Why Auto Repair Shops Need a Labor Guide to Maximize Revenue

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April 7, 2023

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Read time: 3 min

Your auto repair labor revenue and parts margins are critical for enhancing your shop’s profitability. Adjusting your pricing on parts to make a profit is pretty straightforward.

But when it comes to labor times for auto repair shops…that’s where things can get a bit tricky. 

Yes, you need competitive labor rates, but you also need to keep those rates reasonable so you don’t scare off your customers with sky-high prices. 

3 ways your shop can make more money on labor: 

  1. By using a labor matrix 
  2. By creating custom labor rates 
  3. By applying a labor guide markup 

Before we dive into the differences between these three methods for setting the best labor times at your shop, here’s a quick refresher on the one thing these methods have in common: the labor guide

What is a Labor Guide? 

A labor guide is like the gospel of labor times for auto repair shops. It tells you how long, on average, it takes to complete different types of repair work.

Remember that the times listed in auto repair labor guides are averages, so it’s best to treat them as a starting point.

Factors That Can Affect Labor Times for Auto Repair Shops 

Let’s take a look at some of the factors to consider when determining how much to mark up (or mark down) your shop’s labor rates. 

1. Age of Vehicle

Older vehicles are often trickier to fix, especially because finding parts for them can require a time-consuming hunt across parts suppliers. You can make up for the time spent hunting down uncommon parts by charging more for all repairs involving vehicles over a certain age. 

2. Geographic Location

Some areas lead to different types of repair challenges that can affect the time it takes for repairs.

For example, shops in Syracuse, New York—the snowiest city in America—might find themselves working with cars that have rust, which can significantly add to the time it takes to remove or even clean certain parts. 

3. Experience of Technician

Chances are, you’re already paying experienced technicians a higher base salary or hourly rate.

However, certain situations might call for cranking up those numbers, like if you really need to put their skills to the test for a tricky repair for a client who wants it done ASAP. 

4. Customer Needs

You can offer customers who need their cars back fast a “Pro Tech” rate, where your tech wraps up the job in record time.

When you’re asking techs to complete a job faster than the time on the labor guide, and still do a good job, the customer is getting special service. Be sure to let customers know that speediness comes with a surcharge. 

5. Relationship with Customers

It’s a good idea to consider giving loyal customers a special rate as a token of appreciation.

With that said, industry leaders advise sticking to your labor rates as much as possible, because if it becomes a habit, you risk financially harming your business. 

How to Choose a Reliable Labor Guide 

A reliable auto repair labor guide is foundational for your shop when you’re setting labor rates, so you’ll want to use a labor guide that stays up-to-date with the latest labor times in the industry.

Just like many people use online directories instead of the Yellow Pages, many auto repair shops use digital labor guides that are constantly updated with the latest labor times. 

When seeking out a digital labor guide, look for one that: 

  • Offers consistent, comprehensive data on labor times from industry leaders, so you can set accurate labor rates that will keep your shop profitable 
  • Adds labor times for new vehicles and jobs periodically, so your shop’s pricing can stay competitive 
  • Integrates with your auto repair shop management software, so you don’t have to dig through multiple systems
👉 Ready to grow your automotive business? [Book a personalized Tekmetric Demo Here]

FAQ

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See how your shop stacks up against thousands of auto repair shops nationwide

You track your ARO. Maybe you watch your car count week over week. You know when a month is good and when it's below par.

But here's a question most shop owners can't answer quickly: Compared to shops like yours, are your numbers strong, average, or quietly underperforming?

There's a real difference between a number that's improving and a number that's competitive. A shop can grow ARO year over year and still be well below what high-performing shops are seeing in their market. Without an external reference point, you don't know which situation you're in.

That's the problem benchmarking solves, and it's the reason the data matters more than the direction.

Internal Tracking Tells You the Trend. Benchmarking Tells You the Truth.

Internal performance tracking is essential. If you don't know your ARO, car count, parts margin, and effective labor rate, you're managing without the most basic tools. But internal tracking has a structural limitation: it can only tell you how you're doing relative to your own history.

That's useful for spotting momentum — a rising ARO, a growing car count, tighter parts margin. What it can't tell you is whether your baseline is strong or weak relative to the market.

A shop with a $580 ARO that has grown from $520 over two years has made real progress. But if top-performing shops in their region are averaging significantly higher, that progress hasn't closed the competitive gap. It's just moved in the right direction.

The fix isn't to stop internal tracking. It's to add an external benchmark so you know what the target actually looks like.

