Five productivity tips to help offset rising parts and labor costs.

A lot of things are looking up. Unfortunately, that’s not as great as it sounds for shop owners, because a couple of those things are the cost of parts and labor.

A recent study shows a 4.7% increase in labor costs and a 1.4% increase in the average cost of parts. Together, that’s a 2.7% increase in overhead for shop owners. As a number, that’s not too big. When your brain sees a number like 2.7%, it often glosses over it. A little voice in the back of your head says: “That number is too small to worry about. Move on to that bigger thing over there.” You need to tell that little voice to hush, because the number is a lot bigger than it sounds.

When you convert that 2.7% to dollars, it means you’re losing $2.70 for every $100 in revenue. Do the math for your shop’s annual revenue. That 2.7% grows into thousands of dollars really fast, and that’s thousands of dollars you’re not making this year versus last year.

So what can you do?

Well, you could always raise your prices. And some shops probably should. Raising prices is a delicate process, though, right? At what point do your prices make your customers drive a little farther down the street to the next shop who promises to save them a couple bucks? Raising prices is a decision that requires a lot of thought and has to be done on a shop-by-shop basis. But another solution to recover that lost revenue takes no thought at all—raise your shop’s productivity and efficiency.

Before we get too deep into a few solutions, let’s define “productivity” and “efficiency.” Productivity is simply the number of hours a tech works versus the number of hours you pay that tech. For instance: if you pay a tech for 40 hours of work in a week and he puts in 36 hours of actual billable work, you divide 36 by 40 and realize he’s 90% productive. But is he efficient?

Efficiency is easy to calculate, too. If you sold a repair job as a two-hour job and your tech took 1.5 hours, it’s hard to complain. But if he takes 2.5 hours for that job, you have an issue. That doesn’t mean you have an issue with your tech necessarily. It could be an issue with estimation. Either way, you’re losing money and need to get the actual hours as close to (if not under) the hours you sold for the job.

If you can keep your techs as close to 100% productive and 100% efficient, it’s going to go a long way toward making up for that 2.7% increase in parts and labor. Here are a few things to consider as you work to close that gap.

Check your prices. Call around to other shops in your area. Ask them what they charge for certain services that have high volumes in your shops. Compare those prices to your own and you’ll soon know whether or not you should increase your shop’s rates.

Hire the right team. It’s challenging to increase the productivity and efficiency of good techs. You often need to change the little things to help them get better. But you can make all of the changes in the world, and it won’t help if you have techs that don’t care about their productivity and efficiency. It’s not hard to tell who’s a hard worker that cares about their job and your shop. If there are people in your shop that don’t fit that description, it’s time to make some changes.

Open an express lane or two. If you can increase your volume, you can increase your shop’s productivity. It’s that simple. Express lanes are one way many shops are increasing volume. Quick lube jobs and tire service can keep a steady flow of customers through your bays, and that steady flow keeps techs busy.

Thorough inspections during all jobs. It sounds a little counterintuitive to say that you should spend more time and energy on something that doesn’t make you money in the moment. But thorough inspections often reveal minor problems before they become major. Pointing those problems out to your customers can save them the headache of a breakdown, and it increases your productivity even though you spent a little time finding those problems.