Key Numbers 101 Series – Key # 23 – Effective Labor Rate
This series includes 24 Key Numbers. If you work on getting all of them in the ranges mentioned, your shop should be solidly profitable.
Key Numbers 101 Series – Key # 23 – Effective Labor Rate
For Key Number 23 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, key number 23 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.
There is a fill in the blank form where you can automatically calculate this number for your shop in our Business Calculators area available to Premium Members.
https://www.automotivemanagementnetwork.com/business-calculators/
This is a great learning and working tool for anyone in your shop who should know what the key numbers need to be.
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