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[Podcast] Labor Rates: A Function of the Business Not the Market [THA 187]


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https://youtu.be/LOkePodEzpA

Brian Gillis is the Chief You Net Results Strategist, with 25+ years experience in auto shop operations, hiring, recruiting, systems, processes, multi-store experience, and employee training.

More about Brian Gillis…

  • 25+ Years owning and operating auto repair shops in Texas, Georgia and Colorado, multi-unit stores
  • Hired and Trained over 2000 staff members
  • Budgeting and Profits Brian’s Specialty
  • Smooth as silk with customers

Brian's previous episodes are HERE.

Bob Greenwood is one of 150 Worldwide AMI approved instructors. He has created Business Management development courses for aftermarket shop employers/managers, Jobbers and Jobber Sales representatives which are recognized as being the most comprehensive, industry-specific courses of their kind in North America. His courses address the creation of measurable bottom-line profitability and not just developing activity to keep busy, by covering the very detailed nuts and bolts issues that are required to be clearly understood by every level of the industry if an independent shop is going to financially prosper and enjoy a professional future. Bob’s previous episodes are HERE.

Link to Automotive Aftermarket E-Learning Centre Ltd. (AAEC) HERE.

Key Talking Points:

  • Must know your true cost of doing business to set your labor rate.
  • Know your numbers. Always review them.
  • Multiple labor rates are needed today. One catch-all labor rate will not support the sustained profits necessary to survive
  • Minimally you need three labor rates:Maintenance Rate 
  • Diagnostic Rate
  • Re-Flash Rate
  • Additional to consider  Fluid Installation Rate
  • Tire Inflation Rate
  • Do not look down the street to set yours. Understand your business
  • A formula is necessary. See below slidesCost Per Billed Hour Formula (CPBH)
  • Bob. Technicians wages need to be expensed not put into the cost of goods for his formulas to work
  • You may have a productivity problem, and the formula will help you determine that
  •  The only way you can lower your cost per billed hour is to increase the number of hours you bill.The industry is stuck on sales and activity but should be measuring productivity
  • You may have big sales gains, but have little profit to show as a percent of sales
  • Labor rates on diesel and fleets should be different  
  • Rethinking labor rates are critical because when parts are not sold in conjunction with labor you will be making less money at your standard labor rate
  • See slide on show notes page: Setting Your Door Rate for the three basic rates. Below shows two different formulas to discover your three labor ratesMaintenance Door Rate4.5 Times Top Technicians Basic Hourly Wage
  • 85% times your CPBH
  • Diagnostic Door Rate5.35 Times Top Technicians Basic Hourly Wage
  • 125% Times Your CPBH
  • ReFlash Door Rate6 Times Top Technician-Basic Hourly Wage
  • 135% Times your CPBH
  • We are in a knowledge base business, and we must be paid to cover your costs to obtain and sustain that knowledge
  • The Cost Per Billed Hour (CPBH) reflects your efficiencyIf you are inefficient, your cost per billed hour is going to be higher
  • If you are efficient, your cost per billed hour is going to be lower
  • You’ve got to understand your numbers inside and out today
  • Bob recommends twice a year review of labor rates and CPBH
  • Your labor rate should respect the competency of your team
  • You also need to understand the average billed hours per Repair Order (RO)It helps you see how easy it would be to raise your labor rate
  • How many diag hours should we bill vs maintenance hoursMeasure this.
  • Bob suggests today: 25% of your maintenance hours should be diag hoursIf you bill 100 hours of maintenance, you should also have 25 hours of diag billing
  • Diag hours are when you interpret or analyze informationTest driving you are analyzing
  • Scope time is analyzing
  • Consider using a labor matrix on your shop management system
  • Bill decided years ago to be the cheapest shop in town that has the highest prices. Job was done right the first time
  • He tasks his technicians to recommend the labor time it is going to take to do the job right
  • We need to be courageous enough to charge what we are worth and have a conversation with your customers: why.
  • We work on one of most complicated vehicles that man has ever created
  • Labor is the future focus. Your labor rate reflects the value proposition you bring to the tableSafe, reliable, and efficient is what you do for your customer. It requires skills that you need to keep up on.
  • Calibration Labor Rate will need to be calculated as an additional rate necessary as you consider doing calibrations.
  • We are a knowledge-based business. The trade days are gone this is a profession. Bob Greenwood
  • Once you know CPBH, you can calculate your gross margin on every RO
  • If you have a pure labor job you quote the job. Take the cost per billed hours times 20%
  • Become client-focused; use quality parts.Your labor rates will reflect your quality
  • Always consider the investment you must be making, which will require monies; therefore you need to be paid for what you do at the rate that allows you to invest.

