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Key Numbers 101 Series – Key # 8 Labor Gross Profit
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 # 8 Labor Gross Profit
For this key number, we want to know what percent of labor sales was profit. That is, the total sale price of labor sold less the cost of that labor expressed as a percent of the total labor sales price. This is like parts gross profit except that instead of subtracting the cost of a part you are subtracting the cost of a technician to perform the repair.
Last month Acme Auto had total labor sales of $25,000. The cost of labor was $7,250. That was the amount of gross payroll for all technicians last month.
$25,000 less $7,250 = $17,750 profit.
$17,750 ÷ $25,000 = 0.71
So, our key number is 71%
When looking at this number for a typical independent shop which is solidly profitable, this number will normally run between 70% and 74%
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.
Definitions and notes:
Total labor sales: Includes labor only. Does not include any parts or fees or other sales of any kind.
Gross profit: The total profit on the sale of something before any expenses or other costs of any kind are deducted.
#autoshoplaborprofit
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