Automotive Labor Guide with ProfitBoost
Labor Guide Integration
Auto repair shops who use Profitboost shop management software have asked for an internal labor guide, With the introduction of our ipad and tablet friendly software “Auto Shop Software by Profitboost” we have partnered with Motors and integrated a cloud Labor guide. No more side by side labor guides, or cut, copy & pasting Labor Times.
Through an integration with Motors labor guide now it’s easier and seamless to look up labor times and make estimates. An integrated solution is probably less costly than having a separate guide for your labor times. Also, no more mistakes, or transposing numbers, your service writer changing the times because of “you fill in the word” a friend, a relative, etc.
Repair shops only sell 2 things, parts and labor, to not get the labor times correct is likely a very costly mistake. Time is very easy to measure, let’s say your shop is open from 7:30am to 5:30pm, 5 days a week, that’s 9 hours a day or 45 hours a week.
Your technicians work 8am to 5pm with an hour for lunch, that’s 40 hours a week. Let’s say your technicians get paid $25.00 per hour, or even if it is a salary you can divide the salary by the hours and get a per hour amount, of if you pay on flagged or billed hour, the same conversation, everything revolves around an hour. So not to maximize the labor guide to get the most billable hours sold is to be blind to half of the opportunity of of being profitable.
The next step to understanding profitability is to compare the hours charged to the car owner and the hours consumed by the technicians, or efficiency. If you use the labor guide properly, assign labor to the technician, and have the technician use the internal time clock, 3 things happen.
- The car owner get charged a fair and correct amount of time to do the repair.
- The technician has a reasonable expectation to meet, and to be compensated for.
- The shop owner has a measurable metric to judge performance, calculate labor rates, and evaluate half of his business.
- The net of using the time clock is that all staff members step up production, and the service writer, technician, and shop owners all benefit, activity and productivity are 2 completely different issues.
Technician efficiency has been reported to be somewhere around 60%. After 15 years selling and setting up software in hundreds of shops I’d agree, I’ve also noticed that owner have all sorts of reasons for poor technician productivity.
The top producing shops usually reach 90% or better efficiency. The difference between breaking even, and being very profitable is a very small amount of increase in technician efficiency. 60% to 90% can mean a $100,000 in profit. So not to use a labor guide, assign labor, measure, monitor, and use management software correctly is a costly mistake.
Technology should be used to help the repair process. By using Ipads and tablets, the technicians have the ability to receive messages from service writers (hey the parts for the Ford are in etc), check TSB’s and look up wiring diagrams right there at the vehicle. When a tech can get their job done quicker it means your shop has more profit potential and a happier customer base (no one likes being without a car for any amount of time)
The ability to send SMS messages to the car owner from inside the software speeds up the whole process, no more waiting to get approval for extra work that your tech find.
Cloud based auto shop management software makes all these once hand written tasks paperless. There is no down side to including the car owner, service writer and technician in the process of repairing a vehicle today. Being transparent creates trust, speeds up the process, and helps to create a reputable business.
Variable Labor Rates
Once upon a time One hourly labor rate would fit all jobs, not today.
Profitboost recognized this after studying job profitability, being fair to the car owner, and comparing what a job can be sold for being fair to the car owner, and at the same time profitable to the shop owner.
Diagnostic rates can and should be one rate, say $150.00 / hour. While Lube, Oil & Filter or maintenance rates may be more fair and competitive at $60.00 / hour. Installing a transmission, rebuilding a transmission, servicing an AC system, aligning a front end, install brake pads, rotating tires, rebuilding a differential or transfer case as compared to just installing a rebuild assembly.
Each Job may and could have a different labor rate based upon skill level and competitive analysis of what a job can sell for in your market. The technician who does Lube Oil Filter work and tire rotations is not the same one who gets all the complicated diagnoses jobs will not be getting paid the same so their time should be charged differently.
The Solution:- Profitboost has allowed for 1 global labor rate, then different labor rates per job types.
Result:- A half hour for diagnostic time can bill out at $75.00 while a half hour LOF can bill out for $30.00. The car owner is treated fairly, the technician is compensated or judged fairly, and the shop owner is compensated fairly, everyone wins.
No more fiddling with your management system to get the job sales price to come out to the amount you have determined to be the right price to charge the car owner, thus skewing production reports and shop data, rendering it useless.
Remember, it all about hours, and hours are alway 60 minutes long, your shop is open 45 hours, your technicians work 40 hours, and the labor guide determines the fair and correct amount of hours to charge for the repair. Don’t fiddle with the hours, use your Profitboost management software correctly. Your data collected will help you to become an informed decision making shop owner based upon facts not feelings.
What Should My Labor Rate Be?
What’s missing in this conversation so far is how do you determine your labor rate ? Competition, dealerships, trade associations, accountant, consultant, dart board. The answer is yes.
Somewhere in all that you’ve determined your hourly labor rate, once that is done then determine the labor rate for more skilled and less skilled jobs, knowing some you’ll have parts profit and some you won’t. The more thought you put into this part of your business the more profit or dollars you’ll put to the bottom line.
Profit Per Hour
Lastly, but most important when talking about Labor, PPH or profit per hour.
There is that all important hour again. Each hour in your business represents dollars, the question is how do you determine what dollar per hour you need to be profitable and how do you translate that to pricing your work. Profit as a percentage is discussed adnossium.
It is mathematically wrong and misleading when trying toi determine or measure profitability. Why, to achieve a determined amount of profit as a percent does not take in account time, or hours. Or more important a shops fixed expense or desired profit. Percentages are used by accountants to compare data from one time period to another, or to compare 2 values to each other, but to be honest has nothing to do with determining profit, remember percentage do take into account, productivity and production, the 2 most important metric that need measured, monitored and studied.