- October 13, 2005 at 3:51 pm #5002
What is a good formula for determining parts mark up? I am a fairly new shop owner, and I may may not be marking parts up enouph. I am right around 100%, but I have seen shops that mark up 300%, any ideas? Thanks
- November 10, 2005 at 3:09 pm #11098
That is a tough one…. We’ve been in business 25 years (my husband & I), and there’s no pat answer for us, it varies. The dealer list on dealer parts is helpful to me, otherwise they will just want to save a few bucks and go get their own parts. (It is a small town and that happens lots.)
I can’t do that with aftermarket, because the bigger nationwide stores just don’t offer much of a discount, they let the DYIer pay the same thing you would, which I feel is very wrong. Your book keeper will probably be your best guide, but we get no where CLOSE to even 100%, maybe we should, but I like to treat people the way I’d want to be treated, and while I want profits, I do want to see the customers again. One of the shops in town who insists on getting the most markup he can is losing his tech for lack of work, what is the next step? Decide what you think is FAIR and stand by that, knowing you have to warranty your work, provide quality repairs, still be there tomorrow, and pay your own bills.
- November 11, 2005 at 1:34 am #11099
BEING NEW IN THE AUTOMOTIVE BUISNESS IS TOUGH I KNOW IM A NEW MANAGER AT MY SHOP AND I’VE ASKED OTHER LOCAL GUYS WHAT THEY CHARGE ON PARTS MARK UP. MOST CHARGE THE SUGGESTED LIST PRICE FOR AFTER MARKET AND OEM. I PERSONALY THINK IT’S FAIR ESPECIALY IF THEY WANT WARRANTY WITH THE JOB.
- November 18, 2005 at 8:01 pm #11102
I would assume there is not one set answer. My customers that are using VAST, specify up to 15 different and unique markup % ranges based on the part cost, and based on the part type. Example, we can have 15 different default markup % for tires, 15 different markups for brake pads vs. brake shoes vs. water pumps etc.. the list is never ending. Call it "Set it and forget it."
Our old Mgmt. System would allow for up to 10 different markup % based on cost, but that was universal, for all parts. That, in my opinion was not nearly broad enough for someone who really wants to Manage or Micro Manage their inventory and parts purchases from outside.
Just an opinion.
- April 9, 2006 at 8:57 pm #11182
Well first things first. We must understand we cannot live on mark-up, but on gross profit. There is no such thing as "List" price. Just a made up number. If you are using list price, then you are letting the parts store tell you what you can charge, correct? Industry standard is 50% gross profit on all parts sold. Now, there are items that we cannot obtain 50%, IE battery and tires just to name 2. So we must use a parts matrix. A parts matrix takes the lower price parts and marks them up higher, and higher priced parts and marks them up not as high. End result should be 50% gross profit. To determine Gross profit, If you buy a part for $10 and sell it for $20, then you havfe achieved 50% gross profit and 100% mark up. If you would like a parts matrix, please give me a call or shoot me an email.
- April 27, 2006 at 8:35 am #11188
Just to let you know, I don’t let customers bring there own parts. I agree they can buy it cheaper at the parts store but posted in my office is a sign that states WE DO NOT USE CUSTOMER’S PARTS. then it states YOU WOULDN’T BRING YOUR STEAK TO THE STEAKHOUSE AND ASK THEM TO COOK IT. When customers complain about this I politely point them to the garage down the street if they insist. I also am straight forward and tell them I am making money on parts. But I also explain that I have been in business for 15 years and have seen alot of shops come and go. The reason that I make money on the parts is I will be here to warranty the problem. We offer a no hassle warranty of 12/12 on most repairs. You will find that most people do understand. If they don’t they are not really a customer. they are a price shopper. Do yourself a favor and get rid of them.
Matt Bowman wrote:
> Well first things first. We must understand we cannot live on mark-up, but on gross profit. There is no such thing as "List" price. Just a made up number. If you are using list price, then you are letting the parts store tell you what you can charge, correct? Industry standard is 50% gross profit on all parts sold. Now, there are items that we cannot obtain 50%, IE battery and tires just to name 2. So we must use a parts matrix. A parts matrix takes the lower price parts and marks them up higher, and higher priced parts and marks them up not as high. End result should be 50% gross profit. To determine Gross profit, If you buy a part for $10 and sell it for $20, then you havfe achieved 50% gross profit and 100% mark up. If you would like a parts matrix, please give me a call or shoot me an email.
- April 28, 2006 at 4:11 pm #11189
Matt, I would like a parts matrix. We are having a hard time dealing with mark ups. If we had a basic matrix to go by, it would make things alot easier. Thank You
Auto Maintenance, Inc.