➡ See how your ARO compares →

The Problem With Benchmarking From Anecdotes

Many shop owners get their benchmarks the informal way: conversations with peers at trade shows, numbers shared in coaching groups, or revenue figures posted in forums. These have real value, but they're also limited.

Self-reported numbers skew high (people share their wins). Peer groups are small samples. Industry averages from trade associations are often lagged and lack the granularity you need to compare fairly — a six-bay shop in a suburban market shouldn't be benchmarking against national averages that include dealership-adjacent shops in metro areas.

The more useful comparison is data drawn from shops operating in similar conditions, at similar scale, tracked in a consistent and anonymized way.

What Good Benchmarking Actually Looks Like

Effective benchmarking for an auto repair shop compares you on the four metrics that most directly drive profitability:

  • ARO: Are you getting full value from each car that comes through your door?
  • Car count: Is your volume where it needs to be to support your revenue goals?
  • Parts margin: Are you protecting margin as supplier costs fluctuate?
  • Effective labor rate: Is your real revenue per labor hour aligned with your posted rate?

Each of these metrics has a different lever. If your ARO is lagging, the fix usually involves inspection completion rates or customer communication. If your car count is stagnant, the issue is typically acquisition or retention. If your parts margin is eroding, your pricing matrix needs a look. If your effective labor rate is low, it's often a discounting or packaging problem.

Benchmarking tells you which problem to solve first. That's valuable when you have limited time and you're trying to prioritize.

How the Tekmetric Shop Index Works

The Tekmetric Shop Index is a free benchmarking tool built from data collected across more than 12,000 auto repair shops. Enter your shop's metrics and get an instant comparison showing where you stand on each of the four key measures. No Tekmetric account is required. Anyone can use it.

The output isn't a vague grade — it shows you where each metric ranks and gives you a clear picture of where the gap is largest. That's the signal that tells you where to focus first.

➡ Benchmark your shop now →

What to Do After You See Your Rankings

The benchmarking data is the starting point, not the finish line. Once you know which metric is your biggest gap, you can start asking the right questions:

  • If ARO is lagging: How consistently are your technicians completing and sending digital vehicle inspections (DVIs)? Are customers seeing and approving the recommended work?
  • If car count is flat: Are you actively pursuing new customers? Are return visit intervals optimized? Are declined jobs being followed up?
  • If parts margin is soft: When did you last review your parts pricing matrix? Is it adjusting for recent cost increases from your vendors?
  • If the effective labor rate is low: Are service writers building jobs accurately? Are discounts being applied consistently or inconsistently?

Each of these questions points toward a workflow, and Tekmetric's reporting is built to surface the answers at the job, technician, and service writer level. But even before you get to that step, knowing which question to ask is most of the work.

➡ Benchmark your shop now →

The Shops Getting This Right

High-performing shops don't treat benchmarking as a one-time exercise. They check their rankings periodically, track how their numbers shift against the industry baseline, and use the comparison to coach their teams with context.

"You're at 85% DVI completion" is a data point. "You're at 85% completion, and top shops are at 95%" is a coaching conversation with direction.

"Seeing them take the shift to Tekmetric and then grow profitability in the same four walls has been phenomenal. Some of them are just exponential."  — Matt Schwab, Clutch Automotive, Tekmetric Customer

Takeaways

  • Internal tracking shows you direction; benchmarking shows you position.
  • The four metrics — ARO, car count, parts margin, effective labor rate — are the right comparison points.
  • Good benchmarking data is consistent, anonymized, and drawn from shops with similar operating profiles.
  • The TSI tool is free, built from more than 12,000 shops, and gives you an instant read on where your gaps are largest.
  • Your benchmark result tells you which lever to pull first — and that's where the work starts.

Once you know your gaps, the next step is building a system to close them.

➡ Benchmark your shop now →

There are many reasons you might want to sell your auto repair shop.

You might be ready for another venture; you might be trying to fund your retirement; or you might just be curious about the value of your business if you do decide to sell. 

Whether you're actively in the market to sell your shop, or you just want to know how to value an automotive repair shop just in case, you’ve come to the right place.

How to value your auto repair shop

The industry standard for establishing a sale price for an automotive repair business is to use total owner benefit (TOB) multiplied by four (or TOBx4).

So, if you took home an average of $50,000 a year for the past three years, the price of your business will likely be valued around $200,000. Keep in mind this TOB value does not include property value.

For those who are reading this with the hopes of selling in the near future, that valuation method might seem low to you. And it is.

