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Viewpoint: Include All Your Labor Operations…Because You Deserve It

You should be charging the hourly rate your business needs to get paid to be profitable and all labor and refinish operations necessary in the proper repair of a vehicle.

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First of all, let me say that I really care about the collision repair industry and am hopeful that, if we can all share a little information on what has been successful in our daily business practices, we as an industry can be more successful in various areas of our business.

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Our industry has been divided for far too long and I’m hopeful that, by working together and sharing ideas, we can begin to move in a positive direction. This is way overdue, but it would allow us to take back control of our businesses.

P Is for Profit
We should be charging the hourly rate our business must be paid to be profitable and for any and all of the labor and refinish operations on our damage analyses necessary to complete the repair and return the vehicle to pre-loss condition. You are the expert when it comes to repairing the vehicle. The consumer is putting their trust in you (the repair professional) to return a safe vehicle to them.

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The shop owner, manager and estimator all have the responsibility to the customer to use their professional judgment to make sure that all necessary labor and refinish operations are completed during the repair process.

You also must use any and all available data to determine the proper repair process. The OEM repair recommendations, the paint manufacturers’ technical information, the database providers’ information, etc. All of these sources need to be referenced for the repair process.
 
You Are the Professional
If your business needs to perform a labor or refinish operation, then you need to include it in your damage analysis. You are the professional working and performing the repair and refinishing process. I personally take this very seriously, and I’m sure that other collision repair shops do as well.

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At my shop, we include the necessary labor operations on our damage analysis that many shops do not. Please don’t take this statement as an insult; it’s not meant to be in any way. Over many years, we’ve been programmed by the insurance industry not to include various labor and refinish operations on our damage analysis because we’ve been told that they (the insurance industry) will not pay for them. So, over the years, we’ve been coerced one operation at a time into omitting the operations from our own damage analysis.

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We’ve heard the well-rehearsed word tracks:

  • "Your shop is the only shop that wants to get paid for these operations.”
  • "No one else wants to get paid for that, and it’s included anyway.”
  • “You’re the only one.”
  • “Wet sand and color buffing is included in the refinish times.”
  • “We don’t pay anyone to test drive a car.”
  • “Cleaning the vehicle is a courtesy your shop does for your customers.”

And my personal favorite? “Oh, you’re THAT shop!”
 
Without being able to communicate and share information with each other, we can never be 100 percent sure if we are, in fact, the only ones in our area asking to be paid for these operations.

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Labor Rates
Labor rates are the real eye opener. Too many shops are terrified about this subject, but me? Not so much. We’ve been threatened by anti-trust for as long as I can remember, and unfortunately it seems to have worked really well. Shops can talk about labor and material rates as much as they want; this is not illegal. I am not an attorney, but I did discuss this issue with an attorney. What we cannot do as an industry is collectively get together and set labor and material rates.

There is a huge difference in what I get paid for labor and materials and what other shops get paid. My labor and refinish rate of $65 is what I paid per hour to have my lawn mower fixed in my area. My new lawn mower cost me around $400. I came to the conclusion that if my business was going to be repairing vehicles worth $20,000 to $40,000 and taking on the liability for those repairs, I should be paid at least the same as the lawn mower repair shop!

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Most insurance companies in my area pay $65 for body and refinish labor and $53 per hour for paint materials. The company that pays me $72 per hour for body and refinish labor pays me $53 per hour for refinish materials as well. And none of these rates are even enough!

By now, most of you reading this article are probably in disbelief, but everything I’ve said is 100 percent true.

Don’t get me wrong: there are a few insurance companies that believe they’re special that still refuse to do the right thing and pay the labor rates and materials. I think they call that price fixing.

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It all starts with one company, and a little persistence. The only way to ever make changes is to document everything!

A Few Examples
I’m going to discuss three simple labor and refinish operations that are explained in the three major database provider estimating guides. The shop’s damage analysis and the insurance company’s estimate will be written on one of the three databases, and most of the labor and refinish operations are similar if not the same in all three.

