Is Selling Time on Testing/Analysis jobs Hurting Our Profits?

[Joe Marconi]

When a tech completes a timing belt in 3 hours, but the job is billed to the customer at 4 hours, we don't reduce the labor charge.

BUT, if we project a check engine diagnosis to take 2 hours, but the tech completes the testing in 1.5, why do so many shops reduce the labor charge to 1.5 to the customer?

We need to get away from selling time, to selling what the job is worth.  We need to factor in that highly complicated jobs require your top tech (the most expensive too), the most expensive equipment and information programs, more service advisor time to explain, and have NO part profit.

Your labor rate also has to be based on your top tech's pay rate, plus your average gross profit percentage added to your labor rate, at minimum. 

Your thoughts, comments, opinion? 

 

 

 

[Transmission Repair]

Different shops tend to write/sell labor by whatever method makes them feel the most comfortable.  I'm no different.  Behind the scenes, we calculate the number of hours X hourly labor rate.  However, on the printed estimate or invoice, we show a lump sum with the quantity of ONE.  That way we don't get into any discussion about the number of hours or how much we charge per hour.  If anyone asks, we simply say, "We don't charge by the hour, we charge by the job."  End of discussion.

Since I've retired, I let my Adobe subscription lapse so I don't have a way of redacting a sample estimate to black out the customer's personally identifiable fields.  Please bear with me as this estimate was written 11 years ago.  You can see from my sample estimate exactly how we did it.  We did give the customer his AAA discount because that's how we got the job in the first place.  I never got into an hourly discussion with any customer.David Breding Revised Estimate.pdf

[Joe Marconi]

2 hours ago, Transmission Repair said:

Different shops tend to write/sell labor by whatever method makes them feel the most comfortable.  I'm no different.  Behind the scenes, we calculate the number of hours X hourly labor rate.  However, on the printed estimate or invoice, we show a lump sum with the quantity of ONE.  That way we don't get into any discussion about the number of hours or how much we charge per hour.  If anyone asks, we simply say, "We don't charge by the hour, we charge by the job."  End of discussion.

Since I've retired, I let my Adobe subscription lapse so I don't have a way of redacting a sample estimate to black out the customer's personally identifiable fields.  Please bear with me as this estimate was written 11 years ago.  You can see from my sample estimate exactly how we did it.  We did give the customer his AAA discount because that's how we got the job in the first place.  I never got into an hourly discussion with any customer.David Breding Revised Estimate.pdf

I may have missed my point.

I have shop read and heard on podcasts that if the shop creates an estimate for a check engine light analysis at 2 hours billed to the customer, but the tech finds the problem in one hour, the shop adjusts the labor down to one hour. MY QUESTION is, if a customer is billed 3 hours for a Water Pump Job, but completes it in two, we would never reduce the price. Right? So why do it on a Check Engine light or similar job. 

I hope I am making sense. 

[Transmission Repair]

2 hours ago, Joe Marconi said:

I hope I am making sense. 

You are making sense, Joe.  We advertise "our estimates are written in stone" and we stick to that.  I've posted this before, but here it is in our promo video.

Although I've never actually calculated how much we win, or lose, on each job.  I just looked at the monthly/quarterly/yearly totals and compared them to my production payroll numbers.  I would adjust up if we were losing but I seldom adjusted down.  I believe that it's easier to do with transmission repair than it is with general repair.

Edited February 21, 2024 by Transmission Repair
Added video link.