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Resources:

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This episode is brought to you by Shop-Ware Shop Management. It’s time to run your business at its fullest potential with the industry’s leading technology. Shop-Ware Shop Management will increase your efficiency with lightning-fast workflows, help your staff capture more sales every day, and create very happy customers who promote your business. Shops running Shop-Ware have More Time and generate More Profit—join them! Schedule a free live demonstration and find out how 30 minutes can transform your shop at getshopware.com

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This episode is brought to you buy Shop Marketing Pros. Your guides are Kim and Brian Walker with a rich history as shop owners and industry veterans. When someone searches for a shop, who are they finding? Your competitors? It should be you! The good people over at Shop Marketing Pros know how to drive website traffic and make Google work for you! www.shopmarketingpros.com

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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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      Chris Cotton (00:01:16) - So we are titling this Loosely Catching Up with Kimberly or follow up, and this is the follow up episode to The Kidney Donation. So in the previous episode, we talked about everything that we did running up to it. We've had the,, actual donation and what are we, six weeks past now? Kimberly Cotton (00:01:41) - It'll be seven weeks on Thursday. Chris Cotton (00:01:43) - Seven weeks on Thursday. I don't even know where all the time went. I don't even know how 1010 episodes elapsed either. But,, but this is amazing. So. Even even people that talked to me last week still ask me this week how she's doing. So who better than than my lovely wife Kimberly, to come in here and talk a little bit, talk about the donation and,, and kind of catch us up. So,, how are you doing? Kimberly Cotton (00:02:14) - I'm doing physically. I'm doing really well. Mentally, I'm doing really well., but I have started to notice,, I do have limitations still., I want to get back. Kimberly Cotton (00:02:28) - I want to be like I was before surgery. I could just go and do anything at the gym I wanted to, and now I have to really be careful on how much weight I'm lifting. I have to be careful the classes I'm taking because I am still feeling throughout the day. In the morning I'm great. It's usually in the afternoon and it's my back and strangely enough, it just starts to ache. It doesn't really hurt, it just takes a little bit. And so I just have to remind myself, you're only, you know, six weeks out of surgery. You have to give yourself some grace., but I all of my incisions from the surgery are healing great., I haven't had any issues with that., a week and a half after the surgery, my doctor released me to get back to normal activities., he did say, you know, don't lift anything over £30 and, you know, don't do any kickboxing classes or, you know, classes like that., but he said, yes, you are looking great. Kimberly Cotton (00:03:35) - You just resume your normal activities. Chris Cotton (00:03:39) - And, and so that's where we're that's where we're at now. And I'm going to rewind here just a little bit and talk about, you know, kind of the run up to surgery and everything. But you know, I, I kind of knew this was how this was going to go because I know you, you're like, you like to push things and they are pretty much everything they've told us, like, okay, this is going to happen here. This is going to happen here., and they said, like, it's going to take six months for you to get back to quote unquote, normal. And I think you forget that sometimes that,,, they told you six months and you're like, I know you're superwoman, but sometimes, you know, you got to slow down. Kimberly Cotton (00:04:15) - I do forget that I've donate a kidney. I literally do forget., because physically you can't tell., it's all like, internal. And if you didn't know me, you wouldn't know that that's what happened. Kimberly Cotton (00:04:31) - , so yes, I do have a problem with containing myself, and I. I'm humbled. Just about every day my body says, okay, that's enough. Stop. So. Yes. Chris Cotton (00:04:43) - Well, and I will tell everybody that's listening. She's like swimming on Tuesdays. She's doing her kickboxing now., she rides her bicycle to the gym. So she's she's pretty much getting after it, maybe not quite as hard, but she's, she's, she's doing great. And and I love