Labor vs parts

[ncautoshop]

Running my numbers for the year and saw an issue I'd like to improve on.

As many of you know I'm trying to correct some labor revenue issues and things have gotten much better. Roughly 20k increase between last year to date and this year to date to be exact.

But I'm still 20% shy on my labor revenues from being 50/50 parts/labor.

I use my labor as a tool to discount so this may be part of the problem, but I also feel I'm not billing enough hours per job. We're using book and I'm considering marking all book hours up 20-30% instead of a rate increase (we intend to raise our rates but it will be in a larger time frame).

Has anyone tried something like this? Or have any input?

 

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[bstewart]

Industry standards state that 50:50 isn't good enough anymore to run a profitable shop.

You should be shooting for 55:45 right now, and eventually 60:40 labour:parts ratio.

 

It's a known fact that for many jobs, book hours are too low, but to mark all of them up by 20-30% might be a bit overkill.

Consider maybe picking and choosing ones that are impossible to meet, and increasing them by a larger margin, but leaving a lot of the "good" ones alone.

 

It sounds to me like your labour rates are too low, and like you said, you aren't billing enough hours.

Do you make 70% gross profit on your unloaded tech's pay/60% on loaded tech pay?

If a job goes over book time because of corrosion or excessive grime, you bill for your time?

Do you have excessive comebacks or unbillable work?

 

A good book to read might be Mitch Schneider's Managing Dollars with Sense.

It shows 2 methods to calculate a suitable and profitable labour rate for YOUR shop based on YOUR numbers.

[ncautoshop]

Industry standards state that 50:50 isn't good enough anymore to run a profitable shop.

You should be shooting for 55:45 right now, and eventually 60:40 labour:parts ratio.

 

It's a known fact that for many jobs, book hours are too low, but to mark all of them up by 20-30% might be a bit overkill.

Consider maybe picking and choosing ones that are impossible to meet, and increasing them by a larger margin, but leaving a lot of the "good" ones alone.

 

It sounds to me like your labour rates are too low, and like you said, you aren't billing enough hours.

Do you make 70% gross profit on your unloaded tech's pay/60% on loaded tech pay?

If a job goes over book time because of corrosion or excessive grime, you bill for your time?

Do you have excessive comebacks or unbillable work?

 

A good book to read might be Mitch Schneider's Managing Dollars with Sense.

It shows 2 methods to calculate a suitable and profitable labour rate for YOUR shop based on YOUR numbers.

Labor rate is a touch low for my margins but I'm surrounded by 10+ $45.00 shops, so I'm very cautious to get ahead of myself and hurt business. I'm the only tech, and I have a helper so in some ways I'm my own worst enemy. Pull off a job to take a quick look at something or move to another job and have to start back. No come backs, maybe too much helping long term customers that should be billed. It's worth mentioning that after more research I found some accounting errors that closed the gap a good but but labor is still less than parts sales. We try to markup rusty jobs but virtually every vehicle here is a rust bucket. 3 years old and it's starting. As far as labor profits , it's close to 60%. I'm thinking of implementing a sliding scale for labor hour increase that moves with the year. Again, profits are nice right now. Just trying to balance it as much as possible.

 

Sent from my SCH-I605 using Tapatalk 2

 

 

[xrac]

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