Labor Secrets EVERY Service Advisor Should Know! (Service Drive Revolution)
Jeremy O'Neal and Chris Collins break down four labor types service shops sell, focusing on diagnostics. Price diagnostics 25-50% higher than your posted rate since they generate no parts revenue. A $100 posted rate becomes $125-$150 for diagnostics, and some dealers charge $135 per concern or quote $900 upfront.
Questions this video answers
Competitive, maintenance, repair, diagnostic labor.
25–50% markup on the posted labor rate (example: $100 → $125–$150).
Typically close about 3 out of 4 for check-engine free leads; bringing the car in can convert ~90% of callers.
Examples cited: $135 per concern at one dealer; a $900 diagnostic quote for a wiring/ABS speed sensor issue at another.
Chapters
There's four different types of labor that we sell. What are they?
They are competitive.
Yep.
So that would be like your oil changes things that drive traffic.
Yep.
Get people in the door.
Absolutely.
There's maintenance.
Yep.
There's repair.
Yep. And the fourth one is diagnostic labor.
That's something I learned from, from Jeremy is.
Yeah, go ahead. Like I, I, I totally learned this from you and I think it's great.
Well, diagnostic services, we all provide it. And realistically now, if you are a repair shop or a repair dealership and you get a lot of repairs, your technicians are doing diagnostic services all day long. Now the challenge with diagnostic services, when we're generating the diagnostic labor, what are we not generating revenue wise for the shop?
Parts.
Parts. Because when the diagnostic.
Yeah, I should give you a sticker. Right. Or a gold star. When your technician is performing the diagnostic service, there's no parts labor generated with that repair. So if I could do a franchise, it was timing belt king. Right. Like we did timing belts all day long. And all I did was timing belts. I had four timing belt jobs a day. I could be super efficient and I could knock out hours all day long. Give me four timing belt jobs to start my day. I'm super happy. Give me four intermittent drivability stalling issues to start my day out with. I'm going to take in about eight more cars for the day because I don't know when the revenue is going to hit the cash register. Now what I've noticed is this, independent shops sometimes can struggle with fixing cars. So then when we get stumped on a car, where do we turn for help?
The dealer.
Yes. So we'll send a car to the dealer. What I noticed over the last, say five years with dealerships is I could send you a car and you charge me one hour of your labor time to diagnose the car. It's a hell of a value for an independent repair shop. I don't care if I pay you 200 bucks to tell me what's wrong. Well, it doesn't matter, does it?
Yeah, it does.
Why?
I'm just like you mark it up.
Right. Well, of course, yeah. I mean, typically you'll double it and you know, pass the bill over to the customer.
Yeah.
You got to make profit on stuff, Right. You're providing a service.
I just think it's good for them to hear that.
It is. Yes. Yeah. I mean, and I'm not ashamed of our pricing at all. And I think the one thing that, and this is important, no matter where you're at as a service advisor, your success is all determined by the relationships that you build. So for instance, you were at Crevier BMW. If I knew you as a service advisor there, I would build a relationship with you as my BMW guy. So I would have your cell phone, I wouldn't have to go through reception. If I had a problem with BMW, I'd text, hey, Kris, I got an M5 I need help with. Can you get it in the shop today? And you'd be like, yeah, bring it over, we'll squeeze it in. So guess what I just did for my client. Instead of waiting two weeks to get in the shop, I just, with my special relationship with you, got you on the fast track. Now here's what's changing. I took a car to a Japanese import dealership where they used to charge me $135 for diagnosing. I got a call from the advisor. He says, you have three concerns. That is 135 for each concern. Your totals, $570 or whatever it was. I was like, okay, you've been to my diagnostic class. Awesome. I love it. Great. I'm changing the industry, right?
It's awesome.
Then I took another vehicle to this local Chevy dealer and the Guy quoted me $900 to diagnose a wiring issue. 900 bucks in diagnostic time up front.
Is there like rat damage?
No, no, it's an ABS speed sensor issue. Shouldn't be that hard to figure out.
So do you think they're doing that because you're a shop and you're a competition?
I don't think so. I think that more shops and dealerships are understanding that we can't take a loss on diagnosing cars. I can't let my technician spend four or five hours figuring out somebody's concern and not drive the right revenue. So take that timing belt job. If I can in a four hour period, if I can do a timing bell job for fifteen hundred dollars and I'm going to make so much more gross profit per hour. Same advanced drivability for four hours is even at 200 an hour is only going to generate $800 in revenue. The profit's a lot lower and my cost is higher because it's my most highly skilled technician doing the work. So that's where the industry is changing. So with our diagnostic labor, there's a couple rules that I recommend for service advisors and shops to understand. Number one, price it properly. So I recommend a 25 to 50% markup on your regular labor rate. So this is going to Help your effective labor rate out. So let's just take 100 bucks for instance. Let's say $100 is the average door rate at a shop. And you follow my model of increasing.
So that's your posted laborator.
Yes, your posted labor rate. Right. So now your diagnostic rate is going to be 125 or 150.
Yes.
Right. So price it like it's a fourth labor type of.
