Gross Profit On Parts

Edward Owner San Antonio, Texas Posted   Latest   Edited  

Will it's been about a year now and I haven't seen a drop in business and about 14% increase over last year's profits. As a mobile Technician in the great state of Texas I no longer mark up parts and pass on the savings to my customers. Now I've been told by many business professionals this incorrect and this is wrong business practice and your just giving your time away for free. 

I had about 36 estimates pending last year and about 8 this year all parts had some kind of markup last year and most of them were not as close to the sample matrix below, seem like I had more customers buying there parts last year versus this year. When customer buy there own parts it's not a good thing to many factors arise when customers do this and in the long term you end up losing more time.

So am I cutting myself short is this the basic business model do we need re-envision this model.

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Interesting
Matt Diagnostician
Red Wing, Minnesota
Matt Default
 

I don't feel it matters all that much what you do, you need X amount of profit to maintain or grow and that's that. That cannot be altered. Sure, there are ways to lower you profit requirements, but regardless you need profit to pay bills. If you lower how much you make on parts, then you need to increase what you make in labor, be it rate or charged units. What you seem to be speaking of is…

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Edward Owner
San Antonio, Texas
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Matt Great analogy, could you elaborate a little bit about client perception and what kind of percentage of markup in labor year after year..

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Matt Diagnostician
Red Wing, Minnesota
Matt Default
 

With online availability of parts to consumers, and more importantly mostly the same parts we use for the same amount of money we pay, our mark-ups are perceived as gouging. We can take the time to educate the clients about how we arrive at our prices and the value attached to them, or we can drop our parts profit margins significantly and raise our labor charges...and then educate the client…

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Edward Owner
San Antonio, Texas
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Matt Got it, Thanks for the feed Back.....

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Stuart Mobile Technician
Blue Island, Illinois
Stuart Default
 

The heck with these so called business professionals​.​Sometimes you need to go outside the box just like we do when diagnosing and repairing vehicles​.​You have to do what works for you to increase profits and what you are doing is working for you.I am happy for you​.​Hoping that 2020 you see an increase in profits.

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Edward Owner
San Antonio, Texas
Edward Default
 

Stuart Thanks for the response Stewart, thinking outside the boxes what is my concept is just trying to get some facts behind that...

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Stuart Mobile Technician
Blue Island, Illinois
Stuart Default
 

Edward I have changed the way I have done business in the past last year and found that I was working on less vehicles but making more money.I realized that when you are competing with the big chains that offer cheap services to get vehicles in their bays and auto parts stores offering free services in order to sell parts,I needed to change my game plan​.​Instead of installing parts…

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Edward Owner
San Antonio, Texas
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Stuart Thanks For the input this very clear and a better understanding on how we in the industry are coming up with ways to adjust....

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Mike Technician
Salina, Kansas
Mike Default
 

If,you are able to pay your bill and still make some money it's good. Raising up your cost may have them going to others , With the outside people we use the other important things we like is keeping us informed on how the repairs are going . What ever you do , have a happy new year

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Edward Owner
San Antonio, Texas
Edward Default
 

Mike Thanks for the response....

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Albin Diagnostician
Leavenworth, Washington
Albin Default
 

It really doesn't matter where the money comes from, parts profit, or from labor, as long as you have enough at the end of the week to pay all the bills, bring home the needed income for your family, and have some left over for retirement. One way or the other, the money needs to come in. It is easy to start tossing numbers around, but the bottom line in, you need profit to stay in business…

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Edward Owner
San Antonio, Texas
Edward Default
 

Albin Thanks for the response, just with the anvil of Amazon RockAuto most of my customers are willing to wait to have their part shipped and have it repair. Here's my example of what happened today, customer called me explaining to me on a Toyota sienna the radiator was $849 at the dealership part only and if I can fine it cheaper I search for an oem parts number and found it on RockAuto for…

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Michael Diagnostician
Irving, Texas
Michael Default
 

I have never been much of a person when it came to marking up parts, but learned from a business that marking parts up 200 to 300 percent help cover future warranty claims as we offered 2 years 24,000 mile warranty on all work. If all work was done right, it was a profit. When it came to customer purchased parts, we didn't offer a warranty and charged extra on labor.

