How do you know what your Shop Rate should be?
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This is a question I ask people and the amount of different answers is great. It just goes to show you the art and science of determine your shop rate.
One metric I use to get my Shop rate is the full loaded cost of an employee. Taking into account what you pay an employee per hour is just a part of the equation. Factoring in benefits and vacation divided is important as well.
I think it would surprise people what the true cost of your employees really is. Once you do you can then start determining the profit you want to make based on a ton of other factors in the marketplace.
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This is a question I ask people and the amount of different answers is great. It just goes to show you the art and science of determine your shop rate.
One metric I use to get my Shop rate is the full loaded cost of an employee. Taking into account what you pay an employee per hour is just a part of the equation. Factoring in benefits and vacation divided is important as well.
I think it would surprise people what the true cost of your employees really is. Once you do you can then start determining the profit you want to make based on a ton of other factors in the marketplace.
@george-bain09 In addition to fully-loaded employee cost, do you recommend including utility and space costs as part of that equation as well?
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I recently saw a post that showed typical machine shop rates and they were dramatically lower than I had expected. A mechanic, HVAC, plumber, all bill shop rates of around $120+ hour where I am.
The shop rate needs to take into consideration:
Hourly pay
PTO
workers comp
taxes
insurance
equipment usage
wear and tear
shop rent
margin
operating costsAt the same time, the shop rate needs to be competitive.
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All true but it's an art, hard to set a flat rate using these as a guide because we have different skill/pay levels on the shop floor.
