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Sell the Job, Not Labor TIME and Parts


Joe Marconi

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Been in this predicament myself. I had a guy that I told up front that I would charge a minimum of a 1/2 hour to look at his car. (This is a long time before a diagnostic charge was ever considered as a part of our routine repairs.) He agreed, and when I found the problem his only response was, "It's only been fifteen minutes!" Needless to say I had the same conversation you had with your customer. Which, ended up with the same results.... I'm a bit ticked off, the customer is a bit ticked off, and even with an adjusted bill... everybody is still ticked off.

 

Here's my resolution for this dilemma. Instead of hours, I quote dollars and then time. I compare it to making a bid on building a bridge. I say ten bucks the next guy says eleven... so on and so on. Once the consumer decides who is going to do the work the price is set. Now.... beat your own time for doing the work. If you run over your allotted time, well, that's poor planning on your part. If you can come in under your projected time... well.. "Home Run".

 

Now the customer has only one option from you. If you say the job will take 5 hours. No way, no how, will the customer get their car back in 4 hours. I may have lost a few jobs over the years because of this policy but I've never EVER had to back pedal on one since.

 

May not work for everyone... but it sure does for me.

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Joe, another great and helpful article! my question is, I use snap-on shop key (switching to bay-master soon) to do my estimates, labor time etc., it prints out on the estimate the labor time that I give to my customers, should I not be giving them this estimate? should I print my own est. on our shops stationary/letterhead that just includes prices not times? then what about parts prices on the estimate? should I just be giving them an estimate that says something like.... FRONT BRAKE JOB $179.99 includes the following...pads...rotors, labor etc. etc.??

originally I thought if I spelled everything out clearly...costs, time etc. on an estimate it would avoid issues but alot of times we are able to get the job done in under book time and find ourselves "stalling" at the end or leaving the car in the bay and doing another job to avoid the issue you had, but then the stalling tactic wastes our time/money to get on the next job!

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  • 9 months later...

Been thinking about this a lot myself. Breaking down invoices line-by-line typically has two or three issues associated with it:

 

  • Arguments on labor costs (discussed above)
  • Arguments on part price mark-up
  • Arguments on shop supplies, if you add this one

 

Lumping everything together by job gets rid of all of the above arguments. And, they have no hidden fee surprises when the invoice comes out.

 

A business adviser that I know questioned the legality of this in regards to taxes and whether or not the state required separation of parts and labor. We did a bunch of research, and here is the law in Georgia: Taxes must be paid on parts, but not on labor. If the invoice separates the two, you are fine. However, if you combine the two (parts and labor) into one job, then the entire job must be taxed:

 

http://rules.sos.state.ga.us/docs/560/12/2/78.pdf

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I don't publish my hourly labor rate or include book labor times on my estimates or invoices for just this reason. When I give an estimate I include dollar amounts for parts, labor, and tax, but never actual projected times or rates. So far I haven't had any problem. I have had very few people ask me what my "hourly rate" is and the ones that did were just calling (probably every shop in town) to see who was the cheapest. I gladly told them I had NO INTEREST in being the cheapest shop in town and let them go on to the next phone call. In my experience the customer who is simply looking for the CHEAPEST anything is not the kind of customer I really want.

 

This may be better off started as a separate topic, but on a side note I do not mark up my parts. I charge the customer the exact same amount for a part that they would pay if they walked into the part store and bought it. The only profit I make off of parts is whatever "discount" the part store gives me, which is based on my monthly sales with that parts store and usually NOT very much. Personally I would rather charge a much HIGHER hourly labor rate so that at least it is clear and honest what the customer is paying me for. Little to no actual work is done in the process of me acquiring parts from the parts store (a phone call and a free delivery). I have discovered that people appreciate this level of honesty and it allows me to avoid all kinds of issues such as the customer getting upset because the price I charged him for the part was quite a bit higher than the price he was given when he called the parts store and also gives me the freedom not to chase away those customers who insist on "supplying their own parts".

 

Been thinking about this a lot myself. Breaking down invoices line-by-line typically has two or three issues associated with it:

 

  • Arguments on labor costs (discussed above)
  • Arguments on part price mark-up
  • Arguments on shop supplies, if you add this one

 

Lumping everything together by job gets rid of all of the above arguments. And, they have no hidden fee surprises when the invoice comes out.

 

A business adviser that I know questioned the legality of this in regards to taxes and whether or not the state required separation of parts and labor. We did a bunch of research, and here is the law in Georgia: Taxes must be paid on parts, but not on labor. If the invoice separates the two, you are fine. However, if you combine the two (parts and labor) into one job, then the entire job must be taxed:

 

http://rules.sos.state.ga.us/docs/560/12/2/78.pdf

 

Must be nice. In Arkansas I have to collect sales tax on parts AND labor. :(

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This may be better off started as a separate topic, but on a side note I do not mark up my parts. I charge the customer the exact same amount for a part that they would pay if they walked into the part store and bought it.

