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Measuring the Accuracy of Labor Estimates for Auto Repair and Tire Shops

Labor is a significant component in determining profitability and competitiveness in the auto repair and retail tire business. It is of the utmost importance that estimates of labor time are as accurate as possible to ensure that work is profitable and pricing is in line with the marketplace. There are a number of factors that can affect labor times and therefore this important area should be evaluated and managed on an ongoing basis.

Frequent Services

Most tire and repair shops have a number of standard services or ‘canned jobs’ that are frequently performed (e.g. oil changes) and the labor charge on these services is often fixed. The idea employed here is that there may be fluctuations in the amount of actual time required to perform the service but in the long run, things will even out. Or they may be considered a loss leader and the shop expects additional business for offering them at a lower price.

Labor Guides

For repair work that is done infrequently usually a labor guide is used. A good labor guide can provide an accurate estimate of the time required to perform a specific repair on a certain year, make and model of vehicle. These estimated times can sometimes be affected by environmental conditions and may need to be adjusted accordingly. Many times an adjustment factor is applied to allow for this.

Tire Mounting and Balancing

Tire mounting and balance is a somewhat routine task however there can be differences that should be considered. Many tire shops simply embed this in the cost per tire and/or base it on a fixed charge. It’s often worthwhile to consider the size of the tire when pricing mount and balance jobs. It can take longer to perform this service for a vehicle with larger tires.

Actual Labor Time

Recording actual labor time per job can provide significant value. Significant and impactful measurements can be derived by reporting actual time required to complete tasks. Efficiency and proficiency can be measured and average employee productivity ratios can be calculated. Reporting actual labor time is necessary to evaluate labor estimates as well.

Measuring the Accuracy of Labor Estimates

Many shops that report actual labor times use this information to evaluate employee efficiency based on actual vs. estimated hours. This is a very useful measurement. But efficiency is impacted by the accuracy of the original estimate. In order to do the most effective job possible, the accuracy of estimates should be measured and adjustments made if necessary. The accuracy of estimates from labor guides can be measured. If the variance between estimate and actual is determined to vary a certain percent then an adjustment factor can be applied to the hours from the labor guide to close the gap. The same measurement can be used for canned jobs. If there is a variance between estimate and actual over a period of time then an adjustment to the estimated labor for the canned job is most likely needed. Measuring and refining the labor estimating process on an ongoing basis can go a long way toward allowing a shop to be competitive and successful.

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