Quantcast
Jump to content


Tougher to make a profit


Recommended Posts

It is harder to make a profit nowadays so my question is if anyone knows what the breakdown of percentage spending should be on your shop? This is what we have been told in the past when taking management classes. We are finding hard to stick with the 20% on cost of parts, it's more like 25% to 28%. We are $92hr so we can't really raise our prices anymore.

 

Any input would be great!

 

Here is breakdown we have:

 

Cost of parts - 20%

Cost of labor - 20%

Office Admin - 10%

Expenses - 30%

Owner Salary - 20%

Link to comment
Share on other sites

It is harder to make a profit nowadays so my question is if anyone knows what the breakdown of percentage spending should be on your shop? This is what we have been told in the past when taking management classes. We are finding hard to stick with the 20% on cost of parts, it's more like 25% to 28%. We are $92hr so we can't really raise our prices anymore.

 

Any input would be great!

 

Here is breakdown we have:

 

Cost of parts - 20%

Cost of labor - 20%

Office Admin - 10%

Expenses - 30%

Owner Salary - 20%

 

 

I don't see how you can have a set a percentage of overall spending using this method. Part and Labor are costs of sales and will increase according to sales volume. If you have a phenomenal year, you will have to spend much more on parts and pay more for the labor to do the work while your overhead will remain basically the same. The will skew these percentages as you have them laid out here.

 

I think you are looking at this in a overly simplistic manner. You need to at least divide your expenses into Cost of Goods Sold (COGS) and overhead. You need to know your break-even number. What do you have to make every year/month/week/day to keep the doors open. You then adjust your gross profit (money left from sales after deducting cost of parts and labor) to cover your overhead and provide the owner with a salary.

 

Rather than looking at what you are spending on parts and labor as a percentage of expenses, you need to be looking at what your gross profit is on your parts sales and labor. That is the important number.

 

I don't know if this clears anything up for you.

Link to comment
Share on other sites

Yes, you are absolutely correct about knowing your breakeven and in looking at what your gross profit is on your parts sales and labor etc.

 

But what I am talking about and I appologize maybe I wasn't clear enough, is that I am looking at my profit and loss statement for 2010, the previous year and looking at what percentages have been spent in those specific catagories that I stated, parts, labor, admin, expenses etc.

 

I look at this as a tool to see where maybe we overspent in one area, so now I can take a look and say, "Wow! it cost me 28% on parts for the 2010 year when really it should be at 25%" or "I'm only spending 15% on labor rather than 17%." So now I know or maybe need to do some tweaking for the following year. That's the percentage breakdown that I was talking about. Looking back to make any needed adjustments for current year. I hope that I am making sense?

 

Wondering if anybody knew that percentage formula.

Link to comment
Share on other sites

Yes, you are absolutely correct about knowing your breakeven and in looking at what your gross profit is on your parts sales and labor etc.

 

But what I am talking about and I appologize maybe I wasn't clear enough, is that I am looking at my profit and loss statement for 2010, the previous year and looking at what percentages have been spent in those specific catagories that I stated, parts, labor, admin, expenses etc.

 

I look at this as a tool to see where maybe we overspent in one area, so now I can take a look and say, "Wow! it cost me 28% on parts for the 2010 year when really it should be at 25%" or "I'm only spending 15% on labor rather than 17%." So now I know or maybe need to do some tweaking for the following year. That's the percentage breakdown that I was talking about. Looking back to make any needed adjustments for current year. I hope that I am making sense?

 

Wondering if anybody knew that percentage formula.

 

 

I see what you are saying but maintain my position that you cannot look at your overall spending in this way. What if your sales doubled this year? You would obviously have to spend more on parts and labor while your overhead expenses would remain largely static. Looking at it using your method you would have spent a much larger percentage on parts and labor. This would not be a bad thing though, it means you made more money.

 

You need to monitor what you are making on the sale of those parts versus what you spent on them. What you are spending on them as a percentage of total expenses is unimportant.

 

What is your Gross Profit percentage on parts sales?

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • Available Subscriptions

  • Have you checked out Joe's Latest Blog?

         0 comments
      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.
  • Similar Topics

    • By Joe Marconi

      Premium Member Content 

      This content is hidden to guests, one of the benefits of a paid membership. Please login or register to view this content.

    • By Changing The Industry
      Is Your Toxic Boss Actually YOU? #podcast #automotiverepair
    • By DUFRESNES

      Premium Member Content 

      This content is hidden to guests, one of the benefits of a paid membership. Please login or register to view this content.

