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I am in a small market and our only real competition is a shop that charges $70 an hour and marks up their parts an average of 100%. What is a fair percentage on parts mark-up? I was thinking 20% was fair and profitable. Also the average labor rate in the area I am in is $60 an hour so we are planning to go in at $58. We do all our head work in house with our county's only ASE master certified machinist who is also our lead tech. The shop has been in business for a year now and has reached the point where we either expand or fail. We are moving into a better location(we were out in the country and are moving in town). My main question is since we have a good reputation already how do we bring in more customers once we move? Should we hit radio ads hard or do mailers or just kind of do everything. I was kind of tossing around the Idea of a 9.95 oil change on opening day. Any ideas will be greatly appreciated.

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I do not know what your overhead is but my overhead is such that if I went to a 20% parts markup I would soon be out of business. In my opinion that is too cheap. For example on dealer parts shops are usually able to buy at a 25% discount over the general public. In my mind that is a bare minimum that should be charged on any part although on most things we try to do much more. The way our shop pay is structured at 25% I am breaking even on a part. I think one of the biggest mistake that small shops and start ups make is to not charge enough. This leads to a lot of issues. The owner has to work way to many hours to be profitable. You establish a reputation for being cheap and attract a clientele that are all price shoppers. The whole pricing structure is not profitable enough to allow investment in technology, equipment, more qualified personnel, better buildings, and locations. You do not have a great enough return on your investment. We have been working on our pricing because we have just not been profitable enough.

 

As far as the $9.95 oil change it will attract a customer you may not want in the long run. While you are doing the $9.95 oil change the shop at $70 an hour will be fixing the cars of people who want their car FIXED. The $9.95 oil change customer is often the one who says just change my oil and DON'T look at anything else. How about offering something like an oil change and tire rotation for $25.95. That is the promotion I favor. It is not too cheap but it is attractive to someone who wants to take care of their tires. This is a customer more than likely to take care of the car.

 

thank you so much we are getting into selling tires also so the $25.95 idea is way better and i did some math and figured that 35% easily covers our lease payment based on an slow month.

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Oh by the way I forget to welcome you to the forum :wub: . WELCOME! Tell us a little more about yourself and where you are located!

 

 

Martin, TN and I have worked in a ford dealership both as a tech and parts manager, several independent shops, and retail parts management. I am not the shop owner but have the option to buy in which i am strongly considering. The shop owner has been my best friend since diapers and we have worked well together in the past. We both got our automotive educations from NADC. He is an ASE master certified machinist and holds six other ASE certifications.I was in a car accident that ended my technician career so I only have about 4 years of experience as a tech. My role at this shop is primarily a service manager and business manager. The building we are taking over is a old semi truck shop with three huge bay doors in front and back with plenty of room for a machine shop and large office. Also there is a loading dock and storage room that has enough room to stock plenty of tires and common parts. We are waiting to find out if the bank loan for the expansion is going to go through and still waiting on the building owner to decide what he wants for the building so hopefully we will be fully functional by April first. Thanks for the welcome and help xrac. I wish I had found this site sooner it is the most helpful resource Ive found.

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I am in a small market and our only real competition is a shop that charges $70 an hour and marks up their parts an average of 100%. What is a fair percentage on parts mark-up? I was thinking 20% was fair and profitable. Also the average labor rate in the area I am in is $60 an hour so we are planning to go in at $58. We do all our head work in house with our county's only ASE master certified machinist who is also our lead tech. The shop has been in business for a year now and has reached the point where we either expand or fail. We are moving into a better location(we were out in the country and are moving in town). My main question is since we have a good reputation already how do we bring in more customers once we move? Should we hit radio ads hard or do mailers or just kind of do everything. I was kind of tossing around the Idea of a 9.95 oil change on opening day. Any ideas will be greatly appreciated.

 

WOW, where do I start. Do yourself a favor and ditch the 9.95 oil change idea. If cheap customers are what you are after this kind of promotion will get you just that. I just returned from the Vision High Tech Expo in KC this evening. I attended 3 days of some fantastic management and marketing training. The first thing I can advise you is this, get some training. It is available through your parts vendors. I know for a fact that NAPA, Carquest and Oriellys have training available for either free or at very reasonable prices. These training options are usually in CD or Tape form and on the internet. Check out this link for some great training options Automotive Management Institute (AMI) Join BNI, http://www.bni.com/ and participate, Join ASA, Automotive Service Association Automotive Service Association ( ASA ) and get involved. You will surround yourself with sharp business people and make some great friends at the same time.

By the way, as I told you earlier, I just returned from management training this evening. After 25 years as a shop owner I still try learn and better myself.

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I strongly suggest that you read the E Myth. It seems like you run your operation as a technician and not as a business man. You should calculate for yourself what profit you want to make and what your goals are. With a 20% parts margin you will end up like many shop owners, you will have a business that is only worth the equipment when you are ready to retire.

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  • Have you checked out Joe's Latest Blog?

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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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