into working on more car lines, like BMW, Mercedes, Audi, etc. 

In regard to raising prices; your labor and part profit must be taken into account when setting your prices. Your  business must be profitable. 

I hope this helps. Great question! 

 

[Guest]

On 8/6/2017 at 9:02 AM, Old and Tired said:

116 in Austin

It's interesting to see where we were at almost 5 years ago. Now its $158.00. Still seems low.

[Joe Marconi]

4 hours ago, Old and Tired said:

It's interesting to see where we were at almost 5 years ago. Now its $158.00. Still seems low.

I agree 100%. 

Most shop owners are crunching the numbers and realize that labor rates have been too low for too long.  As a business coach for Elite, I recommend now more than ever that every shop owner sit down and perform a complete financial analysis on their business. Make sure that their expenses are in line and that their part and labor margins are correct for THIER business, not the shop down the road.  It's the only way to continue to build for the future.

One last thing, increased labor rates will hopefully bring in much-needed cash. So build your cash reserve. Everyone in business learned from COVID that cash is truly king. 

[Mason Garza]

We are a transmission shop in Texas. We are currently at $165.00 per hour

[Joe Marconi]

23 minutes ago, Mason Garza said:

We are a transmission shop in Texas. We are currently at $165.00 per hour

Nice Mason!  it is truly inspirational to see how so many shops are doing the math, looking at their operating expenses, and payroll, and increase their labor to what's needed to earn a profit! 

[xrac]

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[Joe Marconi]

Agree Frank, and to add to that, for the most part too many people in our industry have been underpaid for too long, and that includes the shop owners too. 

I also agree that being the cheapest guy in town is a  sure way to go out of business. We are not mass-marketers, we are a specialized group of professionals with a lot of associated costs of doing business. We need to charge what we are worth. 

 

[Guest]

6 hours ago, Joe Marconi said:

Agree Frank, and to add to that, for the most part too many people in our industry have been underpaid for too long, and that includes the shop owners too. 

I also agree that being the cheapest guy in town is a  sure way to go out of business. We are not mass-marketers, we are a specialized group of professionals with a lot of associated costs of doing business. We need to charge what we are worth. 

 

I found out last week that the Honda dealer is at 198 so I raised ours another 20 to 178.  At this rate my take home pay might actually equal an Amazon driver's! Haha.  👍

[xrac]

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[Joe Marconi]

Sometimes out of Crisis comes Clarity. I think that is what is happening now. The build up of the tech shortage, low wages, low shop owner profit, and rising expenses has come to a point of crisis for so many shop owners. But, for it's worth, lessons have been learned and it reflected in so many shop owners increasing their labor rates. 

I would urge all shop owners on this forum to spread the word and give other shop owners that you know, the confidence that they can have a labor rate that is in line with what they need to earn a living, pay competitive wages and turn a profit. 

 

[Transmission Repair]

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[Joe Marconi]

4 hours ago, Transmission Repair said:

What does it matter what other shops charge?  To me, that's not even relevant.  I base OUR labor on OUR costs.  I say piss on the competitors' labor rate.  Their labor rate is mostly based on competition and what the market area can bear.

I base our labor charges on the job, not by the hour because we are a transmission repair specialty shop.  There's a whole lot of the same thing over and over.  Business volume, production capability, and efficiency rate will affect labor rates.  I use the following profit model: 

Parts = 20%
Labor = 20%
Expenses = 40%
Profit = 20%
And I work backwards with those percentages to calculate parts and labor rates.  G/R is different but that's how it's done in the transmission repair industry.

Amen.  A shop should always base their prices on what they need to earn a profit, never the shop down the street.  I guess it's nice to know what other shops are doing, but in the end, you need to know the numbers of YOUR business, then set your prices accordingly. 

[IDAS Cleveland]

We are based in SE Tennessee and are charging $100/hr for asian and domestic & $125/hr for European and diesels.  We shoot for 35-40% markup on parts.  We have lately had quite a few customers asking for work on 1975 and older vehicles and I have not been adjusting my prices much for this.  But like some other shop owners I think I will increase the price for those jobs as it always includes many suprises and 10x time comittment.  Thanks as always for all the great info!

[Transmission Repair]

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[Joe Marconi]

60% overall gross profit (parts and labor) is a realistic and needed number to attain. For a general repair that usually means a labor margin of 70% and a part margin of 50%.  Even in this age with the Rock Autos, Amazon, and eBay, a shop must achieve its needed part profit. 

While there are differences around the country, it's becoming more uniform in terms of overhead expenses. 

Sit down, and crunch your numbers. Review all your expenses.  Understand what it takes to be in business. Your expenses should be around 40% of sales revenue. BUT, here is the difference: Once you know the Cost of Doing Business, you then add an ROI, a return on your investment. That's right, profit. 

Typically, general repair shops target a goal of 20% net profit.  There are other factors involved, but these are the core numbers of a general repair shop: 60% overall GP, keeping expenses at 40%, and a goal of 20% net profit. 

 

[Transmission Repair]

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[Joe Marconi]

2 hours ago, Transmission Repair said:

Well put Joe.  Some accounting software places the labor under expenses, including office payroll.  I need to make it clear the office payroll and technicians' payroll are in two different categories.  Technician's payroll us a Cost Of Goods Sold (COGS) account and any office payroll is under an expense account.

Another is the owner's pay.  If he/she works predominantly in the shop repairing vehicles, their payroll is a COGS account.  If he/she works mostly in the office, then their payroll is an expense account.  In either scenario, the shop owner's pay should be commensurate with what a normal employee would be paid for the same job.  The owner's pay IS NOT the net shop profit. 

This was a hard concept for me to grasp early on.  In the beginning, I thought my pay was what (if any) money was left over in the checkbook.  Later, I began to think the net profit was my pay.  Much later in my career did I finally learn the concept of my pay should be commensurate with what a normal employee would be paid for the same job.  Throughout my career I was always learning more and more about accounting and that was a good thing.

Cheers, Larry

[email protected] 

Not only is this a hard concept for some, but many accountants also don't get it. But you are right, the Cost of Labor must go in the Cost of Sales (also known as Cost of Goods) section of the Profit & Loss Statement.  The main reason is that this is how we price out jobs on a daily basis: We factor in the Cost of the Part, and the Cost of our Technician. 

Great points Larry!