you so much for doing this for your brother. And I still think I'm amazed every day, but the fact that you could do it because I know I couldn't. There's no way. So. So last time we talked to people, we were kind of giving them the rundown of the way we thought things were going to happen. And so I kind of wanted to follow up on what actually happened,, like the run up to the surgery, if you can maybe just go back and tell us, like, like you and I drove to Tulsa, we got into the Airbnb and kind of just take it from there a little bit, and we'll just work forward from there. Kimberly Cotton (00:05:35) - So,, two days after we made it to Tulsa, we had a follow up., basically they wanted to retest everything. So,, my brother and I both at the same time, went to the hospital and we did,, an EKG. We had blood tests., we did all kinds of different stuff., at that time, they gave me information that I was going to need for the surgery. Now, knowing that. I may not still be a match. Something else could have gone wrong between that appointment and the donation, which was a week away. So even though we are doing this and they're giving me all instructions for the surgery, it's still not a guarantee. And so we had to keep thinking about that., so we had the appointment pretty much all day, you know, met with, the nephrologist again and the, the kidney center., again, they're saying, you know, you can still back out. This is still your choice., we won't tell your brother any, you know, just, you know, something else happened, and not that you would have pulled out. Kimberly Cotton (00:06:44) - And it never even crossed my mind to not go through with the donation. I mean, it just. It is what it is. I was going to do it no matter what., so then after that Wednesday,, it was pretty much just a waiting game until we heard from my kidney advocate., the next Tuesday. So we did all the testing on that Wednesday. Then we had to wait until the next Monday and I had to have a Covid test., and then after that, it was again, you were just waiting. And then Tuesday afternoon., they finally called and said, okay, all the cross matches are still good. Everybody's healthy. Covid was negative., so we're good to go. So even though we thought we were good to go and the surgery was scheduled, it's never really a done deal till the final. Okay. Everybody's good to go. So then it was just another, you know, let's see. That was Tuesday. So the rest of Tuesday, all day Wednesday I had to not eat or drink anything, but I couldn't eat anything on that Wednesday it was an all liquid diet. Kimberly Cotton (00:07:54) - And then after midnight on that night, I couldn't have anything to eat or drink,, through the surgery. So I'd been fasting. I've been doing some, some of that, so I was comfortable with that. It was still hard., I was still, you know, I still wanted to eat, but I made it just fine., but I was getting very antsy. I just I wanted to get it done. I everything was good. I'm like, why do we have to wait? But that's when we had it scheduled for that Thursday. So it was just a waiting game at that point., so I tried to get out and walk a couple times a day just to get, you know, fresh air,, get my mind off of it. Which helped., and then my mom and dad showed up that Wednesday evening as well. So that helped me take my mind off of it, too. So they come over,. And stayed for another week and a half after that, just to take care of me and make sure I was doing okay, and basically to say, hey, you don't need to be doing that. Kimberly Cotton (00:08:58) - But so anyway,, everything's good to go. We wake up at 4:00 on Thursday morning. My brother and sister in law actually come pick us up. So we don't have too many vehicles at the hospital and we make it to the hospital. We get all checked in., and then they called me back first, and. That was it. That was like, okay. That was the point where I was like, okay, this is real. And for me, until something happens, it's not really real. When they called me back, my brother gave me the biggest hug and said, I want to thank you so much for doing this for me. So he gave me the big hug. It was hard for him to let go, but he let go and they took me back to my room. And so. Chris Cotton (00:09:50) - So I'm going to I'm going to stop you for just a second right there. So if, if anybody out there is listening, never experience this., I knew where we were going and I'd seen the room before. Chris Cotton (00:10:03) - I really didn't know kind of my part in all this, which is not super important other than just support. But,, you know, in hindsight that day. No, I don't think