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I was wondering how many shops charge for everything that goes into a repair? For example, zip ties, dielectric grease, clamps, bulbs, fuses, heat shrink , butt connectors, etc. It seems to me some shops have a "shop supplies" charge and let it go at that. Other shops do a great job of getting everything on the invoice and then also have a "job supplies" ( not shop supplies, because it is for the job, not shop ) to cover consumables.  Of the shops that are getting everything on the invoice, what is your advice on making that happen? How do you do it?

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I don't charge "shop supplies" even though it is common practice. When I was working for big chain stores, I had so many customers complaining about shop costs - even with a sign hanging up. So if we use a can of brake clean, I charge seperately. Now if it's one ziptie or one fuse... I dont charge...

Like the other day, I charged a customer MAF sensor cleaner bc I used it to clean electrical connections that were oil soaked and probably used about half a can. With this left over can, I will use it for someone else as a courtesy since the can has already been paid for.

I built brake clean into the price of doing brake jobs. We do so many brakes that brake pads are a canned job. I alot half a can of brake clean per car and of course we will have a bunch left over. It is then free to use it for cleaning things like oil leaks and so on and I don't have to charge the customer for it. People appreciate having upfront prices without all the "add-ons." for us it's just Parts, labor and sales tax.

Now I do want to charge supplies because that will just make it so much easier and I'm sure I'm losing money on supplies but I like advertising and letting people know that we are just parts, labor and sales tax. Customers like that

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We don't charge for individual supply items or sundries such as butt connectors, brake clean,  dielectric compound, gasket sealer, etc. When doing a wiring repair job we will sell everything as one lot. For instance "wiring and supplies" $49.88 and add labor. We DO charge shop supplies as a percentage of the job, and these shop supplies bring in to my one shop around $4,500 to $6,000 a month. We never mention shop supplies and our clients don't either.

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We use 4% as our shop supply rate based on labor only capping out at $37.83. I've never had a customer complain or even ask about it. I had to adjust sales tax to comply with state laws on these items as Joe said that's different in different areas. There are shops in our 20 Group that charge 6% or more with no complaints. It is definitely an area that any shop owner should look closely at to make sure its not going out the door for free or even at a loss.

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I charge for Brakleen, throttle body cleaner, enviro-wipes, conditioning discs, tie wraps, electrical connectors, shrink wrap, fuses, light bulbs, nuts/bolts/washers, washer solvent, PS fluid, etc.... I have prepared canned jobs in my shop management program that covers about 95% of the jobs we do. When appropriate these canned jobs include items like noted above.  Example: Every brake job includes 1 can of Brakleen, 2 enviro-wipes, 1 can of brake fluid and 2 conditioning discs. My techs edit their work order by crossing off what they don't use or add items not included in the caned job so the customer only pays for what was actually used. This has always worked out fine for me and has never been questioned. My shop management program allows for a shop supply charge but I don't use it.

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We do 4.5% for shop supplies with a $51 cap, and don't have any complaints. I used to try charging for every item, but I found that techs will often forget to write down how many butt connectors or bolts they used. I also can't charge out oxy/acetylene gas etc. The small parts and fluids that were going out the door without being documented ended up being significant, and I found myself constantly having to monitor it. I had better things to do, so I implemented a shop supply charge. Now I have a shop supply sales line on my P&L, and a shop supply COGS line as a sub-account of parts COGS. Now I can simply look to see if my supplies charge is in line with what we're spending.

At my current shop supply rate, I made 50% GP on shop supplies last year. Probably could have done slightly better if all those items were billed individually, but at what expense to productivity while my guys are tracking those items, and me tracking them tracking those items? I'll take the 50% GP and be happy about it.

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After 10+ years of monitoring auto shop reviews add-on fees are in the top three of customer complaints. No matter how you justify generic, unspecific fees I feel they are bad business practice.

Your customers may not be complaining to your face about your add-on fees, but these fees cause what I call customer relationship "rot".

Add-on fees are little annoyances that most customers won't question but they accumulate over time and silently undermine customer trust and loyalty. This makes your customers more prone to customer defection. And customer loss is a HUGE cost to your business!

Every shop has service failures. And the day something big goes wrong customers will have less forgiveness if they are already annoyed. The customer blows their cool and you are left wondering why they stormed out over some mistake you apologize for and make right... A classic case of death by a thousand small cuts.

 

Every business should do everything they can to create a positive customer experience and relationship. Get rid of every friction point and possible annoyance in the customer's experience. That is what keeps customers coming back.