 

You are the first shop I've seen that does this, and it sounds like a GREAT marketing tool. It would be so nice to just avoid those "Why do you mark up your parts so much?" questions altogether, rather than explaining over-and-over again the very valid reasons.

 

We may go to this model and adjust our labor rate accordingly. Has anyone else done this?

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I'm not sure I explained this clearly, my apologies ...

 

Integrity is not advocating to simply drop all margins on parts and just lose that part of his income. Rather, he adjusts his labor accordingly, so he makes the same $$ at the end of the day, just split up differently.

 

Example (old way):

Labor Rate = $95/hr

Parts Margin = 60%

 

Example (new way):

Labor Rate = $155/hr

Parts Margin = 0%

 

Using the "price by total job" approach above, this allows you to dodge the entire "why do you mark up your parts so much" argument entirely, while still maintaining the same necessary profit margin at the end of the day.

 

Maybe I'm way off base here ... could really use some advice or input from a few owners that have moved to this model.

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I'm not sure I explained this clearly, my apologies ...

 

Integrity is not advocating to simply drop all margins on parts and just lose that part of his income. Rather, he adjusts his labor accordingly, so he makes the same $$ at the end of the day, just split up differently.

 

Example (old way):

Labor Rate = $95/hr

Parts Margin = 60%

 

Example (new way):

Labor Rate = $155/hr

Parts Margin = 0%

 

Using the "price by total job" approach above, this allows you to dodge the entire "why do you mark up your parts so much" argument entirely, while still maintaining the same necessary profit margin at the end of the day.

 

Maybe I'm way off base here ... could really use some advice or input from a few owners that have moved to this model.

we understand, it's just not good business at all. Just imagine being a shop around him where everyone wants to brig there parts to you because your labor is cheaper. And don't forget that he doesn't mark up parts so now you're the thief even though you're cheaper in the end... No thx
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Integrity, IMHO that is a horrible business practice. Giving customers parts at your cost...?

You are certainly entitled to your opinion. Speaking in strict business terms maybe it isn't the most lucrative practice, but in my mind (having been a customer once myself) I think it is more upfront and honest. As Wes Daniel stated, I am not actually charging the customer any LESS money overall, I am just being more transparent about WHAT they are paying for. I am not in the parts business. I have no inventory or warehouses or shelves or stockrooms. I don't spend any time whatsoever organizing, labelling, zoning, merchandising displays, or any othe type of work that would justify (in my mind) making a profit off of part sales.

 

To me it is similar to looking at my water bill or electric bill and seeing a whole bunch of obscure fees, taxes, and miscellaneous charges that I have NO IDEA what they actually are. I would much rather my bill state simply the amount of water that I used and how much they charged me for it. From a business stand point I guess I can see how it would be easier for them to make more money the way they do it NOW, but it also makes me (the customer) feel like they are ripping me off.

Edited by IntegrityAutoCare
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You are certainly entitled to your opinion. Speaking in strict business terms maybe it isn't the most lucrative practice, but in my mind (having been a customer once myself) I think it is more upfront and honest. As Wes Daniel stated, I am not actually charging the customer any LESS money overall, I am just being more transparent about WHAT they are paying for. I am not in the parts business. I have no inventory or warehouses or shelves or stockrooms. I don't spend any time whatsoever organizing, labelling, zoning, merchandising displays, or any othe type of work that would justify (in my mind) making a profit off of part sales.

 

To me it is similar to looking at my water bill or electric bill and seeing a whole bunch of obscure fees, taxes, and miscellaneous charges that I have NO IDEA what they actually are. I would much rather my bill state simply the amount of water that I used and how much they charged me for it. From a business stand point I guess I can see how it would be easier for them to make more money the way they do it NOW, but it also makes me (the customer) feel like they are ripping me off.

It's your business so do what you what you want but it seems more dishonest than anything. As a customer I see it the exact opposite of what you're trying to portray. From the outside it looks like you are closer to a back yard mechanic than a real shop.

 

Not saying this to be mean but I want others real perspective and opinions so I will give the same. I agree it would make some things easier, ex. Parts markup matrix.

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From the outside it looks like you are closer to a back yard mechanic than a real shop.

 

OUCH! That was a low blow!

 

I guess I can see why defying the unwritten laws of "parts markup justification" would be offensive to many shop owners. I apologize if my posts seemed like they were attacking any (or as I imagine MOST of you) who do mark up your parts. I assure you that was not my intention at all. I didn't mean to imply that anyone is being dishonest by marking up parts, only that from a customer's standpoint I think that is how they view us a lot of times because that is how I viewed mechanics before I became one. And based on the feedback of my own customers and potential clientele in my area that is how many people view us.

