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Just wondering how many of you all sub out jobs vs recommending other shops and if you do sub it out how do you markup the service?

For example, we don't do transmission work at our shop and have a trusted shop that we refer all of the work to.  The only time we sub the work out is for our fleet account and we just do a flat $ markup which is decent in my opinion.  We do send that shop a lot of business but not sure I want the hassle of being the inbetween person and potentionally impacting my shop reputation based on someone else's work (no matter how much I research and trust a shop).  At the same time by not subbing out I feel like I am leaving money on the table.  Currently we refer most transmission, intensive electrical and exhaust work out to local specialty shops.

A shop owner friend of mine on the other hand handles everything car related for his customers.  From windshields to wheel repairs, electrical etc.  His philosophy is he wants to be the only shop his customer needs to know about for anything car related even if he makes no markup (not sure how often that happens) and he is a very successful shop making over $1mil a year.  I get the concept but for me to be involved I want to make some money on it and if its something that requires diagnostic not sure I would want to be the middle man not knowing a price to tell the customer from the get go.  For some of these situations I know he just wings it.  (For example he had a customer with an electrical issue and just told them it would be $800 not knowing what was wrong.  He took it to an electrical shop and the problem was fixed for $200...good profit for him.). He also subs out motor jobs and pays $500 for the install but I know of some instances where he had comebacks and it ended up costing him.  

Curious how you all handle sub work, how you mark it up and if the risk is worth the reward?

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Psychology 102. We all have little brand ladders in our heads for every brand/caragory we interact with. For instance think about toothpaste. Quick, name off as many as you can. I bet the first is the one you use, second would be one you used to use or would use in a bind, you may call out a 3rd but that is usually it. Go ahead, try it with other categories..... cool, huh? When you consider there are 10's if not more choices in most categories.

marketing or first to market usually get us on the ladder ( think 7-up, the un cola) not the first but they created a new distinction with that campaign.

theres a lot more to this but quickly, the dealer is usually on the top wrung of auto repair, they sold you the car and are generally thought of as the expert. Everything I have done was to take that top wrung with my customers. Need car service? Think WAC. Need air in tires, think WAC. Need a windshield? Think WAC. See where I am going? By not subbing work you are giving your customers familiarity with other brands and sub specialties in our category by sending them away. IMO a bad move for your growth and success. 

Establish terms with those vendors, establish expectations, we usually get 30-50% mark up on sublet and get the top wrung

unless you want your customers to start wandering.....trans shop, electrical shop, brake shop, specialty shop......your giving them back of the Ming thoughts and ideas to go elsewhere before even consulting you by sending them elsewhere when they have a need. 

Good luck 

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Transmissions we have a local rebuilder that we worked with many years with little issues / Trying to buy rebuilds and add labor does not work in most cases - When you can mark up - and have your bay for quick work.

You have to sell yourself and your warranty , Your values most of us will be higher  then  a rebuilding shop.

Add an extra year onto the warranty then local providers do ,they offer 12/12 give 24/24 / Our provider has 3/36 we offer 4/48,000  Etc. Stipulate has to come in for yearly check up and service at 36,000 miles .

Sublet Electrical / Diagnostic work and other specific work would be tough the way I see it // I want my shop to be one stop.

Exhaust / Transmission / Body Work / Trailer hitch's / Accessories  can work fairly Easy

Just my belief windows.

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On 7/4/2017 at 4:29 PM, xrac said:

In some instances remans are not competitively priced compared to a local rebuild.  In those few cases we have sublet some work. 

There are those instances, but I've found they're pretty rare. I also get a 3-100 warranty with the reman that I don't get with a local rebuild. And I've had an almost zero warranty rate with the reman vs a much higher rate with local builders.

In those few cases where the reman is sky high, I check with the dealer. In those cases the dealer is usually at or below the reman price. Then I can mark it up, and sell the value of a genuine part to the customer. I get the job more often than not.

If I don't get the job because the local builder is cheaper, then so be it, but we don't lose many. People understand the value of the better warranty. Simply explaining that the transmission gets a test run on a dyno where they can monitor the shift patterns and quality goes a long way too. It makes people uncomfortable to know that at the local builder shop, their car is the test bed to see if the transmission is going to leave them walking.

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On 7/1/2017 at 8:22 AM, Wheelingauto said:

Psychology 102. We all have little brand ladders in our heads for every brand/caragory we interact with. For instance think about toothpaste. Quick, name off as many as you can. I bet the first is the one you use, second would be one you used to use or would use in a bind, you may call out a 3rd but that is usually it. Go ahead, try it with other categories..... cool, huh? When you consider there are 10's if not more choices in most categories.

marketing or first to market usually get us on the ladder ( think 7-up, the un cola) not the first but they created a new distinction with that campaign.

theres a lot more to this but quickly, the dealer is usually on the top wrung of auto repair, they sold you the car and are generally thought of as the expert. Everything I have done was to take that top wrung with my customers. Need car service? Think WAC. Need air in tires, think WAC. Need a windshield? Think WAC. See where I am going? By not subbing work you are giving your customers familiarity with other brands and sub specialties in our category by sending them away. IMO a bad move for your growth and success. 

