819 Technologies

We in the automotive repair industry share some of the same headaches as the health repair industry. For example, should we charge our customers/patients based on their auto/life style decisions? In the upcoming health plan, insurance companies can’t charge more for patients who smoke or are obese. Is this fair What about your shop? Do you charge more for the person who’s vehicle has been neglected? For the customer who spends and spends staff time?

At our shop our shop software factors into the labor charges, age of the vehicle, customers attitude (you know who I’m talking about), type of vehicle Make, and condition of the vehicle.

Here’s why: We have good customers, mediocre customers and customers who only come to us when they have goofed up their car. Our dollar per hour amount is based on a formula factoring in our shop labor overhead, anticipated car count and historical average hours per car.

Any deviation from the actual hours per car figure results in an increase in our dollars per hour amount. Who then pays more for having their car repaired? Our good customers. Is that fair? Or should the repair decisions vehicle owners make impact what it costs to repair their vehicle?

Know your numbers

Shop owners hear this all the time, every shop ‘guru’ says the same thing. Know your numbers, but what ‘numbers’ do we as shop owners really need to know?

Profit margins, car count and average repair order, these numbers are your ‘report cards’ they will tell you how you did. When you are running a shop and I mean the day to day, minute to minute running of a shop, you need to understand the numbers that matter RIGHT NOW!

The typical shop sells parts and labor. When a part comes in, say a spark plug for which you know how much you paid for it, you need to know right then “How much should I charge the customer for this spark plug which I paid $1.25?” We all have a mark up on cost (or we should have) to plug into a calculator which will output a retail price to put on the Repair Order. Simple. Then at the end of the day, week, month, quarter or year we can look at our parts profit margin (the report card) and either keep or change our mark up on cost.

What about Labor? Charging for Labor has always been a very nebulas concept for shop owners to ‘Get their head around’ that’s why the vast majority of shops still use the old ‘Flat Rate’ (now politely referred to as ‘Commission’) pay scheme. Flat rate allows a shop’s mechanics to manage the shop labor income.

When you sell a spark plug, or a washer, or a length or wire, you charge for a measure of that part, 1 spark plug, 3 washers, 2 ft of wire. Well labor is just like selling a length of wire, you just measure it! Time is the unit of measure for labor.

The most oft repeated question in our shop used to be “How much should I charge for this job?” In 2001 I was asked this question and responded with “How long did the job take you?”, the reply was “Oh, about an Hour.”

“Oh about an hour.” I thought about that answer for most of the day, with more questions popping up. What if it was really 1.10 hours? What if all our jobs were off one tenth of an hour? What constitutes a job ? How do I get a handle on this ? What other questions should I be asking?

If a shop charges $100 per hour, services 3000 vehicles a year and the average hours per vehicle is 1.75, the shops gross labor income is $525,000.

What if this shop’s average hours per vehicle is in reality 1.85?

Dollars/Hour # of Vehicles Hours/Vehicle Labor

$100 3000 1.75 $525,000
$100 3000 1.85 $555,000

Wow! If this shop increases it’s hours per vehicle by .10 hour, it’s Gross Labor Income for the year increases by $30,000! .10 hour is 6 minutes, let me repeat that … 6 MINUTES.

‘Oh about an hour’ is costing your shop, at a minimum, $30,000 per year.
Forget flat-rate, time every job precisely (we do, and our shop software Labdog does it for us and increased our average hours per car 1.15).

I wanted our shop computer software to do more than just replace hand written RO’s, more than just tally up a RO when it was done. No shop software was designed to measure and manage my shop’s labor numbers minute to minute, so I wrote my own. It runs on Windows and Macs, networks all our shop computers and is easy to use. I had a shop in another state contact me to modify our software to fit his shop’s needs. I took his ideas, combined them with our software, and built a much better package. Would any software company do that? I would encourage you to download my software http://www.819technologies.com , check it out, then contact me Jim@proautotechs.com to talk about what I can do with my software to make it better.

When your mechanic comes to you with an RO, the customer is waiting, they HAVE to be home in 10 minutes, and the mechanic says “How much should I charge for this?” Profit margins, car counts won’t answer the question, what will is “How long were you working on the car?”

Under a ‘Commission’ mechanic pay system mechanics who can move fast, find the short cuts, make hours for the shop get the most pay. Is this method the best? What if a shop wants to reward the quality mechanic, the one who takes time with a repair to make sure the customer is happy? How can a shop have one hourly rate and yet charge customers for the ‘Value added’ mechanic? Labdog has the answer, and method, to compensate quality vs flat rate mechanics

Your shop has probably never worked on a Peugeot, or maybe you have and your mechanics hated you for it. Our mechanics are very willing to work on anything, we have even worked on the UofM’s Zamboni, and made labor profit. How? Time management. Labdog provides not only a way to measure labor time, it also provides a means to determine Vehicle Make Profitability, and a method to level the poor profit makes with the good profit makes, (Patent Pending). Profit made easy.

In auto repair we sell two products, Parts and Labor. Selling parts is easy, we measure how many of something we sell by …. counting how many we sell. Pretty simple. Measuring Labor is one of those “It can’t be this easy!”, yet it is. To measure Labor sold, use a clock. It is that simple. Early on in the development of our Labdog system, we thought through the pitfalls, dead ends and ‘what ifs’ of timing labor in auto repair. Labdog is to Labor Time Management what the O2 sensor feedback loop is to Engine Management. Labdog measures the Labor being used, provides a means to adjust the final output, and builds a map for future measuring.

In tight markets, and anytime, when a shop’s costs go down, the profits go up. Recurring monthly costs, such as leasing shop management software are great for the big company doing the leasing, but are a real killer of profits for the repair shop. Why would any shop lease software? There is no logical reason, for the shop.

Historically auto repair has tied mechanic income (and therefore shop income) to a fictitious “Flat Rate Time” (Politely called Commision). Flat Rate Times come from flat rate books, books that we all question with “Who comes up with this stuff?”. Repairs that aren’t in a book get a time charge by asking the mechanic “What do ya think it’s worth?” . Then there is warranty time, time that the manufacturer comes up with to keep from paying their fair share of vehicle warranty.

Anyone who has worked on cars professionally knows that Flat Rate Times don’t take into consideration age of the vehicle, condition of the vehicle (eg accidents, flood exposure etc), lack of owner’s ehthusiasum for maintenance or previous unprofessional (read flat rate) repairs. To make money, mechanics hustle to “Beat Flat Rate”. From a psychologically prospective, proper and professional auto repair and any commison/flat rate pat system are mutually exclusive.

On top of inefficient shop time management, often a shop’s hourly rate is tied to another shop’s hourly rate and/or to a computation which includes the shop’s flat rate time success or failure.

Running an auto repair business using a Flat-Rate mechanic pay scale/Customer charge scheme is just like vehicle fuel delivery with a carburator, it works but is highly inefficient.

Auto repair sells the labor of it’s mechanics. As in the sale of any product, profit comes from the precise measurement of the quantity of product sold.