|06-13-2012 03:36 PM|
|poncho62||Wonder how the original poster made out with his business?|
|06-13-2012 12:51 PM|
"effective hourly rate" was referred to earlier. This is how much eah hour of time actually makes yo. For example, our shop rate for repair is $100/hr. If I do a 2 hour job in 1 hour, the effective rate is $200/hr. If it takes 4 hours, the effective rate is $50/hr. You can go into negative EHR.
BTW, your overhead is ALWAYS double what you "think" it will be. Sit down add everything up, and add 25%. Then add 30% profit, divid by 2000 hrs in 1 year, and this will gvive a starting point for figuring labour rate. You need to add equipment purchase, and depreciation into this, as well. Parts markup, look into price matrixing, and Gross Profit Margin markup.
OOPS!! I just noticed how dusty this thread was, lol!
|06-12-2012 10:32 PM|
|'49 Ford Coupe||
Your New business...
And MOST of all...
NEVER EVER screw a customer..(no, not literally)
ALWAYS tell the truth (you never EVER know how much your customer already knows, and when/if you get caught "screwing" a customer, 15 more potential customers will find out)
ALWAYS cover any errors you made for FREE. You will secure a customer FOREVER, and he/she will tell 5 or more other people about you.
Oh, and just to VENT, nearly ALL "Brake Repair" chain companies CONSTANTLY SCREW customers, but they figure that they have an unlimited customer base, and they think there will ALWAYS be stupid customers.
|09-07-2010 10:09 AM|
Here is what I do.
I try to keep a 50% margin, meaning that the cost involved is half of the sale. I let that slide on larger repairs like transmission rebuilds. Once the repair gets over about $1800 I forget about the 50% and just try to keep at least $800 profit in it.
... but I have 15 shops in three states and about 50 employees
I would start by paying yourself a modest flat rate; say, $20/flag. If the labor book says it should take 1.2 hours to replace a water pump, charge the customer 1.2 hours and pay yourself 1.2 hours regardless of how long it actually takes. Start with about $75/hr labor rate for repair.
From there, you can tweak things. For anything older than about 1975 you won't find labor times so you'll have to guess and sell the job based on your estimate. Certain jobs (like hotrodding) you may find it easiest to charge based on the actual time it takes you to complete something. It is custom work after all. In those cases, lowering your labor rate to something like $60 will still cover your labor by a 66% margin and not cause your customer to faint when he gets the bill.
On parts, do a sliding markup. I just use my gut sometimes. For instance, if I buy a thermostat gasket for 1.50, I won't hesitate to put it on the bill at $6. Anything below $20, use your gut. Anything from $20 to 100, do about 40%. Anything above $100 I do about 30% markup.
Also, make a CLEAR warranty statement that you can physically give to the customer. You'll get a zillion people who will try to jerk you for free stuff. For instance, we have a truck in the shop right now that we built the transmission. Now its shifting late. The problem was that the EPC solenoid in the transmission failed which is not a part that was replaced (or even touched) during our rebuild. The breakdown in communication was twofold - 1) the customer was not properly educated on what "rebuilding" a transmission involves. They thought that we gutted it and replaced everything but the case and the whole tranny was under warranty, and 2) he didn't read the warranty paper and felt entitled to a rental, a free tow, and lost wages. Since he signed a copy of the warranty when he picked up his truck the first time, he had no grounds for demanding it.
Also make sure your invoices are crystal clear on the work you performed. If you replace a ball joint, make sure it says "left front lower ball joint" instead of just "ball joint." That way if another ball joint fails, their is no legal question.
It all sounds so untrusting, but its just honesty and disclosure. Tell the whole truth, so you never have to cover your *** later. When all the cards are on the table, no one can accuse you of hiding an ace in your sleeve.
|09-06-2010 06:44 PM|
Look at this for example, McDonalds. The place is ran by 18 year olds and a 25 year old manager making 12 dollars an hour. No big experience, no big business mind. Nope, it is built on a great business plan and the people BEHIND it are the businessman.
