Shop owners, hourly rates and how do you bill for them??

this does happen but there is a flip side also, alot of people take a car in and want it done "right", and that can get very timely to do. un-seen horrors arise as you dig in deeper and deeper more often than not, think about how many times you've done something and it was LESS work than you thought, i'm willing to wager not that often. it's almost impossible to not go over budget having someone build your car "right"

also alot of customers don't know exactly what they want and change their minds mid build as something new catches their eye, and that gets timely.

fact is hourly is the only way for a shop to really do a proper job on car and not go bankrupt doing it. it's expensive and more often than not the shop is waiting for the customer to rob a bank to pay for the work so they can get that car done and gone and move on to the next one. there's no benefit in storing cars.

of course there are also some businesses that work on deposits and that's a whole other story....

 

BobbyD; I'm retired now, but when I ran the shops I tried giving each mech a specific breakdown, not have two working "together". If one needed help holding something the guy holding it knew that he was spinning his wheels on his assigned tasks. It kept them all honest and aware that at the end of the day, if it didn't look like they accomplished much, that was exactly the case! I'm sure you pay by the hour, so that has to be passed on to the customer, no way out of it. Shop rate is the cost of opening the doors, overhead, paying the girl up front if you're lucky enough to have one, etc. not directly related to each mech's performance.........

 

Calm down! What I was saying is the tmes two theory is too simple.A new employee does not simply double everything.Your basic overhead stays the same until you need a bigger shop,more phones etc. with the exception of the additional costs of the employee.You have to figure what the employees potential profit and cost will be and figure from there.I didnt mean just add the cost of his wages.I am pretty sure I passed the second pay period and have not changed my mind .I have been in the same buisiness for almost twenty years now and have fluctuated from two employees to fourteen sometimes just surviving and some years much better.As I said in my opinion its not as simple as x2 per employee.

 

As I stated above, I don't run a auto related business but I run into the same situations. I can quote a control system when it's just the control panel, the basic assembly procedures are pretty set in the shop. When I have to do a field installation I will not give a firm quote, just too many variables, just like what you guys are saying about old cars. I will only do installations on a time and material basis. Early in my business I had a few very costly lessons on why I won't give a firm estimate. Let's just say I worked many, many free hours. Now if a customer asks for an idea of what an installation will cost I figure out what I think it will take and double it and qualify it with a "not to exceed" cost. I will do the work until I get close to meeting the cost and then I'll confer with my customer to let him know it's going to go over the estimate and why. At the end of the job, whether I go over or come in way below, I will give them a detailed description of the time and materials I used on the project. Some get a little pissed when I go over but I have the reasons why I went over, it's always because they did something that made it more difficult to complete the job. There are aways things that they didn't mention when we first discuss the job and of course, they think I should throw them in.

The thing that really irritates me is my customers are in the industrial field, they know what it takes to do what I do and the problems that can arise but they alway whine about price. Most auto repair customers don't have any idea of what it takes to repair a car so I can see why some are shocked when they find out what it really takes.

 

I suspect you've never run a business, at least not one with more than yourself involved.

Pretty much all of your expenses increase with more people. If your shop is just big enough for two people to work in, your cost goes up when you hire a third and fourth. Either you built a per person cost into your rate or you're in trouble when it comes time to expand.

Each employee increases the amount of bookkeeping required.

You have to make sure each employees efforts are carrying the weight of having that employee plus creating some margin, otherwise you are going out of business.

Charge full freight for each person working on a job and be extremely wary of ever keeping someone around who isn't able to carry themselves. It may seem mercenary but you can't keep employees or continue to serve customers if you can't stay in business and unless you're able to do it as a hobby creating a margin is the only answer.

I've never run a custom shop but I have run a time and materials business with employees. You either charge enough or you go out of business.

 

Read my post above.I think twenty years and still here is running a business. 10000 sq ft on 3 and a half acres with my own real gas station on the property just for fun and too many cars and projects.Yea I know,a real loser huh?

 

Old Sub,

I totally agree. How do you expand your business if you don't charge a multiple for each worker? I am in business to make a profit, it might be a dirty word to some or seem predatory, but that's what I'm in business to do. I can make more money the more people I have working for me. I want to make money! No one should be embarrassed about wanting to make money. As long as you are giving a good service at a fair market price there's absolutely nothing wrong with making a profit. The more the better.

 

You posted your follow-up while I was writing my response. There is only ten minutes difference in post time and with occasional interruptions it can take that or longer sometimes to write a post.

There is an old joke that you can make a small fortune running race cars. They only trick is you have to start with a large fortune. I don't know enough about your situation or business to respond to your own statements of personal success.

What I do know is your first post struck me as coming from someone who hadn't ever had to make payroll. Perhaps that's not the case, and perhaps I misunderstood your intent. If I didn't understand I wasn't the only one who felt your advice could lead to business ruin for the guy who asked the question.

Twenty years beats the odds on most new businesses. Twenty years in a single location may or may not be a good thing. Today I'm part owner of a business that turns 21 next month. Next month we're also moving into our fifth location because we've outgrown each of the previous. We've continued growing and adding staff through the current economic slowdown.

