The Alliance of Automotive Service Providers of New Jersey (AASP/NJ) held a virtual meeting on April 28 where Tim Ronak of AkzoNobel discussed prevailing rates.
“Labor rate is only part of the labor sale equation,” Ronak told attendees. “Increasing labor rate may be valuable, but in many cases, shops are not even writing a fully documented sheet for all justifiable operations.”
The retail rate for collision repair is a shop’s individual posted rate, while a market rate is determined by averaging the retail rates of all shops within the market. In contrast, Ronak defined prevailing rate as “a construct that has evolved as a convenience for communication to market participants.”
“Prevailing rate is an asserted market rate by some third party using a survey method they define that may or may not be open to scrutiny and may also incorrectly include contracted rates,” he said. “I encourage you to complete labor rate surveys if the opportunity presents itself, but never ever complete it with a contracted rate.”
Ronak also touched on recent inflation and noted that as the cost of living increases, shops must increase employees’ wages in order to retain them.
“If we don’t keep pace with rising costs, we’ll lose existing employees to other industries that meet their needs. Fortunately, the current market provides an ideal opportunity to have this conversation with consumers. It’s front and center in every aspect of their lives right now, so they’ll understand why you need to increase your prices. However, if you wait six months to chase a higher labor rate in order to get compensated for inflation, it’ll be too late. You have a narrow window to act.”
As the meeting drew to a close, AASP/NJ President Jerry McNee encouraged attendees to “educate yourself and learn how to improve your business. It’s easy to get caught up working in our businesses instead of working on our businesses, but investing the time to educate yourself can make a huge difference. Knowing your business KPIs is important, especially if you’re sick of leaving money on the table and if you’ve had enough of other people controlling your destiny.”
AASP/NJ members will next gather on May 19 for a town hall meeting at the Holiday Inn in Clark, N.J. For more information about AASP/NJ, visit aaspnj.org.
