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.
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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