This time we're buying 20-some thousand square feet instead of signing a lease because commercial property is currently cheap.

We're a service company that makes its money off the sale of time, which is what a custom shop really is too. We make a little money on other stuff, but its not where the real net income comes from.

When time is your primary profit center you have to charge enough for your time to make it work, and while your overhead may not double each time you double your staff, your risk increases enough that you better be at least doubling your revenue. If the market won't bear that kind of pricing, then your service model needs revision to align costs and pricing with the market.

 

Having been there, done that, for three decades on mechanical things, as Shop Manager, Shop Foreman, & head bottle washer, I find it inconceivable what some of you guys that claim to be running a shop are saying.....
Are you guys really telling me that the work order says “Build car”, with no details breaking it down to simple tasks and you can't estimate the cost??
Example;
“Remove body, drive train, and suspension components, inspect chassis and write estimates based on conference with the owner, two and a half mechanics, one day; Bid $$.
That’s one work order.

After these findings, and a conference between both parties, an agreement would hopefully lead to a contract to continue……. Or not.
The next work order would list each repair or each fabrication agreed upon, with number of man hours and parts necessary for each separate task. Slow on the take? Then don't write the next work order until the one at hand is completed. Example; Don't need to put in writing what wheels and tires to buy until the welding on the frame is done. Duh?

The customer should not pay for errors in judgment or the incompetence of the builder.

Somebody said it takes longer to do it "right". Painting and such, yes to a degree. Welding, fabbing, cutting, machining, wrenching, NOT.

 

and the shop should not eat labor for when the customer changes their mind or adds something.

and "doing it right" does take longer and not just with paint. Welding, actually prepping and cleaning the metal takes time, not just welding.


Again this is the guy that can do a show quality paint job for $350....

 

OK, so you have been in business 20 years. Not 2 pay periods. I respectfully disagree with your assessment that the basic overhead stays the same provided you stay in the same shop - phones etc. To me thats like saying 2 can live as cheap as 1 - I dont believe it - just my opinion.

 

just subscribed so i can come back and carefully re read it all.!! i too am a victim of the mr nice guy demise! thanks for this post, and everyones replys

 

This guy has it right. Billing your customer an hourly rate is just wrong IMO.

If you know what you are doing you should be able to give your customer an exact dollar amount for that job. I always tell my customer's in writing if I find the job to be alot harder than I orginally thought I will let them know asap and requote the job. Also it is fairly acepted to bill 10% over your quote but I usally bill exactly my quote or some times a little less if things go real smooth. Makes for a happier repeat customer.

 

what do you do when the body falls apart as your removing it, 80 year old bolts are found broken off or snap, estimates work great for collision and mechanical work on newer cars, assuming the condition of a 60 year old car before you get in there is rough, constantly telling customers it's going to cost more than the estimate causes all kinds of strains

in some cases, hourly is really the only way to do it, which is what this thread was about, a fella asking about how he should handle hourly billing, if we are going to get into estimating horrors let's start a new thread!

by no means am i saying ALL work should be done hourly, the majority isn't in my experience

 

If you are doing the same thing over and over, sure. But when it's one off stuff there is no way to do that.

 

If you are paying your helpers cash/under the table than you should barely double charge the customer.

If your employees are being 1099'd you should add a couple bucks to there hourly so they don't get screwed.

If your paying workers comp and taxes for your employees,
you should charge customer the total hourly + whatever profit you want to make on them

If your workers have employee health insurance, obviously you must charge for that.

TP

 

The "Right way to do it" is different for everyone. There is no right way that is universal.

You will know you are doing it "The right way" when you are

making a living,

consistently turning out good product,

with satisfied customers!

and your business will grow by word of mouth advertising.

These threads are a useful to a point, after that you should find a guy that has the success you desire, turns out the product you wish too, and emmulate him.

When I started I thought I wanted to be the guy to "invent the wheel"
As I went through my first years I wanted to know why the round wheels work best
I tried to make some square wheels turn.
Now I just turn that round son of a Gun as fast as it will go in the right direction.

P.S. My way is the "Right way" for me and as with any thing.... Opinions vary!

 

If you are doing a job that you have done several times before and on the same type of car and you know exactly what condition the car is in, then yes you can give a fairly accurate quote. But if you are doing custom, one off work on a car that might have a lot of rust or dents hidden under an inch of bondo that you don't know about it is impossible to give a quote, also a lot of custom work is one off, never before done work that is very hard to give a quote for. If my customer wants a quote for a job like that I will explain this to him and give him a best case/worst case type of estimate, that's all I can do and I think that's all anybody can do.