 

Personally, I don't do it this way because I think I can undermine other shops with a "clever strategy" and steal their business or even because I think I can gain more customers - in fact I probably LOSE some of those potential customers who are calling around "price checking" because I have to tell them my hourly labor rate is higher than some other shops (even though my overall repair costs are about the same). I may lose profit overall by doing it this way...I don't know. My decision to NOT mark up parts wasn't based on any sound business strategy or proven financial model that I am aware of. My decision to do it this way was based solely on the fact that this is the way I would want it done FOR ME if I were the customer. Simple as that. I am not advocating that everyone should switch over to my way of doing things, but all I can tell you is that this is how I am doing things and I feel good about it and I have gotten a VERY positive response from my customers in regards to it. My business is going strong: I have several (more than I can keep up with actually) good quality customers, almost all of which are repeat business, my overhead is low, my stress level is non-existent (at least in regards to work, *lol*) and my personal bills are getting paid. That's enough for me at this point. I am very content with the way things are going.

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Don't take offense from me I'm merely giving business advice. Remember, things that work for a one or two man show aren't going to work if you have a full crew. How are you going to explain why you suddenly mark up parts because you have more overhead?

 

I've always believed that you should run your business like you have many employees so you have your policies and procedures are already in place.

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There are many industries that bill like we do ... most skilled labor jobs charge parts and labor separately and then charge a parts mark-up. Plumbers do it ... they mark up their fittings, tubing, etc. Construction workers do it ... they mark up their lumber, nails, etc ... MEDICAL CERTAINLY DOES IT!! Wow, there have been 20/20 specials on the medical field. A $1 pill becomes $54 the minute you step foot into the ER.

 

Most industries do this. It is the norm. We can accept that, or we can question it. Personally, I choose to question that and look for other options to keep the customer as happy as possible. I will not accept a norm or a standard way of doing things until I am convinced it is the best way.

 

Our industry has marked up parts due to the vast difference in jobs that we see. Examples:

 

Brake job: 1 hour time @ $100/hr and $100 worth of parts marked up to $150.

 

For this job, you could go either route. Mark up your labor to $150/hr and keep parts at $100. Or keep labor at $100 and mark parts up to $150. It really doesn't matter either way.

 

Valve spring job: 6 hours time @ $100/hr and $2 worth of parts marked up to $5

 

For this job, you cannot go either route. If you just used your stock, "I'm not going to mark up parts at all and win on my labor being $150," you would lose the customer if they did any price checking at all. You have to use the lower labor rate and the standard parts mark-up.

 

 

This distinction is easy to make for a small shop with one service writer and one tech. They know the numbers; the can make the call at the front desk; they share the profits; no issues. However, imagine trying to train a team of 6 service writers and 1 manager to do this all day long with 40 cars per day. Not really possible, which is why most shops go to the standard parts mark-up table.

 

I should add that I'm also still battling this, myself, as I HATE having to explain parts mark-up. It's just an awkward conversation every time, and if I can avoid having it, I will.

 

Any other suggestions are more than welcome.

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Now lets compare another industry. Outback buys steak at $6.00 a pound. They cook it and serve it to you with the extras. And they charge accordingly.

 

I wouldn't consider this to be comparable to parts mark up. What I pay the restaurant for is NOT the meat itself, I am paying them for their time, energy, and knowledge to select and prepare the steak in a way that is perfectly delicious so that I don't have to do it myself. If I could get a fully prepared delicious high quality steak with all the extras for $6.00 a pound then I would never eat at outback again!

 

They take the raw piece of meat and manipulate it into my fully prepared meal...THAT is what I pay them for. What service is my customer paying me for when I call the parts store and they deliver the $100.00 part right into my hand and then I turn around and sell it for $180.00? That would be like Outback bringing out a raw piece of steak they bought for $6.00 after not doing ANYTHING at all to it, slapping it onto my plate and saying "That will be $27.50." I would be outraged! If I wanted a raw piece of meat I could have gone to a meat market and bought one myself for the $6.00! I would feel ripped off. The same is true for our customers. I have found that the customers respond much more positively when it is clearly defined exactly what they are paying me for.

 

Just like at the restaurant, what my customers pay me for is my knowledge, expertise, and labor. I figure out what part their car needs (diagnostics) and then install it for them (labor) so they don't have to do it themselves. The ONLY time I mark up a part is if I had to go to extra effort (aka...WORK) to acquire it. If I have to research online or spend 30 minutes calling different junk yards trying to find some obscure or rare part then I will mark up the final price of that part to account for the TIME and EFFORT I spent acquiring it. I charge them for EXACTLY the services I render to them and lay it all out clearly on my invoice. I fail to see how, as phynny insists, this can be considered a "dishonest" business practice.