The good news is that you can go above and beyond the industry standard, and sell your shop for a higher value, if you stay on top of your numbers.

Not only will diligent reporting and good customer service increase your TOB, but you’ll also have more leverage when negotiating offers from buyers.

Here are three steps you can take to improve the valuation of your business and secure the money that you worked hard to earn. 

How to Sell an Auto Repair Business (3 Step Guide)

June 14, 2023

Read time: 3 min

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If you take away anything this month, it's that the Tekmetric Mobile app is now yours! We’re thrilled to have launched this across iOS and Android to make your techs’ lives easier, cutting their inspection time in half. As well, it delivers increased customer trust, ultimately driving up your bottom line. 

Other top release highlights include improving the efficiency of Smart Jobs, adding fresh permission settings for increased financial control, speeding up the process of finding parts across your inventory, and making the 10DLC registration process simpler.

If you’re using Tekmessage, please complete your 10DLC registration ASAP.

Starting December 1st, this requirement will be enforced. 

Save Time and Drive More Revenue With The Tekmetric Mobile App 

Perform inspections from any mobile device, complete with photos and videos, building customer trust and increasing job approval. Tekmetric customers using it today have seen their inspection times cut in half. As well, shops that share digital vehicle inspections (DVIs) with their customers, see an average increase of $15k in revenue per month.  With real-time synchronization your team stays coordinated, whether they're under a vehicle or discussing repairs with customers at the front desk.

 

 

Who’s this for?: All customers

Download Today!

App Store   Google Play Store

Learn more about the Tekmetric Mobile App

Reduce Manual Tasks with Smart Jobs 

Minimize the impact of time consuming tasks with these enhancements to our Smart Jobs feature. 

Have you ever built a job using Smart Jobs, only to realize you accidentally selected the wrong part? Now you can instantly search PartsTech again without leaving your current job screen - ensuring you always quote the right part at the right price for your customer. 

Oil changes are a necessary maintenance to keep any car running. So, it’s no wonder that repair shops offer oil change promotions to get new customers in the door. These promotions are usually for the standard 5 quarts, but what happens when a customer’s car requires extra oil? Smart Jobs will automatically calculate the adjusted price for the extra oil and add it to the estimate. This means no more hassling with a calculator to calculate the additional price tag. Smart jobs will simply provide clear and accurate estimates every time. 

Who’s this for?: All Customers  

Learn more about Charging for extra oil    Learn more about recalling PartsTech on a Smart Job

Register Your Tekmessage Number With 10DLC ASAP 

Starting December 1st, 10DLC registration will be required for all businesses using 10 digit phone numbers for application-to-person (A2P) messaging. This requirement will impact all customers using Tekmessage. So, we’ve made it easy for you to complete this registration in-platform. This process should take no more than 10 minutes and can be done from the Tekmessage Integration Card on the integrations page. 

To ensure your service is not interrupted, please be sure to check your status and complete your enrollment ASAP. The approval process typically takes 2 to 3 weeks. Learn more about 10DLC and how to do this here.

Who’s this for?: All customers using Tekmessage.  

Learn More 

Manage Fees Across Multiple Locations

Ensuring shop fees are consistent across all of your locations is critical, especially for maintaining customer trust. This process is now easier than ever to manage using the Multi-Shop dashboard. You can create new fees, edit existing fees, and delete fees across all of your locations. Need to maintain shop-specific pricing? No problem. Individual shops can manage their unique pricing details without impacting universal pricing. 

Who’s this for?: All customers with the Multi-Shop add-on. 

Learn More Here  

Control Permissions for Accounts Receivable 

We heard you when it comes to wanting more control over your finances in Tekmetric, especially for those with lots of employees accessing the platform. Within the payments permission, there’s a new sub-permission for engaging with accounts receivable. By checking this box, the employee will have the ability to send repair orders to accounts receivable. 

Tip: This will default to “on” for newly created shop owners and shop admins. If you had employees with the payments permission “on” at the time of the release (10/28/24), this sub-permission was defaulted to “on”. 

Who’s this for?: All customers. 

Learn More Here

View Inventory Across All Your Locations From One Place 

Locating parts across your network can be extremely cumbersome, especially if you have to hop in and out of shop views. Your Multi-Shop account now brings inventory from all your locations into a single view, saving you time & getting your team back to work quickly. Filter by shop, status, and part type to find what you need in a snap. 

Who’s this for?: All customers who have the Multi-Shop add on.

Learn More Here

Tekmetric's October 2024 Product Rundown

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