Implementing a labor matrix in your auto shop

Welcome to the final installment of our 3-part guest blog series by the Repair Shop of Tomorrow. Throughout this series, they have provided essential knowledge on how to strategically assess your shop’s labor rate health. This last post discusses one of the top tools for managing your labor rate strategy — a labor matrix.

(If you missed the two previous posts in this series, we encourage you to go back and read them. Click to read Part 1 | Click to read Part 2)

What is a labor matrix? 

Just as margins need to be managed for the parts you sell, labor costs must also be strategically managed. Like a parts matrix, a labor matrix helps you ensure your auto repair shop achieves the net profit it deserves. A labor matrix functions similarly to a parts matrix, providing a structured approach to pricing labor that maximizes profitability. It is a structured set of rules that systematically increases labor times within your shop. It’s designed to automatically account for additional hours needed for more extensive repairs, vehicles over 20 years old, and other specific conditions.  

Why Use a Labor Matrix

Using a Labor Matrix, your shop can effortlessly set your labor markup, optimizing profit margins without manually adjusting each repair order’s rate or labor time. The matrix applies a multiplier to the labor hours based on predetermined ranges. This multiplier can either increase the quantity of labor hours or multiply the labor rate itself, maintaining the same number of hours but boosting the rate charged.

This system is crucial for earning the revenue you deserve and supporting significant growth opportunities by reinvesting the increased profits into your business. For example, you could up-level your pay structure to be more competitive,, give your facilities a facelift,, and get the new equipment your shop has been lacking. All of this aids in attracting and retaining top talent and repeat customers. 

Sample Labor Matrix

Look at the sample labor matrix below to begin to understand how a matrix can help automate the selection of the right labor rate for every repair job. But remember, the right auto repair labor rates differ from shop to shop. Your shop must set up its unique labor matrix to ensure you have the right labor charges for every vehicle you service.

Managing your labor rate is a strategic and ongoing process

Understanding and optimizing your labor rate is not just about setting numbers and walking away. It’s about knowing your shop’s numbers. It’s about making informed, strategic decisions that enhance operational efficiency and profitability. It’s about keeping a pulse on the numbers and adjusting your strategy as necessary to achieve and maintain profitability.

 If you missed the two previous posts in this series, we encourage you to go back and read them.

About Repair Shop of Tomorrow 

Being A NAPA Autocare Endorsed Coaching & Marketing Resource, Repair Shop of Tomorrow was born out of Dave Justice’s vision for a comprehensive program that would equip shop owners with the necessary tools for success. During his tenure on the NAPA National Auto Care Advisory Council, Dave recognized the industry’s need for such a program. With the launch of his web-based time management system, Labor Profit Management (LPM), in 2013, the path to creating Repair Shop of Tomorrow became clear. LPM gained notable recognition in industry publications, and its national launch by NAPA in 2013 provided shop owners nationwide with the means to measure and manage their labor profits effectively. Following the sale of his stores in 2016, Dave could fully devote himself to his true passion: assisting shop owners in achieving success. Thus, Repair Shop of Tomorrow was established, offering comprehensive programs that encompass expert coaching, standard operating procedures (SOPs), and marketing designed to deliver tangible real-world results. With a commitment to empowering success, Repair Shop of Tomorrow has transformed shop owners’ businesses on a national scale, providing the guidance and support needed to thrive in a competitive industry.