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Industry Benchmark Report: Initial Thoughts - Business By The Numbers

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Do you recall episode 49, about the Automotive Industry Benchmark Report? Well, its release is fast approaching! Today, Hunt goes deeper into the origins of the report, the questions posed, and a sneak peek at some (surprising) discoveries.

Nuanced relationships, direct or inverse, between different variables and metrics in the automotive industry.

Linking Labor Rate and Profit: One key highlight from the report is the insight on the Overall labor rate and its correlation with profit. Were there notable differences between different locations?

Sales vs. Profit Growth: We also explored a vital question: Is there a direct link between escalating sales and an increase in profit as a percentage of sales? Our findings might surprise you.

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

Aftermarket Radio Network

Click to go to the Podcast on Remarkable Results Radio

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  • Have you checked out Joe's Latest Blog?

      Auto 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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