Feather, block and prime: We include this refinish labor operation on our damage analysis any time we’re repairing a vehicle that calls for this particular operation. You’ll never get paid for a labor operation unless you list it on your damage analysis.

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We recently repaired a quarter panel on a vehicle that had a 6.0-hour repair. On my damage analysis, I also included 1.0 hours refinish labor for the operation (feather, block and prime) because the labor rates were paid at $72 refinish and $53 materials. This operation produced an additional $125 of revenue for our shop.

I know what you’re thinking: “We don’t get paid those rates!” And that may be true, but what’s also true is no matter what your labor rates are, if you never charge for this labor procedure, even though your tech performs the work, you’ll get paid nothing! Let’s say that one of the “special” insurers is only paying $48 per hour and $28 for refinish materials and you include the 1.0 hours on your estimate. This will still make your shop $76, so regardless of the labor and material rates, you’ll always make more money if you include it in your damage analysis.

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Include feather, block and prime on all your repairs that need this operation. On any labor or refinish operation, the least amount of labor you can charge is .1 hours. If we as an industry only start with .1, we’ve taken a step in the right direction and made progress, which can make all the difference in your business.

Wet sand and color buff: I love this one. “We don’t pay for that; it’s included in the refinish labor.” Wrong! Or, “We don’t pay for that; your booth filters need to be changed.” Wrong again! According to all three of the major database providers, this is an additional “Refinish Labor Operation” and calls for 30 percent of the refinish time.

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For example, your damage analysis has 10.0 refinish hours (forget the clearcoat) if you have to wet sand and color buff this vehicle, according to the database providers. You should add wet sand and color buff of 3.0 hours. At the low end of $48 per hour and $28 for materials, this operation alone in this example would increase your damage analysis another $228. And 3.0 refinish hours at $65 refinish labor and $53 materials would be $354. And 3.0 refinish hours at $0.00 refinish labor and $0.00 materials would be $0.00. But you can make it up in volume, right?

Wet sand and color buff is done more than most refinish procedures. We have our technicians perform it, but we don’t charge for it because we don’t think we’ll get paid for it, so why even include it on our paperwork? Over time, we just accept this, costing shops tens of thousands of dollars per year in lost revenue. Yet we pay our hourly employees to perform this operation, with absolutely no return to the shop in the form of payment. Do we really expect the flat-rate technician working at our shop to buy into the insurance theory that the wet sand and color buff is included in the refinish labor?

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Clean vehicle for delivery: This is another labor operation that must be done after the repair process and before returning the vehicle to your customer. This operation should also be charged for because it’s a necessary, non-included labor operation. However, we pay our employees daily to perform this labor operation and rarely get reimbursed from insurers. The reason we’re not getting paid for it is because we believe the insurer will not pay to clean the vehicle for delivery. However, I include this operation on my damage analysis, and most companies pay for it.

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I don’t believe anyone disagrees that this labor operation must be done on the customer’s vehicle before delivery to the customer. After all, who would return to your shop if their vehicle was returned to them in worse condition than when they dropped it off? It’s a non-included labor operation, so why would you not charge for it? For example, at your labor rate, if you were to charge .5 hours labor and $10 materials, calculate what this would be per vehicle. Then multiply it by the number of cars your shop does per month. This minor operation would potentially add thousands of dollars a month to your income. If you were to charge .5 hours labor at $48 and add only $5 materials, this would add up to $29 (for the same half hour of work that you’ve been doing for free). Suppose your shop has to clean 100 cars per month for delivery – you’ve just added $2,900 a month to your shop, or $34,800 per year! At $10 materials, it would equate to $40,800 per year.

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In all of these labor operations, you’re paying an employee and getting paid nothing if you leave them off your damage analysis.

In other words, we all need to quit subsidizing the insurance industry.

You Deserve It
If you really want to make money, read my next article and find out how you can quit losing money on repairing and refinishing flexible parts. Maybe you can make enough extra money to pay for your family’s next vacation.

The main reason you must always include all the labor operations on your damage analysis is because you deserve to be paid for them.

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Rick Finney is president of the Choice Autobody Repair Association. He can be reached at (740) 391-7005 or [email protected].

 

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