For Success, Understand the Dimension of Labour Rates Required

Mr. Robert (Bob) Greenwood, AAM (Accredited Automotive Manager), President & CEO, Automotive Aftermarket E-Learning Centre (AAEC). With over 36 years of Business Management experience within the Independent sector of the automotive aftermarket industry, Bob has created Business Management development courses for automotive shop employers/managers. To contact Bob Greenwood: bob.greenwood@autosphere.ca

I’m finding too many shop owners still use one “catch all” labour rate for their business and if they don’t change the way they charge their customer/client for services rendered, it could contribute to the demise of their business.

The dimension of the labour component that must be understood today is the “tier” labour rate system, or a rate that is referred to as the “diagnostic” labour rate.

The tier labour rate denotes the level of diagnostic skill that is under the roof of the shop. This rate is invoked when diagnostic services are required for the automobile.  There is no “flat rate” manual to follow—it’s solely based on the skill level of the technician involved.

Many shops are failing to understand that today’s services, and their future services, will be based on their knowledge and skill to diagnose the technology under the hood that has failed their particular customer/client.

When technology fails, a systemized strategy which consumes “time” is required to diagnose and fix the problem. This issue involves special expertise by a highly skilled, specially trained technician, coupled with the use of high end, very expensive equipment.

One other element to diagnosis, that’s often over looked, is the fact that management, or the service writer, is required to spend more time with the customer/client explaining the procedures and progress of the diagnosis element. This time can be substantial to ensure customer/client confidence and shop credibility is maintained when compared to the amount of time to explain a mechanical/maintenance service. This element must be accounted for in the financial equation.

When examining the door rate of diagnostic work, the mathematical formula must take into account the above mentioned issues plus the cost of numerous pieces of specialized diagnostic equipment, the cost of on-going software upgrades to said equipment, continuous, and numerous, diagnostic training courses.

In diagnostic work, the saying “time is money” has never stood out so strong!

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