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Build Your Labor Rate From the Ground Up: Part 2 [THA 346]

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Part 2 of our labor rate discussion in the automotive aftermarket industry. Our panel emphasizes the importance of setting labor rates based on the shop's own expenses and profitability, rather than comparing them to competitors. They also stress the need for regular labor rate increases and educating staff about the financial aspects of running a shop. They address fear and mindset issues that can affect labor rates and overall success. The episode provides valuable insights and advice for shop owners in effectively setting and managing their labor rates.

Chris Cotton, AutoFix Auto Shop Coaching, Chris Cotton Weekly Blitz Podcast. Listen to Chris’ previous episodes HERE

Rick White, President and Lead Coach for 180BIZ, Listen to Rick’s previous episodes HERE. Dave Schedin, CompuTrek Automotive Management Systems. Dave’s previous episodes HERE

Show Notes:

  • Build Your Labor Rate From The Ground Up Part 1 [THA 276]: https://remarkableresults.biz/remarkable-results-radio-podcast/a276/
  • Where the Money Goes – The $100 Lesson [THA 210]: https://remarkableresults.biz/remarkable-results-radio-podcast/a210/
  • Labor rates should not be set based on competitors (00:02:10) The importance of setting labor rates based on the shop's own expenses and profitability, rather than comparing them to competitors.
  • Educating staff about where the money goes in the business (00:03:18) The need to teach employees about the various expenses and costs involved in running a shop, to help them understand the labor rates and the owner's income.
  • Fear and mindset issues affecting labor rates and success (00:05:02) The fear and mindset issues that can affect labor rates and the overall success of a shop, and the importance of addressing these issues before setting labor rates.
  • The importance of financials and owner thinking (00:07:46) Discussion on the prevalence of shop owners not having up-to-date financial statements and the need for owners to transition from technician thinking to owner thinking.
  • Raising the Labor Rate (00:15:40) Discussion on the importance of raising labor rates and providing value to clients.
  • Labor Rate and Value (00:17:19) Exploration of flipping the conversation from price to value and the curse of knowledge.
  • Labor as Time vs Value (00:18:05) Insights on how labor is often tied to time, but should be based on value and the skills of technicians.
  • Setting a Higher Standard (00:23:11) Discussion about the importance of qualifying customers and setting a higher standard for the shop's services.
  • Firing Customers for Excellence (00:24:03) Exploration of the concept of firing customers who compromise the shop's level of excellence and professionalism.
  • Running the Business Like a Business (00:25:58) Importance of charging correctly, controlling the schedule, and making every car count to improve the shop's profitability and efficiency.
  • The impact of increasing labor rates on gross profit (00:31:37) The relationship between increasing labor rates and gross profit. It explains that when a technician's pay is increased, the labor rate must also be raised to maintain the same gross profit percentage. It highlights the importance of understanding the math behind labor rates and setting them proactively.
  • The need to compete with other industries for skilled technicians (00:33:42) The challenges of attracting and retaining skilled technicians in the automotive industry. It compares the benefits and compensation offered by other industries, such as Target and emphasizes the need for competitive labor rates to attract and retain talent. It also highlights the importance of providing tools and benefits to technicians to create a profitable and sustainable industry.
  • Building a profitable business (00:42:42) The significance of being profitable and setting labor rates that allow for a 20-25% net profit, as well as the importance of love and grace in running a successful shop.
  • The importance of making changes now (00:44:27) The need to make changes in labor rates immediately instead of waiting and encourages shop owners to trust the advice of coaches.

Thanks to our Partners Shop-Ware and Delphi Technologies

Shop-Ware: More Time. More Profit. Shop-Ware Shop Management https://getshopware.com/

Delphi Technologies: Keeping current on the latest vehicle systems and how to repair them is a must for today’s technicians. http://DelphiAftermarket.com

Connect with the Podcast

-Join our Insider List: https://remarkableresults.biz/insider

-All books mentioned on our podcasts: https://remarkableresults.biz/books

-Our Classroom page for personal or team learning: https://remarkableresults.biz/classroom

-Buy Me a Coffee: https://www.buymeacoffee.com/carm

-The Aftermarket Radio Network: https://aftermarketradionetwork.com

-Special episode collections: https://remarkableresults.biz/collections

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  • Have you checked out Joe's Latest Blog?

    • Joe Marconi
      The Toolbox is Last to Leave, First is the Heart
      By Joe Marconi in Joe's Blog
         0 comments
      It always amazes me when I hear about a technician who quits one repair shop to go work at another shop for less money. I know you have heard of this too, and you’ve probably asked yourself, “Can this be true? And Why?” The answer rests within the culture of the company. More specifically, the boss, manager, or a toxic work environment literally pushed the technician out the door.
      While money and benefits tend to attract people to a company, it won’t keep them there. When a technician begins to look over the fence for greener grass, that is usually a sign that something is wrong within the workplace. It also means that his or her heart is probably already gone. If the issue is not resolved, no amount of money will keep that technician for the long term. The heart is always the first to leave. The last thing that leaves is the technician’s toolbox.
      Shop owners: Focus more on employee retention than acquisition. This is not to say that you should not be constantly recruiting. You should. What it does means is that once you hire someone, your job isn’t over, that’s when it begins. Get to know your technicians. Build strong relationships. Have frequent one-on-ones. Engage in meaningful conversation. Find what truly motivates your technicians. You may be surprised that while money is a motivator, it’s usually not the prime motivator.
      One last thing; the cost of technician turnover can be financially devastating. It also affects shop morale. Do all you can to create a workplace where technicians feel they are respected, recognized, and know that their work contributes to the overall success of the company. This will lead to improved morale and team spirit. Remember, when you see a technician’s toolbox rolling out of the bay on its way to another shop, the heart was most likely gone long before that.

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