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The importance of understanding your…

The importance of understanding your numbers

Shops need to do a better job of understanding their numbers and it starts with labour rate.

If you let your labour rate be an emotional decision, you’ll never raise it. It has to be a mathematical formula, a shop coached urged.

But there’s more to it, advised Rick White, president of 180Biz, during the presentation Business Boss Leader: From Creeper to Leader at the Mid-West Auto Care Alliance’s Vision and Hi-Tech Training Expo.

You have to also look at production. You can’t have your labour rate hide production problems. You can’t have your labour rate at $250 because your tech can only do four hours a day so you can reach 75 per cent gross profit.

“What I need to be able to do is talk to my guy and work with him to get him from four to eight or eight to 10, or whatever it is,” White said.

“I want to make sure I’m getting the production and I’m basing my labour rate on getting that production.”

While 75 per cent gross profit seems high and most try to go for 60 per cent, White noted that things cost more these days, especially talent.

“Is it costing us more money to be able to give people the benefits and such that we need to attract and retain them? Absolutely,” he said. “And those aren’t going to go away. They’re going to get weirder.”

Some of those benefits include helping employees with child care and elder care expenses. Shops are helping with retirement plans and education plans for children. These are all things needed in a shop to attract talent.

“Do you think that makes a difference for them? Yes,” White said.

And benefits packages can’t even be a one-size-fits-all. “It used to be we have one benefits package. Not anymore. Now it’s a benefits guy. It’s a Chinese menu — what do you want?” White said.

And they’re not cheap. A big part of a shop’s expenses these days are benefits.

“You need to understand your numbers,” White urged. “I don’t mean you got to stay there all day with them. But you got to understand your numbers.”

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Comments

  1. Rob Nurse Avatar
    Rob Nurse

    Consultants make everything so complicated so you invest into their crap they are selling. You can micro manage your business right into receivership. I don’t worry about technician efficiency or average repair cost orders. If your running a honest profitable business they are going to be what they are going to be. I figure out what I need to make to pay the bills plus extra to be a profitable business, while living within my means. I work towards my parts gross profits goals and analyze parts to labour ratios. As part suppliers increase the price of parts, which happens frequently, my parts to labour ratios get out of wack needing my labour rate to be increased. I also keep an eye on my customer retention. As long as I am retaining or gaining new customers around the 55-60% mark, bills are getting paid and I’m running a profitable business. The bottom line is you have to make money and pay your bills. You can not get behind on paying suppliers, employment deductibles or HST remittance. If you do it will be very hard to get out of the red and back in to the black.

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