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By Joe Marconi in Joe's Blog0 commentsAuto 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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By Joe Marconi
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By carmcapriotto
Raising labor rates is not just about increasing prices. It's about finding more value in the industry and positioning ourselves as professionals. Join our panel as they highlight the need for understanding the concept of effective labor rate, ensuring services are charged appropriately, viewing the business as a professional entity, providing a positive customer experience and addressing core business problems before raising labor rates. Our panelists encourage shop owners to take a comprehensive approach to their business strategy, considering all factors and not just focusing on raising labor rates. Aaron Woods, X-tra Mile Auto Care, Stillwater, OK. Institute for Automotive Business Excellence. Listen to Aaron’s previous episodes HERE Brent Fleischman, Yocum Automotive, Republic, MO. AutoFix Auto Shop Coaching. Listen to Brent's previous episodes HERE Jennifer Hulbert, Service Plus Automotive, Calcium, NY. Institute for Automotive Business Excellence. Listen to Jennifer's previous episodes HERE Show Notes:
Raising Labor Rates: Importance and Impact (00:00:01) Discussion on the reasons to raise labor rates, the impact it can have on a business, and the need for a long-term strategy. Factors to Consider Besides Labor Rate (00:04:14) Exploration of other factors that contribute to a business's success, such as overall business strategy and addressing pain points. Calculating Effective Labor Rate (00:07:34) Importance of understanding and calculating effective labor rate, including the need to charge appropriately for all services provided. The mindset shift and the need to raise labor rates (00:08:33) Discussion on the importance of raising labor rates and positioning the industry as valuable and professional. The impact of undervaluing the industry (00:09:52) The negative effects of undervaluing the automotive industry, including difficulty in attracting technicians and obtaining loans. The bottom line and approaching the business as a business (00:12:10) The importance of considering the bottom line and treating the automotive business as a professional enterprise rather than a hobby. The importance of customer experience (00:17:59) Discussion on how people buy feelings and the need to focus on providing a positive experience in the automotive industry. Sharing new labor rates with the team (00:18:39) Importance of communicating labor rate changes to the team and how it helps maintain profit structure and make investments. Effective labor rate and its impact (00:19:03) Exploration of effective labor rate, its calculation, and the need to consider menu jobs and their effect on gross profit dollars per hour. The importance of personnel and procedural issues (00:27:40) Discussion on identifying whether the problem lies with personnel or procedural issues in a shop and the need to align the shop's mission and vision statements with its culture. Addressing cultural issues and offering training (00:28:50) Exploration of the top-down approach in addressing cultural issues, identifying personalities, offering training, and monitoring staff to create long-term relationships with customers. Considerations before raising labor rates (00:30:07) Importance of analyzing gross profit percentages, solving core problems, and focusing on profitability and core processes before considering raising labor rates.
Thanks to our Partners Shop-Ware and Delphi Technologies Shop-Ware: More Time. More Profit. Shop-Ware Shop Management https://getshopware.com/ Delphi Technologies: Keeping current on the latest vehicle systems and how to repair them is a must for today’s technicians. http://DelphiAftermarket.com Connect with the Podcast -Follow on Facebook: https://www.facebook.com/RemarkableResultsRadioPodcast/ -Follow on LinkedIn: https://www.linkedin.com/in/carmcapriotto/ -Follow on Instagram: https://www.instagram.com/remarkableresultsradiopodcast/ -Follow on Twitter: https://twitter.com/RResultsBiz -Join our Insider List: https://remarkableresults.biz/insider -All books mentioned on our podcasts: https://remarkableresults.biz/books -Our Classroom page for personal or team learning: https://remarkableresults.biz/classroom -Buy Me a Coffee: https://www.buymeacoffee.com/carm -The Aftermarket Radio Network: https://aftermarketradionetwork.com -Special episode collections: https://remarkableresults.biz/collections
Click to go to the Podcast on Remarkable Results Radio
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By carmcapriotto
Meg Lewis, BJ’s Automotive Diagnostic Center, Belfast, ME, NAPA Auto Care Technician of the Year 2022. Carm and Meg discuss the shop's transition to a four-day workweek to promote work-life balance, the challenges of finding and retaining skilled technicians. Meg shares her experience as a female technician. They also discuss the need to change the perception of the automotive industry and attract more women. The episode concludes with a discussion on succession planning and the shop's community involvement
The decision to move to a four-day workweek (00:03:14) Meg discusses the idea of transitioning to a four-day workweek and the process of deciding which day to take off. The role of a diagnostician as a technology specialist (00:07:55) Carm suggests renaming the role of a diagnostician to a technology specialist, highlighting the importance of technology in automotive diagnostics. The collaboration between a technology specialist and a mechanical specialist (00:08:48) Carm and Meg discuss the complementary roles of a technology specialist and a mechanical specialist in automotive repair and the importance of their collaboration. Challenges with staffing during COVID-19 (00:10:02) The impact of COVID-19 on staffing, including layoffs, struggles to find new technicians, and the use of apprenticeship programs. The decision to pursue automotive technology (00:17:36) Meg discusses her early interest in working with cars and her decision to pursue automotive technology in high school and college. The importance of attracting more women to the automotive industry (00:18:09) Carm suggests changing the perception of the industry and highlights the unique traits that women can bring to the workplace. Overcoming physical challenges as a female technician (00:19:31) Meg talks about how she adapts and finds creative solutions to overcome physical challenges in her work as a female technician. Importance of communication in internal succession (00:27:14) The significance of regular and effective communication between the owner and the successor in a business's internal succession process. 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
Connect with the Podcast:
-Follow on Facebook: https://www.facebook.com/RemarkableResultsRadioPodcast/ -Follow on LinkedIn: https://www.linkedin.com/in/carmcapriotto/ -Follow on Instagram: https://www.instagram.com/remarkableresultsradiopodcast/ -Follow on Twitter: https://twitter.com/RResultsBiz
-Join our Insider List: https://remarkableresults.biz/insider
-All books mentioned on our podcasts: https://remarkableresults.biz/books
-Our Classroom page for personal or team learning: https://remarkableresults.biz/classroom
-Buy Me a Coffee: https://www.buymeacoffee.com/carm
-The Aftermarket Radio Network: https://aftermarketradionetwork.com
-Special episode collections: https://remarkableresults.biz/collections
Click to go to the Podcast on Remarkable Results Radio
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By carmcapriotto
Hunt explores the crucial differences between shop management software and QuickBooks, focusing on the impact on parts margin. This episode is a must-listen for shop owners and financial managers seeking clarity and efficiency in their business operations.
• Dual Bookkeeping Explained: Unravel the reasons behind running two sets of books and its effect on your financials.
• Real-Life Client Case: Learn from a client's experience with discrepancies in parts margin between shop management systems and QuickBooks.
• Strategies for Financial Accuracy: Gain insights into aligning financial data across platforms for precise tracking and profitability.
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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By Transmission Repair
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