they prepared us for that day or they didn't prepare me., because we walk in there and they're doing, I think, 96 surgeries that same day, everything from kidney transplants to heart transplants to there was a lady there that was there to get her,, leg amputated from diabetes,, pacemakers, everything. And all this is happening at once. Every person individually has their own team the, the, the donor, the recipient. And it was really, really something. It was interesting to watch. And again, like Kimberly said, we got there, you know, 430 in the morning and they were done with all the surgeries. By 530 that afternoon. They had like everybody off to recovery. The, the,, the rooms were empty, but basically we got like a little cubicle for the family to sit in, and they called us every hour,, to update us, the nurse did to let us know that we're okay and or that Kimberly's okay, not us. Chris Cotton (00:11:13) - Okay? We're just fine and kind of keep us apprised of all the situations that's going. So that's kind of what I was doing during the day sitting, waiting, managing family and things like that. So,, so, okay, so you saw your brother,, I think I was back there with you until somewhere around that point, and then the nurse finally says, well, okay, you can't back out at this point. We're a go. We're go for liftoff. So,, I give you a hug and a kiss. Take your glasses or put it in the bag and they wheel you out. So if you want to pick it back up from there, then then that would be great. Kimberly Cotton (00:11:49) - So,, right before she says, okay, we're good to go, the surgeon comes in, he's like, okay, there's you know, he marks the spot, literally marks the spot where, you know, things are going to happen. And so then the two little air ladies come in and they wheeled me down the hall. Kimberly Cotton (00:12:08) - We were supposed to have rooms right next to each other, but,, that didn't happen. So as they were wheeling me back to the E.R.,, or the E.R., the operating room,, I saw my. They'd paused at my brother's door, and that's when it got me. I had been fine. I hadn't cried or anything until that point, and I paused and I said, okay, I'll see you on the other side. And he said, thank you again, I love you. And I'm crying as she's willing me back. I'm fine. Nobody else is with me. It's just the poor ladies listening to me cry with me. Back to the operating room. But once I'm through the doors, it was. It happened so fast.. They killed me in. They got the table ready that I was going to be on. They scooted me over. They laid me on my side. They put the oxygen mask on me, and I didn't even count to ten. And I was out. Kimberly Cotton (00:13:14) - I don't remember anything after that. The only the next time I woke up was in the recovery, and I had lots of blankets on me because I think I was shivering because it was cold., and I just remember I had two nurses continuously checking on me. How are you doing? Do you need this? Do you need that? And the only thing I said was, is where's my husband? Can I see my husband? And so I think that's at the point. They went and got you and brought you back. The problem was, is I had to stay in recovery for quite some time. Our surgery was early and so it lasted, what, four hours, I think something like that. Chris Cotton (00:13:56) - Yeah. They, they told they pretty much told us this is a four hour surgery and, and we're going to have you because of the staging and everything. I guess they give you kind of like they give you like an hour headstart and then and then then they start start on, started on your brother and and then they've got your kidney, which they, the doctor said, hey, it looks pink. Chris Cotton (00:14:20) - It's great. We cleaned it up. And so basically they will you out to recovery and then and then clean up the kidney, get it put into your brother and and then he's off and going. But, yeah we had a trouble. We had trouble getting into the actual,, the room that we that not not not I guess ICU or recovery, but your actual room that we stayed in for two nights. Yeah., so you were done by 11, and I think we had you in your room by five. So we kind of sat around for spent more time sitting around trying to get you into another room than than the operation took. Kimberly Cotton (00:14:59) - Yeah., luckily I slept a lot during that time., so it wasn't too bad for me., it was just. I was just down there for a long time, so. Not a big deal. They got me up into a room., and actually, I, I was hungry,, when we finally did make it up to the room,, so I, I think we had tried to order something through the hospital, but