Key #23 – Effective Labor Rate

For this key number, we want to know the true labor rate – in other words, how much per hour is the shop really getting as opposed to their posted or normal billing rate.

Last month Acme Auto had total labor sales of $25,000 and their two techs produced 275 hours.
$25,000 ÷ 275 = $90.91

So, our key number is $90.91

While their normal labor rate that they use for billing is $104.50, their effective labor rate is $13.59 less. The effective rate is often 5% to 15% less than the posted or normal billing rate because of labor that is discounted or done at no charge for some reason.