gandgautorepair

When I bought my partner out a few years ago, he said it was time to raise our labor rate. Because I lost his customer base, and he was the expert mechanic, I was afraid to raise the rate. I worked my butt off and struggled. I finally got over my fear, and challenged by other shop owners I raised my rates. Nothing happened. So I raised them again. I don't recommend this, but I can tell you what I did and what happened. I ended up raising our labor rate from $89 to $125 in a period of 18 months. Nothing happened. Except I started being profitable. I know I am the highest labor rate in town. The shop across the street, a very good shop, is at $90, we're both very busy. The big difference between me and the owner across the street is that he's the main guy and can't leave, and I don't work in my shop in daily operations and have taken up to a month off at a time. I know this is not recommended, but I ended up not caring what any other shop in town did. I concentrated on giving great service. Besides, if any shop works towards a 60% GP you have to get it somewhere. There is less push back on labor rates (rarely comes up) than there is on parts pricing. BTW, I'm just sharing experience here. We've had lot's of issues to overcome. I found out last year that we were not charging nearly enough on parts compared to other shops, and getting that pricing correct has really helped our profitability. Also, we try to stay comparable by quoting an opening estimate for testing at $98. If we really get pinned down on labor rate we quote our average labor rate, which is 110-115, and we say it's our average rate. Not recommending thus stuff, just saying what we do. Richard G

May was a record breaking month for us in every way. We added another service writer and another tech and needed the month to be good. We over doubled last May, up 110% in gross sales, and nearly tripled GP, up 180%. June was also good compared to last June, gross sales up 50% and GP up 44%. However, with adding a service writer and a tech we need to be up. We are currently booking almost a week out, so I'm very happy we increased staff when we did. We are a relatively new shop, so we've been up every year. I don't expect it will always be this way. Richard G

Very interesting read. I also have been doing inexpensive oil changes, and I consider it to be successful. My shop is in it's 6th year (brand new shop), and we have grown in gross sales an average of 30% a year for the last 4 years. We currently do a semi-synthetic oil change for 29.99, which is 5 qts and filter, including inspection and battery test. Full synthetic is 59.99, 5 qts with a premium filter. Most European is a separate price on an individual basis. Our car count is 250-300, and we've been averaging 100-120 oil changes a month. We average 15% of oil changes are new customers. So far this year we average 17 new customers a week, and the ARO on new customers is higher than the ARO on existing customers. Overall ARO for the last quarter is $454. We have struggled with ARO and GP% but with training, solid goals, and pay plans we seem to have gotten over the hump. I've had interesting discussions about this subject, and seem to be going somewhat against the grain, but I haven't been able to convince myself to change strategy. My goal was to get my existing customers to come to us for routine service, not just try to remember us if they have a problem. Since only 15% of oil changes are new customers I think we've accomplished what was intended. The low oil change price has also attracted new customers, but since most of our new customers come for more than that, it isn't currently a big new acquisition strategy. One thing the oil change price is a part of, and that is developing a good value reputation. We watch closely those things we consider comparables, like oil change, brake job, trans service, and make sure our prices are at or below market average in our area, then charge a good price for everything else. I know we're one of the highest priced shops in town, yet we regularly get good reviews about how reasonable our prices are. Still open to ideas about this, but I'm not currently convinced to change, and it's encouraging to read Anderson's experience.

When we have the occasional customer come in and ask if we will install their own part, we don't argue, we just quote them 150% of our normal labor rate for that part and we tell them that the repair won't come with a warranty. If we provide the part, they will have our Lifetime Warranty on that part, then we quote the job with our normal margins. We don't win them all, but we've had a surprising number of customers let us do the whole job and they return their part for a refund, or we do the job for more labor. Additionally, if any conversation regarding parts pricing gets that far, we explain that our cost to be in business to be there for them is based on margin per hour, and it doesn't matter if that margin comes from parts, labor, or both.