How To Increase Your Labor Rate Without Losing Car Count [THA 152]
Devin Kelly, All-Star Automotive, Columbia, MODevin Kelley is a passionate entrepreneur with a technician background. As a shop owner, he is responsible for general leadership within his company. This puts him at the front-line of the fight for a more professional auto repair presence in his community and helps maintain his companies positive reputation. While acquiring another shop and brand in 2018 Devin doubled capacity going from a four bay shop to eight. With the new brand and downtown location his company grew annual sales from $370,000 to $1.8M in 2019. The new brand's prior year losses turned into big profits with new ownership. Devin admits these changes would not have been possible without becoming more mindful and organized when the challenges grew relative to the sales. Having ATI coach Paul Marsh, MWACA mentor Ron Haugen and AutoVitals coach Bill Connor provided invaluable guidance while the shops high performing team set all new company records. He is excited about how advancing the automotive industry enhances opportunities for his team and improves perceptions of auto repair professionals. When Devin isn’t working, you’ll find him going on adventures with his wife, working out in the gym and riding laps on a motocross track.
David Roman began his automotive career in 1999, attending an automotive technical school at a local community college. While attending college, he took a part-time job at a large parts retailer, hoping to gain some experience in the field. This part-time job turned into full-time employment, as he was promoted to management, culminating in placement as a store manager in East Central Illinois.
David discovered a passion for helping people and sharing his automotive knowledge. This passion for serving others allowed him the opportunity to successfully manage multi-million dollar operations in Illinois, the St. Louis area, and eventually Kansas City. His approach to customer service garnered him several accolades and awards, something he eventually wanted to bring to automotive repair and service.
In 2012, he opened Done With Care Auto Repair with the goal of bringing exceptional customer service, transparency, and honest work to his clients. The business was started with only some savings, no prior clients, and no history. Over the last six years, David has been able to bring a servant’s mentality to helping his clients with their automotive needs resulting in loyal customers, excellent reviews, and a solid reputation. Find other episodes that feature David HERE.
David Johnson, DJ Auto, Provo, UT
Key Talking Points:
The overall root of this problem is having confidence
We are behind the times addressing labor rates because many do not know how businesses work
Losing car count is not the goal, however, consider 95% of your profit is being done by about 50% of your customers. Losing a few customers may be OK. It will happen, but it should not hurt your business
You need an acceptable labor rate that equates to an acceptable level.
Parts margins must be considered in the solution
Parts to labor ratios are correct
The psychology of the sale at your counter is critical
If we are running a good business we are not competing with price. We are competing on value and experience
Take pride in what you do. Do you have the self-esteem to make this happen?
Your staff needs to know your strategies and the reasons for all that you do
You must practice your value proposition; the ‘talk’ you have with your customer.
You are willing to pay top dollar at a restaurant because you get so much more. No different than at your shop
Find your confidence. You’ll do more to help your business
You do not need a Taj Mahal shop. Keep your shop clean, presentable and professional. Present your enthusiasm, confidence, that you have what they need and speak to your value proposition. Find your differentiation.
Price becomes irrelevant
David Johnson give lifetime battery warranty
When he replaces he considers that cost as marketing for customer retention
He has a higher installation fee, but find his retention is very high
Most shops labor rates are artificially low
Raising your labor rate doesn’t have an impact on the customer than you think
Don’t call the neighborhood to test your labor rate. Every shop has their own profit structure. Many are not business people who really understand how to set the correct labor rate
David Johnson is $30 per hour higher than dealerships in his market
As an industry, we must do more work on pre-scheduling customer work. Like the dentists do
Practice your value proposition so you gain confidence. When you are not rehearsed or prepared you’ll cave and start to discount
You cannot sell anything if you don’t believe
Help your service advisors with key trigger words
The presentation is more critical than ever
Remove clutter from counter to keep your customer focused on the service advisor. Too many signs can distract from your message
You can get great ARO from the power of your counter
Learn the psychology of selling
True success can happen when you get out of the daily grind and observe what is going on with your business
Change does not have to be overwhelming
Start somewhere. Go to training. Take an online course
Find information that can teach you something you need to do better
Your largest opportunity to have a strong labor rate will be on how you talk and present to your customers. Your value proposition should nail it
You need to have multiple labor rates
Diagnostic rate. You’ll need to be at least $4-$5 per minute. You have no profit in diagnostic time so you need to make up for it.
Set profit goals and then work backward to cut costs, set sales and margin goals will help you achieve your profit goals
Your labor rate needs to be dictated on what the market will bear
Even if your shop is paid for don’t have an artificially low labor rate
Ingrained into us is the ‘Hero Syndrome’ our pride gets in the way of running a profitable business
David doesn’t sell batteries he sells a car that will start
How much do you charge per hour? A question Devin Kelly like to hear.
It depends on what we are dong
We don’t charge the same time vs oil change or enging change.
SWOT is an exercise you need to do (Strengths, Weaknesses, Opportunities, Threats) Consider this exercise with both short and long term timelines. Then create your strategic plan from these findings.
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