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There are many industries that bill like we do ... most skilled labor jobs charge parts and labor separately and then charge a parts mark-up. Plumbers do it ... they mark up their fittings, tubing, etc. Construction workers do it ... they mark up their lumber, nails, etc ... MEDICAL CERTAINLY DOES IT!! Wow, there have been 20/20 specials on the medical field. A $1 pill becomes $54 the minute you step foot into the ER.

 

Exactly, and as a customer of each of those different fields I have felt ripped off on most occasions, and I know I am not the only one (otherwise there wouldn't have been a 20?20 special on it). That $54 aspirin is outrageous to me! Is it not to all of you??? Does it comfort you to have it explained that those poor pitiful doctors who live in three story mansions in the suburbs and go out on their yachts every weekend are "just trying to make a living" or that it's "just the way the industry works"?

 

One key difference between the medical industry and ours is that in our industry our customers have options. Capitalism still exists in truest form. If they don't like the way I do business then they can go three blocks down the street to a different shop....if I don't like the way I was treated or billed in the ER I have very few other options to explore except possibly just to let myself bleed. On a side note, does anyone see correlations to maybe why so many customers try to work on their own vehicles or ignore problems altogether until their car absolutely quits them? I do the same thing in regards to medical issues...unless I am convinced I am about to DIE if I don't, I will not step foot into a hospital emergency room.

 

 

Our industry has marked up parts due to the vast difference in jobs that we see. Examples:

 

Brake job: 1 hour time @ $100/hr and $100 worth of parts marked up to $150.

 

For this job, you could go either route. Mark up your labor to $150/hr and keep parts at $100. Or keep labor at $100 and mark parts up to $150. It really doesn't matter either way.

 

Valve spring job: 6 hours time @ $100/hr and $2 worth of parts marked up to $5

 

For this job, you cannot go either route. If you just used your stock, "I'm not going to mark up parts at all and win on my labor being $150," you would lose the customer if they did any price checking at all. You have to use the lower labor rate and the standard parts mark-up.

 

You are correct that I will lose the customer who is calling around checking labor rates for his Valve spring job. I can live with that. I still won't mark up parts. It usually evens out though because of the one type of job that you are forgetting about:

 

Ignition module replacement: $250 part and 0.25 hours labor time.

 

I could charge them the 0.25 labor at $100 an hour ($25.00) and then mark up the $250 part to $375 for a total bill of $400.00

-----OR-----

I could sell the part for the $250 and charge the 0.25 labor time $150 per hour ($37.50) for a total bill of $287.50

 

Which customer do you think will feel ripped off and which do you think will come back to me for the brake job next month?

 

And what happens when the first customer looks at his invoice and sees that $375 ignition module only to call the parts store and find out that he could have gotten it himself for $250! Do you really think that customer is going to bring me any more of their business? Personally I would have trouble sleeping at night taking that extra $112.50 out of that customer's pocket when I really didn't do ANYTHING to earn it. I certainly would have trouble justifying to that customer when they came back to my shop IRATE exactly what I did to earn that extra $112.50...and even if I came up with an explanation I doubt he would believe it or it would make him feel any better for being $112.50 lighter.

 

And what do I tell the first customer who called for an estimate and I told them it would be $375 for the part and $25 for the labor when they come strolling in with the part in hand they just bought for $250 at the parts store and want me to put it on for $25 labor? I don't know how YOU GUYS handle this situation, but when I worked at shops before (who marked up parts) this is the point where my boss would get very irate at the customer and RUN THEM OUT THE DOOR! If he was in a particularly good mood he would simply refuse to install the part unless the customer was willing to pay the extra $112.50 as a "customer supplied parts" fee....which consequently accomplished the exact same result as his other reaction.

 

I take that same customer that walks into the door and greet them KINDLY and tell them I would be GLAD to install their part for the $37.50 labor charge that we talked about on the phone. I then proceed to explain to them that because they supplied their own part, I could not honor any warranty on it (which covers my @$$) and then I proudly tell them about my policy of NOT marking up parts so that next time they can just go ahead and let me get the part for them and they won't even have to worry about it...plus I will be able to honor the part manufacturer's warranty.

 

Like I said before, I have had MANY positive responses from this practice and have gained quite a few customers from just such situations. I feel like I am serving my customers in a much more direct and honest way and I sleep like a baby at night.

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That all works well till you HAVE to do a warranty repair. Then you submit your labor to the parts store. 30 days go by and you call "Where is my labor?". Another 30 days goes by...still no labor. 90 days and the manager calls and tells you it is not reimbursable. Or they will only pay 30-40 percent. Now ya waited 3 months to get 30 percent. Not to mention the time again! Nope...I will stick with my mark up, explain to the customers that ask, and keep on making money.

