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By Joe Marconi in Joe's Blog0 commentsAuto shop owners are always looking for ways to improve production levels. They focus their attention on their technicians and require certain expectations of performance in billable labor hours. While technicians must know what is expected of them, they have a limited amount of control over production levels. When all factors are considered, the only thing a well-trained technician has control over is his or her actual efficiency.
As a review, technician efficiency is the amount of labor time it takes a technician to complete a job compared to the labor time being billed to the customer. Productivity is the time the technician is billing labor hours compared to the time the technician is physically at the shop. The reality is that a technician can be very efficient, but not productive if the technician has a lot of downtime waiting for parts, waiting too long between jobs, or poor workflow systems.
But let’s go deeper into what affects production in the typical auto repair shop. As a business coach, one of the biggest reasons for low shop production is not charging the correct labor time. Labor for extensive jobs is often not being billed accurately. Rust, seized bolts, and wrong published labor times are just a few reasons for lost labor dollars.
Another common problem is not understanding how to bill for jobs that require extensive diagnostic testing, and complicated procedures to arrive at the root cause for an onboard computer problem, electrical issue, or drivability issue. These jobs usually take time to analyze, using sophisticated tools, and by the shop’s top technician. Typically, these jobs are billed at a standard menu labor charge, instead of at a higher labor rate. This results in less billed labor hours than the actual labor time spent. The amount of lost labor hours here can cripple a shop’s overall profit.
Many shop owners do a great job at calculating their labor rate but may not understand what their true effective labor is, which is their labor sales divided by the total labor hours sold. In many cases, I have seen a shop that has a shop labor rate of over $150.00 per hour, but the actual effective labor rate is around $100. Not good.
Lastly, technician production can suffer when the service advisors are too busy or not motivated to build relationships with customers, which results in a low sales closing ratio. And let’s not forget that to be productive, a shop needs to have the right systems, the right tools and equipment, an extensive information system, and of course, great leadership.
The bottom line is this; many factors need to be considered when looking to increase production levels. While it does start with the technician, it doesn’t end there. Consider all the factors above when looking for ways to improve your shop’s labor production.
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By Joe Marconi
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By carmcapriotto
Part 2 of our labor rate discussion in the automotive aftermarket industry. Our panel emphasizes the importance of setting labor rates based on the shop's own expenses and profitability, rather than comparing them to competitors. They also stress the need for regular labor rate increases and educating staff about the financial aspects of running a shop. They address fear and mindset issues that can affect labor rates and overall success. The episode provides valuable insights and advice for shop owners in effectively setting and managing their labor rates.
Chris Cotton, AutoFix Auto Shop Coaching, Chris Cotton Weekly Blitz Podcast. Listen to Chris’ previous episodes HERE
Rick White, President and Lead Coach for 180BIZ, Listen to Rick’s previous episodes HERE. Dave Schedin, CompuTrek Automotive Management Systems. Dave’s previous episodes HERE Show Notes:
Build Your Labor Rate From The Ground Up Part 1 [THA 276]: https://remarkableresults.biz/remarkable-results-radio-podcast/a276/ Where the Money Goes – The $100 Lesson [THA 210]: https://remarkableresults.biz/remarkable-results-radio-podcast/a210/ Labor rates should not be set based on competitors (00:02:10) The importance of setting labor rates based on the shop's own expenses and profitability, rather than comparing them to competitors. Educating staff about where the money goes in the business (00:03:18) The need to teach employees about the various expenses and costs involved in running a shop, to help them understand the labor rates and the owner's income. Fear and mindset issues affecting labor rates and success (00:05:02) The fear and mindset issues that can affect labor rates and the overall success of a shop, and the importance of addressing these issues before setting labor rates. The importance of financials and owner thinking (00:07:46) Discussion on the prevalence of shop owners not having up-to-date financial statements and the need for owners to transition from technician thinking to owner thinking. Raising the Labor Rate (00:15:40) Discussion on the importance of raising labor rates and providing value to clients. Labor Rate and Value (00:17:19) Exploration of flipping the conversation from price to value and the curse of knowledge. Labor as Time vs Value (00:18:05) Insights on how labor is often tied to time, but should be based on value and the skills of technicians. Setting a Higher Standard (00:23:11) Discussion about the importance of qualifying customers and setting a higher standard for the shop's services. Firing Customers for Excellence (00:24:03) Exploration of the concept of firing customers who compromise the shop's level of excellence and professionalism. Running the Business Like a Business (00:25:58) Importance of charging correctly, controlling the schedule, and making every car count to improve the shop's profitability and efficiency. The impact of increasing labor rates on gross profit (00:31:37) The relationship between increasing labor rates and gross profit. It explains that when a technician's pay is increased, the labor rate must also be raised to maintain the same gross profit percentage. It highlights the importance of understanding the math behind labor rates and setting them proactively. The need to compete with other industries for skilled technicians (00:33:42) The challenges of attracting and retaining skilled technicians in the automotive industry. It compares the benefits and compensation offered by other industries, such as Target and emphasizes the need for competitive labor rates to attract and retain talent. It also highlights the importance of providing tools and benefits to technicians to create a profitable and sustainable industry. Building a profitable business (00:42:42) The significance of being profitable and setting labor rates that allow for a 20-25% net profit, as well as the importance of love and grace in running a successful shop. The importance of making changes now (00:44:27) The need to make changes in labor rates immediately instead of waiting and encourages shop owners to trust the advice of coaches. Thanks to our Partners Shop-Ware and Delphi Technologies
Shop-Ware: More Time. More Profit. Shop-Ware Shop Management https://getshopware.com/
Delphi Technologies: Keeping current on the latest vehicle systems and how to repair them is a must for today’s technicians. http://DelphiAftermarket.com
Connect with the Podcast
-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
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By carmcapriotto
Passing Your Business on to the Next Generation - Part 1: The Basics
Thanks to our partners, NAPA TRACS and Promotive
Visit NAPATRACS.com and 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
Click to go to the Podcast on Remarkable Results Radio
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By carmcapriotto
In this two-part episode of Business by the Numbers, Hunt delves into passing your business on to your children. In Part 1, he explores the key factors that can either strengthen or strain your family relationships during this process. Hunt shares valuable insights and personal experiences to guide you through this important transition, such as;
• The Power of Communication: why open lines of communication are vital to ensure that everyone involved is on the same page.