Look at a "Maaco" auto painting or something like that, do they do real good work, are there any craftsmen there? Nope, but they make money because of the BUSINESSMAN or at the very least the business plan that the owner follows to a tee (the Maaco corp makes SURE you follow it).
So this great mechanic opens the shop, he doesn't know how to handle the money, he doesn't think marketing is important, he doesn't think anyone "knows" his business because it is so "different". The shop is full of dead horses because he doesn't value every square foot of the shop he is paying rent on. He has friends cars stored there. He gives friends deals. THAT is why he fails, he is a GREAT mechanic but he fails because he isn't a good businessman.
My point being you MUST become as good a businessman as you are a mechanic. And if you have a PASSION for the business side as you do for the mechanical side you WILL succeed. If you think the shop is so different and no one could understand or teach you something, you WILL fail.
|09-06-2010 06:34 PM|
And doing T&M (Time and Materials) or flat rate, it really doesn't matter. If what you charge when the car goes out the door is too low, you are looked at by the AVERAGE consumer as a someone who didn't do a good job. OR you are looked at as a shuck and they will be back to bury you some more!
If you charge too much, unless you are slicker than snot and really are all that and a bag of chips, you look like a thief.
|09-06-2010 06:14 PM|
|09-06-2010 06:12 PM|
|SG60IMPALA||I see a lot of good advice here. I wish I had been told this much info before I took the plunge into business. I have been open for almost 2yrs. and it has been a crash course. My advice would be if you can afford the machine's to make life easier then do it, but they (machines) need to be running to pay for themselves. Friend's. don't let friends talk you into going into business. They will for the most part be the last one's that do business with you because you don't work cheap anymore. As for shop rate. If you are too low you will miss jobs because people will wonder why you are cheaper and will think they are not getting a quality product or service. Too high and they will think you did not do a good enough job. Always be specific what your customer is expecting (cheap, average,show,the best money can buy). Trust me you will have days that someone will come in a say that is way to high. Stick to your quote especially if you are not making much on it. Sometimes it is best to let them walk. Because if you are fair the good one's will come to you and they will come back if you treat them fairly. It will make you feel good when you charge someone fair price for the work and they tell you it's not enough for the work you done. "here is some more for your effort and treating me right". The other thing is do not build someone's project out of your pocket. Do a deposit and draw system for the work you have done and the parts bought for the job. In the end you need to be able to sleep at night , but also make aliving a what you love to do. That is a good feeling to have. Best of luck to you. Bryan Allen . . Allen Fabrication Service|
|09-06-2010 04:36 PM|
|supersmurf666||Thats some great advice and stuff to consider from ya'll.Thanks alot.Im going to be doing electrical,engine compartment design,engine detail and building engines.I have 28years of experience building hotrods and drag cars for me and my friends.I dont do chassis fab.I only do paint and body for me because I hate bodywork.I can do suspensions but I tend to be to slow at that.I want to build engines but I dont want the cars at my shop.Im working with a machine shop Ive used since I was 15 years old.My overhead is VERY low and its just me.MY shop is only 180.00 a month for a 12'x60'.All of my tools are paid for.So I no I can be cheaper than the big shops but I dont want to be to cheap.What work I want to do at my shop I am VERY good at.I dont want to do work Im not 100 percent comfortable with.|
|09-06-2010 03:44 PM|
You can not figure what to charge for a rate until you know what your over head will be. You need to figure as close as possible what it will cost you per hour to keep the doors open. If you are in a labor intensive business you dont have as much parts markup to rely on like a general repair shop would have. We charge 75 per hour, so on a brake 2 wheel brake job we get .7 per wheel. That is 105 for labor, but we will also probably make another 75 markup on the parts.
