Guides · Labor

Why is my effective labor rate so far below my posted rate?

You post $145 an hour, but the math never seems to come out that way. Here's how Nolavi works through it, the same way a good mechanic works on a car: find the concern, the cause, the correction, then verify the fix.

1

The concern

Nate's posted rate was $145. His effective rate was $104.

Bar chart of where an auto repair shop loses effective labor rate: discounts, free diagnostic time and underquoting
Three leaks, sized.
2

The cause

Nolavi broke down every labor dollar. Discounts cost $9 an hour, diagnostic time given away cost $14, and jobs quoted under book time cost $18.

Nolavi alert that diagnostic time was given away on 31 auto repair jobs
The biggest single fix.
3

The correction

Diag time is now always charged, discounts need a reason code, and quotes use book time by default.

4

The verification

Effective labor rate rose to $126 in two months, worth about $6,800 a month at his billed hours.

Effective labor rate results for an auto repair shop after closing leaks
Closer to what you post.

How we work. We make changes like this for shops all the time, using each shop's own data. The numbers shown are examples.

Questions

Quick answers.

What is effective labor rate?

Total labor sales divided by hours billed. It shows what you really earn per hour.

What's a good effective labor rate?

As close to your posted rate as possible. A big gap means discounts, giveaways or underquoting.

Keep reading

See it for yourself.

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