3 min read

What’s the Difference? — Repair Hours or Labor Rates

Written by
Jonathan Pyle
Published on
October 7, 2022

Every shop owner wants to grow their revenue.  Obviously, you could add more locations and try to bring in more cars, but before you go there, you should ensure you maximize revenue on each vehicle that’s already in your shop.  For most shops, the largest portion of revenue dollars relates to Labor Sales.

Labor Sales are the primary driver of your shop's revenue.

As the primary driver of total revenue in your shop, it makes sense to focus there first when working to grow revenue.  Your first step to achieving that goal is to increase your Labor Sales per Repair Order.  There are only two ways to do this: increasing your labor rates or selling more labor hours per repair order.

Fruit in a tree too high to reach.

Increasing Labor Rates (The Not-So-Low Hanging Fruit)

Labor rates seem to be the most obvious place to start, but the is collision repair, nothing is as simple as it appears.  As the vast majority of auto body repairs are paid not by the vehicle owner but by their insurer, raising your rates isn’t all that easy.  Typically these rates are set by the prevailing rate in your area as determined by the insurer, leaving you with little influence in this key driver of revenue growth.

Adding the last piece of a puzzle to complete it.

Labor Hours per RO:  The factor that you control.

Since we cannot simply increase rates, let’s take a closer look at ways to increase labor hours per repair order.  The common areas of underbilled labor time are body repair time, misinterpretation of P-Pages, and overlooked OE-recommended operations.  Of these areas for growth, increasing body repair time has the most potential to grow revenue and where you should spend your focused efforts.  The app was built with the primary intention to help you standardize and justify body repair times, giving you the control you need to pursue the rates you deserve.

Maximizing body repair time can make a substantial impact on your bottom line.  In a previous post, we ran the numbers on a hypothetical average shop that increased their bottom line by more than 21% using the app to secure two more hours on each repair.  Just imagine what a difference it would make to the health of your business if you could add 21 cents to every existing dollar of profit.

Cheering repair team in a body shop.

The downline effects of increasing body labor hours.

An increase in body labor hours doesn’t just impact your bottom line, it also directly affects technician pay.  As a shop owner, you want to take care of your people, not just because it is the right thing to do, but also because when your staff knows you are taking care of them, they will do more to take care of you and your business.

In today’s competitive employment environment, you must do all you can to recruit, cultivate, and maintain your staff.  While there are many things you can do to build community and foster relationships, at the end of the day, your team is there to make living to support their family.  When there is an opportunity to increase technician pay that will directly boost your bottom line, that is a win-win scenario if I’ve ever seen one.

Don’t throw the baby out with the bathwater.

We are not recommending you give up your efforts to secure higher labor rates but rather suggesting that you focus on what you can control, maximizing fair compensation now by capturing the labor hours needed for each repair.  As the prevailing rates in your market increase, the benefit to your shop’s profit will compound from the effect of getting paid a fair number of hours on each repair.

The damage measurement app is the tool that can help you do just that.  Using advanced LiDAR technology already built into your iPhone, the app scans the damaged panel, creates a 3D topographical map of the damage, and suggests repair times based on severity, substrate, size, and body lines.

Be smart, be fair, control what you can, and get paid what you deserve for the benefit of you, your technicians, your staff, and your entire business.  We would love to help you grow your business.  To get started today or see the app in action, please schedule a demo at the link below, or send us a message through our contact page.

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