Gross profit per hour
The gross profit a shop made on labor and parts in a period, divided by the hours it took to make it. It is the one figure that moves when either the parts margin or the labor pricing moves, which the labor rate alone does not.
The labor rate says what the shop charges. Gross profit per hour says what the shop keeps for each hour of the bay it used, with the parts counted. Hunt Demarest's March 2026 column in Ratchet+Wrench works it on one job: a water pump job that "pays us $600 in gross profit" over four hours is, in his words, "$150 GPH".
Gross profit per hour = (labor sales + parts sales − technician labor cost − parts cost) ÷ hours
The hours in the denominator are the shop's choice, and the choice has to be stated beside the figure: flagged hours give the profit per hour sold, clock hours on jobs the profit per hour of technician time, and hours the shop was open the profit per hour of the building. The clock-hour version is the one that notices a comeback or an unbilled diagnosis.
Two tickets with the same hours of labor and the same labor rate can be a hundred dollars apart in gross profit per hour, because one carried a part at matrix and the other a part the customer brought in. As an example only: a 2.0-hour ticket with $300 of labor at a $60 technician cost, and a part sold at $140 that cost $100, made $280 gross profit, or $140 per flagged hour; the same ticket with the customer's own part made $240, or $120.
The effective labor rate is the labor half of this figure; the parts markup and margin entry is the parts half. Work your own from a week of closed tickets with the labor rate calculator.
Sources (1)
- Demarest: The Power of Gross Profit Per Hour · Ratchet+Wrench, Hunt Demarest, CPA · read November 4, 2026