• August 17, 2016 at 11:26 am #64924

    This series includes 24 Key Numbers posted over 12 months. If you work on getting all of them in the ranges mentioned, your shop should be solidly profitable.

    Key Numbers 101 Series – # 1 Payroll Cost

    For this key number we want to know what percent of total sales is spent on gross payroll for all employees of every type except the business owner.

    Last month Acme Auto had total sales of $50,000

    Total gross payroll for everyone except the owner was $12,000

    $12,000 ÷ $50,000 = 0.24

    So our key number is 24%

    When looking at this number for a typical independent shop which is solidly profitable, this number will normally run between 22% and 27%.

    There is a fill in the blank form for this number in our Business Calculators area available to Premium Members.


    Gross payroll is simply the gross number of dollars that an employee earns, including all incentive pay, before any deductions or alterations of any kind.

    Example: Joe works 40 hours at $15 per hour which equals $600. He also received $250 in incentive pay, so his gross pay is $850

    Total sales include all parts, shop supplies, labor, sublet, and tires.

    Copyright © 2016 Automotive Management Network

    [email protected]

    September 21, 2016 at 5:05 pm #74532
    Jeff Graser

    Shouldn’t this also include all payroll related expense, taxes, benefits, etc…?

    September 21, 2016 at 6:56 pm #74533

    There are a number of ways to look at auto shop finances. 

    This is the “4 quarters” approach to auto repair shop finance which goes like this – for each dollar the shop takes in, approximately:
    25¢ goes for parts 
    25¢ goes for payroll 
    25¢ goes for expenses
    25¢ goes to the owner
    As you can see it is extremely simple to remember. While there are often slight variations from the 25¢ for each area (parts are often a bit lower and expenses a bit higher), overall it is pretty close when looking at the numbers from most typical independent shops. 
    The 25¢ for payroll is the most accurate when it includes gross pay only. Payroll taxes, benefits, and all other employee related expenses (which can vary greatly from shop to shop) are then included with other expenses. 

    [email protected]

You must be logged in to reply to this topic.