they, the time had passed when they were delivering meals and stuff. Kimberly Cotton (00:15:31) - , I did you bring me something or did I? I don't even remember what I had that I. Chris Cotton (00:15:36) - Think I think we, I think I got you, I was able to get you something that you could eat. Kimberly Cotton (00:15:41) - I don't think I was very hungry, but I wanted something small, so. Chris Cotton (00:15:45) - Well. And and to give everybody like the idea of the recovery room you're in, basically, it's just like a long row of beds with like 10 to 15 slots on either side. And when I first went down there, you didn't have anybody next to you. So then we got you some ice water. I think we got you some pudding then or something. Yeah., but because the HIPAA regulations, they were bringing other people down on either side of you, and they had me leave. Yeah., but so we. So we got you to the room and kind of settled in a little bit., and we were trying to manage your pain, and I think, I think one of the important things, if you're listening and you're going to go through this out there, they talk about this. Chris Cotton (00:16:32) - It's not a phantom pain. But what happens is, is where the kidney was. And they insert these robot fingers inside your body and they blow up your abdomen with nitrogen. And and they do this with a robot. And they try to get all the air out, but they can't. And what happens is, is the air or the nitrogen that's left pushes on your diaphragm. And when that happens, your body thinks your shoulder hurts. So it has this like tremendous pain in your shoulder. And I've seen Kimberly,, give birth. I've seen her do all kinds of stuff in 25 plus years that we've been together. And I've never heard her. Yell in pain or anything like that. And oh, maybe that's what had happened. I'd gone and got you something to eat. And then I went and got me something to eat. And when I was coming back, I heard you hollering down the hallway I had. Kimberly Cotton (00:17:30) - Yeah, you hadn't probably been gone 20, 30 minutes maybe. And the pain all of a sudden hit me so hard. Kimberly Cotton (00:17:38) - So I pushed the nurses button and took them, you know, longer than I wanted to them for them to respond. But they finally responded and they said, can we help you? And I said, I need something for the pain. My I'm absolutely excruciating right now. And they said, what on the scale of what to what I'm like, I am above a ten. I mean, this is awful., and so it took them a little bit and then he could hear me moaning and groaning down the hallway, and I think he sprinted to the room after he could hear me., but it just hurts so bad., and it's the strangest thing I don't get it., but it wasn't just one shoulder. It was across my back, right at my clavicle. And it just so hurt, so bad until the pain medication finally kicked in., initially, I had only wanted to stay one night in the hospital, but everybody was like, just see how you feel. See how you're doing. Kimberly Cotton (00:18:41) - Well, the next day, the doctor,, comes. Another one comes in and takes me over, and he looks at me and he's like, yeah, you're spending another night. He could tell the pain on my face. And it wasn't constant, but it was just enough for him to say, yeah, we're going to up the dosage of your pain medication. And you're saying I'm like, okay, so but after they up the dosage, it was much better and much more manageable. Chris Cotton (00:19:07) - So, so out of all the things that they didn't tell us, this was kind of like the big moment or less and not right then. But,, so they wanted me to get her up and have her walking like at 8 p.m. that night. And so that happened. I think we took you for a walk before this happened. Yeah, but but what nobody told us was, was about 30 minutes before you get up to walk, call a nurse, have them give you the pain medication. That way, when you're sore and hurting after the walk, you've already been medicated and you're good to go. Chris Cotton (00:19:44) - So I think I think we walked you that night. I think we walked you a couple times that next day. And then I think the nurse that came in the following night was the one that was like, hey, you guys should be taking pain medication before you walk. And nobody, nobody told us that up until then. And that's,, that's like some Ron White. That's good information to know, right? Like. Yeah. Like,, that would have been handy. That would have been a little handy tidbit for people to tell us., so I, I think... Click to go to the Podcast on Remarkable Results Radio
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