 

Labor claims are a whole different beast...and a headache at that! *lol*

 

So do I understand you correctly that you are saying you mark up parts as part of some kind of extra labor warranty? I had never thought of that. I guess I could start offering that, but even if I did I would offer it as an OPTIONAL additional cost for labor warranty on parts. I would ask the customer up front if they wanted to pay extra for labor warranty on their parts and if not I could simply explain that in the event of a failure the part would be covered under the manufacturer warranty, but they would have to pay the labor cost again. Up to this point I just buy the highest quality parts I can get and hope for the best. Some times high quality parts are simply NOT available at all, though, and I have had to eat a few labor bills due to that (NOBODY makes decent P/S pumps these days). I do most of my business through Advance Auto Parts and they have been good to reimburse my labor the couple times I needed it...part of being a good parts store. So much of it depends on local management, also, though.

 

I am admittedly a fairly new business owner, so all of these suggestions you guys are making I am taking into consideration.

Edited by IntegrityAutoCare
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Just wow, I learn so much about different thought processes.

 

I believe there is no difference between a restaurant meet and our parts. Do you not spend time finding the right parts? Do not order the parts? Do you not make sure the part is correct and not damaged? Do you not warranty the part?

 

Also how is it not ripping people off to double their labor on say a timing belt when 90% of the job is labor? You say you lose customers because of your high labor?, I've never lost a customer due to parts markup. How can I warranty an item I don't mark up? Just makes zero sense to me.

 

All in all man, if your customers question your markup that much maybe you have the wrong customers.

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I have never lost a customer because of my high labor rate...I only meant that I could potetially miss out on a customer who was calling around comparing shop labor rates.

 

The opposite is true, also, though in the sense that if someone is calling around asking for prices on many "part heavy" jobs my prices will be lower and so I will earn their potential business (by implication meaning that the shop down the street that marks up parts will lose the potential business). So again it all kind of evens out in the end.

 

I have determined that the BEST way to get business is to develop a longstanding trusting relationship with customers. If they feel like you are treating them fairly and honestly they will keep coming back. My decision to not mark up parts is part of my effort to achieve just that.

Edited by IntegrityAutoCare
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I DO NOT buy from ADV or AZ. Did in the beginning and had way to much trouble with the parts and the parts people.

 

 

This brings up an interesting point also. What parts store chain do you mainly use? I started out with autozone because they had the best commercial service, but was very disappointed in the quality of parts. I switched to Advance because their customer service is good (in my town) and I can get the part brands I trust (Wagner Thermoquiet, Moog front end and suspension, Dayco belts, etc). So far I am very happy with Advance Auto.

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It's amazing the difference what area you live in makes. *lol* I think a lot of it boils down to local store management. There is no carquest in my city and though I had previously shared your respect for NAPA, the particular store in my town has horrible (and slow) commercial service and I have had problems with them honoring part warranties. The other thing I don't like about NAPA is that they do not publish who manufactures the parts that they sell (they are all NAPA brand) and while this would be fine if they ONLY sold quality parts I find that they are now selling the same cheap crappy parts in many cases and it impossible to know what you are getting.

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I use only thermoquiet brake pads. I ran into a similar situation with power steering pumps...installed 4 before I got one that worked. I felt like a failure till that fourth one but I KNEW I was doing everything right. They ended up paying labor claim on the other 2. D*mn Cardone. Anyway, I think I may start a thread (if there isn't one already) about trusted parts names. I am always looking for good quality parts.

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Anyway, I think I may start a thread (if there isn't one already) about trusted parts names. I am always looking for good quality parts.

 

Please do ... I am especially interested in this topic among a bunch of others. 3 failed replacement parts in a row is absolutely ridiculous. Have not seen that (yet) in Atlanta.

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Please do ... I am especially interested in this topic among a bunch of others. 3 failed replacement parts in a row is absolutely ridiculous. Have not seen that (yet) in Atlanta.

 

Thread started here: http://www.autoshopowner.com/topic/8963-in-search-of-quality-auto-parts-list-suggestions-here/

 

Please feel free to contribute!

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  • 2 weeks later...

As you can probably tell :) , you have started somewhat of a firestorm with your answers to this post Integrity.

I just have one question, make it two, for you.

a.Do you feel that the labor rate should be dependent on the shop's overhead?

b. Are you a mobile mechanic by any chance?

Thanks!

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This has turned into an interesting thread. I don't think that marking up parts is unethical to the customer in any way. You have to pay the CSA who orders the parts and you are having the parts delivered to the shop for the convenience of the customer, those cost something. We have a car wash attached to our auto repair shop and when we charge $8 for a basic wash, sure some of that charge is for the equipment and service but some of it is also for the chemical cost. We don't give the chemical cost to the customer at the same price that we purchase the chemical. At a company like US Foods that distributes food products, they don't sell you the food products for the same price they purchased them for even though they don't necessarily "do anything" to transform those products. Just my 2 cents.

