Auto repair shops generally calculate the cost of their repairs with numerous factors that contribute to the entire process.
This includes the cost of parts and any necessary upcharges for the shop to generate a profit, as well as the cost of labor.
In this guide, we will help your independent auto repair shop learn how to maximize your profit margin specifically on your shop's labor rate.
Want to learn more? Check out our latest Auto Repair Industry Index! We cover everything from overall industry health to unique shop settings for Tekmetric users to get the most value out of the work they already do!
Maximizing Auto Repair Labor Revenue: Factors to Consider
While labor rates can differ in how they are applied or calculated, shops generally charge customers an hourly labor rate based on factors like employee pay, technician expertise, job difficulty, or even unique make and model specialties.
Location
One major factor of your overall labor rate should be your shop's location, demographic, and customer base. We saw this in real-life in our most recent industry index report.
Shops need to consider how much they're charging for labor in relation to shops around them. You don't want to overcharge compared to the your closest competitors, but you also want to get fair compensation for your business based on expertise and quality of work.
Timing
First, try to avoid the habit of raising labor prices primarily at the end of the month. The same goes for repeat or even new customers.
If they're used to one labor rate, or they see a labor rate posted on your shop's wall if they're new, and they're hit with a bill that differs, customers will understandably be upset. Try to maintain consistency, and most importantly, fairness in your pricing.
Fairness
Additionally, it’s important to be fair to your customers and the technicians at your shop. Exercise good judgment when it comes to deciding which method to use. As your labor rates go up, so will your shop’s ARO.
But there’s a danger in only sticking to the labor matrix or custom labor rates. Your shop’s technicians might get discouraged if they see that the shop’s bottom line is growing, but they’re not getting additional money for their hard work.
Custom labor rates allow you to set a special hourly rate for different categories of work that mechanics do at your shop.
Setting custom rates enables you to increase the labor rates for special jobs, such as work done by a pro technician, work done for family and friends, and work done on luxury cars.
By using custom mechanic labor rates, you can offer discounts while still safeguarding technicians’ time and pay.
Boost Your Shop’s Revenue with Custom Labor Rates
By offering special rates for loyal customers or specific groups, such as teachers or first responders, you can show that you value their business and are committed to their satisfaction. This can lead to repeat business, positive word-of-mouth referrals, and ultimately, increased revenue for your shop.
Creating custom mechanic labor rates is a powerful way to increase your shop’s revenue. Don’t be afraid to get creative with your labor rates and offer unique pricing options for your customers.
By setting a special hourly rate for different types of work, you can offer discounts while still safeguarding your technicians’ time and pay. Your shop’s bottom line will thank you.
What is a Mechanic Labor Markup Guide?
A mechanic labor guide markup is a tool that boosts the hours allocated to the technician, increasing the money they make from a repair.
It allows the shop to adjust the labor time listed in the labor guide, increasing the costs of labor for a particular job.
When to Use a Mechanic Labor Guide Markup
Labor guide markups are best to use when it seems like a job is going to take longer than the estimate in the labor guide, and the technicians will be dealing with the brunt of it.
A labor guide markup can be used when an older vehicle stops by your shop, one that you're astonished is still cranking along on the road, and you know that the technician will need extra time on it because of the complications that come with older vehicles.
Or, maybe your shop services luxury cars and the technicians will have to take extra care to return that Ferrari to its owner in pristine condition. That means the technicians will have to slow down to keep dents and scratches at bay.
Why use a mechanic labor guide markup instead of the labor matrix or a custom labor rate? When a technician is working hard to get the job done right, those extra hours (and cash) should go back to them.
Get the Most Value out of the Work Your Shop Already Does
By adjusting your shop’s pricing for labor—whether by creating a labor matrix, implementing custom labor rates, or using a mechanic labor guide markup—you can ensure that you reach your desired profit goals in a balanced manner that keeps everyone happy.
And custom labor rates is just one part of the story.
By investing in a more modern, cloud-based shop management system, you can establish a transparent, replicable digital vehicle inspection and repair estimate process, and streamline parts ordering so that service advisors can dispatch repair orders quickly to technicians.
Maximizing Auto Repair Shop Customer Service: A Guide to Selling Maintenance Work
Training service advisors how to properly sell maintenance work can create more loyal customers.
Drivers typically come in with an expectation of what's wrong with their car, which can make it tricky to sell maintenance work. Drivers might think you're trying to squeeze more money out of them, or may simply have a set budget in their mind and don’t plan on spending extra.
In reality, you're simply trying to go above and beyond and provide them the best service possible. So how do you show that, and which tools will help you transform the way you sell maintenance?
Here’s how to build customer trust while staying true to your auto repair shop’s mission of providing optimal maintenance recommendations.
Why Selling Maintenance Work Can Be a Challenge for Auto Repair Shop Customer Service
According to a survey conducted by AAA, 76% of U.S. drivers said that recommending unnecessary services was the top reason they do not trust auto repair shops. The survey also points out that ⅔ of U.S. drivers have managed to find an auto repair shop that they trust. Whether it’s an independent auto repair shop, or a chain repair shop, trust needs to be at the forefront of the customer experience.
Service advisors may be hesitant to sell maintenance work and only focus on the problem at hand because they don’t want to come off as pushy. But not recommending maintenance work can be a disservice to customers who deserve to know about any and all issues with their vehicle, not just the ones they’ve noticed themselves.
