Running an auto repair shop can be quite rewarding but, at times, equally challenging. Once you start your automotive repair shop and it goes into the expansion phase, you’ll have to hire more technicians. But do you know where things get really tricky? It’s the part where you need to manage auto repair labor in a way that is profitable.
You see, in auto repair shops, auto mechanics are quite important. They are the driving force of the business. So if you want your auto repair shop to thrive, you need to keep your labor well-managed. To do this, it’s essential for you to track labor times.
So without further ado, let’s discuss all there is to know about labor times for auto repair shops.
What is labor time?
The most crucial service an auto shop owner can provide is through its labor, and labor time refers to the hours spent by a technician working on a vehicle. The total earnings can then be calculated using the billable hours. In fact, auto repair labor times are a key factor in determining the profitability of an auto repair shop.
For example, if your hourly labor rate is $200 and a job requires two hours of labor time, your total labor earnings will be $400, and the labor time for this job will be two hours.
Getting precise labor times from most mechanics has traditionally been difficult without appearing to be on top of them at all times. This is mostly always true, even if you hire the best mechanics for your auto repair business. This process is time-consuming and, luckily, no longer exists.
In fact, there are other ways that auto repair shops can generate labor times and car repair estimates like through the use of guides and software. A good auto repair labor guide can help you calculate accurate labor times and manage your operating costs more efficiently. Once you have the labor times, it will become easier to calculate the labor cost.
But that is not the real question! The real question is how can an auto repair shop use labor times to its advantage for better profitability.
Well, to answer that question, we will first have to understand how labor times can impact your auto repair business.
How Does Labor Time Impact Auto Repair Business?
Parts and labor are both profitable in your shop. It’s simple to adjust your pricing on parts to generate a profit. But what about labor times in auto repair shops? That’s when things get complicated.
You need competitive labor costs to keep your lights on and your technicians happy (you know what they say: “happy techs, happy shop”). But, of course, you must keep those charges reasonable so that you do not scare away your consumers with exorbitant prices for car repairs.
Well, there are three ways for your car repair shop to increase its labor revenue:
- By employing a labor matrix
- By developing personalized labor rates
- Using a labor guide markup
Which method you ultimately use is determined by the individual circumstances of your workplace as well as the unique circumstances of each task. No two vehicle repair businesses or repair orders are the same, just as no two snowflakes are alike.
Consider employing a labor guide or creating a labor matrix tailored to your shop’s needs to make this balance easier to achieve. Both of them are great options for coming up with a car repair estimate.
Factors Affecting The Labor Times For An Auto Repair Shop
As an independent repair shop, you need to stay ahead of the game and control your repair costs. This means that you need to monitor, track and adjust your auto repair labor times.
But before you can do that, you will have to understand the different factors that affect labor times for an auto repair shop. Many factors go into the mix, and each one has its own weight in coming up with accurate estimates.
These factors impact the times, the labor cost, and the eventual car repair estimate that you give to potential customers.
1. The average time it takes for auto repair labor to perform a job
The most essential and obvious component in labor times is the time it will take auto repair labor to complete the repair.
For example, if a technician raises the hood of a car to replace the engine but learns that the automobile also needs additional repairs, it will take him a long time compared to what’s mentioned in the auto repair labor guide or the average time.
The average repair time will rise for this kind of repair job. To cover the expense of repair work that was not included in the original estimate, you might charge clients more for all jobs that require more than a specified number of labor hours.
2. The age of the vehicle
When calculating auto repair labor times, you must consider the age and condition of the vehicle that has arrived at your auto repair company.
Typically, the older the car, the longer it will take for your auto repair labor to complete the repair and maintenance.
This is because repairing older vehicles is more difficult and time-consuming. You may also need to seek hard-to-find repair parts for older vehicles. This will also lengthen your auto repair labor times.
3. The competence of technicians
Different auto repair shops hire technicians or auto repair labor with varying levels of ability and experience. The more a mechanic’s expertise and competence, the less time it will take to repair the vehicle. More experienced mechanics know exactly what to do and hence, need less time for the same repair jobs as their less experienced counterparts.
That is the general rule. However, you may need to raise your auto repair labor rates for more difficult repair projects that require more time and effort than typical.
4. Geographic Location
Believe it or not, your geographic location influences how long it takes your vehicle repair labor to complete a task.
