By Murray Voth
“Many automotive trainers (including Murray) make the statement that automotive service technicians are among the lowest-paid skilled trades. Lately, after years of making improvements and with my techs earning $45-50 per hour, I thought my business was finally the exception to this rule.
“That was until I volunteered for my daughter’s school field trip last week, where I was paired up with two other dads – and it turned out that we were all tradespeople. We had a good discussion about the trades during that day. One of the dads was an elevator mechanic and earns $58 per hour. The other was a refrigeration tech who earns $51 per hour, apparently his company’s starting rate. All of the elevator mechanic’s tools are supplied by his company, and the refrigeration tech owns about $1500 in tools; the rest are supplied by the business.
“Our industry clearly has more work to do.”
Chris Dekker – My Garage Auto And Tire
“We had a garage door company come in and repair the rear door on a client’s box truck. Cost: $100 service call, $175/hour repair time, in Ontario. In no way is this meant to bash them – the truck was repaired properly, the client is happy, I’m happy.
“I could be wrong, but I’d be willing to bet there is nowhere near the training and tool costs in the garage door industry as there is in ours.”
Spencer MacPherson – MacPherson’s Auto Centre
These two quotes are from discussions in RPM Training’s Mastermind group chat.
What most of the other trades and professions have in common is that they charge straight time for what they do. They rarely package their work tasks; in fact, the opposite is true. They add on travel time, and regularly bill for their breaks. They might charge different rates for different levels of experience, but it is straight time – and when you charge straight time, your calculation of gross profit is very simple: Hours billed equals hours worked. Hours billed minus hours paid equals gross profit.
Here’s an example. 8 hours worked at $100 an hour = $800 billed. 8 hours paid at $30 an hour = $240 paid. $800 – $240 = $560 in gross profit. That is a 70% gross profit margin.
Your service gross profit is the difference between what you charge for your time, and what you pay your technicians for their time. Many times, we mistakenly think that it is the difference between what our service rate is and what our average technician wage is: $100 an hour service rate minus $30 an hour average technician wage, leaves $70 an hour left over. That appears to be a 70% GPM on Service.
A 2016 AIA study showed the average shop in Canada produces 4.2 billed hours per technician, per day, even though the technicians were working for 8 hours a day, which comes out to an average gross profit of just 57%.
So how do we fix this? Being charging straight time, the way other trades do? Well, not so fast.,
The current way things are working, if we began to charge straight time for all vehicle service and repair today, we might price ourselves out of the market. However, we can still operate our shops in a way that collects time in a straight-time fashion.
There are a multitude of solutions to discuss, but we are going to cover three ways that good shops are overcoming this issue. Let’s start by looking at the three things that keep a technician from working on cars for eight hours in a row.
One. Stopping and starting. How many times in a day is a technician interrupted, pulled off of a job to “check something out” for a client, or had to stop because the part they received was wrong, or they are waiting for client authorization before they can proceed with a repair?
Two. There are at least 15 minutes of time that are not billed for on each “menu-priced” item like an oil change or tire changeover. If you do a pre-test drive, lift a vehicle on the hoist, perform service or repair, lower from the hoist and do a confirmation test drive, that adds up. On four menu-priced items, that is a loss of one hour.
Three. Expecting to have the vehicle repaired the same day it is dropped off. That’s actually more an expectation of shop owners and technicians than it is of the driving public. We used to be able to offer that because cars were simpler and parts were more easily available. That is no longer the case. Many consumers are more understanding than we give them credit for. They only get angry if we set an expectation and then don’t meet that expectation.
So, let’s get into some solutions.
One. Become a strictly appointment-based automotive service facility. Nothing gets looked at or serviced without an appointment. Period. We often wait days, weeks, and even months for some of the other trades; why should we try to provide instant auto service?
Use modern CRM software to send email and text reminders to reduce late customers or no-shows. If you service fleets or commercial vehicles, allow some reserve time each day for emergency drop-offs. (However, if you have the right kind of fleets that allow you to maintain their vehicles really well, you will reduce the need for emergency drop-offs.
Two. Reduce or eliminate menu-priced services. When it comes to oil changes, create service packages that include the seasonal tire changeover, an alignment inspection and a good mechanical inspection. Begin to put your clients on a maintenance plan. That means they are not booked in for just an oil change, but for whatever else the vehicle is due for as well: replacement wiper blades, replacement cabin and engine air filter, and so on. The next visit might be an oil change along with transmission service, GDI injection service and a battery service. (Of course, don’t make these services up; the vehicles need to legitimately require them.) If you service and maintain a vehicle well, it will mean $650 to $750 dollars’ worth of repairs and services twice or three times a year. If your average work order size is less than $500, you are not serving your client professionally.
Three.Vehicles should be left by the client for a minimum of one day, with two days preferably. Concerns should be documented well by the service advisor for the technician: Technician performs inspection, or troubleshooting, or preliminary service. The technician then reports the cause of concern and the correction. The vehicle is then removed from the shop and the technician moves on to the next vehicle. Advisor performs estimate, sends estimate and inspection results to client for approval. After approval, they order the parts. Once all of the parts are delivered and inspected for accuracy and quality, the job can be reassigned to the technician. At that point, the technician can rock and roll through that job or jobs and be very efficient. At each step along the way, the advisor is keeping the client informed as to the timeline of their vehicle completion. Ideally, technicians are only working on two to three cars a day. Inspections and troubleshooting are all done early in the day to give the advisor time to source parts and create estimates. There should always be some carryover for the technicians to keep going on if a client should be late or not show up.
As you can see, just in three concepts we are getting close to being a straight-time shop. The closer to straight time we get, the better our billings will be. And the more we can pay our technicians!