Free guide
LiveHow to set your bike shop labor rate
Your labor rate is arithmetic, not a guess. Costs divided by the hours you actually bill, then a margin on top. Here is the method, with a worked example.
Why a copied rate does not work
Most shops set their rate by looking at the shop across town and charging a bit less. That tells you what they charge, not what your service department costs to run. Your rent, your wages, how many mechanics you have, and how many of their hours actually end up on a ticket are all different.
The method is simple. Work out what the service side of your shop costs in a month. Work out how many hours your mechanics bill in that month, not how many they are paid for. Divide one by the other and you have a break-even rate. Add your target margin and you have a rate that pays.
This guide does not tell you what rate to charge, and it does not quote industry averages. The numbers below are an example with round figures to show the method. Use your own.
The method
1. Add up service costs for a month
Mechanic wages including payroll taxes and benefits, a share of rent and utilities for the workshop floor, tools and tool replacement, shop consumables, insurance, software, and a fair share of the owner and counter time spent on service.
2. Count paid mechanic hours
Hours each mechanic is paid for in the month, excluding holidays and time off.
3. Apply utilization
The share of paid hours that end up on a ticket and get billed. Cleaning, waiting on parts, answering the phone, builds for the shop floor and comebacks are paid but not billed.
4. Divide for break-even
Monthly service cost divided by billable hours. Below this rate, every hour loses money.
5. Add a target margin
Divide the break-even rate by one minus your target margin. Round to a clean number.
A worked example
Hypothetical round numbers to show the method. Not a benchmark and not a recommendation.
| Line | Example figure | Working |
|---|---|---|
| Service costs per month | $20,000 | Wages, share of rent, tools, insurance, software, share of owner time |
| Mechanics | 2 | |
| Paid hours per mechanic | 160 | 40 hours a week, 4 weeks |
| Total paid hours | 320 | 2 x 160 |
| Utilization | 70% | Share of paid hours that are billed |
| Billable hours | 224 | 320 x 0.70 |
| Break-even rate | $89.29 | $20,000 / 224 |
| Target margin on labor | 15% | Your choice |
| Rate with margin | $105.04 | $89.29 / (1 - 0.15) |
| Rounded rate | $105 | For the menu board |
Example only. Every figure here is invented to show the arithmetic.
Utilization is the lever
Look at what utilization does in the example. At 70%, the break-even rate is about 89 dollars. If utilization falls to 60%, billable hours drop to 192 and break-even climbs to about 104 dollars. If you raise it to 80%, billable hours rise to 256 and break-even falls to about 78 dollars. The same shop, the same costs, a 26-dollar swing in what an hour has to earn.
Utilization falls in quiet months, when mechanics are paid but the bench is thin, and it falls on days when bikes sit waiting on parts. It also falls quietly on busy days when mechanics fix small things without writing them on the ticket. A written approval limit and a habit of recording every task help more than you would expect.
Work out your rate on a realistic utilization for the whole year, not your best May. If you set it on peak-season numbers, the winter will find you out.
Flat-rate menus and your hourly rate
Most shops sell a menu, not hours: a basic tune-up, a brake bleed, a tubeless setup. Each menu price is book time multiplied by your hourly rate. A brake bleed with 30 minutes of book time at a 105-dollar rate is 52.50 dollars; round it to 55 on the board.
Book time should be how long the job takes a competent mechanic on your bench, including stand time, test ride and paperwork. Time a few real jobs before you set it. When a mechanic beats book time, the shop earns more than its hourly rate; when a job runs long, it earns less. Compare the two regularly and adjust book times that are consistently wrong.
Revisit the whole calculation when your costs change: a new lease, a wage increase, a new mechanic, a new tool purchase. The rate is only as current as the costs you fed it.
What Service measures, and what it will
Time and hours are live today. Costing each job is still on the roadmap.
Time on the job
Mechanics clock in and out against a visit and its job, or on their own, as work, drive, shop or break time. Forgotten shifts can be added by hand.
Weekly timesheets
A manager approves each week, nobody approves their own hours, and overtime follows California rules.
Hours report
Monthly hours per person, split into straight time, 1.5x and 2x.
Job costing
Labor at rate times time, plus parts, against the price of each job. Not built; hours do not reach invoices yet.
Forecasting the season
Cash flow forecasts for busy and quiet months in the erp.io CFO module.
WO-2291 · Trek Fuel EX 8
closed
- Price
- $238.20
- Labor cost
- $71.50
- Parts cost
- $48.30
- Margin
- $118.40
Quoted 1.0 h · booked 1.4 h — 0.4 h over on the rear bleed.
Labor and parts against the price
Per-job costing. Time is clocked against jobs in Service today, but the job costing screen is on the roadmap and not built yet.
Illustration · sample data
FAQ
Questions shop owners ask
How do I calculate my bike shop labor rate?+
Divide your monthly service department costs by the hours your mechanics actually bill in a month to get a break-even rate, then divide that by one minus your target margin. For example, 20,000 dollars of costs over 224 billable hours is about 89 dollars; with a 15% margin it is about 105 dollars.
What is utilization in a bike shop?+
Utilization is the share of paid mechanic hours that end up billed on a ticket. Cleaning, waiting on parts, phone calls and comebacks are paid but not billed, so utilization is always below 100%.
Should I copy the labor rate of other shops near me?+
No, not as your starting point, because their rate reflects their costs, not yours. Work out your own break-even rate first, then compare it with the local market to decide how to position your prices.
How do flat-rate menu prices relate to my hourly rate?+
Each menu price is book time multiplied by your hourly rate. A 30-minute brake bleed at 105 dollars an hour is 52.50 dollars before rounding.
Can BIKE.co track technician time today?+
Yes, technician time tracking is live in BIKE.co Service, with clock in and out against a visit, weekly timesheet approval and an hours report per person. Hours do not flow onto invoices yet, there is no payroll export, and job costing is on the roadmap.
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