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Many Shops Have Raised their Labor Rates, But Still Struggle!

Joe Marconi
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Transmission Repair Experienced

Transmission Repair

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I learned a lot by simply doing a YouTube search on "auto repairs cost more".  Here's the best video I found, on CNBC.  13:43  Why Car Repairs Are Getting So Expensive  In my opinion, the reason shops are struggling is that they aren't including Hidden Costs in their calculations.  It has been my experience that most shops set their prices off of competing shops in the area, not off of their true costs.

You can either do a Google search on "Job Costing" or read this article.  I give credit to my dad who opened up my eyes to Job Costing and Hidden Costs.  He had a saying that summed it all up pretty well... "How the hell do you know what to sell something for if you don't know what it costs you."

Edited by Transmission Repair
Added the last paragraph.
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Transmission Repair Experienced

Transmission Repair

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Speaking of shops experiencing an uptick in labor costs, has anybody allowed for bonuses?  What about a holiday (Thanksgiving, Christmas, etc.) bonus?  What do you consider if and when a bonus is warranted?

Has anybody noticed the massive layoffs and businesses that are closing locations?  I don't understand why shipping companies are laying off a lot of employees at the busiest time (holidays) of the year.

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  • 3 weeks later...
juanpablo4219 Contributor

juanpablo4219

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On 12/1/2024 at 3:27 PM, Transmission Repair said:

Speaking of shops experiencing an uptick in labor costs, has anybody allowed for bonuses?  What about a holiday (Thanksgiving, Christmas, etc.) bonus?  What do you consider if and when a bonus is warranted?

Has anybody noticed the massive layoffs and businesses that are closing locations?  I don't understand why shipping companies are laying off a lot of employees at the busiest time (holidays) of the year.

If your making reference to the season, at this point it's the hi season for them. The holidays is the answer. Business closing, there are so many factors.
For the shipping companies laying off, they're at their peak due to the Holidays and online orders, not laying off until after season... The purchasing habits have change a lot...
My sales for November & December had diminished a lot, nothing to compared to the previous months. My thoughts for this year, "Black Friday turn into Black November" The Black Friday sales started early in November and not in the Black Friday, therefore people spending on gifts and specials for the holidays. Once we got to the Thank Giving week, the consumer buy food and kids are out of school, so their funds go to the groceries store.
The auto shops are empty since the consumer does not consider their car well being since it runs, if it does not run then they'll consider doing something about it... it's an uphill battle. and Yes, I have been advertising even more, with very little outcome.

 

weighit Enthusiast

weighit

Posted
Posted

I may have done it all wrong when I owned the last service business in figuring my true costs, but this is what I did. Took every single expense that we had for the entire year, everything from taxes, materials payroll, utilites, advertising, damages. Tried to not miss one thing and got a total. Then counter every single hour worked in the shop, if I or any employee was there, it got counted as worked hours. Didived that and got my true cost to have the business by hour opened. So I knew what I was having to bring through the doors to be open and break even. Knowing that I knew to make a profit, or I should say to make the profit I wanted I then knew how much over that dollar per hour rate I needed to make, on every hour we were working. Right or wrong it kept me on my toes and we did make a decedent profit every year.  It also let me know how much every year to raise my prices to keep my profit where I wanted it.

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Transmission Repair Experienced

Transmission Repair

Posted
Posted

I don't think there is only 1 way to calculate a shop's costs, etc.  I see shops setting prices based on the prevailing competition more often than any other method.  I was a transmission technician at a local Chevrolet dealer in the early '80s.  Unknown to me at the time, I received a great job costing lesson that really opened my eyes.

A new car dealer has many revenue streams, including parts, new cars, and used cars. Most shops have only 1 or 2 sources of income.  I quickly learned that we HAD TO have a higher labor rate than any dealership.  It took me at least 6 months of constantly editing our costs because as soon as I thought I was done, I'd discover a new cost that I hadn't thought of before.  One killer hidden expense is core handling.  We were constantly handling high-dollar transmission, transfer case, or differential cores.  For example, when we buy an Allison transmission for a medium-duty GM truck, the core price alone could surpass the price of the Reman unit.  GM provided "core management training" for the parts guys.

Look at all the cost increases due to supply chain issues and/or inflation.  If you think it's bad now, wait until Trump gets in office and starts slapping tariffs on imported parts.  We might as well start buying tickets to the circus because that's what will seem like what is happening.  Many shops, owners, and managers have a hard time selling for top dollar, but that's what it's going to take to be successful now and beyond.  

My advice would be to start with a living document (spreadsheet) of all the costs you know.  When another new cost pops up, merely add it to the list.  Keep doing that to the point where you feel like you've finally captured all your costs.  Even then, some other new cost you've never thought of before will surface.  Lastly, don't be afraid to be significantly higher on your labor rate than the dealer.

Larry in Draper, Utah   [email protected] 

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  • Have you checked out Joe's Latest Blog?