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As you can probably tell :) , you have started somewhat of a firestorm with your answers to this post Integrity.

I just have one question, make it two, for you.

a.Do you feel that the labor rate should be dependent on the shop's overhead?

b. Are you a mobile mechanic by any chance?

Thanks!

 

Not sure if these questions are designed to be or leading into a jab at me personally or at Mobile Auto Mechanics in general or both or neither, but let me just preface my answers by saying that I am very well aware that a lot of the rules that apply to a 10 bay shop do not apply to me, or at least do not affect me nearly as much. The implications of a 10 bay shop not marking up parts is likely to be quite a bit different than a 1 man mobile mechanic not marking up parts. I am not necessarily even recommending that EVERYONE immediately stop marking up their parts on ethical or any other grounds.

 

Being a Mobile Auto Repair business, I have overall much less overhead than a regular shop and therefore I can afford to charge a lower labor rate than everyone else. I can also afford to NOT mark up parts. I am my own receptionist, janitor, supervisor, CSA, accountant, maintenance man, etc etc etc...so I don't have all the costs associated with paying individual people for each one of those positions. This is the way I have chosen to structure my business and I am very pleased with the way it is working out.

 

Let me also say for the record, perhaps because of my personality or maybe because of my religious or social background I am NOT in this business to make money (at least not lots of it...*lol*). I started my business because I wanted to do something that I felt was meaningful and helpful to people and that I could do QUALITY work and be satisfied in my Job. I have worked factories and I have worked Corporate Retail jobs and I have worked in the food industry and NONE of those jobs could give me what I seek in that regard.

The bottom line FOR ME is, the less overhead I require, the less I have to charge my customers in order to make enough profit to keep my business going. The less I have to charge my customers, the MORE satisfied they will be with me and more likely they will come back. I can then be picky about my customers (weeding out the good ones from the bad) which improves my overall personal satisfaction in life not having to deal with the stress.

 

I am not sure that I completely understand the exact reason for your first question or even what you mean by it. The relationship between a shop's labor rate and a shop's overhead is only associated by the fact that the labor rate drives revenue and the revenue is what pays the overhead costs. So in that sense, yes, the labor rate is somewhat dependent on the shop's overhead. But in the sense that I think you may be asking my answer would probably be "not necessarily." I DO NOT think that a shop's labor rate should be dependent on overhead in the sense that the bigger the shop is the higher their labor rate should be. The labor rate should be dependent on the quality of service provided....this is what the customer is ACTUALLY paying us for.

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This has turned into an interesting thread. I don't think that marking up parts is unethical to the customer in any way. You have to pay the CSA who orders the parts and you are having the parts delivered to the shop for the convenience of the customer, those cost something. We have a car wash attached to our auto repair shop and when we charge $8 for a basic wash, sure some of that charge is for the equipment and service but some of it is also for the chemical cost. We don't give the chemical cost to the customer at the same price that we purchase the chemical. At a company like US Foods that distributes food products, they don't sell you the food products for the same price they purchased them for even though they don't necessarily "do anything" to transform those products. Just my 2 cents.

 

My rule of thumb for marking up parts is that if I can get the part cheaper than what the customer can get it themselves then I have good reason to mark it up. Most discounts on parts and supplies are based on a bulk purchases that the customer could not possibly have access to. I guess in my mind for it to make sense to the customer you have to be actually offering them something to charge them for it. If you offer them the exact same part and the exact same availability as somewhere else down the road except you charge them MORE for it then why would they choose to get it from you instead of the other place?

 

And then, in their minds, we exacerbate the issue by getting angry with them or charging them an EXTRA fee to install a part that they got at that other place down the road. The customer is just trying to save money, they don't care that you have high overhead and a CSA to pay. To THEM it looks like you are just trying to price gouge them by charging more for a part they could just as easily get themselves to save some money.

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I feel that there always been and always will be a place for a mobile mechanic trying to earn a living. I am sure many of the shop owners here started that way. If it takes some of my business away, so be it, it's the market forces at play and nothing I can do about it, nor would I want to, considering you may end up working with that customer I really don't want.

As far as the labor rate goes, I disagree. In the sense that a brick and mortar shop should charge a somewhat "standard" for the industry and geographic location rate. Are this arbitrarily set? no, it is dependent on the going $ per sq ft lease rates or the payment on the building financing. If someone is charging $90 an hour and someone else is charging $200 there better be a reason, just like there should be a reason for a mobile mechanic not to have to charge the parts mark up. When someone is coming to a mobile mechanic, they consciously or subconsciously know that this business may or may not be there tomorrow. So whatever warranty you give them could be a mute point for them. When they come to a brick and mortar shop, they have different expectations and are hopefully willing to pay a different price. What it boils down to is the very same reason this thread was started "Sell the job not the labor and parts" .

