Calculating warranty/comebacks/do-overs

[Greg McConiga]

There are two costs, the gross sales needed to offset costs only and the income lost when a new and profitable job isn’t in the bay in the place of that “comeback” or “won’t leave.”  Divide your cost by your NET profit percent to determine how much income it will take to pay the comeback.  Let’s say your net is 15% and your cost of materials and labor is $500.  Divide $500 by .15 and you’ll see that it takes $3333.34 to make back the $500… plus the lost income from a lost new and profitable job.  This assumes that you only account for cost and not retail for your comebacks.  Add to the $3333.34 the amount of new income lost… let’s say a thousand dollar job… you lose not only your net of $150 but also the gross profit from which your bills and liabilities are paid… Assuming your overall GP is 55% that’s another $400 gone from the checkbook….  I’m sure others account for it in other ways…

[Tom]

Easy to overlook much of that. 

Another reason to get them in and out fixed right ASAP – even if you have to eat some of it.

[crosbyauto1]

Now all one needs to do is get the rest of the industry to get it. I loose a good share of work because we quote only quality parts that carry warranty. On most parts that also includes us getting paid par to replace defective parts. Quality workmanship, quality parts, cb’s stay well below 1% of monthly car count. The old saying, “it isn’t how much you make but how much you keep that counts” holds true in this situation.