    • By carmcapriotto
      Thanks to our Partner, NAPA Auto Care Alex Saladna from WickedFile discusses the challenges shop owners face in tracking parts, expenses, and managing profit margins. With real-life examples of shop owners discovering hidden costs and inefficiencies, this episode is a must-listen for anyone looking to optimize their business operations. Alex Saladna, WickedFile Show Notes
      The Brakes for Breasts Initiative (00:00:15) An initiative by two shop owners to raise funds for a vaccine for triple negative breast cancer. https://brakesforbreasts.com Challenges in Business Management (00:02:06) The challenges in tracking parts, expenses, and managing profit margins in the automotive industry. Founding of WickedFile (00:02:38) How WickedFile was founded and the motivation behind creating a parts tracking solution for the auto repair industry. Importance of Tracking Spending and Financial Documents (00:06:05) Discussion about the significance of tracking spending and managing financial documents in the automotive industry, including the risks of financial discrepancies. Identifying Business Gaps (00:07:14) Alex highlights the importance of identifying gaps in business operations and the potential financial impact. Efficient Parts Tracking and Profit Management (00:09:25) Discussion about the significance of efficient parts tracking and managing profit margins in the automotive industry. Tracking Vendor Credits (00:10:35) Discussion about the processes and disciplines for tracking vendor credits and ensuring the accuracy of financial transactions. Simplified Document Management (00:12:04) Explanation of the simplified document management process offered by WickedFile, including email invoicing and categorization. Efficiency in Document Retrieval (00:13:31) The efficiency of document retrieval in WickedFile's system and the benefits of streamlined data organization. Expense Management (00:15:40) Discussion about the upcoming features of WickedFile for expense management, including insights into business spending patterns. WickedFile's Integration with Management Systems (00:20:19) Explanation of the integration process and the management systems currently supported by WickedFile. Inventory Management and Disciplines (00:21:47) The importance of inventory management, including tracking parts and maintaining discipline in the system. WickedFile's Role in Enhancing Business (00:25:01) How WickedFile aims to enhance business operations, improve profitability, and address parts-related challenges. Training and Support for WickedFile Users (00:26:16) Details about the training, support, and enablement provided by WickedFile for its users. Impact of WickedFile on Business Operations (00:26:57) Real-life examples of how WickedFile helped businesses identify issues such as excessive spending and theft.
      Thanks to our Partner, NAPA Auto Care Learn more about NAPA Auto Care and the benefits of being part of the NAPA family by visiting https://www.napaonline.com/en/auto-care Connect with the Podcast: -Follow on Facebook: https://www.facebook.com/RemarkableResultsRadioPodcast/ -Join Our Virtual Toastmasters Club: https://remarkableresults.biz/toastmasters -Join Our Private Facebook Community: https://www.facebook.com/groups/1734687266778976 -Subscribe on YouTube: https://www.youtube.com/carmcapriotto -Follow on LinkedIn: https://www.linkedin.com/in/carmcapriotto/ -Follow on Instagram: https://www.instagram.com/remarkableresultsradiopodcast/ -Follow on Twitter: https://twitter.com/RResultsBiz -Visit the Website: https://remarkableresults.biz/ -Join our Insider List: https://remarkableresults.biz/insider -All books mentioned on our podcasts: https://remarkableresults.biz/books -Our Classroom page for personal or team learning: https://remarkableresults.biz/classroom -Buy Me a Coffee: https://www.buymeacoffee.com/carm -The Aftermarket Radio Network: https://aftermarketradionetwork.com -Special episode collections: https://remarkableresults.biz/collections
      Click to go to the Podcast on Remarkable Results Radio
    • By carmcapriotto
      Thanks to our partners, NAPA TRACS and Promotive
      In this episode, Hunt explores the crucial difference between profit and cash flow. Learn why your high profits don't always translate into more cash in the bank and how to better manage your shop's finances.
      Difference Between Profit and Cash Flow: Understanding why profit and cash flow are not the same and how this affects your financial planning. Accounts Receivable Impact: How the timing of your transactions can create a lag between recording a profit and actually seeing the cash. Managing Inventory: The effects of inventory purchases on your cash flow and strategies to manage it effectively. Fixed Assets and Liabilities: The impact of major purchases and financing options on your cash reserves. https://www.tn.gov/revenue/2024franchisetax.html  
      Thanks to our partners, NAPA TRACS and Promotive
       
      Did you know that NAPA TRACS has onsite training plus six days a week support?
      It all starts when a local representative meets with you to learn about your business and how you run it.  After all, it's your shop, so it's your choice.
      Let us prove to you that Tracs is the single best shop management system in the business.  Find NAPA TRACS on the Web at NAPATRACS.com
      Paar Melis and Associates – Accountants Specializing in Automotive Repair
      Visit us Online: www.paarmelis.com
      Email Hunt: [email protected]
      Get a copy of my Book: Download Here
      Aftermarket Radio Network
      Click to go to the Podcast on Remarkable Results Radio


  • Our Sponsors



×
×
  • Create New...