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Agree
Albin Diagnostician
Leavenworth, Washington
Albin Default
 

Was that enough money to make the payments on your mobile vehicle, put a set of new tires on it, and a tank of gas? How about your medical insurance and your business expenses? Will that income cover that? How about a retirement account and business insurance? How about a warranty claim here and there? All of these things are must have items to Pay. Either you are going to mark up your parts to…

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Edward Owner
San Antonio, Texas
Edward Default
 

Albi Makes Sense, Understand and thanks for the feed back.....

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Glen Owner/Technician
Arthur, Illinois
Glen Default
 

What year was this Sienna?

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Samuel Technician
Somers Point, New Jersey
Samuel Default
 

There are 2 trains of thought on this subject. 1. You could side with others and say, "whatever profit I need for my business to survive", "whatever works for each individual situation", etc. That's fine as long as you are content to exist. 2. What about ALLL the debates we have about "training" the customer. We complain when one shop doesn't charge enough for diagnostics and we look too…

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Edward Owner
San Antonio, Texas
Edward Default
 

Samuel Great Point and thanks for the feed back...

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Michael Mobile Technician
Clinton, Utah
Michael Default
 

Edward, It is great to see your business is growing and that you are gaining some ground. Keep in mind the true reason for going into business. If you don't have goals of hiring and training others you are just trading job A for job B. A true entrepreneur's goal is to have others working in your dream. This way you can dream bigger. I have only worked my current business for 3 years. Eventually…

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Edward Owner
San Antonio, Texas
Edward Default
 

Michael This is what i was thinking but didn't know how making up parts 50-%59 which is the industry average and the optimal benchmarks should be around 60% how is that going to affect my business in the long and short term, it just blows my mind when my CPA tells me if you don't start marking up auto parts it will be a hard journey on expanding in the future which is only one of the several…

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George Owner/Technician
Skagway, Alaska
George Default
 

You have this much in bills you have x amount of income that you work hourly for. If you let them source their own parts you potentially lost xx amount that you don't have to work hard for. You are charging to change the parts and then you get an extra 20 or 30 or xxx amounts on top of your hourly rates. I charge extra for installing their parts. Wrong parts cost you time. I also won't warranty…

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Edward Owner
San Antonio, Texas
Edward Default
 

George Great point, I agree with your analogy wrong parts cost time and i would never warranty any part that i didn't buy, Thanks for the feed back.....

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Mike Owner/Technician
Manteno, Illinois
Mike Default
 

My thoughts on this and a couple come to mind. First how are you compensating your self on the time it takes to look up and order your parts. It can take time to locate parts And you should be compensated for the time it takes. Second if you have to put money out for parts and the job gets held up and you don’t get paid your money is tied up you should be compensated for this also. Just a couple…

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Edward Owner
San Antonio, Texas
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Mike My CPA pointed that out to me, and if I fail to adapt to the business principles its going to be hard to expand in the near future like Michael had stated. Seems like Iam going to come up with a balanced approach to this issue... Thanks Again Mike...

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Matthew Owner/Technician
Carlton, Oregon
Matthew Default
 

I feel that I need to have a parts mark up. I don't follow a specific matrix but I make money on my parts. Mike makes a good point that it takes our time to look up a part and float the capitol to get them to the customer. With the quality of parts and the type of work that I do I make sure I get a "good enough" mark up that I'm going to be ok having to warranty the job. I'm not nearly cutthroat…

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Edward Owner
San Antonio, Texas
Edward Default
 

Matthew Your are right on the money when you state that it takes time sourcing quality parts and marking sure its back up with warranty, could you elaborate on what of kind of percentage you markup up on parts......