Rogers, AR 72756
- April 28, 2006 at 4:44 pm #11190
We install customer parts, don’t like to, but once in awhile a customer will come in and ask, I’d rather do it, then send them down the street. We don’t charge our standard labor rate, we use our regular rate then times it by 1.2. If they want it then I gladly do it. Most of the time we will find something else that is needed, and they usually buy it, with are parts. I always tell them we will not warranty their part and give them a price of ours first, sometimes they will buy ours and take theirs back. Hopefully out of it we will gain a new customer, and will buy are parts.
- May 3, 2006 at 10:45 am #11191
Over many years of service mgmt. and ownership, I’ve learned to live hard and fast by one important rule. Parts cost should/must/needs to be around 20% of your gross income. Ditto for labor. Deviating from those percentages up or down is an easy way to guage your shops profitability. I’ve paid for and received alot of mgmt training from franchises, indy courses, etc. and they all come back to those numbers as it relates to parts/labor, so I can’t take credit for some mystical formula that no one can reach, but I use it to monitor whether I’m making money on every job. The bottom line is at the end of the month, I’m right in the neighborhood, and it works for me. Maybe it will work for you, or already does.
That said, I already know a spark plug you don’t stock can’t be bought for $2 and sold for $10. (20%) Or maybe for some of you it can! Let’s do a generic V6. The job is plugs installed. Average install difficulty. $12 for plugs, sold at 100%, $24. 1 hour labor @ $70. Total w/o tax, $94. My guess is most of us are getting more than that for this job, but for this example, let it play out.
Parts cost 13%, pay tech $20 per hr. incl. payroll obligations, takes an hour for him to install, labor is $20 or 21%. Total parts/labor is 34% congratulations, you’ve just come under by 6%. Now plug in your numbers on a few jobs, and take a look at your numbers. If you’re in the money, assuming your mortgage/rent is not 100K per year, you should be making money. Most shop mgmt. software gives you a way to check "profit" on each RO, and if it doesn’t, trash it and get some that does, especially if you’ve got an SA doing your selling.
I also know you cant "mark up" a dealer part 100% (or again, maybe you can,) and it’s difficult if not impossible to add enough labor to create an avg of 40%, but if you can AVERAGE those %’s over a month, you’re gonna make a few bucks.
Next, if your customer isn’t willing to pay the price you need to charge, don’t do it. You’ve hung your *ss out in the wind to the tune of thousands of dollars in equipment, a building, diagnostic equipment, technicians, and so on and so on, all of which needs to be paid for right? If the guy down the street is working in a shed w/o even a cheap scan tool, and your cust thinks you’re both equally competent, re-educate them. Take them on a tour, introduce the tech who’s gonna do the work (w/ those ASE certs, clean uniform, clean work area,) and SELL THE JOB. I do it with every customer who has doubts or objections to my price, and rarely can they say no once they’ve been re-educated. Most of them already know, they’re just waiting for someone to point it out.
Lastly, negative responses to cust queries (silent or spoken) will create a negative atmosphere. Posting the old restaurant analogy, without your customer even asking is showing your anger at a small % of your customers. For that matter, take down the no checks, no soliciting, no "whatever I don’t like" signs, even the "no customers in shop area" (very few would go there anyway, w/o permission) sign, and fill your write up area with signs that say what you WILL DO! It makes for a much more positive selling environment.
I posted this honestly hoping to contribute in some way. If it comes out as some sort of know-it-all post, please remember I’m only stating what I believe, what works for me, and what I’ve been trained, at a huge cost. There is no "one solution fits all" answer to the parts mark up question, but this might be a start. Have a good day!
- May 3, 2006 at 11:36 pm #11192
I am no expert, don’t claim to be, I do agree with most of your post. I don’t like sign’s either. But I have to tell you I just took the steak sign down. Not because of your post but of course because of another sign. more of a explanition sign. But I will tell you it does help when people walk through the door with parts and don’t want to take no for a answer. Unfortunely my insurance does require the no customer’s in the shop sign. We do encourage our customers to see what’s wrong with there car. But the sign is there. Your percentage looked right on target. One thing we as business owners must never forget. WE are in business to make money. Most people realize that. I find that if I explain why I am charging more for a part Most not all but most understand. Most of the time people just don’t even ask. Once again you wrote a great post.
- May 4, 2006 at 5:33 pm #11193
Hey Todd, thanks. I believe that alot of shop owners like to prove to the world they’re the alpha dog in their little world. In mine, the customer is. I set and follow rules, and then explain whenever questioned, why they’re there, and how it helps me do a better job. I was also instructed by a field rep for my insurance co. to post the no customers sign. Instead I put up "We would love to show you our shop, just ask!" Exclamation point and all. I actually brag about my "open shop policy" saying, "you can come by anytime you want, and we’ll gladly show you what we’re doing!" I say it alot, and I can’t remember the last time someone took me up on it. Speaks volumes about trust. I have to add I’m a nut bag for cleanliness, and everyone knows it. It’s a real closer.