 

we run a repair facility. we use flat rate to quote and bill jobs. its just that simple.
we let the customer know that there are potential circumstances that may require additional cost (broken bolts, corroded parts, etc), but we try our best to stay as close to the quote as possible. we don't make all of our money on labor. in this business you simply can't. there is a mark up on parts also. but remember, the mark up on parts ALSO goes to pay for warranty time if (and when) a part occasionally fails. so when people say... i can go buy that part for $XX from so and so, i tell them that that is the install it yourself price. and that in order to offer the warranty that we do, there is a factored cost.

when a car comes in, its usually pretty easy to tell if the book time is fair or not. old cars will almost always get a little extra time tacked on because old cars have problems that new cars don't... like rusted out stuff and time on the phone/computer/freeway hunting down hard to find parts. but if we don't use the time we don't bill for it. thats fair.

we charge for diagnosis. you have to. its time, and time is money.

we bill for everything... hazmat disposal, zip ties, aerosols, chemicals, fluids, wire, nuts, bolts, etc... if it costs us something, we bill for it.

thats just how the repair business works. some jobs are gravy, some jobs eat your ass. experience pays off on one hand, but you cant charge for learning on the other.

here's the deal with man hours... it would take 1 guy 100 hours to get something done or 2 guys 50 hours each. either way, your at 100 hours of billable time.

if you're charging straight time, your guys better be getting stuff done or nobody is going to be happy.

 

Well I never thought this thread would start all this and has gotten a little off base point but some good things have come out of it in my mind.

That "customer changes his mind thing" is a biggee!! Just recently done a '67 Camaro rearend swap from 10 bolt to 9" Ford, customer supplied a empty housing which we had to narrow and the pumpkin, no axles or brakes. I quoted 10 hours= $500 + parts and a used but freshened up set of 11" drum brakes I had on hand. HERE'S THE PART MOST OF ALL US RUN INTO... Then he wants a locker and different gear put in HIS 3rd member, which means a teardown and reset everything, etc, then "while you got it apart" wants to add disc brakes, new spring bushing, you get the idea. I give him a estimate every time he changed something but still in the end when it come up a little over $2500 he hit the roof! His excuse was I had told him it'd be $500. I guess I was supposed to do all the other shit for free? And that was me buying the parts it took to do it!

And I agree with Zman on it does take longer to do it right sometimes, and you never know what your going run into after you start. Someone else said it as well, but the customer gets tired of hearing "we run into this" and its gonna cost you more. When its by the hour its not an issue. And I do try and give a good Guesstimate as I call them but stress it is just that, an estimate!

I just wanted to know about what other were charging by the hour and how in the beginning..............

 

Quoted for truth.

There are two ways of looking at this, total shop rate and man hour rate. Most of the time when we quote someone shop rate, we really mean man hour rate. My true shop rate is close to 175.00$ an hour for all employees and other shop overhead, while my man hour rate is $75.00. If everyone was working on the same project and I were to flat rate at a true shop hourly rate I would not have any room for errors, vacation or sick time and everyone would have to work at peak levels. That just isn't going to happen.

This is a business and not a hobby. None of my guys are going to work for free, neither am I. For those of you that are not in business for yourselves, there is a tendency to only work hard enough to support your own paycheck and nothing else. You are oblivious to the rest of the behind the scenes overhead your employer has to cover so you can be comfortable and entitled.

I'm not going to go Ellie Light on you guys and complain about how hard my job is as a business owner. Because the reality is, I love my job even with all the stress of collecting money from customers, dealing with OTJ squabbles, the taxes and regulations and insurance and so forth. There is a lot to do, this is an expensive hobby, it is art and engineering on a per car basis.

 

Bobby D, you said it brother.

The reality is, every time a customer changes his mind or you run into some issue on a hard quoted job you are going to lose your ass. If you were to do it by the book, every time something comes up or the customer wants to change something, you need to stop and re-quote the job all over again and have the customer sign it.

It sucks, I don't like to work that way either. I want to have some level of trust between my customer and I that I will do my best and not gouge them. And at that you can understand why some businesses are charging for quotes!

 

Bullshit. All of those take time to do it right. That's an insult to true craftsmen.

A welding example: If I take two rusty pieces of metal and just MIG them together with no prep work that is going to take a hell of a lot less time than properly prepping the metal and welding it. There is a big difference in welding a BBQ pit for the backyard and TIG welding a part that has to be held within +- 1 degree of angularity plus magnafluxed and x-rayed.

Fab work: A simple example is a 1/4" metal strap with some holes drilled and tapped in it. One guy can drill and tap it out of perpendicularity while the other takes the time to make it right. The first guy doesn't sand the millscale, while the second one does. The first guy also doesn't radius the edges at all. The second guy radiuses all the edges and makes sure that they are the same. Which one do you think takes longer to do RIGHT?

 

That's his MO...

 

When your customer is whining about your $50/hr rate, ask them how much they paid per hour to have their brakes done at the Toyota dealership.

For custom work on custom cars, zman and polacko are the only guys I've seen with realistic hourly rates so far!

 

Really, such deep insight and wealth of knowledge. NOT

 

+1
Amen

 

Well said Paul, thanks for chiming in. The '52 P/U that started this thread is the one I got the crossmember kit from you awhile back!

 

One guy working on setting up the front suspension for 5 hours and another guy setting up the rear for 5 hours equals 10 billable hours.

If one guy did both it would take him 10 hours total.

I hope that makes sense... ha.

 

It makes perfect sense... but may be lost on some...