What Is a Good Labor Efficiency Percentage for a Body Shop? - BodyShop Business

What Is a Good Labor Efficiency Percentage for a Body Shop?

What is a good labor efficiency percentage for a body shop for both the body side and prep/paint side?

What is a good labor efficiency percentage for a body shop for both the body side and prep/paint side?

Efficiency percentages, or ratios, are important for each shop owner, manager and production manager to know. We need to know that number for each technician, department and the shop as a whole so that we can effectively schedule and forecast.

This seems like a simple question, but it’s not. Unfortunately, efficiency ratios are not good benchmark numbers.

For a national average, 160 to 175 percent is close. It depends on who’s measuring and how. But don’t hang your hat on that number!

The formula for efficiency ratio is Sold Hours / Worked Hours x 100. So if the tech produced 80 billed hours while working 40 hours in a week, his efficiency ratio is 200 percent: 80 Sold Hours / 40 Worked Hours x 100 = 200 percent.

It’s also difficult to come up with an accurate metal department vs. paint department number because so many paint operations get posted to body. For example, you’re able to gain compensation for color, sand and buff, but the insurance adjuster pays that as a body operation to avoid paint material charges. (I’m not saying that’s okay! I’m saying it happens…a lot.) Unless all of those miscellaneous operations are corrected, efficiency ratios are not accurate.

Unfortunately, billed hours are not standard across the country because there is not a standard labor rate.  This question came from a California shop. California is the prime example of the problems associated with the use of efficiency ratios as a Key Performance Indicator (KPI). Labor rates in Northern California average $80 per hour, while labor rates in Southern California average $45 per hour. Why? Are shops in Southern California faster? Nope. The techs all work at basically the same speed with the same materials and same tools on the same cars. Fact is, there are regional differences in labor rates.  

Using the California example, efficiency ratios in Southern California average 200 to 225 percent, while in Northern California the efficiency ratios range around 120 to 150 percent. There are even differences within the markets, but efficiency ratios are not good benchmark KPIs because they vary by door rate.

So, yes, it’s important to know your efficiency ratio. Check with local resources – perhaps your paint company has a local business development consultant who can provide a local efficiency benchmark to see how you compare in the market. Then, find ways to improve your number. There are many ways to do this!

Caution: Most in our industry think that efficiency ratios are improved by making the techs work harder. Not so! The easiest way to improve efficiency is to generate more complete damage evaluations. Let’s say an adjuster wrote a repair for four hours and the technician took three hours to complete the repair. The efficiency ratio on this job is 4 Sold Hours / 3 Worked Hours x 100 = 133.3 percent. But if we had reviewed the P-pages and negotiated an additional .5 for the repair, we would have been paid 4.5 hours. Our new efficiency ratio is: 4.5 Sold Hours / 3 Worked Hours x 100 = 150 percent. 

Implementing a complete blueprint process results in more complete damage analysis, improved compensation and improved efficiency ratios.

You May Also Like

Sticker Shock at the SEMA Show

This year’s SEMA Show held a new surprise for me — a secret drop-off at our booth in the form of a mysterious sticker.

There are always surprises at the SEMA Show, which is one reason why it’s such a special event. New faces to meet, old faces that you haven’t seen in a long time with which to reunite, new technological wonders … the list goes on and on.

This year held a new surprise for me, however — a secret drop-off at our booth. Visiting the booth one day to make sure the magazines on display were still neat and tidy, I noticed a roll of stickers on the table. Upon closer inspection, I saw that the stickers read: “Collision Repair Equal To Mechanical Repair Rates: Why Not?” And there was also a mysterious symbol that my wild imagination took to be the logo of some secret society. But it wasn’t so mysterious after all; the letter “Y” and the drawing of a knot was a visual representation of: Why + Not. Haha, very clever!

Keys To Making 2023 A Huge Success For Your Auto Body Shop

Stopping daily work to work “on” your business instead of “in” your business is essential in order to deliver change in the new year. 

Auto Body Consolidation Update: What Will 2023 Bring?

The bull market of consolidation is expected to continue in 2023 even amidst high inflation, rising interest rates and other challenges.

The Great Awakening: Collision Repairers Taking a Stand

Many repairers are now taking a stand, realizing they cannot conduct business the way they used to.

CARSTAR Fort Collins: Process Produces Performance

The new facility that CARSTAR Fort Collins moved into was designed with organization and performance in mind.

Other Posts

Are Collision Repairers Their Own Worst Enemy?

It’s always been easy for repairers to see insurers as the bogeyman that causes all of their problems, but insurers are merely taking advantage of repairers’ lack of business knowledge and acumen.

Are You Ready to ROCK in 2023?

Do you know a “rockstar” in the automotive aftermarket? Then it’s time to nominate them as a Vehicle Care RockStar!

BodyShop Business 2022 Executives of the Year

This year’s Single-Shop award winner is Michael Bradshaw of K & M Collision in Hickory, N.C., and the Multi-Shop winner is Matt Ebert of Crash Champions.

Conducting Collision Business: It’s a New Day

The goal is not to declare war against insurers; it is to declare independence for your organization so that you’re able to provide the highest level of service to your true customers.