A small shop nearby that actually looks OK from the street, steel bldg, glass entry door with 6" tall letters saying what? Welcome? The address? The shop or owner name? Oh no, it says NO SOLICITING! You know what this guys mad about without even setting foot NEAR his so called sales office. I can see this even across 4 lanes of traffic, and his building is 50′ back from the road. You can fire a cannonball through his parking lot and not hit a thing. Wonder why. The place has changed hands twice in the last 4 years, no ones given a thought to it.
Have a great day.
- May 4, 2006 at 11:02 pm #11194
A little of the venue, but what is your take on signed work orders. I have been in business for 15 years and have probably only had 20 or 30 signed. I feel it’s a trust thing. NOw the state is charging up to 300 per invoice not signed. I feel that if my customers trust me I can trust them. Let me know.
- May 5, 2006 at 10:37 am #11196
Being in the major repair business, it’s a concern with each and every job. Years ago, I had taken oral authorization for an estimate on a trans OH on an old Honda. Afterwards, the cust denied authorizing anything, and we ended up in frt of a magistrate who stated "I don’t care what the law says, if you don’t have a signature, you don’t have squat". He’s wrong as one person can be, but you fight the fights you can win.
Since that day, I do no work without a signature either in person or by fax. I promote it as a consumer trust issue, stating it’s the law, (it is) and we not only follow it, we support it, and any other consumer awareness/protection issue. It has not, I repeat not, caused me any lost money whatsoever, and the 2-3 times I’ve been back to that same nutjob judge wannabe, I simply hand him copies of 4 signed RO’s (major repair) and rather sarcasticly point out "I’m done, and going back to work". You only have to learn the lesson once.
Later this morning if I have time, I’ll explain how NC law lets your customer take their car without paying, with the help of the sheriff!
Doing mostly major repairs that are quite costly in most cases I"m sure I run into this issue more than most gen. repair centers.
- May 14, 2006 at 5:36 pm #11197
todd holloway wrote:
> A little of the venue, but what is your take on signed work orders. I have been in business for 15 years and have probably only had 20 or 30 signed. I feel it’s a trust thing. NOw the state is charging up to 300 per invoice not signed. I feel that if my customers trust me I can trust them. Let me know.
For us it’s just one of those habit things which was encouraged greatly by the state BAR many years ago. Over the years I have prevented a number of problems by having that signature. We get one when the car comes in and another when it is picked up. It’s just one of those things that a business should do today to cover themself. Most professional businesses do so. Once you do it for a bit, it’s no big deal.
5355 Plainfield Ave. NE
Grand Rapids, MI 49525
- July 6, 2006 at 2:20 pm #11219
I’m interested in VAST re Parts Mark-ups.
Please send me info, Web site or whatever.
- July 6, 2006 at 2:22 pm #11220
I would appreciate your parts Matrix.
- December 19, 2006 at 2:34 pm #11272
Please send me a parts matrix. it will be greatly appreicated.
T.W. Roberts Auto & Truck
- December 20, 2006 at 10:16 pm #11274
- January 1, 2007 at 2:46 am #11285
Matt please send me that price matrix.thanks Jack
- February 9, 2007 at 2:53 pm #11302
my name is tony i been in bussines since 1979. but now it not like he use to be bussinss is slow now my parts mark up and labor , i dont know if it is right, my tickets are aways big, but i never see a new customer come back to my shop again after that first sale.
can you e-mail the parts martix to see if i am doing this right or over chargeing i am in a small town, that not a good thing because everyone knows everyone.
so please mabe you can help me.
i like to talk if you have a second
my hours are 8am to 5pm est
thanks again matt
its been great talking to you
my shop number is 401-828-9738
my cell is 401-301-9738
i will be waiting for your e-mail and call
have a good day now.
- February 15, 2007 at 6:50 pm #11304
I just wanted to point out that it may not be the price. I’m sure that you give great customer service, but just wanted to point out that if a customer is completely satisfied they usually don’t complain about the price. But if they are unhappy with the service or repair, or anything else, it doesn’t matter how cheap your price is, they will be unhappy with it. And your right, that is not good in a small town.
You didn’t say you were getting complaints but that they aren’t comming back. It could be something else. We charge pretty high prices for our town, but almost everyone returns. We are in a small town as well and there are cheaper guys around.
Check on your pricing, but before you go dropping your prices too much, you might want to check that all other areas of your business and service are good. Customers are really after convenience, trust, and value, even more than price.
