Auto Shop Coaching Blog

How to Qualify Your Labor Rates

“I can’t raise my labor rate to that!” This is a common phrase ATI’s coaches hear from members after calculating where the labor rate needs to be relative to labor costs. The disconnect is that we’re already committed to our labor COG (cost of goods) because we already incurred labor expenses like technician wages, benefit packages, tools, and the software our technicians use.

Considering we’re not going to make wage and benefit cutbacks with our staff (at least not in this current hiring climate), the logical step would be to raise labor rates to keep margins and other profit details in check. Mathematically, we know what the labor rate should be, but what if we’re not qualified to charge that amount? Here’s what is at stake – if we have quality control problems and customer service issues and don’t separate ourselves from our competition, maybe the math is just the math until we make some changes.

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Quality Control

Let’s start with quality control. If we can’t correctly fix the primary reason the customer visited us, our charges can be questioned in addition to our expertise and professionalism. We should track how often we get return visits on prior repairs (or comebacks, as we call them in our industry). A comeback log is necessary and will help identify where the problem exists: with part manufacturers, specific part vendors, or technicians. We’ve built professionalism and trust once we clear up these issues and reduce the chances of seeing a customer a second time on a prior repair.

Provide Great Customer Service

Next, we can’t qualify our charges if customers feel we’ve left them in the dark. If we’ve heard statements like “That’s not what I was quoted,” “I couldn’t get a call back from you,” and others along these lines, we have work to do. We’ve already lost if a customer must call us for an update on their repair. If we were on our “A” game, we would contact our customers at an established interval to update where we were in the repair process. This way, chasing us down isn’t a path they’re inclined to take. If we don’t return phone calls, don’t sound welcoming, or give an unnecessary attitude, again, expect questions on charges that extend from our poor customer service.

Know Your Competition

Lastly, it is imperative to recognize that our competition in the customer service realm is all organizations the public does business with, not just other automotive repair facilities. What does this mean? The last great hotel, airline, and restaurant experience your customer had is the measure by which we’ll be compared. In addition, what we offer beyond automotive repairs for convenience is another way to substantiate what we charge. Do we provide concierge services or a rental car or shuttle service?

Can customers securely pay for their repairs online and safely pick up their vehicles outside our business hours (please — no keys left underneath driver’s floormats!)? If our competition is in the dinosaur age and taking credit card numbers over the phone, imagine the professionalism we’ll portray by offering online payment and financing options. Don’t forget DVIs (Digital Vehicle Inspections). These aren’t only a proven way to increase sales but a great way to impress our customers with pictures, videos, and notes that make it easy to interpret what repairs we’re suggesting. Back all of this with values like longer warranties, washing every car, fuel top-offs, and more, and we’ve clearly set ourselves apart from those around us.

Now, with all these improvements checked off our list, we can qualify by charging the labor rate we need to. Picture Starbucks coffee vs. what you get from the local gas station. They’re both coffees, right? But the one charging triple has a drive-thru line, and the other doesn’t.

Non-ATI Members: Want to learn more about today’s best practices for marketing, selling, improving profit, and growing your bottom line? Start with a shop owner event at We offer virtual and in-person events, fee-based and free, for both auto repair and collision repair shop owners. Find one near you today!

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Koole Bolina is a Performance Coach at ATI and has been in the automotive industry since 1998. Starting with a personal interest in automotive repairs, he continues to be part of car clubs, drag racing and keeping up with industry trends. Koole loves to positively influence those who want to do better, be better. If the industry we happen to do business in is the automotive field, that makes it all the better.