We try as hard as possible to do every job as perfect as possible. Come backs can kill your profits in a hurry. I know everyone will think this labor is high but it takes time to do the job right, and quality parts cost more than the AZ crap . We take everything apart,sandblast all mating surfaces, re-lubricate everything and reassemble using a torque wrench. Customers don't mind paying if they are happy when they get their cars back.
Happy customers will come back and send their friends. Unhappy customers wont come back and they will tell everyone they talk to to avoid you.
Make sure you get paid when the cars leave the shop, you will not have time to chase money.
|09-06-2010 03:35 PM|
I have found that once you have built your reputation the money will come to you.. When first stating out you may have to give a little, But once you have your name out there, They will find you.. And like someone said there's no set book for the charges on chop top,New frames,body mods,and so on,, Charge what you feel you should get,(BE FAIR) And you will soon know if it's to much, are not enough,, If you have a waiting list to get in your shop, Like some do.. Then it might just be time to get paid more,, It isn't hard to find the spot you need to be at,, I have done job way back when, where I would get paid $$$$ and the guy would say.. I would have gladly paid you this much for what you did.. After hearing that a few times,, well you should know what to do..Like I said your work,skill level, and your reputation has a lot to do with getting the right amount of $$$$,, When I do a car. I treat it like I'm building it for me.. Give them what you would want.. And you will never be out of work...
And most of all,, Never set any limits on what you can do..even more with a hot rod shop...
|09-06-2010 03:05 PM|
We are pretty much on the same page and I am obviously not expressing myself well.
I have done PLENTY of custom one off fab work, and everything I said pertains to it as well as production work. Again, there really is no difference between a production shop and a fab shop or a tire shop or an ice cream vendor, business is business.
We have both said the same thing I will leave it at that.
|09-06-2010 01:31 PM|
|Silverback||Oh, and before going back to the previous argument, MARTINSR, you can look up in a book how many hours is allowed for replacing X and painting Y, and in that situation your argument makes sense, where there is no book (that I know of) listing "chopping the top 3.5 inches on a X" and "custom fabricating a new spring perch for Y."|
|09-06-2010 01:04 PM|
Martinsr, I think that you are 100% right WRT to some businesses, and WRT to what it takes to make a profit, but you're slightly missing the point about what you can charge in this kind of business.
Tubetek I think is dead on...
In your case you're coming from a fairly standardized business that in general, you know that it's going to cost so much to do X and it does that every time, occasionally you might run into hidden damage that will change it, but even that is pretty predictable in body work.
The sort of totally custom work that he's talking about getting into that approach is probably not realistic. The extra skill and equipment that you talk about being a cost/benefit analysis, that X should take Y hours and if something lets you get done in half the time that's added profit that you have to weigh against the extra cost won't fly in that kind of work. Most of the work does not have a set X hours value and sure, you can just assign one and charge that but it seems like that means that you're either screwing yourself when it takes longer or the customer when it takes shorter, and somehow, someone always gets some impression of that if that's what you're doing.
Instead, in this kind of work, the extra abilities (whether they're yours or some machine's) is the difference between being able to do work and not, stay in business or not... and you have to weigh if you need to be able to do it, or if you can farm it out for a reasonable charge...
My best suggestion is to take a job working in a similar shop for a while to get a feeling for what works and doesn't, and what type of work is around in your area and what services are missing (someplace you may corner the market or if there is a reason why someone should stay out of that part of the market, like you might find that _no matter what you do_ that with cerntine things the customers will never be quite happy, it either costs too much for 90% of them, or you can't compete with another company (in quality or price or final product) or something...).
You'll learn how much that shop and others charge for that work, how much of that work exists, what you really need to get that done and you'll probably get some impression of the types of employees available in the area, zoning, taxes, shop overhead, what you need to get the work done...