I am only trying to point out that if you would have started your answers to the post with this statement and made people here aware of the the fact that you are "mobile", it would have limited amount of unenthusiastic replies.

Wouldn't you agree? Integrity

 

Not sure if these questions are designed to be or leading into a jab at me personally or at Mobile Auto Mechanics in general or both or neither, but let me just preface my answers by saying that I am very well aware that a lot of the rules that apply to a 10 bay shop do not apply to me, or at least do not affect me nearly as much. The implications of a 10 bay shop not marking up parts is likely to be quite a bit different than a 1 man mobile mechanic not marking up parts. I am not necessarily even recommending that EVERYONE immediately stop marking up their parts on ethical or any other grounds.

 

Being a Mobile Auto Repair business, I have overall much less overhead than a regular shop and therefore I can afford to charge a lower labor rate than everyone else. I can also afford to NOT mark up parts. I am my own receptionist, janitor, supervisor, CSA, accountant, maintenance man, etc etc etc...so I don't have all the costs associated with paying individual people for each one of those positions. This is the way I have chosen to structure my business and I am very pleased with the way it is working out.

 

Let me also say for the record, perhaps because of my personality or maybe because of my religious or social background I am NOT in this business to make money (at least not lots of it...*lol*). I started my business because I wanted to do something that I felt was meaningful and helpful to people and that I could do QUALITY work and be satisfied in my Job. I have worked factories and I have worked Corporate Retail jobs and I have worked in the food industry and NONE of those jobs could give me what I seek in that regard.

The bottom line FOR ME is, the less overhead I require, the less I have to charge my customers in order to make enough profit to keep my business going. The less I have to charge my customers, the MORE satisfied they will be with me and more likely they will come back. I can then be picky about my customers (weeding out the good ones from the bad) which improves my overall personal satisfaction in life not having to deal with the stress.

 

I am not sure that I completely understand the exact reason for your first question or even what you mean by it. The relationship between a shop's labor rate and a shop's overhead is only associated by the fact that the labor rate drives revenue and the revenue is what pays the overhead costs. So in that sense, yes, the labor rate is somewhat dependent on the shop's overhead. But in the sense that I think you may be asking my answer would probably be "not necessarily." I DO NOT think that a shop's labor rate should be dependent on overhead in the sense that the bigger the shop is the higher their labor rate should be. The labor rate should be dependent on the quality of service provided....this is what the customer is ACTUALLY paying us for.

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So while your out "doing the world a favor" and "not trying to make money" you're okay with cutting fellow mechanics down by under charging them? Makes sense to me, or maybe not.

 

I've taken a lot of insults on this thread, man...but seriously? I don't owe you a damn thing. It's called free enterprise. You act like me and all the other shops and your customers OWE YOU a living and you should just be able to charge whatever price you want and they should be GLAD to pay it because you DESERVE to make money. Nothing comes for free. Offer the customers a service they need at a price they can afford and they will keep coming back. Nobody likes a bully. Next thing I know you are going to be coming to my house at night slashing my tires trying to strong-arm anyone who "undersells" you.

 

To my knowledge I have not mocked or insulted a single person on this forum. If you disagree with me that's fine, I'm not asking you to like it, but the way you (and maybe a couple others on this thread) are acting is not beneficial to ANYONE.

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I've taken a lot of insults on this thread, man...but seriously? I don't owe you a damn thing. It's called free enterprise. You act like me and all the other shops and your customers OWE YOU a living and you should just be able to charge whatever price you want and they should be GLAD to pay it because you DESERVE to make money. Nothing comes for free. Offer the customers a service they need at a price they can afford and they will keep coming back. Nobody likes a bully. Next thing I know you are going to be coming to my house at night slashing my tires trying to strong-arm anyone who "undersells" you.

 

To my knowledge I have not mocked or insulted a single person on this forum. If you disagree with me that's fine, I'm not asking you to like it, but the way you (and maybe a couple others on this thread) are acting is not beneficial to ANYONE.

Why again are you here as you clearly do not run a business. A name on a truck doesn't make you a repair shop and you just want to debate your so called reasoning for making ignorant business decisions. You trade your time for money, that is not a business, it's a job.

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I apologize, on my part, for any perceived disrespect I have shown towards fellow shop owners on this forum...I can assure you ALL it was not my intention. I have the utmost respect for the multi-bay shop owner and am quite aware of the fact that most of you guys are operating businesses that are on a whole different caliber than mine is at this point.

