“Sorry I broke the………?”
“Sorry, I broke the (insert whatever part here) when I was reassembling the engine”, transmission”, whatever they were working on. This is where some “hidden” costs come from, those parts that are broken, not on purpose, not even always out of negligence, but parts that are, in fact broken during disassembly or reassembly. Who pays for those parts? Big or small the business usually pays because in most States it is illegal to take the money from the employees check. So how does the business make up for these losses? Generally they don’t, “it is part of doing business” is the usual statement followed by, “I sure hope it doesn’t cost too much”. Whether it does or doesn’t cost a lot is irrelevant because it must get replaced, again, usually at the businesses expense.
So where does the business, or more exactly, the business owner make up this money? In a lot of cases they simply don’t. There is a way however that over the years has been developed and fine-tuned to help this situation become more tolerable. Ultimately, the customer pays for everything in a business, correct? The answer had better be yes or you are not in business to make money, you are in business as a hobby. The customer pays for everything, whether up front as in the case of warranty repairs, built into your labor rate as warranty costs or through small adds to the labor hours for those “broken” parts.
I’ll assume that you already have your labor rate set based on your costs of doing business, so the warranty costs have already been calculated into your labor rate. This may be a huge assumption simply based on the daily shop owners we speak with that have set their labor rates based on the shop down the streets rates, but for now, that’s another article.
So, let’s talk about those small adds to the labor hours mentioned above, this is what helps pay for those broken parts that the business ends up paying for. This generally isn’t calculated into the hourly rate because it is inconsistent (or should be) and as such a little harder to figure accurately. For years we have recommended charging an additional .2 for every hour the labor “guide” suggests. It is through this .2 that the business starts to make up for failures elsewhere within the business. By adding .2 to every hour of labor, we can start to see very quickly how this can help when accidents do happen, and they will!
A second part of this equation is, who gets this .2 for every hour? Does the technician get the .2 that we have added or not? A great question for sure, and one that has a couple of answers. The easy answer is easy because it is easier to do, “yes”. The harder answer because it takes more work, but has much better results is “no”. Let’s look at the yes answer for clarification first; since we are adding this .2 at the current labor rate is the business still makes money even though we are paying our Tech as well since he/she is not being paid at our hourly rate. Now the harder to grasp “no: clarification; If we are asking our Technicians what they want for the non-black & white (i.e.—oil changes, basic brake services, alignments…etc.) in terms of hours based on the labor guide, and it should be, we will be paying them what they asked for. This should keep them happy while the business gets .2 that goes into the bank with nothing being taken from it. The big question here is, are you asking your Technicians what they think the job is worth? If you are not, you are losing money, everyday!
This is the subject of another article, but I want to clarify this quickly if I can! By asking the employees who are working on the vehicles (the Techs) what they want for the job (again, based on the labor guide) you can get additional money for items like aftermarket add-ons, excessive mud or rust, harder to work on situations. All of which the businesses Service Advisor may or may not have noticed when they checked the customer/vehicle in through a “walk around”. By asking the Techs they are able to better inform you of situations that could and do take them longer than it should, by no fault of their own. This being said, it is still going to be the Service Advisors job to look up the labor times in the guide as well as to make sure that what the Tech is asking for makes sense. If it doesn’t, the Service Advisor can ask the Technician why and hopefully get the answers needed to help make the sale to the customer.
Bottom line here, figure out how many hours your facility sells per week, then multiply that by .2 and see how many more hours you should be charging for what you may not be getting right now, and then multiply that times your current labor rate…………would this help your business?
If you need help with your business and want to see and feel the successes you expected when you opened your doors, give us a call at:
The ACT Group, 916-588-0775 or visit our website for more information www.automotivecoachingandtraining.com