Yes. Now what am I capturing with that markup? The lost parts gross profit that we're not generating during the diagnostic time.
Yeah.
Okay.
And so what do you think about the idea of doing like. So I've done this before, doing check engine lights for free.
Well, I believe in, believe in a lot of things. First one I believe in with helping customers is there is a time or you need a lead capture tool.
So that goes into competitive.
Yes. But to drive traffic, if you're gonna do it, it's not a full on diagnostic service. It's an initial assessment at no charge.
So if I were pulling the codes. Yeah, yeah.
And I'm gonna pop the hood and look under the hood and see if there's a rat or. We've had a lot of rabbits under the hoods recently.
Rabbits.
Rabbits.
Do they chew wires?
They do they eat everything? Yeah. Cottontail bunnies, Bugs Bunny. Yes. Yeah.
So in my experience with good advisors in an independent or a dealership, and obviously it's different like in a dealership because you're doing the same make. Right. So Ford is a Ford, but it's a little harder in independence because you know, the check engine lights are different on a BMW than on a Chevy or whatever. And it can require different skills than the technicians. Yeah, you know, just a little different. But usually you close three out of four in that scenario.
Okay.
So if you.
You know, if you give away the check engine light diagnosis, three of them are going to leave it and have the work done and one's going to take it out. So it's just batting average, right?
Correct. I think even the deeper issue that we're seeing today is we've got to get focused away from the component because the customers are going to, they're going to do some research, they're going to go to YouTube, they're going to go to the parts store, they're going to get the code and then they're going to want to sell them the part, the O2 sensor or whatever with a proper root cause analysis, which is a phrase that we've used for the last 10 years, RCA, you need a root cause analysis, Not a diagnostic service. It's a root cause analysis. Yes.
Have you ever had a root canal?
No, I don't do root canals.
Root cause.
But we do root cause analysis. Because, Chris, it's important not only to understand that the O2 sensor needs to be replaced, but why does it need to be replaced? Because if we're missing something and we're just changing the component, let's say that the connection is bad up at the ECM and we miss that and it causes this O2 sensor to fail, it can cause other damage in the system and cost you more money. So what we need is the proper time for my technician to do the root cause analysis, the pinpoint isolation testing to find out what has failed and why it's failed.
Yeah, no, I totally understand that. The thing with doing the loss leader check engine line is it just says. So here's what, what it says. Now we need to dig in.
Yes, right, absolutely.
And I love your approach of the root cause analysis, but it gets them in the door.
It does.
That's the idea.
Yeah. And what I've discovered with it is there's two things. Time is talk time management for service advisors. I don't want to take 10 or 15 minutes to convert a lead. So I only have so many hours in my day. So when the phone rings and I'm dealing with a live client, the best way for me to help you is to bring me the car. So I'll do an initial assessment at no charge. Now here's what I'm going to do. I'm going to pour some tequila in your coffee, pour you a nice cup of coffee, give you a tour of the place. But now I've got your car and your time. You made a decision to come down to our facility. If I can get you to do that, 90% of the time, you're going to do business with me. I'm going to win you as a client for life. There's no question.
Well, I'm drunk.
Of course. There you go.
Which we're not encouraging.
You heard it here on str. Get him drunk. No, don't get him drunk.
No, I totally. Yeah, I agree. And that's a good point. I, I love like.
The, the, your whole approach to diagnosis. And it works, I've done, I've been teaching it now and it works. Like having that as a fourth one and having it up a little bit higher.
So absolutely.
Going 150 or 180 on it and it doesn't. I mean, I Haven't heard of one customer declining.
It works. It does work. Absolutely.
They're at the time of need. And the thing is too like diagnosis is, is going down because the cars are made better there. There isn't as much diagnosis as there used to be. There aren't as many electrical problems as.
There used to be. Right, Yeah, I, I agree with you. And you know, it's interesting to see taking care of the car. I like to follow the demographics of the car that we are attracting. So where is the sweet spot for your shop? So obviously right now for a lot of independents, we're seeing cars that are 2005 model year to 2012, 2015, and that window's moving. So now we're in 2020. So we're going to get some maintenance on some of the newer model years. But things that are 2010 and older, you know, the intrinsic value of the vehicle typically is not there, especially for people in the rust belt that have to deal with rust. So you've got to understand what you're dealing with, how to be profitable on it, be fair for the customer, but also be fair for the business. And I gotta be fair for my technician as well.
That's good. Great stuff. Hope that that gave you some food for thought, something to try out. You know, just try it for a week and see what happens. But so far I've been doing this for, I don't know, over a year since I heard it from Jeremy and it's worked. I've had no negative feedback. It's genius. And it's just going to make your effective labor rate go up.
It does, absolutely.
Thank you so much for watching this clip of Service Drive Revolution. Now you can catch the full episode on YouTube, iTunes or Spotify or wherever you consume your podcast. If you have any questions or go ahead and post them in the comments below, make sure you subscribe and hit the bell icon so you're notified when we post new episodes. I'm Chris Collins and you can find me on Facebook and Instagram at Chris Bulldog Collins and I'll see you again on the next episode.