That said, I have worked in a shop like that in the area, I babysat the counter some times, and I also contracted work to the shop either doing custom work (making small custom parts...) and full installs/projects (they were more speed and muscle car oriented then strictly hotrod). I was the goto guy when something didn't exist anymore and they needed one for whatever project the shop was working on, and like I said, some of the projects eventually started coming home with me to my personal shop. I know what the shop owner was not able to get or what others were not able to make, what it took me to do it and how much I made and how much it got marked up to the customer. I know what the customers were happy with and what caused problems, and I made mistakes (thinking I was doing the right thing or even fixing a problem) on both ends, the actual fab work/installs and on the invoicing a customer/selling them parts/work end (in other words, I saw things that I thought were causing problems and found out why they were like they were as well as found things that could be done much better).
I found that I could build things well enough that I could charge more than the going rate for similar parts/work (that wasn't done as well as mine) and that customers were willing to pay more than what I needed my labor to be worth to make it worth my time, and that the owner of the shop could still mark up enough to cover his costs (including when accedents happen, that's important, **** happens in this kind of thing) and make a profit.
I ended up hanging a stop watch next to the door of the shop and would hit the start button when I walked in, stop button when I finished and would keep a log of my hours and billed accordingly, and found that for this kind of work, that almost always worked out better (both me and the customer were happier) then trying to work to a set price. Generally "this is what we need to do, but there can always be problems along the way, aftermarket parts don't always (usually? Ever?) fit and when they do they'll save money, when they don't fabbing stuff is your only choice...
And then I kept a photo log of the work, that way the customer could see what was happening (I could email them) with their stuff that was getting worked on off site, they would have pictures why something took longer than expected, and I would also have pictures to show manufacturer's of products if their stuff didn't work. Everyone understood what was going on and things were better that way.
There were a few things that I did for a set price, but they were things that I'd done dozens of times and I knew what they were going to cost and how long they will take, but if there was any question they got a quote and usually a call if there was a significant change (be aware that there are also state laws about automotive service work and estimates/charges, you need to know what applies and make sure your pricing/quotes cover you if they do apply).
No, that doesn't give you an exact $/hour. Sorry, I'm not in your area, I don't know what your abilities are, what equipment you have and what your overhead is. I can tell you that 3-5years ago, depending on the actual work that I was doing I could charge between $75 and 130/hr (or about 20% less if I'm contracting to another shop that is taking some of the risk and overhead off my hands) and locally the customers are happy with the work that they're getting for their money. Some of the smaller, piecemeal stuff I can make MUCH more if you work out an hourly rate because I have equipment others don't and can "assembly line" them and bulk order parts so I can do things faster and cheaper (and to be honest, the competition charges that much and if I charge significantly less that's as suspicious as charging more for the same work).
Of course, I live in a pretty expensive part of the country and the market has changed a lot the last couple of years, so that might not even give you a workable ballpark to figure off of. (3-5years ago because I went back to doing something in a totally different field since then)
|09-06-2010 09:41 AM|
VERY GOOD advice Kevin! LOL, the "friends" part, LOL.
EVERYONE is your "friend" when you own a shop! LOLOL. I had a fellow business owner in town who said the funniest, yet most profound thing ever on the subject. We both had the same customer who would go back and forth between us. This guy was odd to say the least, first off he couldn't read or write, but made good money working for the "Union Sanitary district", yep the guys who keep the sewers running nice. Good job, I'll give you that! Anyway, he was from Hawaii and so was this other business owner. In fact, they knew each other there. But they both spoke a Hawaiian broken English.
The guy that went back and forth between us had a chopped Deuce three window. Anyway, I was chatting with this other shop owner one day and he told me how the customer was trying to get him to do something for him and he called him his "Friend". LOL, I still laugh out loud with my brother when we remember this. The shop owner told me how he told the customer in his broken English. "You not my friend, you never come to my house for my boys birthday party, we never go fishing, we never go to ball game, you not my friend". LOLOLOL, is that profound or what! LOLOL He went on to say "you my customer, you only know me because I fix cars". Yep, so true so true.
Yes, that thread has some good stuff in it.
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