 

I know I have a LOT to learn (that's why I'm here) and I hope that I can continue to do so through these discussions and the constructive criticism that you guys have for me, but also please keep in mind that in the same way that you don't want your business to be like mine, I may not want a business just like yours either. I am very happy with my business model as it is right now, it suits my needs perfectly. Maybe some day I will be ready to expand my business into a multi-bay brick and mortar shop with employees and the like, but for now that is not my aspiration. My goal is simply to be able to pay my own bills while doing something that I enjoy and providing a needed service to my customers. I say "simply" because that is my whole theme in life right now, I am looking to keep things as simple as possible (if I had my way everyone would go back to ZERO emission horse and buggy transportation! *lol*). I can see that running a multi-bay shop and keeping up with employees (as I am certain all of YOU are aware) is a much more complex and complicated endeavor than my little "one man show" and for that reason I am purposefully avoiding it at this stage in the game.

 

I also want to commend the ASO staff for stepping in and refocusing this conversation away from the direction of non-constructive criticism and personal insults that it was migrating toward. I admire you guy's commitment to excellence in the upkeep and moderation of your forum! Keep up the good work!

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I agree. At the end of the day I have no one to answer to except God, myself, and my customers. ALL the responsibility, ALL the blame, but also ALL the reward falls on me for the quality and amount of work that I put into my business. It can be stressful, but also can be fun and exciting. I wouldn't trade it for any regular "job" in the world, no matter how much the pay was!

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I suppose the real question is what constitutes an auto shop owner? I have seen so very many mobile mechanics and/or back-yard mechanics come and go and for the most part the customers suffer. If all you have is a truck and some tools what kind of customer service and warranties do you offer? What keeps you going when you don't feel like getting up or doing work?

 

For those that have a shop and 14k scanners and a lot of infrastructure we HAVE to ensure we keep our customers happy and our names good.

 

I personally joined this site to get insight from other shop owners that understand what we go through daily not to listen to how it's a better business practice to give parts at cost...

 

I care deeply about my employees, their wife's and kids so when I get undercut by someone who does this as a hobby or doesn't understand how to run a business it bothers e as I'm sure you can tell.

 

I always see different owners talking about how we need to standardize this industry and I completely agree. So it begs the question, how can we work toward that if the opinions or "arguments" as some have suggested can't be worked through?

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I have seen so very many mobile mechanics and/or back-yard mechanics come and go and for the most part the customers suffer.

 

Fair enough. I know the type you're referring to: beer in one hand, wrench in the other..."cash only please". That's not me, though. I try to operate my business with a degree of professionalism that lets the customers know that I am NOT just another backyard mechanic. I have never known a backyard mechanic to purchase liability insurance. I have never known a backyard mechanic to set daily and weekly hours of business and stick to them rigidly....professional uniform, shirt tucked in, coffee in hand, ready to go to work at 8am. I have never known a backyard mechanic to buy subscriptions to professional auto resources such as Mitchell ProDemand and IATN. I have never known a backyard mechanic to remit sales tax to the state government. And I have never known a backyard mechanic to join a business owner specific forum in an effort to IMPROVE the quality of service and professionalism that he has to offer his customers.

 

I can understand your frustration and your reservations about back yard mechanics, but I just want you to know that you have pegged me all wrong. It's true that you and I disagree on the parts markup issue (as do many other shop owners on this thread) which is fine with me. To be fair I wasn't really even arguing that EVERY shop should sell parts at cost or that it's all around better business practice. I only stated my case that I don't mark up parts and that it is a decision I feel very good about. It is working out well for MY business. At this point we will just have to agree to disagree, and perhaps some time in the future when I see the error of my ways I will come back to this thread and give credit where credit is due to all of you who have told me explicitly that not marking up parts is a BAD IDEA.

 

As far as warranties go, I do warranty my work. I value my good name above making an extra dollar. A lot of my customers are actually social acquaintances or past co-workers as well and as such they KNOW ME and they know the degree of integrity that is an integral part of my entire life, not just my business. None of them have to worry that I won't warranty work or won't be here tomorrow. Even if I went out of business tomorrow, if a mistake that I made caused a problem for one of my customers I would endeavor to still make it right; NOT for the sake of my defunct business, but for the sake of my GOOD NAME.

 

Almost all of my daily business is from repeat customers who have been doing business with me from the beginning....some of which recognized the quality of repair work which I have to offer from the five years that I worked at a (now closed) independent repair shop previously and have followed me over and become loyal customers of my current repair business.

 

I extend to you the olive branch of peace. I harbor no ill will toward you. I am open to any and all advice and criticism about my business decisions and practices as long as it remains devoid of personal insults. I have worked very hard to build my business into what it is now, and as others have said: Everybody has to start somewhere.

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  • Have you checked out Joe's Latest Blog?

         0 comments
      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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