Use Formula Based Labor Rates to Earn the Profit You Will Need!
Saturday, November 11, 2023: 1:30pm - 5:30pm
Many say the repair shop business has changed more since COVID-19 than in the past 10 years. Better vehicle quality means shops enjoy less profit per vehicle. We replace less parts per driven mile and many parts last longer than on vehicles of the past.
It is claimed ICE vehicles (Internal combustion engine) have about 20,000 moving parts while EV’s have only about 2,000 moving parts. The result is fewer parts sold per driven mile. The growth of electric vehicles reduces total gross profit per billed hour, so we build the necessary parts profit into the labor charge. Carpenters, Electricians and Plumbers do it all the time.
FYI the average shop leaves $50 - $80,000 on the table each year due to repairs and activities that generate below average total gross profit per billed hour. Some examples are; replacing rear main seals, swapping engines, intake manifold gaskets, oil changes, tire rotations, changing tires, test drives, state inspections. Services such as performing ADAS are the financial equivalent of performing a mechanical repair but not selling any parts. The missing parts gross profit needs to be built into the fee.
The idea is to raise below average gross profit per billed hour repairs up to average total gross profit per billed hour repairs. Repairs that create above average total gross profit per billed hour (brake jobs) pricing never changes so your services are always competitively priced.
Using formula-based labor rates you can sell your parts at cost and make your full average combined gross profit per billed hour in labor. Many have increased their profit by $3000 - $4,000 per month using Labor Intensive and Diagnostic Labor Rates set from cost up. The idea is to raise below average total gross profit per billed hour repairs to average total gross profit per billed hour repairs. Services that produce above average total gross profit never change which keeps your services always competitively priced.
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