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Matthew Owner/Technician
Carlton, Oregon
Matthew Default
 

I don't necessarily follow a matrix, but I'm sure to get at least 20% on my parts, as that is what dealer/OE is going to give me. They can't get them that cheap. It's a lot harder to argue a $15 profit on an air filter than it is to argue a $50 profit on a 400 injector, so I price accordingly. My customers can google prices all they want. What I point out to them is it the SAME part that I'm…

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Scott Owner
Moreno Valley, California
Scott Default
 

Hi Edward, A few thoughts... What is our business that we're in? What type of business is it? Who do we want to attract to our business - consumers, or customers/clients? These are important questions and should be addressed by "business people" and not by the typical repair shop, as that's why we're even having this conversation. I’m not trying to say you’re a poor businessman, as quite a few…

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Scott Owner
Moreno Valley, California
Scott Default
 

I would also add to this, as this has been discussed over on that other site. I went over invoices and my profit margins and to maintain the same level of profit that I would lose by selling parts at my cost would mean my labor rates would have to go up by over 35%. What do you think this would do to me for the consumers that are only concerned with THEM saving money? Sometimes the blessings I…

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Edward Owner
San Antonio, Texas
Edward Default
 

Scott I agree with you Steve B, Micheal,Matthew and my CPA there going have be some kind of profit margin on parts sells, Great information Thanks Again for the feed back....

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Bill Technician
Rosetown, Saskatchewan
Bill Default
 

I find that I battle price objections on parts. I do not completely do away with parts margin, but it is very weak. I don't want my parts perceived as cheap, because I don't want to attract bottom feeders. I just don't want anyone feeling "ripped off" after googling the price. I make up the margin on my labor. I don't sell parts unless they are part of my service business, its part of a complete…

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Edward Owner
San Antonio, Texas
Edward Default
 

Bill You have a point the world is changing quickly and the advent of the internet, customers can google anything. I just need to fine the right formula on this topic and should be able to run with it..... Thanks again for the feed back

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Randall Owner/Technician
Kalkaska, Michigan
Randall Default
 

Edward Thanks for starting the thread As threads do, this thread has morphed to several different aspects that make up profitable automotive service. I will throw in a couple learning's that have surfaced for me, over the last few years: As I considered making changes to our business model, to address modern challenges around parts margin and customer supplied parts, I wanted to be sure I…

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Matthew Owner/Technician
Carlton, Oregon
Matthew Default
 

Edward, I do the very same thing. My labor cost is always static. I don't charge extra for customer supplied parts, with the caveat that if I somehow have to spend extra time with a not quite perfect part then there could be some additional labor. What I don't do is offer warranty for customer supplied parts. I guarantee my labor. What I physically did was done right and will continue to be…

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Edward Owner
San Antonio, Texas
Edward Default
 

Randall You have a great point at last i understand the dos and don't, what long term profit margins i can shoot for..... Great Input Thanks

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Bill Owner/Technician
Jackson, Michigan
Bill Default
 

The advent of the internet..... Lol did this just happen?? The ones who constantly are trying to undercut and do it for cheeper have contributed to the lack of professionalism in this industry for decades.

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Edward Owner
San Antonio, Texas
Edward Default
 

B. kenel And we are in the middle trying to make a honest living. Professionalism is key in our industry and we need to keep focus. Unfortunately good old capitalism is knocking on our door with cheaper, faster delivery on auto parts welcome to the rat race. Furthermore at the end of the day it's always about the bottom line in todays focus. Iam trying to balance, both professionalism and the…

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Uzuorji Technician
Lagos, Nigeria
Uzuorji Default
 

Hello Bill, I understand you work in Canada pls this is my email message me, we need to talk. …. thanks

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Bob Owner
Baldwinsville, New York
Bob Default
   

There are a lot of moving part to this. more later..

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Michael Owner/Technician
Cartersville, Georgia
Michael Default
 

Hi Edward, I don't think there's a right or wrong answer here. There are many different business models that can succeed. The important thing is decide how you want to compete and everything you do promotes that model. People have a tendency to associate with people who have like personalities so you will get referrals from people who like what you're doing. Your business will grow if you stick…

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Edward Owner
San Antonio, Texas
Edward Default
 

Michael You have a point, I just wanted some facts behind this whole concept of making up parts in 2019 with the whole internet deal at your finger tips customer have a good idea on parts cost.... Thanks for the input

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Glen Owner/Technician
Arthur, Illinois
Glen Default
 

What about counterfeit parts?

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Phillip Diagnostician
Anchorage, Alaska
Phillip Default
 

How I do it is this. Customers pays what they would if they walked into a parts place. Only time that changes if I have to go out of my way like 30 minutes to an hour to get a part. Their is some places I do not get a discount on parts and I inform the customer it will be cheaper for them to pick up the part them self. Normally I only mark up the parts like 10-30 bucks depending on what it is…

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Edward Owner
San Antonio, Texas
Edward Default
 

Phillip Yes, I agree also I might put some exception in my new matrix Thanks for the input....

