On Jan. 15, ASA’s January 2020 installment of its Webinar Wednesday series featured Becky Witt, AMAM, George Witt Service in Lincoln, NE, and former AMI president and instructor, who presented “Would You Take a Job for $200 an Hour?”
Based on a university-level cost accounting class, the webinar was applied to an automotive shop to provide better understanding of how pricing should be determined as well as tools to increase profits. Witt explored how the way people look at things impacts behavior, how shops leave money on the table because they don’t recognize the value in the transaction, and the use of cost accounting principles that can open new methods to increase profits.
The webinar began with Tony Molla, ASA’s vice president of industry relations, welcoming attendees and introducing Witt. Witt began by clarifying that the seminar is a micro class, not a macro view, and should be treated as a buffet – some things may not apply to each attendee, while others may be extremely helpful. She added, “If you don’t learn anything, then you get validation that you’re great at business.”
After stressing that he would not recommend any price or discuss pricing with the intent to set prices, she defined gross profit as “the amount left over from the sale after costs have been “deducted” and mark-up as “a calculation made on the cost of the part to arrive at a selling price.” Net profit is “what’s left over after you deduct operating expenses from your gross profit.” Witt stressed, “You should all know how much it costs you to put that key in the door each morning.”
Witt discussed how to find hours per repair order (total bill hours divided by number of repair orders) and net effective labor rate (total labor sales divided by total billed hours). She then explained how to calculate gross profit per billed hour, which she called “the most important number you’re going to use the rest of your life,” dividing total gross profit by total billed hours.