pattersonautobody

Of course, over the phone they just want a number. But, if they are looking at their tire or brake bill, you sometimes want to be careful what the labor looks like.

Good comments. By NY state law, as far as I know, we have to show our labor rate and show what we charge for labor on an invoice. Further, we have to show each part, its number, and the price we are selling the part at. So, a picky customer can look at the labor line and complain that back in the 70s when he was a tire chucker, he could have got the whole job done in half an hour, etc. etc. So, oftentimes I find it easier to put profit onto the parts side when putting it on the labor side can be tricky. But again, I already named which situations. FUrther, maybe this is only relevant in NY because we have to show these items. I will read the Motor article.

The above example is good for us to know what we need to do to beat our costs, but it does not take into account that we don't want to merely bill enough to hit an imaginary number. For example, we never want to be consistently cheaper than competition. In fact, when possible, we want to sell the value of a repair. There should always be a maximum of return on a repair, regardless of whether we already hit the numbers we deem necessary to pay the bills. Another random thought: How do most shops realistically track technician efficiency? We use Mitchell , so we use a time clock and my own head, and I input these numbers into the computer. It is an imperfect system, as in the real world time is lost to unbilled time all the time (putting air in tires, helping a lost parts guy, digging snow when its the season, etc.) It would seem to me a more logical financial metric would be total labor sold divided by labor cost per technician. I have heard the number for B techs of them producing at least three times their own cost. Because, in the end, we don't necessarily care how slow or fast a technician gets the work done. We care how much work we can sell out of that bay and how much selling that work costs us. Last random thought: I have found that for certain jobs, you don't want to bill the labor out so high, so you compensate on the part when possible. Good examples are tires and brakes. Customers actually get offended if they see a high mount and balance charge, or 2.5 hours to do a brake job. While some customers will spend time shopping around parts prices, most understand everyone makes some money on them and they are less likely to fight about that. It is in these situations where I find the labor:parts ratio to be counter-productive, because you actually penalize yourself when you bump up the parts side.

Problem is to do that, you would honestly need a $165 an hour labor rate, and people would rather live in la la land than know that's the real cost for labor.

I'm a former shop owner (only 4 years) and now I am a service writer. There is an internal discussion within our shop what we should be gunning for precisely. From my own perspective, I think the endgame is always Gross Profit. All I cared about was whether I was making money, not how I was making it, as long as the car is fixed right. In my mind, tracking ARO, labor:parts, profit percentage, and other indicators are all means to meet that end. However, there is disagreement about this in the shop. What do you guys think?

We use a matrix, we want above 50% profit on most parts. However, if the list price is higher, we go with the list price. Further, if there is a comparable but higher list price from a competing parts store, then we go with the highest of the list prices. Better yet, if you are getting aftermarket OE parts (not "OE equivalent" that's different) from a Worldpac or whatever, sell them at the dealer list if it is higher. Even after doing all of this, when tires and dealer parts are included, it is hard to crack above 35% parts profit. Any suggestions to make it any higher aside from buy from the dealer as little as possible?

Sorry to resurrect an old topic, but it appears that 0.67 to 1 is a Key Performance Indicator for parts:labor? One thing I don't understand is why is it necessarily to get better profit on the labor end than on the parts end? If you are making 50% profit on parts, if not higher excluding tires and dealer parts, we don't want to decrease this margin merely to make the parts:labor ratio better.