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Michael Diagnostician
Irving, Texas
Michael Default
 

Do you mark up cost or list? When I first started in the business, I purchased parts at say list minus 20 percent and the more I spend the more discount I got. When I billed the part it was at list price, so I never had an issue with pricing because the price was the same as if the customer went to the store and I got paid for my time. Years into it, I learned to buy parts at cost plus 5…

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Stuart Mobile Technician
Blue Island, Illinois
Stuart Default
 

Michael I find it ironic that you mentioned rockauto.I am in the middle of a battle with them and Luk industries.I purchased a Luk Brand clutch and flywheel through Rockauto thinking Luk is the best​.​Turned out to be a nightmare and a half​.​The prices were great but the clutch kit was made in Taiwan and the flywheel was made in china​.​The issue was that…

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Interesting
Randall Owner/Technician
Kalkaska, Michigan
Randall Default
 

I have no interest in hijacking this thread and this topic should certainly stand on its own. I would just repeat the following words, that i have said to my suppliers dozens of times: "Build a better part, charge me more money" When we stand together and deliver this message, we will see change. Currently, every one of my suppliers tells me I am the only one delivering this message. They tell…

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Matthew Owner/Technician
Carlton, Oregon
Matthew Default
 

You can't be the only one saying it, as I say the same thing. The work I do is complicated. I'm fixing issues that require the correct parts at the correct specifications. More and more I end up going OE because the aftermarket stuff just won't make the grade. Something as simple as an ignition module that has a slower shut off time on the cheaper option than the more expensive option. All of…

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Michael Owner/Technician
Montague, New Jersey
Michael Default
 

They're full of shit if they say that. It's the retail customers who want that. That's who they cater to.

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Edward Owner
San Antonio, Texas
Edward Default
 

Randall I see Morpar spark plugs repack with NGK plugs, at the end of the day its about the bottom line and our average ticket reflex's this.... Great Point Thanks for the input

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Michael Owner/Technician
Montague, New Jersey
Michael Default
 

Your situation is why I no longer deal with Rock Auto and why I use the American Express card. With local suppliers and the wholesalers, I have clout because of the volume I do. They also know better than to send me junk.

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George Owner/Technician
Skagway, Alaska
George Default
 

Rock auto. fast , cheap, but not always what I want or need. Most of those who buy from rock auto tell me how much cheaper they are. I always tell them to take it someplace else then to have it installed. I see them around town, at the store etc and ask how it went. Turns out the part was defective, wrong part, misboxed. They get stuck sending it back and having to order another part. I won't…

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Edward Owner
San Antonio, Texas
Edward Default
 

Michael I'am working on my new matrix and finally got all the facts inline on this issue.... THanks for the input

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Michael Owner/Technician
Montague, New Jersey
Michael Default
   

Do not quote parts and labor. Quote a price for the job. If you don't want to make anything on parts, that's fine but bear in mind I have had and still have people tell me that even at cost, I am higher than they can get the "same thing" for online. They often neglect to factor in freight, brand etc. I also NEVER install a part supplied by a customer. There is a legal precedent on this. If you…

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George Owner/Technician
Skagway, Alaska
George Default
 

When they tell me thy can get it cheaper I usually tell them to do that. And oh by the way take your car there as well. Some of them go , some of them understand. I work semi remote 6 months out of the year and I am usually booked up for 2-3 weeks in advance.

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Edward Owner
San Antonio, Texas
Edward Default
 

Michael 100% Right, I don't like installing supplied parts form any customer been done that. I finally seen the daylight on this issue, Am working on a new matrix..... Thanks for the input

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Glen Owner/Technician
Arthur, Illinois
Glen Default
 

Edward, If you are looking for a business coach or trainer Cecil Bullard or Jeremy O'Neal would be my recommendations. I don't have Cecil's matrix in front of me but to me the one you posted starts to get off at about the 2.5 mark. In my experience "Net" profit is more important than "Gross" profit

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Edward Owner
San Antonio, Texas
Edward Default
 

Glen Thanks for the in put

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