For example, if your vehicle repair shop is located in the arid area of Pheonix, your auto repair labor and experts will require extra time to execute bodywork at your shop. Auto repair labor times are impacted by the location because certain states cause more wear and tear to vehicles than others.
5. Customer Needs
Another item to consider is the needs of your customers. For example, if a customer walks into your shop and requests an urgent repair, you must mobilize your team to perform it as soon as possible.
In the end, it is the customer experience that distinguishes an independent repair company from the competitors. Completing tasks, especially common repairs, will also help you in charging a fair price from your customers.
How To Use An Auto Repair Labor Guide?
One of the most essential resources for calculating labor rates and times is a car repair labor guide, just like an auto repair shop business plan does. Labor guides serve as the foundation for determining labor rates.
However, while selecting an auto repair labor guide for your business, you must be careful to get the most useful one. So how can you determine which one is right for you?
It’s best to go with a reputable guide because the industry and repair costs are constantly changing. While traditional labor guidelines for repair work are still used in the industry, digital ones are becoming more common in auto repair businesses.
When it comes to labor guides, go with the one that:
- Provides reliable and thorough data on anticipated labor times from industry leaders, allowing you to set labor rates that will keep your business of car repairs running smoothly.
- Updates and offers accurate labor time estimates on a regular basis so that your shop may update operational costs and maintain competitive pricing.
- It is simple to integrate with your automobile shop software, so you don’t have to waste time maintaining multiple systems at the same time.
You can easily come up with estimated labor times and labor rates after selecting labor guides. It will assist you in keeping track of your labor expenditures and ensuring that they are up to date in accordance with industry norms.
Breaking down the labor rate, labor matrix, and labor guide markups
If there is one thing that auto shop owners are always looking for, it is ways to reduce expenses while increasing profitability.
And there are three basic approaches for a store to generate more money on labor:
- Using a labor matrix
- Custom labor rates
- By applying a labor guide markup on the labor rate
Labor Matrix
So, what exactly is a labor matrix, and how can it benefit you? A labor matrix is a tool that can help you increase your shop’s labor rate based on how long a repair work takes.
It then utilizes this information to reinvest the funds in your store.
When employing a labor matrix, you may automatically apply markups or multipliers to jobs based on time ranges and how long the job takes to complete.
Let us not lose sight of the fact that time is money. If you use the various elements we outlined to effectively manage your labor time, you will be on the way to greater profitability.
You can easily use the labor matrix to increase the labor rate by doing various calculations, including basic and compounded ones.
Custom Labor Rates
Assume you opt to hire a highly talented and experienced mechanic. Then using the labor matrix or charging a flat amount for the repair makes no sense.
You might utilize a custom labor charge for the experienced and qualified individual in this scenario. More experienced team members typically get a higher hourly rate than the market rate.
Although it may appear difficult at first, you may charge a reasonable fee for the time of your technicians and service advisers by using unique labor rates. This makes the repair job worthwhile for the crew as well.
Labor Guide Markup
Labor guide markups are most effective when work appears to take longer than expected and the technicians must deal with it the majority of the time.
In this case, using a labor guide markup rather than a labor matrix or a specific labor rate makes sense. Giving technicians more hours with no more remuneration is unjust. But they deserve it for their efforts.
Other conditions may also necessitate a labor guide markup for the hourly rate.
It’s incredible, but it’s possible that an older vehicle will stop by your shop for repairs; however, they are a lot of effort, and there are certain things you can do to make them go more easily.
If your store provides custom repair and maintenance services, your technicians should be compensated for taking great care in constructing the best suits for your customers.
Expect the technicians to slow down in order to avoid dents and scratches. This means it will take them much more time and much more car parts to repair and restore the ancient vehicle.
Using the labor guide markup makes sense in this scenario.
Final Thoughts
You can achieve your intended profit targets in a balanced manner by modifying your shop’s pricing structure and labor costs. This means that in the end, both your customers and employees will be pleased.
Keep these suggestions in mind when you make your decisions. Your first thought could be to increase your prices at the end of the month.
Don’t do it. Customers will immediately discover when repairs are more expensive, and they will tell everyone else, and word will spread.
Being fair to your customers and shop technicians is also essential. When deciding on a method to use, good judgment is required.
Your shop’s ARO will rise if your labor rates rise. However, there is a risk in simply using the labor matrix or custom labor rates.
Your shop’s technicians will be dissatisfied if their bottom line grows but they don’t get paid more for their efforts.
In the end, you will have to balance everything.