 

One of the most dangerous mindsets in business is arrogance. You think you may be impervious to customer loss but all you need is a competitor to move in on you and customers who are not completely loyal will quickly be tempted to go elsewhere...

Still not convinced add-on fees are bad? Have you ever gone into a restaurant and had them automatically add a mandatory 20% tip to the bill. Not sure about you but it just irritates me and makes me reluctant to return.

Service fees may not seem like a big deal but they can be a very real threat to your reputation. And that can be far more damaging to your bottom line than what is mistakenly called a loss of profit due to shop supplies.

A couple negative reviews about you being a price gouger and over-charging can significantly increase your advertising cost. The first thing prospective new customers do after seeing your advertisement is inspect your online reputation. What they find there has a HUGE impact on your advertising response rate and your cost per new customer. And that increased advertising cost will amount to far more than the relatively small amount represented by shop supplies (I feel shop supplies should be part of general labor rate, incorporated into specific job labor rates, or separately billed. If it is something used on every job of that type then add it to the canned job package that almost all shop management software has, e.g. include the price for 1/2 can of brake cleaner, etc).

 

Every business should do everything they can to protect their reputation. Add-on fees are one of those silent business killers.

Still not convinced add-on fees are bad? Think that because your customers aren't complaining about add-on fees they aren't annoyed by them?

In 2009 I wrote a blog post about the pros and cons of using add on environmental fees (a new practice back then). It is still the highest traffic page on my blog by a WIDE margin! I finally had to turn off and remove the comments since it quickly produced 25 PAGES!!! of people complaining about add-on fees. Your customers may not be complaining to your face but I am sure they dislike the fees. And that underlying dissatisfaction will hurt your business.

Hope this helps,
Doug

Edited by RobMax
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RobMax- thank you for that. I was starting to think I should charge for this, but I increased my labor rate to offset the costs so they are just hidden into the labor. It's much easier to add .1hr on a job where you needed a few odds and ends and easily core for them without the customer feeling like you "nickel and dimed" them to death.

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  • 3 weeks later...

I think the core of this discussion revolves around communicating with the customer.  If they understand what they are paying for then they are fine with it and it builds trust at the same time.  When we go through an invoice with a customer we just tell them what we used for shop supplies, "we used some brake cleaner, a few rags, the paper floor mat, a gallon of windshield washer fluid, and a scoop of floor dry."  If people know what they are buying they are really okay with paying for it.  Most price objections occur soley because they customer doesn't know what they bought.  If you tell them they are fine with it.  Better yet, if you tell them up front and again when they pick up the car you begin to build trust with transparency, and the next time they don't push so hard.  We've actually converted quite a few upset customers by doing this.  Now they are great and they don't question anything because they know what they are paying for and they trust us.

Bottom line, if your customer doesn't know what they are getting, then they will think you are randomly adding money to their bill.  It is up to you to make sure they know what they are buying.  You have the power to manage and avoid price objections for shop supplies (among other things).

Side note: some of my customers actually pay us more than we charge.  They bring us cupcakes, donuts, coffee, gift cards, beer, refuse change etc... because they are grateful for our transparency and the time we take to help them understand what we did and what they are paying for.

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  • 4 weeks later...

Just adding $5 to a set of brake pads compensates for the brake clean and synthetic grease used on the job and keeps everyone happy. $5 to balance a tire? Not when weights cost .25 per ounce. You must charge for the materials used unless you're running a charity shop or are independently wealthy. 

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  • 2 months later...
On 2017-06-04 at 8:34 PM, alfredauto said:

Just adding $5 to a set of brake pads compensates for the brake clean and synthetic grease used on the job and keeps everyone happy. $5 to balance a tire? Not when weights cost .25 per ounce. You must charge for the materials used unless you're running a charity shop or are independently wealthy. 

Charging for parts or items that the customer can see is much different than charging for supplies the customer can't see or understand the need for. RyanGMW has got the right idea. I don't see any problem in charging for wheel weights as they are something the customer can see and understand why they are needed.

Explain all you want but shops need to understand that customers don't talk your language or understand what you do. You can waste a lot of time explaining invoices and people will nod their head and still walk away feeling gouged. I tell shop owners all the time to take their "tech" hat off and put their "customer" hat on - especially when thinking about marketing and advertising. That old story of walk a mile in my shoes to understand me...

