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hourly rate , not enough?

steve fox
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steve fox Rookie

steve fox

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We are in Miami and can't get a feel for the average hourly rate. Other shops either won't tell or aren't reputable. We are AAA approved and been here 23 years and charging $99.00 per hour and would like to raise it. Any thoughts on what's appropriate.

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Wheelingauto Collaborator

Wheelingauto

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That is a difficult question to answer on a national message board. I would suggest first figuring out what your labor rate needs to be so you are profitable to the level you desire. Then I would call local dealers and indys and do a labor rate survey. Be honest, tell them who you are and why your calling. We are trained not to answer the labor rate question but when someone calls and tells me who they are and why they are asking I am usually more than happy to give them the number they are asking for.

We are in Chicago and I suspect overall costs are similar and we are at $120 and looking to go up. I can tell you when we were at $99 I was afraid of the xxx figure so when we decided to do it we went to $114. If your going to do it you might as do it right :)

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jfuhrmad Enthusiast

jfuhrmad

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Wheelingauto, can you comment on the response from customers to your price increase?  We've always made small increases successfully but we've never tried a larger jump.  However, it's harder and harder to find techs so I think this type of increase may be warranted soon.  

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mspecperformance Mentor

mspecperformance

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Pricing is a hot topic as always. Food for thought though, when was  the last time someone scrutinized what your hourly labor charge was? More often than not if a customer has a problem with pricing its either a comparable from another shop's estimate or its a blanket statement of, "Thats expensive" or "Thats too high" or something along those lines. I live by the rule of thumb that if you are providing high enough matching value then the RIGHT customers won't complain (the majority of the time). The rare cases you may have a bottom feeder customer that won't be happy unless you take a few dollars out of your own wallet to fix their car. Otherwise I have never had a problem with labor rate increases. I've done probably 5-6 in the last 5 years. 

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Wheelingauto Collaborator

Wheelingauto

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12 hours ago, jfuhrmad said:

Wheelingauto, can you comment on the response from customers to your price increase?  We've always made small increases successfully but we've never tried a larger jump.  However, it's harder and harder to find techs so I think this type of increase may be warranted soon.  

As said above. No one really questions dollar per hour charges. When we went up I can't remember a single comment about it. 

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Shopcat Community Regular

Shopcat

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A good way to price your labor rate is to take your most expensive tech's pay rate, then add in uniforms, benefit costs, FICA, workers comp, etc until you have the loaded cost of having a technician. From there multiply that number by 2.5 to get to a 60% profit margin. For example a $30.00 tech probably costs you about $39.00 per hour, times 2.5 is about $98.00 per hour labor rate, at the least.  

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jfuhrmad Enthusiast

jfuhrmad

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Thanks Harry.  Just for reference for a smaller town we are in Minnesota 45 minutes north of Minneapolis.  We were at $98 18 months ago.  Now at $102.  Chevy dealer in town is $118 and Ford is 15 miles away at $135.  I'm thinking of going to $105.

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hartcoauto Rookie

hartcoauto

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Wow we are in a small town one hour from Louisville Kentucky at 65.00 per hour. When we moved here the very first comment was welcome to the Twilight Zone. No one here truly understands the cost of staying in business


Sent from my iPhone using Tapatalk

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Joe Marconi Grand Master

Joe Marconi

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sheltrens Rookie

sheltrens

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I am in rural Iowa 5 miles from Minnesota border. Town of 6000 people and we are at 101.93. I merged with the shop across the street at the beginning of the year.

I was at 100 and he was as at 92. I changed it after a week. No one noticed. If I went up another 10 tomorrow no one would still notice. At this level $10 basically equals .1 per hour. No customer has a clue if the job books for 1.5 or 1.8. If someone is afraid to raise labor rate just index all labor by 1.1 or 1.2.

The industries around me are paying 18-20 per hour with good benefits. I have to pay my guys well to keep them and they deserve better wages. They are educated workers and I rely on them heavily. At the rate of inflation and how far behind my area is. We should be around 120.

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mmotley Proficient

mmotley

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I agree with working based off your technicians pay, at least for a starting point. 70% GP is the standard I was taught (not loaded). That gets you where you need to be to make your proper margin. From there, shop around. You might be leaving some on the table. I called a few other shops around town and once I explained who I was and why I was asking (I didn't want to the 'that shop' that isn't charging enough), everyone was glad to share their rates. 

