bstewart

This is exactly what I was talking about in this thread: http://www.autoshopowner.com/topic/9381-labor-margin-vs-parts-margin/ I believe this is where the future of the industry should be headed.

http://www.ratchetandwrench.com/RatchetWrench/December-2013/Make-Fleet-Service-a-Valuable-Addition-to-Your-Shop/ http://www.ratchetandwrench.com/RatchetWrench/April-2014/Transitioning-Away-from-Fleet/

Don't forget that when you purchase parts from the dealer and resell them to your customers, you are adding your warranty to that part, plus your time to source the parts, and your tech's time to inspect said parts once they arrive. All that has to be integrated into your pricing to be profitable. That being said, I believe that matrix will yield close to 45% GPM average on your dealer sourced parts, which I agree is probably too high to compete. Look at tweaking the matrix, especially in the $25-75 and $75-500 ranges, or even create your own cost ranges. (I personally think $75-500 is too wide of a range) Don't forget that it's just a guideline, not anything set in stone. Also don't forget that you should be constantly looking at and tweaking your matrices to make sure you're hitting your GPM targets, it's not a "set it and forget it" solution! You say you get 5-20% GPM on your parts, say 15% average. Find out what would it take to be profitable and still competitive. 25%? 30%? Just make small changes until you're hitting your desired GPM. Also, if you buy a lot of parts from the dealer, consider asking to get your account on a better pricing level. Even a couple percent difference can be a big help.

Coolant should be basic (alkaline) as it resists acid from building up in the system. AFAIK, it should be 9.5-10.5 pH, below 9 should be changed, below 8.3 will cause damage to the water pump, seals, rad tubes etc. For long life coolant, I don't know of a test strip. The dealership I work at uses a refractometer to check long life coolant.

I'm impressed, it looks fairly professional, and not too cookie-cutter either. Stay on top of your blog (weekly is good), that will do wonders for your SEO, since websites that are updated more often get higher SEO results. I'm not an SEO guru but there are resources out there that will help a lot. Other then that, you might consider paying for a company to manage your SEO since it's probably the most important thing about your website that it be on the top page of someone's search results.

What about something like the Bosch Service credit card, or a GE CarCareOne card? 6-12 month no interest financing. I don't really know how they work, seeing as they aren't offered in Canada (I wish!), but it might be something to look into. EDIT: NAPA offers this in the US as well. Just not Canada haha.

Care to elaborate on this? I've heard it before, but haven't had someone describe what the problem actually is. Has anyone contacted Mitchell about fixing the problem(s)? I can't see a big company like Mitchell not fixing issues with their system.

Just like the title says: What are some of the software add-ons or features that you couldn't live without? Now I'm not talking about which shop management software you recommend, as that has been debated just about everywhere. I'm talking about add-ons like Bolt On Technologies, Repair Shop Solutions, Auto Vitals etc. OR a unique feature of your SMS that makes your life way easier! Even subscriptions such as iATN, MotoLogic, etc or even something like AutoNet TV. I want to know what works for you, and even what doesn't!

I'm curious as to why your planning on switching away from Mitchell1? It's quite frustrating that most of the good software packages only work with the biggies: Mitchell1, ROWriter or Alldata Manage, and maybe a select few more (Bolt On also works with TASCO, one that I had never heard of). Shop owners who want good add-ons get pigeon holed into picking a certain shop management software suite.

As for selling a recommendation that needs to be done in the future: Why not actually book the work into your schedule right now? If something needs to be done at their next service, book it in anyways, that way they can't wiggle their way out of it easily. From what I read, and know about people, men like to know what work that can be put off until the future, while women generally want a safe vehicle now. With a man, telling him that something could wait until his next service might just sell that job, plus maybe another one on this service that he thought he couldn't afford. With a woman, it might work the opposite, you might tell her that it could wait until her next service, and she might ask for it to be done now, just so she has a safe vehicle and peace of mind. Like I said, CCW looks to be a great product for the price range, and it's not that hard to snap a photo on your digital camera, smartphone or tablet. While I agree about your soccer mom with brake pads, what about showing that same soccer mom a picture of a seeping shock absorber, a valve cover gasket that's just starting to leak onto her exhaust manifold, or a fluid comparison between her dirty transmission fluid with some nice clean ATF? I'm a firm believer of the "seeing is believing" mantra. I always like to hear a good shop story, seeing as we've all got one and no two are alike. Some have a happier ending then others, and some like mine are just in the opening chapters. I hope you find time to write about your toils. It sounds like you've got a really good thing going.