    • Joe Marconi
      The Technician Shortage Is Our Fault, And It's Time We Own It
      By Joe Marconi in Joe's Blog
         0 comments
      The Technician Shortage Is Our Fault, And It's Time We Own It
      Nearly every day, I hear shop owners complain: "There's a technician shortage. We can't find qualified people. There's no one out there." If that's true, then who's to blame?
      The industry? The schools? The government? I don't know how you feel, but who promised us an endless supply of qualified technicians?
      Another common complaint is that young people do not want to work in the trades. Well, if that were true, then why are other trades such as HVAC, electrical, and plumbing growing? What are they doing that the automotive industry is not? 
      Here's the reality we need to face: We do have a problem, but we shouldn't look for someone or any entity to rescue us. Not the government. Not the trade schools. Not the recruiting companies. No one owes us a workforce. If we want great people in our industry, it's up to us. At some point, we need to own up to the truth: Building a pipeline of qualified technicians is our responsibility.
      In this blog article, I will break down the key reasons we are in this situation today and what we, as an industry, can do to solve the technician shortage. Are you ready to look in the mirror?
      Have We Pushed Technicians Away?
      Let's take a look at flat-rate pay. True flat rate, which pays a technician only for the hours they produce, is a controversial pay plan that emphasizes high production levels and creates a competitive work environment that, if not properly controlled, can lead to increased mistakes and a decline in morale and team spirit. Additionally, the stress and physical demands placed on technicians as they age are not favorable to long-term employee retention. What do we do with technicians as they grow older into their fifties and begin to slow down? 
      I have heard all the arguments and pros and cons of flat-rate pay, and I am not going to judge any pay plan. Let the facts speak for themselves. True flat rate has changed in most areas around the country and has evolved into a pay plan that gives technicians some pay guarantee.
      Many shop owners have learned that team morale, along with the opportunity to earn income, is important to technicians and to the company's long-term success. But let me ask you: how many technicians have left or been pushed out over the years because of the old flat-rate pay system?
      Another issue is the workplace environment. I remember being grateful to be hired as a young technician at a local repair shop. While very thankful, the work environment was not ideal. The shop owner kept the bay doors open year-round (I am from New York) unless it rained or snowed. He felt that if the bay doors were closed, customers might think we were closed for business. We had no heat and no hot water. Many of the jobs were done outside, year-round,  in all types of weather. The starting pay was minimum wage, with no benefits, sick days, or vacation pay. 
      Now, again, I need to point out that I was truly grateful for the opportunity this shop owner gave me. I learned a lot working there, and the experience was pivotal in my career. But looking back, I wonder how many people were discouraged by these working conditions?
      While the physical demands of the repair workplace are daunting, perhaps even more critical is the culture. Too many of my generation shop owners preached the mindset of "my way or the highway." We were the business owners, after all. We started our companies, took all the risks, and provided jobs. Why shouldn't we be the ones to set the ground rules our way?   
      Many of us found over the years that the "my way or the highway" mentality was a sure way to isolate employees and make them more likely to look over the fence for greener grass. In other words, it led many technicians to seek employment elsewhere, where they felt they could be appreciated and recognized for their hard work. The issue, however, was that there wasn't much green grass around. Disappointment after disappointment, bouncing from repair to repair shop, eventually led to despair. So, I ask you: were workplace conditions a contributing factor in today's technician shortage?
      Another factor that we are all well aware of is the complexity of the modern automobile. When I started, the work was mostly physical, and you were required to master essentially three vehicle models: General Motors, Ford, and Chrysler. Let's fast-forward to today. The evolution of automotive technology, along with the extensive training and tools required, has outpaced the typical technician's pay compensation, with no clear career path. Again, leading to frustration and insecurity about the future.
      Here is the bottom line: people don't leave their job; they leave their experience. We must do a better job. 
      The News Isn't all Bad; Your Next Steps to Fix the Technician Shortage
      To fix the technician shortage, it will take a combined effort from everyone in the automotive industry, particularly automotive shop owners. Shop owners are in the perfect position to make the greatest impact, not only on their businesses but also on the future automotive workforce.
      First, shop owners must become better leaders and understand that their ultimate success is directly dependent on the people they assemble around them. Any shop owner who mistakenly believes they can build an empire solely on their abilities is destined for serious disappointment. Business owners who think like this will eventually plateau. Without the collective contributions from a team of qualified people, your business will stall; it will not continue to grow.
      Create a workplace that attracts top talent: a clean, professional, well-equipped facility designed to support productivity, teamwork, and a career, not just a job. Build a great reputation in your community by getting involved locally. Become the auto repair shop that people take notice of as "the" place to work.
      Next, shop owners must become more financially knowledgeable. Knowing your numbers and what you need to achieve for a strong bottom-line profit is essential to paying technicians the money they need and deserve. Profit will also allow you to compete with other trade industries by providing a benefits package that has real take-home value and security.
      When it comes to culture, this is where the rubber hits the road. People crave recognition, praise, and a sense of purpose. Despite what you hear, people are not just money-motivated. Once people feel secure in their financial situation, retaining and motivating technicians can only be achieved by connecting with them on an emotional level. You cannot show enough appreciation. Give out praise for a job well done as if your business depended on it, because it does.
      As technicians age, we need to have a place for them. Expecting a 58-year-old to perform like a 35-year-old is unrealistic. We need to be more focused on career pathing. Provide training, skill development, and coaching to develop leaders and mentors within our older workforce. While their bodies may have slowed, the knowledge they have gained is priceless. 
      Our future is dependent on young people entering our industry. We need to give more young people opportunities. Every shop owner across the country should consider hiring an apprentice, then build an apprentice training plan and career path for them. If every shop did this, we could solve the technician shortage within five years. Get involved with the trade schools and high schools in your area. Look into the NAPA Apprenticeship Program. Don't sit on your hands with this one. Do it today.
      Lastly, don't get left behind. Commit to ongoing training for all your employees. Keep up to date with tools and equipment tailored to your business model. Don't try to be all things to all people and all vehicles. Identify your core profile customer and the vehicles they drive, and become an expert on those vehicles and the services you offer.

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