When our industry talks about labor rates, most auto repair shop owners have the wrong approach. You see a lot of talk in Facebook groups about labor rates, how to set labor rates, and standard labor rates. While I love these different groups, there's so much more to labor rates.
In our world, there's a business model called finding the customer threshold of pain, which we have to do. It’s a business method where we have to raise our prices until customers say no.
Now a big part of being able to raise pricing in our business is that if you raise your prices, you must offer world-class service. So, I'm going to give you some real specifics.
Give Customers Greater Peace of Mind
When you go to a dealership and buy a part, that part carries a 12-month warranty. Well, in our world, we have a three-year, 36,000-mile nationwide warranty on all parts and labor. We offer that peace of mind warranty backed by 15,000 affiliate shops across the country, plus 365 days of roadside assistance covering towing, jump-starts, and lockout service. If anything happens to you—even if you run out of gas—we will come and take care of you. Convenience—one reason to offer a higher labor rate.
Consider Opening on Weekends
Auto repair shop owners should adopt the retail mindset and by doing so can justify higher labor rates. On any weekend, you can watch a movie, go to dinner, go to church, do anything you want, but you can't get your car repaired if you need it. My shops are also open seven days a week, which is convenient for customers who need the weekend to get auto repair work done. Now that alone I can charge more for. You have to build value to charge a greater price. That means our dual income with kids or dual income without kids, which is a top demographic, don't want to ask their boss for a day off to get their car worked on. We're slammed on Saturday and Sunday which shows how much the market is demanding auto repair services on the weekend. Consider giving it a try.
Tidy Up
Step back and ask yourself what offering world-class services or a higher image looks like for your shop. We have to admit, our industry has a lot of work to do. There's a handful of shops out there where you go, “Wow, that place looks really good,” but the rest don’t look very good. They have greasy, dirty floors. People are dirty. They don't put them in uniforms. A world-class shop should be able to afford health insurance, offer world-class service, and hire world-class technicians to blow the customer away. See, that's what your labor rate's all about. You must raise your features and benefits. Ask yourself: What am I offering to my customers that stands out?
Say “Yes”
We’re trained to say, “No” and in doing so we turn away good customers. Don’t worry about what time it is, be available. Instead, ask, “Is now a good time to bring your vehicle in? I’ll have one of my certified technicians inspect your vehicle, and give you a complete written estimate, no obligation. If you close by, I'll come pick up your vehicle.” Do the inspection, add MotoVisuals, send it for review, and give them a call. That’s world-class service. Now if you offer that to your customers, will they pay more? Absolutely. Can you see your labor rates going up? Can you see your gross profit improving? Before I hang up that call, I set up an appointment. I also do a new customer introduction over the phone and send a virtual shop tour because it’s about transparency.
If we offer world-class and deliver, we can charge very fair prices for the quality of work. Have the mindset that you are in the auto hospitality business. In that, you’ll have no competition in the world. Anybody down the street can fix breaks. You understand that. Anybody down the street can do an oil change, but not anybody can do world-class service, and we have found that customers will pay premium for it.
