Your posted labor rate barely matters. What counts is effective labor rate, which shops can push 10-20% above door rate by segmenting work into buckets (competitive, maintenance, repair, diagnosis, diesel) and pricing each differently. Industry average labor gross profit is low 70%, with 80-82% considered strong.
McRollerPig says, so I'm a fixed ops director in South Carolina. My current labor GP percentage is 80 to 82%. What is considered the industry average at this time? I'm at Audi and Acura stores. Similar question for labor rate. I advertise a door rate of $225. My ELR is $200, 85%-ish. What's considered acceptable by the Bulldog? I've heard you say above door rate is where ELR should be.
Okay, so let's take those one at a time. So the, the gross profit percentage, I, I believe the industry average is somewhere in the low 70s, and 80 is, is really good. 81, 82 is, is doing a good job. Would you agree with that, Hoagie?
Mm-hmm.
Yeah. And then the posted labor rate. So this is, this is a really good question. Really, the thing about posted labor rate is that it doesn't matter. Like there's, there's, it just doesn't matter. First of all, you, you don't really want customers thinking about the labor rate. You want 'em thinking about the outcome and the, the job. And I know there's states where you have to post the labor rate and that is, is what it is, but your 1 hour of labor in In our system won't matter because we might charge a different amount for diagnosis. We might have a matrix. We certainly aren't charging that for maintenance. And the highest ELR that you might have might be on maintenance, not repair. You know, repair's gonna get shopped. Maintenance is more of an impulse. So what you really want to do is get into our academy and go through the pricing strategies of, of how to separate your labor into different categories. So you have, you know, competitive labor, which is what drives traffic. You have maintenance labor, you have repair, and then you might have diagnosis as a 4th labor type, just depending. Then you might have diesel. If you have trucks, you might have a diesel or a heavy duty labor rate. So we, we wanna break all of those down into different buckets and then how you price those, how you approach them, and then how you sell more of them are, are all different. So, you know, repair labor for the most part is sold by people coming in needing a repair or by us inspecting the vehicle and recommending a repair. Maintenance is sold more as an impulse, like we're checking history and then recommending, or customers are coming in and doing their, their maintenance. And so each one has a different approach in how you achieve an ELR from them is completely different. So you gotta kind of separate them. And then the end outcome of doing a pricing strategy correctly will be that your ELR is higher than your posted 1-hour labor rate for sure.
That'd be a target for sure.
The least, the least exciting thing is your 1-hour price of labor. At the end of the day.
Mm-hmm.
And I would say if there was a percent, like if I was, what is he, what does he say he's at for EOMR?
80, 85-ish of his, uh, of his door rate.
So, you know, I would say, uh, 200, 200. I would say you wanna be over by a, by a clip. I don't know, probably over by at least 10%, but maybe 20 is probably more normal for us.
Maybe. Like you said, it's not a— It's not a straight line. That's an outcome of what we do, but we're not really tracking that as closely as we are getting to a desired net profit. So we're tracking net to gross percentage more than we are some of these other metrics. And a percentage of your door rate is just something to kind of look at. What it really represents, like Carfax just came out and said 40% of the vehicles on the road have maintenance way past due. And I forget what the timeline was, but it's a crazy amount of vehicles that just aren't getting offered the maintenance. And so the way we're achieving that is pricing strategy. And then we have a very sound system and a pretty bulletproof way of monitoring, making sure, and giving the advisor, setting them up for success to be able to spend a little time with the customer and go over that every customer, every time, prepare for the visit, check history like you mentioned, Chris.
And then the psychology of the customer and the sales, right?
Yeah, which we'll get to spend some time on that in Academy today for sure. So if you jump on there with us, McRollerPig, we'll be diving into that a little bit later. And you can also—
How dare you call him Roller Pig?
McRollerPig, you can explain that for us also.
Mr. McRollerPig.
And we'll answer each other's questions.
So funny. That's great. Thanks for the question though. Good one. But I— it's pretty easy to achieve an ELR higher than your door rate. And I don't— nobody in our group, nobody really talks about door rate anymore because it's just a— it's such a small part of what you're really doing. In fact, you could lower that and If it's a market where people are looking at that, I would try to have the lowest 1-hour labor rate probably. It's perception.
Yeah. I mean, it's perception. Yeah, 100%. That's what I was going to say. It's just a number. Yeah.
Good stuff.