I ended up raising my labor rate and I never heard any complaints. Sure, there are some jobs I probably lose to pricing, but only to those customers who care about the price and price only... and those aren't my ideal customers

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mmotley Proficient

mmotley

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This week my techs are starting a base salary + flag... I told them Thursday at lunch time. My SA told me Friday morning he can already tell they are turning out work quicker :/ ...I shouldn't have waited so long

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AndersonAuto Community Regular

AndersonAuto

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About 15 years ago I was in dire straights. I was dangerously close to having to lock the doors and going home. I calculated my break even point, and what my labor rate would have to be to survive. Not make money, just to stop losing money. I raised my labor rate $15.75 in one day.  Not one single customer complained. Not one. The only complaint I got was from my advisor, which ended quickly when I gave him the choice between selling the new labor rate, or going home forever.

The bottom line is that no customer is going to complain. Charge what you have to charge to make your business successful, and stop worrying about raising the rate a few bucks to do it.

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AndersonAuto Community Regular

AndersonAuto

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49 minutes ago, xrac said:

This is a post that every shop owner should read. Too many of us have picked labor rates based upon no financial calculations. 

Picking a labor rate based on what everyone else is doing makes no sense at all. Obviously you want to know what the competition is doing, and if the math says you have to be way above them or way below, why is it that way? But the bottom line is that your expenses are not their expenses, and you have to make what you have to make to stay in business, and be profitable enough to be around to serve your customers next year.

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mmotley Proficient

mmotley

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I should add, when I moved my techs to commission pay, I did the math to make sure I was going to hit my margins, no matter how many hours they ran. I made a spreadsheet with formulas and entered all sorts of different combinations of hours...

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Robert Ohlmann Newbie

Robert Ohlmann

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On ‎5‎/‎13‎/‎2017 at 5:46 PM, hartcoauto said:

Wow we are in a small town one hour from Louisville Kentucky at 65.00 per hour. When we moved here the very first comment was welcome to the Twilight Zone. No one here truly understands the cost of staying in business


Sent from my iPhone using Tapatalk

$105 is where I'm at. Gives me a 70.7% labor GP. I call around every year and check labor rates, just to make sure I'm not the cheapest or most expensive.  

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GENUINE Enthusiast

GENUINE

Posted
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On 5/13/2017 at 4:46 PM, hartcoauto said:

Wow we are in a small town one hour from Louisville Kentucky at 65.00 per hour. When we moved here the very first comment was welcome to the Twilight Zone. No one here truly understands the cost of staying in business


Sent from my iPhone using Tapatalk

I am in the same situation just in a different part of the country. But that is the best way to describe the situation...."no on here truly understands the cost of staying in business". When your biggest competition is the local junk yard "fixing" cars or the "shop" that will only install parts if the customer brings them with him, or the out of work neighbor who is a "mechanic",  it's a tough nut to crack. My stupidity for picking this location but the challenge has proven to be overwhelming and so hard. Needless to say, I am currently looking for other locations to move and intent on selling this building. Glad to see I'm not alone in the customer base I have gifted myself with.

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gandgautorepair Enthusiast

gandgautorepair

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When I bought my partner out a few years ago, he said it was time to raise our labor rate. Because I lost his customer base, and he was the expert mechanic, I was afraid to raise the rate. I worked my butt off and struggled. I finally got over my fear, and challenged by other shop owners I raised my rates. Nothing happened. So I raised them again. I don't recommend this, but I can tell you what I did and what happened. I ended up raising our labor rate from $89 to $125 in a period of 18 months. Nothing happened. Except I started being profitable. I know I am the highest labor rate in town. The shop across the street, a very good shop, is at $90, we're both very busy. The big difference between me and the owner across the street is that he's the main guy and can't leave, and I don't work in my shop in daily operations and have taken up to a month off at a time. I know this is not recommended, but I ended up not caring what any other shop in town did. I concentrated on giving great service. Besides, if any shop works towards a 60% GP you have to get it somewhere. There is less push back on labor rates (rarely comes up) than there is on parts pricing. 

BTW, I'm just sharing experience here. We've had lot's of issues to overcome. I found out last year that we were not charging nearly enough on parts compared to other shops, and getting that pricing correct has really helped our profitability. Also, we try to stay comparable by quoting an opening estimate for testing at $98. If we really get pinned down on labor rate we quote our average labor rate, which is 110-115, and we say it's our average rate. Not recommending thus stuff, just saying what we do.

Richard G

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