Do you use a "show and educate" method of sales, where you use visual aids and have your service adviser act as a teacher? (Fluid comparison trays and cutaway displays are two perfect examples of this) http://www.customerlink.com/best-auto-repair-sales-technique-show-dont-tell/ http://www.ratchetandwrench.com/RatchetWrench/October-2013/Improving-Shop-Closing-Ratios/ http://www.motor.com/article.asp?article_ID=1970 http://www.motor.com/article.asp?article_ID=1657 http://displaysinmotioninc.com/ I'm a little surprised that you're using a no-frills software package, every time I read one of your posts I get the impression that you are a "top tier" service shop, so I wouldn't think you'd be using a low-end package like that. I don't like the no pictures thing either, but that's a great price for maybe a smaller shop with only a couple employees. Keep us posted on the Auto Vitals thing, it seems like it would be overkill for a lot of even mid sized shops (on features and price), but great for the larger shop that really needs to keep the workflow moving quickly. For a small to mid sized shop, I like the look of Repair Shop Solutions and Bolt on Technology's software packages. They don't do as much as Auto Vitals I think, but would still be very powerful tools for the price.

I can't find where I've seen the numbers, but I've read that a good/great service adviser will be able to sell about 30-40% of your recommendations. I've also read a study that said a great service adviser can only sell a maximum of $3k per day or $15k per week (using a national average shop rate of $82) or the equivalent of about 35 times your shop rate. There just isn't enough time in a day to effectively sell more then that, according to the evidence. Using your numbers, if the base is 10k, then add 30-40% of 95k (28.5k-38k), then good service advisers would be able to sell 38.5k-48k per week, but it would require 2.5-3 good service advisers to do so. PS. How much does that courtesycheckwizard.com program cost? It looks like a nice system, minus the fact that it has to be on a computer/laptop. No tablet/smartphones, which IMO is a biggie...

Interesting topic. Are you referring to your employees, or your customers who see something on a screen? No customer should ever see any of your profit numbers, period. This goes for any business. If they do by accident, and make a fuss, explain to them some of your expenses and compare to some other industries (clothing or electronics for example) which have much higher profit margins. If an employee purposefully shows a customer your profit numbers, this is a major breach of confidentiality so have a stern conversation with them that profit numbers are strictly confidential. If it continues, you might have to discipline or terminate that employee as it can undermine your customer relations. As for your employees, I believe that you SHOULD show them your profitability, so they understand what they need to do on a daily basis to meet your profitability goals. This goes hand in hand with setting goals for your workers, and giving them bonuses (not necessarily money, either) for meeting or exceeding those goals. Just make sure that they know that your numbers are strictly confidential.

IMO, I don't feel that flat rate is the best option to do "pay for production". 1. During slow times, your employees don't get a good paycheque. This can be very stressful and lower their efficiency even more. 2. It can also be stressful for workers because some jobs simply take full book time or longer, while some jobs can be finished in much less then book time. If an individual gets a string of "bad" jobs, they might get frustrated and feel that there is favoritism occurring. 3. It encourages workers to finish jobs faster just to get them out the door, with less regard to mistakes or doing a thorough job. I feel that "hourly plus efficiency bonus" is a far better method to achieving "pay for production". 1. Your workers know what their hourly base pay is on (very) slow weeks, which can and do happen. 2. Because their pay isn't 100% based on production, it reduces the fighting over who gets the "easy" jobs. 3. Because it's hourly plus bonus, there is less incentive for your workers to rush jobs out, reducing the chance of mistakes and comebacks. You can also make your bonus contingent on having 0 comebacks that week. http://www.ratchetandwrench.com/RatchetWrench/June-2014/Finding-a-Better-Payment-Model/ http://www.ratchetandwrench.com/RatchetWrench/April-2014/Selecting-a-Technician-Pay-Plan/ http://www.autosphere.ca/carcarebusiness/2014/05/21/review-entire-shop-wages/ There's tons more resources available showing you how to set up an hourly + bonus pay structure.

I was unaware that NAPA Tracs was an "economy" system. I thought I read somewhere that it was around $8-10k compared to ROWriter being 12k or something like that?

What were the two economy systems?

What does a product like that cost? A monthly fee I presume?

This is extremely important. Many accountants do not understand this business. They will say you always need to "reduce your expenses" and they will include your labour as one of those expenses. In this business, your labour is the ONLY thing that truly makes you money, with no labour, there would be no parts sales, and no business. Your labour is your biggest asset! If you have an accountant that tells you to reduce your labour expense, fire them and find an accountant that understands this industry.

Right on, it's always good to see real world numbers, and be able to compare apples to apples, something most people don't do. As for the Edmonton Symphony Orchestra, it's not my style of music so I've never seen them, but I hear that it's world renowned, so that's quite impressive. Small world indeed.

I don't understand how those tech schools can qualify their students as "graduates" if they have very little hands on experience. Training apprentices is one area that Canada actually does very well in. You become an apprentice (and can have zero skills), then you need 1500 hours per year for 4 years of hands on experience, plus each year you go to 2 months of technical training. Each year, you earn a minimum percentage of your shop's journeyman pay rate (55% for 1st year, then 70%, 80%, 90% in the 4th year) Once you finish your 4 years, you become a journeyman technician, which I would correspond to a step or two below an ASE master tech. We don't have a master tech program up here, you just become a better journeyman technician with more experience. I'd honestly like to see Canada do a master program for techs with maybe 10 years of experience. As you can see though, the real key is the 1500 hours per year of hands on training. I don't know how you could expect someone with very little hands on training to be certified by a tech school like UTI etc.

