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:
By using a labor matrix
By creating custom labor rates
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
“If you are interested in picking up a new hobby like boating, you’ll do everything you can to learn more and more and more. Why can’t you do that with your auto repair shop?
Is it because it’s boring?
Is it because it’s not the same?
It doesn’t excite you as much as your hobby would?
If you take a second and stop to think, you’ll realize you can have any hobby in the world if you focus on your repair shop and get it to where it needs to be.
There is no waiting for the right person to walk through the door. There is no waiting for the right technician."
"It has to happen right now, today."
Tekmetric Co-CEO and Co-Founder Sunil Patel recently joined Kelsey Outram on the LIFT Your Shop Podcast to talk tech, mentorship, and transforming your auto repair business.
From medical school to law enforcement, Sunil tried his hand at a variety of fields over the years, but eventually all roads led him to founding Tekmetric with Prasanth Chilukuri in 2016.
Tekmetric quickly became the preferred shop management system in the auto repair industry.
And if you ask Sunil why, he’ll say it’s all about mindset.
If you’re a shop owner who has been feeling stuck, here are six steps you can take to shift gears.
1. Define Your Goals
“When you really set your mind to something, it subconsciously changes how you behave as a human, as a person. And you hone in on what you’re trying to accomplish and you accomplish that task.”
Here are some examples of goals you might hear people talk about in the auto repair industry:
“I want to make one million dollars in revenue this year."
“I would like to add another bay to the shop by the end of the year."
“I want to open another location in 2023.”
What do these goals all have in common? They are specific, achievable, and easy to track.
In the same way that it’s difficult to plan a vacation without having a travel destination in mind, it’s difficult to achieve a goal if you never set one in the first place.
Knowing where you want to go is the first step toward figuring out a roadmap to get there.
2. Accept That Change is Part of the Process
“Forget about the technology and software and all that for a moment, and ask yourself this: Are you happy with where you are today running your shop? And if the answer is no, then dig deeper.”
Whether your shop is looking to switch parts suppliers or invest in a new shop management system, change can be intimidating.
Many shops experience growing pains, but keeping an open mind is essential to driving your business forward.
When thinking about how to run an auto repair shop, we might start by thinking about a well-managed football team. The different players know what they’re responsible for, show up to accomplish their jobs, put their best effort into everything they do, and perform their best as a team. Players have each others’ backs both on the field and off the field. They can think on the fly, and move as a unit toward the end zone.
How do your players work together? When mechanic shops assemble the right team, devise the right strategy, and run the right plays, they can win, too. Service advisors can stay informed about what’s going on with every repair order at any given moment in time, switch easily between tasks even when the shop is busy, and provide excellent customer service. Technicians are able to focus on their work and spend more time turning wrenches. And customers? They’ll get their cars back fast and drive away with a good impression of your shop.
Shop owners who think more deeply about how to manage a mechanic shop are rewarded for their efforts. Well-managed shops see exponential returns. Stellar team performance leads to customer satisfaction and repeat business. The more successful your shop, the more you can invest back into your team, continuing the cycle of success for all involved.
Building a startup takes time, effort, and a lot of determination. You and your team have invested in a great idea, and everyone works diligently to bring new team members, investors, and customers on board. However, the process doesn’t end once the product or service has taken off and gained popularity.
A startup can operate on a lean team, with people wearing multiple hats and taking on extra responsibilities. But as the company grows, it will be time to hire more employees and scale the company to meet demand.
How to scale the business is an enormous question that causes hesitation for many leaders. How do you expand your business offerings and your team without losing the heart and inspiration that helped the startup succeed in the first place?
In my own business, Tekmetric, which offers shop management software for auto repair businesses, I have relied on a few tactics that enabled me—and our whole team—to scale sustainably. Here are four of the most vital.
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