Labour rate: If you raise it, will they still come?

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Will any of your customers actually balk at an increase in your labour rate? One shop owner coach bets very few — and maybe no one — will.

In fact, a number of attendees of a recent webinar reported that they raised their labour rates and no one said a thing. Only one said they had a complaint and the customer was someone who was already a bit of a pain; the type of person who was consistently bringing in their own part for the shop to install.

Those who said they raised their rates did so either in the last quarter of 2022 or at the start of the year. They raised it by either $20 or $25 dollars. Apart from Mr. Bring My Own Parts, not one customer complained, they said.

Kurt Hillebrand of Young Street Garage in Ottawa commented on a recent story about low labour rates that his rates went from $130 to $137.50 to $155 last year — with zero complaints.

“We gave our staff raises each time so that we would stay well ahead of the inflation,” he wrote in his comment. “Some rate differences between shops in an area are manageable. Agreed, it can get problematic if the labour rate differences are always way too large.”

All of this jives with Cecil Bullard’s experience. The long-time shop coach, former shop owner and current chief executive officer of the Institute for Automotive Business Excellence, said he’s hosted thousands of classes with tens of thousands of shop owners. He asks those who have recently raised their labour rates to raise their hands. Then he asked them to leave their hands up if they’ve had someone complain. Virtually every hand goes down.

“Because it just doesn’t happen very often,” he said. “And if it does with one or two, but you raise your rate with the other 1000 [customers], then who cares? It doesn’t matter. You still make the money you need to make.”

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And you can generally keep raising your rates. Inflation is up. Life is more expensive all around — just go to the grocery store, he pointed out. So shop owners can’t be left behind.

“I think you keep raising and until you’re losing 5 per cent of your clients and they’re literally telling you you’re too expensive,” Bullard advised. “If you’re not comfortable with a $20 increase, go up three bucks. And then a month later, go up another three — until you’re getting real kickback.”

Your labour rate should be tied to our business costs, added Kent Bullard, chief operating officer of the Institute for Automotive Business Excellence.

“You should also be looking at what it costs you to do business,” he said. “A lot of shops run into this mindset that ‘I need to be looking at all of the shops around me.’ And that’s maybe the last thing you should do. You should look at what it costs you to run your business and start building off of that.”

And if you do lose a customer, chances are they weren’t doing much to help you anyway. They’re “a bottom-feeder customer,” as Cecil put it. “You don’t have to keep that person.”