Technician Labor Sales Potential

Technician Labor Sales Potential

In the service department, your inventory is timeãthe highly marketable time of highly trained technicians. You need to utilize technician time skillfully in order to retain profits while giving customers value exceeding expectations. Thus, you should price service labor competitively, and carefully monitor the mix of work your shop does. You should also analyze your repair orders (ROs) every day, making sure every RO is complete, that pricing is correct and effective, and that your Effective Labor Rate (ELR) is where it should be.

Of the various labor pricing options, variable labor rates based on job complexity may be a good choice. When tech skills are matched to the job, you use labor efficiently while enhancing your competitive stance. Guidelines for the work mix are 60 percent competitive and maintenance, 40 percent repair. Competitive labor comprises such services as lube, oil, and filter changes (LOF) and tire rotations, and is charged at a low hourly rate, perhaps at or near the LOF rate charged by local quick lube shops and gas stations. Maintenance labor is work the manufacturer recommends or requires, including common but less competitive services (e.g., emission control or air conditioning service), maintenance labor is priced at a moderate hourly, perhaps at or above the existing warranty rate. The maintenance rate is the target rate for the department and should never be lower than the warranty rate.

Repair labor comprises the least competitive, most specialized services charged at your highest hourly rate, which might be $8-$10 above the maintenance rate. Fuel injection calibration or engine overhaul are examples of repair labor.

Monitor performance. Use daily reports to study ROs and calculate your ELR, which is the dollar figure you get when you divide sales in each category by hours billed in that category. Analyze ROs monthly to determine what needs to be done to maintain an ELR that always exceeds target. Then, use a monthês actual performance to calculate your monthly labor sales potential:

1.$ Labor sales É Hours billed = Effective Labor Rate

2.Number of techs x Hours/day x Working days/mo. = Clock hours available/mo.

3.Available hours/mo. x ELR = $ Labor sales potential/mo.

How does your actual total (dollar amount labor sales in #1) compare with your potential total (labor sales potential, #3)?

Among the many adjustments you can make to achieve potentialãpricing tweaks, minimizing one-item ROs, upselling needed service and maximizing the use of menus, pricing guides, extended hours, and work mix schedulingãare improvements in facility utilization and in technician performance.

This article was adapted from the NADA Management Education bulletin Service Department Performance Analysis (SP29). This bulletin can be ordered online at www.nada.org/mecatalog or by calling NADA at 800-252-NADA, ext. 2.