Flat Rate and Your Shop

I frequently talk with dealerships that have not yet adapted Flat Rate billing and technician pay programs in their service departments. Without a clear understanding of the benefits and how to effectively quote and bill repairs, moving your shop over to Flat Rate can seem daunting. There are numerous benefits for your clients, your technicians, and your bottom line.

  • Flat Rate billing protects the customer and gives them a sense of security. For clients that are unfamiliar with service repairs and how much time it should take to complete a repair, Flat Rate billing gives them the comfort of knowing that they are being treated fairly. Educate your customers on Flat Rate Billing on the Service Drive. I have found that clients that understand billing procedures are more apt to purchase additional services and become repeat customers. Proudly display and market your Flat Rate Shop status.
  • Flat Rate flagging gives your technicians the opportunity to maximize their pay. Your Certified Techs will reap the rewards of their expertise and strive to improve their efficiency rates. A great tech with a good supporting cast can double their pay (and your billable hours!) and their satisfaction as an employee. With the competition to find and keep quality technicians, Flat Rate ensures that your best employees stay.
  • Flat Rate benefits your bottom line. First and foremost, you are only paying your technicians for the labor time that they are producing. You aren’t paying for time spent taking breaks or socializing. Less obvious, however, are the positive benefits of Flat Rate. Technicians are generally more thorough in their diagnostics and find additional items to upsell to the client and increase their hours. Efficiency rates will skyrocket and billable hours increase as your technicians work to maximize their pay.

Flat Rate sounds great, doesn’t it? Happy customers, happy techs and more revenue! Unfortunately, there are downfalls to a Flat Rate shop but these can be overcome with training and appropriate management.

  • Waiters complaining that their billable hours are higher than their actual hours. Service Advisors should be trained to educate their clients on Flat Rate billing and how it benefits them on the service drive. If the customer is unhappy at the time of payment, explain that a Flat Rate system ensures that a competent technician that has repeatedly completed the same repairs worked on their vehicle. Going to an hourly shop, they run the risk of an untrained tech billing them for their training times. Would they rather pay for expertise or pay for inexperience?
  • Technicians can end up spending more time on a job than the Service Advisor quoted. Improper quoting on the service drive is a pet peeve of mine. It is vitally important that Flat Rate Shops train their Service Advisors on how to correctly quote time. Service Advisors are not technicians; stop diagnosing repairs on the service drive! Service Advisors should only select Flat Rate codes for sold services such as oil changes or accessory add-ons. If a customer comes in with a repair issue, the Service Advisor should ONLY quote diagnostic time. Service advisors should become comfortable with the Flat Rate codes for the various diagnostic procedures and use them liberally. This gives the technician the time to accurately determine the correct repair procedures and also find other needed upsell repairs. The Service Advisor can then give the client accurate Flat Rate billable hours for the repair, access times and testing as needed. The result is more billable hours for the dealership and payable hours for the technician. The customer receives better service and a clearer understanding of the steps needed to complete the repair as well as a list of other needed repairs.
  • Technicians waiting for their next job. This is a management issue. Do you have a dedicated dispatcher? A good dispatcher can ensure that your service shop is turning hours as quickly as possible. Take a walk around your service bays after the service department has closed down for the day. Has your dispatcher made sure that every bay is full for the next morning with RO and parts waiting? An extra hour of preparation the night before will dramatically improve productivity the next morning. Watch the flow of repairs during the day. A good dispatcher will have the next repair ready to pull in the bay as the completed one is pulled out, RO and parts ready to go. If your techs aren’t working, you are losing money.
  • Technicians waiting at the Parts Counter. This is a processes issue. If your software system has mobile apps for technicians to clock on and off jobs and order parts, implement this technology in your shop immediately. A busy shop can quickly overwhelm a parts back counter and your productivity rate suffers as a consequence. With a mobile app, your technicians can take a photo of the needed part and send a parts request without having to leave the bay. When parts are in stock, a parts runner should be delivering them to the bays. Remember, your technicians are creating the only product that your service department has to sell – labor. Any process that stops the creation of labor hours hurts you both.
  • Flat Rate Technicians are unwilling to help train Hourly Techs. Flat Rate technicians frequently do not want to be slowed down by having a shadow or, even worse, overseeing a repair. Training new employees is an expense which your Flat Rate techs should not have to pay. Implement an incentive program for Flat Rate technicians to train new hires and make sure that those new hires are worthy of your valuable Flat Rate Tech’s time and the money that you are investing in them.
  • Comebacks from Flat Rate Techs trying to beat the clock. Management should review all comeback work and talk to the tech. Why is the customer back? Is it really the same repair? Did the dispatcher assign a repair over your tech’s skill level? After gathering the facts, make a fair judgment on how to handle the comeback and be very clear with your technician on why. If your tech had the skill but was rushed and produced sloppy work, he needs to handle the comeback with no pay. If the job was above his skill level, pay a qualified tech to complete and have the comeback tech shadow at no pay. If the repair is, in fact, unrelated to the first repair and not a comeback, gather conclusive evidence and educate and discuss with the customer.
  • Flat Rate and Hourly Technicians are fighting for hours during slow seasons. This is also a management issue; a correctly run service department should have minimal slow seasons. Utilize your CRM to send out marketing emails for reminders of needed maintenance services and specials. Have your Service Advisors call back clients that have outstanding quotes for other needed repairs which were recommended during the diagnostic process; offer your clients incentives to come back in for service during your slow times. Upsell every customer that walks in the door. Finally, if all else fails, take a good look at your team to determine if you need to lay off your lowest-qualified employees. An entry level lube tech can be easily replaced; your Master Certified Techs cannot; protect your assets.

Flat Rate billing and technician pay programs are the best options for a correctly managed shop. Utilizing Flat Rate will increase sales and efficiencies. If you are having issues implementing Flat Rate, this is due to either poor management or employees trying to work the system, neither of which will improve by staying on an hourly program. Bottom line, hire ethical employees, train them correctly, pay them fairly and create the support team that they need to excel. Flat Rate takes a team but the entire team wins when the game is played well.

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