Add a Maintenance-Focused Inspection and Sales Process to Your Auto Repair Shop Customer Service Routine
When it comes to selling routine vehicle maintenance work, it’s important to remember that routine check ups will make a big difference on customer’s cars. Similar to the human body, cars are complex systems. Just like the body has a heart, nervous system, and organs, cars have the engine, the vehicle bus, and the control unit. If one problem is ignored, that could lead to more issues, possibly more serious than the last. For example, if a driver puts off replacing their brakes, it could damage the car’s rotors, which in turn, could lead to loss of braking power. This gets us back to one of the most important benefits of selling maintenance work: it helps your customers stay safe and get as many miles out of their car as possible.
Benefits to Selling Maintenance Work
Regular maintenance makes your customers’ lives easier. It prevents your customers from ending up on the side of the road and prolongs their vehicles’ lifespans.
Customers save money. Maintenance work can prevent car issues from getting out-of-hand, which may lead to spending more on larger repairs in the future. And who doesn’t want to address maintenance work before it becomes a much larger expense?
Providing maintenance inspections helps shops sell more work, which usually means higher ROs and a more profitable repair shop. Also, because maintenance work helps your customers’ vehicles last longer, they’re less likely to buy a new car, which they’ll probably get repaired at the dealership during the first few years.
Maintenance inspections help you queue up more work for the future. Even if they decline the maintenance work, you now have a relationship. You can track those declined jobs, and the service advisor and technician can save time figuring out what all might be wrong with the vehicle and resell that work.
Customers trust you more. When you provide reliable insights into your customer’s vehicles, your like their go-to car whisperer—a trustworthy person who reminds them to check stuff out on their vehicle before anything bad happens
Maintenance by Mileage
Shop owners, we recommend training your service advisors to check customer mileage at each visit and tracking it in your shop's auto repair shop customer service notes. By keeping track of customer mileage on each vehicle, you’ll be able to recommend maintenance work based on how many miles it has been since their last visit.
Mileage
Recommended Car Maintenance
Every 3,000 - 7,000 Miles
Replace oil and oil filters, inspect various fluid levels and wipers, check tires and lights
Every 15,000 miles
Replace air filter
Every 20,000 miles
Inspect battery and coolant levels
Every 30,000 miless
Replace power steering fluid, inspect coolant levels, brake pads, and suspension components, check radiator hoses and HVAC system
Every 35,000 miless
Inspect and replace the battery
Every 40,000 miless
Replace spark plugs and wires, inspect ignition system and suspension
Every 60,000 miless
Replace brake pads and fluid, inspect radiator hoses, timing belt, HVAC system, suspension components, and tires, check coolant levels, and power steering fluid levels
Mileage aside, a thorough digital vehicle inspection of all vehicle’s essential components should be performed regularly.
You might have heard some myths about automotive repair software programs like “it’s too expensive to switch” and “training is tough.” But that's not necessarily true.
Don’t be deterred by shop management software misconceptions. We’re here to help break down these myths and rRevolutionize your shop with modern tools. See what your shop can accomplish once you have all the facts about auto repair software programs..
MISCONCEPTIONS ABOUT AUTOMOTIVE REPAIR SOFTWARE PROGRAMS
Now that you’re a shop owner, you’re probably looking for ways to level up your shop. Thanks to talking to fellow shop owners or browsing online, you may have become somewhat familiar with automotive repair software programs.
Finding the right automotive repair software program for your shop is one of the most effective ways you can increase your team’s productivity, boost your revenue, communicate better with customers, and more. However, there are some myths surrounding auto repair software programs that might be preventing you from taking your business to new heights.
To help you on your journey, we’ve compiled a list of some of the most common myths we’ve heard about auto repair software programs and then let you in on the real deal.
More than anything, partnerships should be mutually beneficial to everyone involved. When good partnerships are formed, the whole should be worth more than the sum of its parts.
Why Should Your Auto Business Partner with Other Brands?
For example, McDonald’s burgers make you thirsty enough to want a Coca-Cola, and sodas have a high margin. By partnering up, McDonald’s can lock in their costs on soda and improve their profit margins for the long term.
On the other hand, not all partnerships are beneficial. Partnerships can expand your opportunities but can also force you into making decisions you never intended to make. When McDonald’s decided to partner with Coca-Cola, they had to exclude other soda brands from their locations.
This exclusivity may have been worth it, but it meant removing options from customers, such as Dr. Pepper and Pepsi products. What may have made the partnership intriguing for McDonald’s is the fact that Coca-Cola owns a variety of beverages, including Diet Coke, Fanta, Sprite, Powerade, Minute Maid and Pibb Xtra.
Thanks to a variety of options, McDonald’s is able to satisfy most customers who ask for a Dr. Pepper by saying, “Will Pibb Xtra be okay?”
Partnerships in the Auto Repair Industry
In the auto repair industry, we face similar challenges when it comes to partnering with other businesses and brands.
Potential partnerships may include teaming up with parts suppliers, software companies, marketing and trade show affiliates, and any other service, resource or tool that could potentially improve your shop. In some cases, these partnerships will help shop owners enhance performance, save costs and drive revenue.
Other times, auto partnerships may bind you to an agreement that doesn’t pay off.
Here are some questions you can ask yourself to determine whether a partnership is mutually beneficial or if they’re asking you for more than you’re getting in return.
1. Are You Free to Choose the Tools and Solutions You Want?
One sign of a bad partnership is being forced to do something you don’t want to do. If partnering with another company means taking valuable options off the table, then you may be at a disadvantage.
If your partner implies or directs you not to do business with their competitors because they would like for you to instead use their services or their partner’s services, think it through.
Before officially entering a partnership, imagine your shop one year, five years and ten years down the road. Where will it be then? What will happen if your shop grows? What if innovation has slowed down with your partner? Will you be allowed to innovate your business by using new tools and solutions that become available in the future?
If you’re restricted in a way that prevents you from innovating or adapting to market conditions by testing other products, tools, solutions, and software, you may be handcuffed and unable to compete with other shops.
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