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Most of us in the automotive repair world shudder at the prospect of a tough diagnostic job because, by their very nature, the outcome is unclear. Rather than doubling the pain by making the undertaking unprofitable, we need to strive to make it an important and very profitable part of our business. A great first step in this is to stop giving it away! 

Don't miss an opportunity for profitable sales and even customer goodwill

As diagnostics are generally a challenge, undoubtedly one of the most misused members of the technician team in many shops is the diagnostic technician. I am talking about the highly skilled, highly experienced guy or gal who is, or should be, our diagnostic technician. This individual is worth their weight in gold, though far too often we sell their services very similar to the way we sell and market a $25 oil change. Diagnostics in today’s environment are tough, require a very special skill set and temperament, but far too often, we discount or give these services away, missing huge opportunities for sales, profits, and believe it or not, customer goodwill.  

Discontinue doing free estimates when diagnostics may be involved

A great second step would be to stop doing free estimates on work that has the potential to involve diagnostics. You cannot always know what repairs will involve diagnostics, but being alert to the possibility is very important. As soon as we know, our customer needs to know. 

When we give diagnostic time away, or sell it cheaply, we are saying to the customer that the most difficult, demanding, and intense service we provide has little or no value. On top of that, we are taking a service that is, in most cases, performed by our most knowledgeable, experienced, and highest paid technician and turning it into a money-loser. Competence and technical ability are of a far greater value than that $25 oil change, and our customers know and appreciate this, even if we don’t. 

Initiate an elevated diagnostic rate

Rather than apologizing for diagnostics, I am going to suggest we start bragging about it. Rather than discounting it, I am going to suggest we institute an elevated diagnostic rate that is at least 25 percent higher than our floor rate. Rather than tiptoeing around it and selling a single hour, I am going to tell you to consult with any diagnostic customer, letting them know that major surgery may be required; we won’t know what it is or what it will cost but we have our best technician on it, and we will let them know what we find. Most customers will appreciate this approach — a few will not. 

If we cannot do diagnostic services profitably, we should not do them at all. The bottom line is that the second we start talking about diagnostics, we are talking about something out of the ordinary. Our customers know this and though they are worried because we are asking for their permission to dive in on something that may or may not be expensive, they need their car, they understand the urgency and we are (or should be) the expert. 

In the examples below, we compare two transactions that include two hours of diagnostic time, the first using the existing floor rate of $145 per hour with a 25 percent discount for the customer, and the second using the elevated diagnostic rate of $181.25 per flat rate hour with no discount. We are paying the technician $43.50 per flat rate hour. 

Using our floor rate of $145 and giving our customer a 25 percent discount, our gross profit percentage on those two hours of diagnostic labor is 60 percent, and our gross profit ($) is $130.50. Our effective labor rate is only $108.75. With the elevated diagnostic rate we described above and our being disciplined enough not to discount our diagnostic labor charge to the customer, our gross profit percentage is 75 percent, our gross profit is $217.50, and our effective labor rate is $145. A third scenario that a shop owner might consider would be to increase the tech pay the same 25 percent ($54.38/ flat rate hour, in this case), compensating the diag. tech for his knowledge, experience and diagnostic abilities. This scenario has no impact on what the customer would pay but obviously will yield strong, but a lower gross profit percentage (70 percent in this case) and GP dollars based on increased cost of labor. Quite a difference, wouldn’t you say? It is never this cut-and-dried or perfect, but clearly, paying our tech appropriately and being profitable matters. The most important factors are the profitability of these individual diagnostic jobs and the long-term viability of the shop. 

Diagnostics are tough enough, but if we are discounting that diagnostic labor and driving down our profits and effective labor rate, they might not be worth doing at all. If we are consistently missing this mark, we are consistently missing out on sales and profit dollars that allow us to prosper and grow. This tends to be doubly true for diagnostic time. The solution is easy; a diagnostic hour of labor paid to the tech for an hour of diagnostic labor charged to the customer. My strong recommendation would be to review what goes into each of these diagnostic services and adjust them so that we can be competitive (not the cheapest and not the most expensive in our market area) and profitable! 

A great diagnostic technician is (or should be) a huge asset to our business. He or she is a very different beast than that motivated (or unmotivated) B tech in the second bay, with a different approach and a very different perspective. Make them a valued member of our team. Pay them for excellence. Market them and market their services but be profitable in that effort. Rather than being a money-losing afterthought, diagnostics needs to be central to our marketing and broad business plan. 

Diagnostics and a great diagnostic tech can bring great value to our shop operation, but only if we are consistently charging appropriately for these complex and difficult services.