Establish terms with those vendors, establish expectations, we usually get 30-50% mark up on sublet and get the top wrung

unless you want your customers to start wandering.....trans shop, electrical shop, brake shop, specialty shop......your giving them back of the Ming thoughts and ideas to go elsewhere before even consulting you by sending them elsewhere when they have a need. 

Good luck 

Thanks for all the feedback!  

Using this approach (windshields, bodywork, trans work etc all come to us) how do you handle estimates for these items and do you tell your customer you are subbing out the work?  For example, a customer comes in for body work and wants a price.  You call the vendor and they need to see it before they can give a price.  How do you handle that?  Do you have the customer leave the vehicle with you and then take it to the vendor?  Do you tell the customer that you sub it out incase they come by your shop and don't see the vehicle?  And do you offer this for all customers or just existing customers?  So if I have never been to your shop before but come in for a quote for body work then what?

In case we were to tell the customer that we sub out the work and they leave it with us for quote & repair I do like Dan's approach with adding value in the warranty.

We did experience with subbing out alignments at one point and we would take in waiting customers and then drive the vehicle to our vendor and usually informed the customer of what we were doing.  I often felt like that was a strange situation when a customer brings their car to you and you drive it down away to get repaired.

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In my shop bodywork and interior work are not sublet. The complexity of body work along with insurance company involvement make it too difficult. Interior work allows for too much personal opinion on the finished product. For all the other sublet (glass ,trans work, machine shop work) we pretty much can nail down a price before service or once the vehicle problem has been diagnosed and give a final price to our customer.

Trans work is the easiest example for me so....we let people know we have a trans re-builder. Why go with us instead of directly to him. You have a relationship with us, as we do with him. You may have one or two trans failures in a lifetime. We rebuild 10 per year (insert number). This allows us to control the situation better for instance he offers a 12/12 warranty. For us he honors our 36/36 warranty (value). We also ensure the job is done to our standards when the vehicle is brought back to our shop. The volume we do allows for us to get better warranty and better pricing than he can give to the public.

For glass work we bring in a glass company, same thing, we do volume which gives us better pricing as well as more leverage if something is not right. For our customer it is more convenient to bring the car to one place and get it all done even if it does cost them a few more dollars. They are comfortable with us and are willing to pay us to take care of it.

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  • 2 months later...

We do it all here except rebuild transmissions. But having had enough experience with a/t rebuilds I feel equally as comfortable putting in a reman or used unit at the same cost or better for my customers. Every single outsourced transmission rebuild ended up costing more than originally bid AND they have continual issues they come back at me for help. I stopped doing them. I've replaced windshields, car/truck bumpers, headlight assemblies, you name it we'll do it. One stop shop. Now, if a customer wants bodywork repair we refer them on but bodywork replaced we at least take a swing at it. I personally installed a rear bumper on a 2008 4Runner for my son - took me an hour and cost me $250 for the part. It isn't cosmetically perfect (scratched) but if I had went to a body shop it would have easily cost over $1500. Never give a customer a reason to go any place else...

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      It always amazes me when I hear about a technician who quits one repair shop to go work at another shop for less money. I know you have heard of this too, and you’ve probably asked yourself, “Can this be true? And Why?” The answer rests within the culture of the company. More specifically, the boss, manager, or a toxic work environment literally pushed the technician out the door.
      While money and benefits tend to attract people to a company, it won’t keep them there. When a technician begins to look over the fence for greener grass, that is usually a sign that something is wrong within the workplace. It also means that his or her heart is probably already gone. If the issue is not resolved, no amount of money will keep that technician for the long term. The heart is always the first to leave. The last thing that leaves is the technician’s toolbox.
      Shop owners: Focus more on employee retention than acquisition. This is not to say that you should not be constantly recruiting. You should. What it does means is that once you hire someone, your job isn’t over, that’s when it begins. Get to know your technicians. Build strong relationships. Have frequent one-on-ones. Engage in meaningful conversation. Find what truly motivates your technicians. You may be surprised that while money is a motivator, it’s usually not the prime motivator.
      One last thing; the cost of technician turnover can be financially devastating. It also affects shop morale. Do all you can to create a workplace where technicians feel they are respected, recognized, and know that their work contributes to the overall success of the company. This will lead to improved morale and team spirit. Remember, when you see a technician’s toolbox rolling out of the bay on its way to another shop, the heart was most likely gone long before that.
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