Edited by RobMax
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Explaining is the only way that customers will ever understand.  If you just eat it then they'll never understand.  Your strategy is a self-fulfilling prophecy.

 

Watch:

YOUR SHOP

1) don't tell customers why you charge for shop supplies

2) customers don't understand what's in shop supplies

3) customers complain because they don't understand

4) you can't charge for shop supplies because they complain

 

MY SHOP

1) we tell customers why we charge for shop supplies

2) customers understand what's in shop supplies and why we can't break it down into line items

3) customers don't complain because they know we billed them fairly

4) nobody complains about shop supplies (I've never had a single person complain about it) so we can charge for them

 

Every shop owner is free to make their own decisions, but in my experience people are willing to pay for the things that are required to do the job as long as they know what they are paying for.  Any shop owner that isn't charging for shop supplies is leaving money on the table that customers are willing to pay for.  I'm up 30% this year in sales and July alone was up 58% in sales over last year!  I'm not losing customers due to charging for shop supplies.  I'm not losing them because my shop rate went up 2%, I'm gaining them because they feel comfortable with us because we show and tell everything that we can so there are no mysteries.  They know they are getting what they pay for and that there is no fluff in the invoice.  It's all legitimate charges for what it takes to do the job in a professional manner.

And just an FYI I'm not a tech and I've never been a tech.  I'm just a business person in this industry trying to make a profitable business that people can trust.  It seems to be working.

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Hide supplies charges by incorporating it into some other charges? Hell let's just hide everything. Supplies? Hide it. Parts? Hide it. Labor? Hide it. Sales tax? Hide it. Lets just have one big fat total at the bottom of the invoice. No itemization whatsoever. Yeh, that will go over big.

I read a lot of repair shop reviews and although I've seen reviews that say so and so shop has too high a labor rate or is marking their parts up too much, I've never seen a review that mentions supply charges at all.

We charge 5% of labor capped at $40.

 

 

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For the month of July my shop supply COGS was $1864. Not charging for this, and making a profit on it, is simply leaving money on the table.
I track my supplies COGS as a subaccount of parts COGS, likewise with supplies sales as a subaccount of parts sales.
To use something in the shop that's not billed in one way or another to a customer vehicle means you must pay sales tax for that item. No thanks.

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  • Have you checked out Joe's Latest Blog?

         3 comments
      Got your attention? Good. The truth is, there is no such thing as the perfect technician pay plan. There are countless ways to create any pay plan. I’ve heard all the claims and opinions, and to be honest, it’s getting a little frustrating. Claims that an hourly paid pay plan cannot motivate. That flat rate is the only way to truly get the most production from your technicians. And then there’s the hybrid performance-based pay plan that many claim is the best.
      At a recent industry event, a shop owner from the Midwest boasted about his flat-rate techs and insisted that this pay plan should be adopted by all shops across the country. When I informed him that in states like New York, you cannot pay flat-rate, he was shocked. “Then how do you motivate your techs” he asked me.
      I remember the day in 1986 when I hired the best technician who ever worked for me in my 41 years as an automotive shop owner. We’ll call him Hal. When Hal reviewed my pay plan for him, and the incentive bonus document, he stared at it for a minute, looked up, and said, “Joe, this looks good, but here’s what I want.” He then wrote on top of the document the weekly salary he wanted. It was a BIG number. He went on to say, “Joe, I need to take home a certain amount of money. I have a home, a wife, two kids, and my Harly Davidson. I will work hard and produce for you. I don’t need an incentive bonus to do my work.” And he did, for the next 30 years, until the day he retired.
      Everyone is entitled to their opinion. So, here’s mine. Money is a motivator, but not the only motivator, and not the best motivator either. We have all heard this scenario, “She quit ABC Auto Center, to get a job at XYZ Auto Repair, and she’s making less money now at XYZ!” We all know that people don’t leave companies, they leave the people they work for or work with.
      With all this said, I do believe that an incentive-based pay plan can work. However, I also believe that a technician must be paid a very good base wage that is commensurate with their ability, experience, and certifications. I also believe that in addition to money, there needs to be a great benefits package. But the icing on the cake in any pay plan is the culture, mission, and vision of the company, which takes strong leadership. And let’s not forget that motivation also comes from praise, recognition, respect, and when technicians know that their work matters.
      Rather than looking for that elusive perfect pay plan, sit down with your technician. Find out what motivates them. What their goals are. Why do they get out of bed in the morning? When you tie their goals with your goals, you will have one powerful pay plan.
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