Do you make it easy for customers to get the answers or help they need? If you go out of your way for a customer, make sure they know that it is special. Do you ever call to check up on them afterwards, or even send a letter? I know in small towns, treating customers like your friends makes a huge difference. Try not to be too "professional" I mean you want to be a professional, but try to talk to them like they are your buddy you have known forever, not like a slick salesman… Joke around and laugh with them, don’t be uptight. Be sure that they know you value their friendship as well as business. As for the value, no matter what your price is, make sure they are getting their moneys worth, and that they know it. Be upfront and tell them that your prices may be a little higher, but_______ whatever the reason is, if it is better that is what they care about.
I don’t know how your small town is, the way people treat each other, etc. but around here that is what works. Every time I see one of our customers I stop to talk to them, ask how the car is doing, their family, etc. We have customers that come in all the time to chat and yes, it takes up time that you are not working, but everytime they end up mentioning that they need some work done and we set up a time. They never complain about the price, infact they never even call around to check on other prices. They trust us and know that we will treat them right. They always recommend us to other people.
These are just my suggestions, and what we have found works for us. You can check out smalltownmarketing.com for more information about small towns, I found it to be a great site.
- February 16, 2007 at 11:27 am #11305
Derek, I don’t think you couldn’t be more on target. Price is not everything. We are also in a small town. I do a couple of things like you said. I treat customers as friends. Alot of times I will sit next to them in the waiting area and just talk. We get alot of presents from our customers. The other day My 13 yoa son was here and a customer who made him a afkin blanket when he was born was also here. When I pointed it out to him and the customer, I had a good feeling because that customer has been with me from the start. One thing I do when I write a new customer up is make a promise to them. I tell them that I will conduct a inspection of their vehicle every time and show them our inspection form. I also tell them the inspection is good for them and good for us because I want to fix their car. If the question of price comes up, I do tell them we are not the cheapest in town. But I believe we are the best. We use the best parts and we use certified Tech’s. We stand behind every repair 12months. The last thing I say when they pay their bill. If you have any problems or questions please call me because I cannot fix what Idon’t know about. I then have a lady do follow up calls to make sure every thing is alright. Works great. One last thing make sure your shop is clean office too. Customers preceive that with quality.
- February 17, 2007 at 1:08 am #11307
todd holloway wrote:
> Derek, I don’t think you couldn’t be more on target. Price is not everything. We are also in a small town. I do a couple of things like you said. I treat customers as friends. Alot of times I will sit next to them in the waiting area and just talk. We get alot of presents from our customers. The other day My 13 yoa son was here and a customer who made him a afkin blanket when he was born was also here. When I pointed it out to him and the customer, I had a good feeling because that customer has been with me from the start. One thing I do when I write a new customer up is make a promise to them. I tell them that I will conduct a inspection of their vehicle every time and show them our inspection form. I also tell them the inspection is good for them and good for us because I want to fix their car. If the question of price comes up, I do tell them we are not the cheapest in town. But I believe we are the best. We use the best parts and we use certified Tech’s. We stand behind every repair 12months. The last thing I say when they pay their bill. If you have any problems or questions please call me because I cannot fix what Idon’t know about. I then have a lady do follow up calls to make sure every thing is alright. Works great. One last thing make sure your shop is clean office too. Customers preceive that with quality.
That’s great. We have only been in business for a couple of years now and (almost) all of our customers are great and we really do look forward to seeing them. Sounds like you have some long time customers. I also think it’s best to be honest and upfront about everything, including any billing procedures or policies.
And yes, I think that customers just need to know that you are going to do it right, and if something does go wrong you will be there to take care of it. They need to know that you WANT to know if anything goes wrong so you can take care of it. If all that is in place, they are happy customers. If they walk out of your shop reassured that their car is fixed and you care about their needs and concerns, I honestly don’t think that the money they just spent is what they are thinking about. Basically, if they have any doubts in you or your business they usually will starting thinking about how much they just paid and worry about it.
I think the call or letter afterwards really helps reassure them that you care.
All that stuff spreads like wildfire in small towns, people are happy to tell others about you and your business. Another great thing about that small towns are that people love it when they know the local business owners and they want you to stay in business.
Ha, our office is always a fight to keep it clean, but that’s the first thing I do in the morning, tidy it up.
And Todd, I just noticed that you say you have been in business since 79, you must be doing something right. I don’t think in a small town you could survive off of new customers only, how many people are you getting that are return customers compared to new customers?
- February 17, 2007 at 1:30 am #11308
Oppps, the first part was to Todd, the second was to Tony.
- May 5, 2007 at 8:18 pm #11333
If you have been in business since 1979 you must be doing something right. If not you would not be sill operating. Never go backwards always go fowards. In order to maintain help you must pay well, therefore you must charge accordingly. Try to do small specialty things to show your customers you care.
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