This is currently being discussed in this thread: http://www.autoshopowner.com/topic/9540-effective-labor-rate/ since the formula you are going to track is actually technician productivity. Tech productivity = Hours billed / Hours available Industry standard for productivity nowadays is 110% or more (bill about 9 hours in an 8 hour day), however most independent shops across North America are hovering below 70%, and many are actually around 55%, or half of what you need to be a profitable shop! Productivity, more then any other key performance indicator (KPI), DIRECTLY translates into profit! High productivity = high profits, low productivity = low profits! You should also consider tracking tech efficiency: Tech efficiency = Hours billed / Actual hours it took to complete the jobs Efficiency is a better measure of how good your techs are (tech skill and motivation), while productivity also factors in many other things, like shop layout, front counter processes, tooling etc. To track efficiency you also need to track lost time (all the hours your techs spend doing non-revenue generating tasks, such as sweeping, cleaning, tool repair, shuttling customers, picking up parts, waiting for the next job etc) because: Actual hours = Available hours - lost time hours Ideally, lost time hours would be 0, but this is unrealistic. It needs to be tracked so you can minimize it each week, and it helps you find and fix problems in your work flow processes. You can have high tech efficiency (great techs), but have low productivity, which will still translate to low profits, if your techs just don't have enough work to do, or you don't have a service adviser, or your front counter processes are lacking. On the other hand, if you have low efficiency (weak techs), I'd be surprised if you could attain a truly high productivity. If you're looking to pay bonuses, try to look at efficiency for your tech's bonuses, and productivity + profit margins + gross sales for your service adviser and shop foremen/managers.

There is multiple ways to calculate just about anything. I found your formula in a dealers edge magazine article, so it could apply to independent shops as well. Here is another article from 2004 that shows 2 methods of calculating effective labour rate, but focus on Table 2, not Table 1 which is for hourly. http://www.motor.com/magazine/pdfs/112004_07.pdf As a side note, this article uses 138% (bill 11 hours per 8 hour day) as a benchmark, which is somewhat unattainable. Future articles do not use the 135% standard, they go back to 113%. I think the best idea would be to find a formula that you like, and works for your situation. Hourly and flat rate require different formulas.

The figures are dated, but the formulas are still the same. The book actually used $65 as an example labour rate, far below most shops nowadays. The 110% productivity standard is from other recent (2012+) sources. At the time of the book's printing, it called for 100% productivity. Here is an article from 2012 that uses 113% productivity as it's example (9 / 8 = 112.5%). http://www.motor.com/magazine/pdfs/022012_10.pdf

Mitch Schneider's book, Managing Dollars with Sense, gives a perfect layout of exactly what you're talking about here. The formula is this: Productivity = Billed hours / hours available to work (Example: 34.8 billed / 40 hours per week = .87 or 87%) Average Shop Productivity = Sum of billed hours / Sum of total hours for all techs (Example for 3 techs: (26 + 34 + 44) / (40 + 40 + 40) = 104 / 120 = .87 or 87% Effective Labour Rate = Labour Rate x Average Shop Productivity (Example: $95 x 87% = $82.65) These number will fluctuate daily, even hourly. So yes, what you heard is correct, 90% is a good average shop productivity, compared to the majority of independent shops which are below 70%. Many shops are actually closer to 55% according to the book - can you survive on barely more then HALF of your labour rate??? ($95 x 55% = $52.25) Productivity = Profits, plain and simple! Industry standard from what I've read, is 110% nowadays (average 9 hours billed in an 8 hour day per tech) to have a truly profitable shop. The book outlines multiple methods for you to figure out what you should set your labour pricing at based on your shop's numbers, rather then basing off other shop rates in your area. As for increasing productivity, you need good techs, but also good front counter processes (efficiency is purely on the tech's shoulders, but productivity has just as much to do with your service writer, shop layout, tooling etc) I don't think cutting hours paid for certain jobs actually pertains to this calculation, nor would I feel this would be the morally right thing to do to try to be more profitable. (Profitability should be win-win for your shop and your techs) Raising labour rates on menu items would have the desired effect (higher labour rate for that job), but I strongly believe that improving productivity would have a far more drastic effect then raising pricing on certain jobs, as it would apply to every tech and every RO.

If you have a lot of unused storage/warehouse space, I would definitely consider something like you are suggesting. You are paying for every square foot of space, so you might as well use it to make money, even if it's only $5-10/month for a set of tires to sit there. You can also think of it this way, you now are in possession of your customers tires, so you are GUARANTEED that he's going to come back to you at some point in time. When you change his tires over (maybe for free, included in the storage fee), feel free to give your customer's car a courtesy inspection and make some recommendations. What would that kind of customer retention be worth? I'd say a lot more then the hassle of having a stack of tires in a corner.