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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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In this podcast episode, Coach Chris Cotton provides advice to a San Diego auto repair shop owner looking to grow their business. The shop owner currently makes around $200,000 a year, mostly from custom jobs, and wants to increase profitability without working seven days a week. Coach Cotton suggests using a cloud-based SMS system for tracking numbers, advertising as a larger shop to attract more customers, and following California's hourly pay laws. He also advises focusing on oil services, brake, steering, and suspension work for consistent revenue, and charging separately for parts and labor. The shop owner admits to lacking proper income statements and running their business in an unstructured manner.
The shop owner's challenges (00:02:17) The shop owner discusses their challenges in scaling their business, working long hours, and the need for more employees.
The issue with custom work (00:05:15) Coach Chris explains the common misconception of making money from custom work and advises focusing on regular retail customers.
Assessing the shop's financials (00:07:28) Coach Chris questions the shop owner's income statement, advertising budget, and advises tracking numbers and moving to a cloud-based SMS system.
The shop owner's financial situation (00:09:23) Discussion on expenses, rent, employee pay, and the potential legal consequences of not following labor laws.
The importance of proper advertising and marketing (00:12:15) Emphasis on the value of effective advertising and the difference between low-cost and high-quality marketing strategies.
Challenges with pricing, warranty, and business operations (00:15:13) Exploration of pricing strategies, the need for clear warranties, and the shop owner's lack of financial and operational management.
Oil services and alignment machines (00:17:55) Discussion about the importance of oil services and the misconception of alignment machines bringing in a lot of business.
Charging for parts and labor (00:20:42) Conversation about the necessity of marking up parts and the importance of charging for both parts and labor to run a profitable auto repair business.
Coaching package and growth potential (00:22:42) Discussion about the coaching package and the potential for the shop to double its revenue next year through improved processes, procedures, and technician work.
Shop owner wants to scale their auto repair business and improve profitability
Current revenue and net income of the shop owner
Coach Chris advises against custom jobs and suggests focusing on regular retail work
Importance of tracking profits regularly and using a cloud-based SMS system
Advertising strategies on Facebook, Instagram, and Google
Concerns about employee payment and legal issues in California
Suggestions for raising labor rates and providing clear warranties
Lack of proper income statements and structured business practices
Disappointment with the performance of the alignment machine
Focus on oil services, brake, steering, and suspension work for consistent revenue
Coach Chris Cotton, 00:12:15, "If we don't have a legitimate business, we don't have anything at all."
Connect with Chris:
#autofixautoshopcoaching #autofixbeautofixing #autoshopprofits #autoshopprofit #autoshopprofitsfirst #autoshopleadership #autoshopmanagement #autorepairshopcoaching #autorepairshopconsulting #autorepairshoptraining #autorepairshop #autorepair #serviceadvisor #serviceadvisorefficiency #autorepairshopmarketing #theweeklyblitz #autofix
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This week on Business by the Numbers, Hunt explores if EVs are transport's future or a subsidized industry.
Manufacturers' stance: e.g., Toyota's hybrid focus and a breakdown of the 2023 credit rules: Differences in dates, base vs max credits, and the significance of kilowatt hours, as well as insight into the business strategies of major players like Rivian and Tesla. Shift from kWh focus to U.S. sourced minerals & battery components, with clarifications on "Made in America" vs. "Final Assembly in America.” Hunt also explores vehicle eligibility criteria, credit restrictions, income & MSRP limits, and unique rules for used vehicles. Hunt talks about 2024 changes, such as the immediate benefits and strategic considerations if you’re thinking of buying EV. He also talks about the importance of doing your own research & where go to do it!
Thanks to our partners, NAPA TRACS and Promotive
Did you know that NAPA TRACS has onsite training plus six days a week support?
It all starts when a local representative meets with you to learn about your business and how you run it. After all, it's your shop, so it's your choice.
Let us prove to you that Tracs is the single best shop management system in the business. Find NAPA TRACS on the Web at NAPATRACS.com
It’s time to hire a superstar for your business; what a grind you have in front of you. Great news, you don’t have to go it alone. Introducing Promotive, a full-service staffing solution for your shop. Promotive has over 40 years of recruiting and automotive experience. If you need qualified technicians and service advisors and want to offload the heavy lifting, visit www.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
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Jaron Kleber, National Sales Manager of Repair Shop of Tomorrow, discusses the importance of maintaining a healthy work-life balance and maximizing one's potential. Jaron explains the negative effects of hitting the snooze button and shares his personal routine for starting the day off right. The conversation then shifts to investing in personal goals and well-being, and the importance of treating employees like family. It's crucial to take a step back from the daily grind and ask oneself what should be done right, rather than focusing on what is being done wrong.
Jaron Kleber, Repair Shop of Tomorrow, National Sales Manager. Jaron’s previous episodes HERE
Watch Full Video The importance of work-life balance [00:03:23] Discussion on the societal pressure to constantly work and hustle, and the need for a healthy work-life balance. The role of coaching and mentorship [00:05:01] Exploration of the benefits of having a coach or mentor to guide and reassure shop owners in their journey to success. The significance of consistency and processes [00:06:22] The importance of implementing consistent processes in both business and personal life to achieve success and prevent burnout. The science behind hitting the snooze button [00:08:14] Explains the sleep cycles and how hitting the snooze button affects the quality of sleep. Sleep inertia and its impact on the morning [00:09:08] Discusses the concept of sleep inertia and how it can negatively affect the first four hours of the day. Starting the day off right for personal and professional success [00:11:01] Emphasizes the importance of starting the day off in a positive state to have more good days than bad days and achieve personal and professional success. The importance of self-care [00:15:38] The importance of setting up a morning routine and taking care of one's physical and mental well-being. The power of music [00:16:38] How music can change one's disposition and attitude, and explores the effects of music on dopamine levels in the brain. Investing in employee well-being [00:19:38] The conversation shifts to the topic of successful shop owners investing in their employees' personal goals and well-being, beyond just technical training. Personal Goals and Work-Life Balance [00:23:54] Discussion on setting personal goals, struggling with work-life balance, and the importance of separating personal and professional life. Creating a Positive Work Environment [00:24:53] Exploring the significance of creating a positive work environment, building a sense of community, and holding employees accountable for work-life balance. Importance of Accountability and Mentoring [00:28:28] Highlighting the value of having a mentor or coach to hold oneself accountable, improve leadership skills, and achieve personal and professional goals. The importance of continuous improvement [00:33:01] Discussion on the need for professionals in the industry to strive for continuous improvement and overcome the fear of exposing weaknesses. Transitioning from a fixed mindset to a growth mindset [00:34:23] Exploration of the difference between a fixed mindset and a growth mindset, and the importance of adopting a growth mindset for personal and professional development. Thanks to our Partner, Dorman Products.
Dorman gives people greater freedom to fix vehicles by constantly developing new repair solutions that put owners and technicians first. Take the Dorman Virtual Tour at www.DormanProducts.com/Tour
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By Joe Marconi
By Changing The Industry
Episode 127 - Rethinking Education: Vocational Training as a Viable Career Alternative