• Crafting a Solid Plan: Learn from Hunt's observations of successful cases and avoid common pitfalls. The importance of creating a comprehensive plan and, more importantly, sticking to it.
• Striking the Right Balance: Finding equilibrium between securing your retirement and not overwhelming your children with unplanned responsibilities can be challenging. Hunt offers advice to navigate this delicate balance while safeguarding both your financial future and your children's well-being.
Stay tuned for Part 2, where we'll delve deeper into the financial aspects of this journey.
Thanks to our partners, NAPA TRACS and Promotive
Visit NAPATRACS.com and 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
Click to go to the Podcast on Remarkable Results Radio
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By carmcapriotto
Learn how to improve your business and take it to the next level with these 21 tips and insights related to management, marketing, customer service, and personal growth. Our panel provides practical tips such as refreshing online photos, using referral programs, and creating a virtual tour of the shop. They also encourage humility, vulnerability, and continuous learning as essential tools for success in the automotive industry. Tom Ham, Automotive Management Network. Tom’s previous episodes HERE.
Russell Crosby, Russ’s Wrench Auto Repair, Clinton, NJ. Russ’s previous episodes HERE
Jeff Grassman, Carsmart Auto Service, Sumner, WA. Jeff’s previous episodes HERE
Show Notes:
Watch Video Episode HERE Updating Shop Photos (00:03:05) Updating old shop photos online to present a better image to potential customers. Tracking Business Performance (00:03:53) Tracking business performance and using past successes to market the business to potential customers. Tracking Your Numbers (00:04:23) It is important to track key point indicators and manage them to ensure clear expectations. Empowering Your Team (00:06:03) The importance of empowering your team to make decisions and not wasting time on small decisions. Effective Onboarding (00:06:46) Tips for effective onboarding, including giving new employees a legal pad and pen to follow and learn from experienced employees. Customer Referral Programs (00:09:36) Customer referral programs and how they can improve business practices. Be the Dumbest Person in the Room (00:11:27) The benefits of being in a room with people who are smarter than you and how it can lead to personal and professional growth. Working Interviews (00:09:12) The benefits of working interviews and how they can help employers find the right fit for their business. Be Humble and Vulnerable (00:13:03) Being humble and vulnerable when attending conferences and seeking to learn from others. Using Clocks for Efficiency (00:15:16) Using digital clocks in the workplace to keep everyone conscious of time and improve efficiency. Train, Tolerate, or Terminate (00:16:25) Jeff's tip on holding employees accountable (00:16:45) Jeff shares his method of holding employees accountable and how he avoids tolerating poor performance. Getting through tough situations (00:19:59) Tips learned from a former Navy SEAL on getting through tough situations and how it can be applied to business. Immediate Response (00:21:52) The importance of responding to customers' inquiries immediately, regardless of the method of contact, to increase the chances of getting the job. Preferred Method of Communication (00:23:56) The importance of finding out customers' preferred method of communication to ensure convenience and satisfaction. Building the Bench (00:24:03) The importance of building a team and having a bench of potential employees to minimize the stress of hiring and ensure a successful business. Approaching Situations with the Intent to Learn (00:26:05) The importance of approaching every situation with the intent to learn, whether it be a good or bad situation. Disarming with "Help Me Understand" (00:29:38) Instead of asking "why," which can put people on the defensive, it's better to say "help me understand" or "can you please help me understand." Parts Management (00:30:59) The importance of efficient parts management Expectation Inspection (00:33:15) The importance of setting clear expectations and regularly inspecting them to ensure that everyone is on the same page and problems can be addressed before they become major issues. Work Order Audits (00:34:38) The importance of work order audits Get Involved with Your Neighborhood (00:35:13) The importance of getting involved with your community, joining nonprofits, and helping people. They explain how this can benefit your business and improve your stature in the community. Stretching Out Your Outreach (00:36:46) Run Your Shop from Your Favorite Vacation Spot (00:39:14) Technology nowadays makes it possible to run everything from a remote location and how it can help cure micromanagement. Spend Intentional Time Every Working Day to Plan, Learn, and Manage (00:41:03) Wear a Bright Jacket or a Loud Shirt (00:42:30) Russ shares the benefits of wearing a bright jacket or a loud shirt, how it can help you stand out and start conversations, and how it can be a part of your brand. Virtual Tour of Shop (00:44:33) Using virtual tours of the shop to market it to potential customers. Slack Communication Tool (00:45:47) Useful Apps (00:47:47) Useful apps for the automotive industry, including Today's Class, Mentor/Mentee, ASE Renewal, Grammarly, Microsoft To Do, and Canva. Thanks to our Partners Shop-Ware and Delphi Technologies
Shop-Ware: More Time. More Profit. Shop-Ware Shop Management getshopware.com
Delphi Technologies: Keeping current on the latest vehicle systems and how to repair them is a must for today’s technicians. DelphiAftermarket.com
Connect with the Podcast
-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
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