Jump to content

Marking up parts

Recommended Posts

what is the best way to mark up parts. When i worked for someone else i always went by the list price and cost price. But now that im on my own. I'm not sure what way to do it. So many people call autozone and advanced so i have to hear "they only charge me this price". I want to keep my customers happy but i need to make a living as well

Link to comment
Share on other sites

I agree with both of the guys above. I can tell you personally (as a tech gone shop owner) I was a little nervous about charging what I thought was too much for parts. Since I have moved to a bigger building with a LOT more overhead, I am quickly realizing that the 45-55% is what you will NEED to be able to pay the bills and make any money. I personally use a matrix like Joe said. The Mitchell1 manager system that I use allows me to easily do this.

Link to comment
Share on other sites

What are your margin targets? I look for 80% before mechanic labor and 65% after mechanic labor is factored in. To achieve the 80% before labor, I teach my writers one very important rule: When Ticket Total equals Cost of Goods times five, then Gross Profit will always equal eighty percent. (TTL=COGS*5,GP=80%). This is an immutable law of math. If a part cost $10 and you charge $20 for the part and $30 for the labor, then your gross profit is 80%. If the part cost $10 and you charge $0 for the part and $50 labor, the gross profit is still 80%. Yes, I know, you can't always apply this formula. If you go by a labor guide (we use Mitchell) the labor is what it is and you cannot ethically alter it without solid grounds. It also becomes a problem when you have an expensive part such as an alternator. If an alternator costs $150, you can't very well charge $750 for parts and labor and expect to stay in business. But what I teach my writers is that you can take the rule and use it as a guideline and then look at add-ons. In the case of the $150 alternator, I would expect to sell the part for $250-300 and usually about 1.5 hours labor. So if I sell the part for $250 and my labor is $150 (1.5*$100/hour), this is a total ticket of $400 which gives me a gross profit of 62%. This is well down from what my target it. If that is the case, they need to thoroughly inspect the vechicle and see if there are other services that they can legitimately recommend without raising the COGS. An alignment and balance ($125) has no COG but will bring my GP up 9 points to 71%. Still down from where I want to be, but it is much easier to make up the nine margin points between 71 and 80, than the 18 margin points between 62 and 80.


I don't spend much time worrying about what the parts markup is, but I obsess over my margin. As a franchisee who has to give 10% back to the mothership, margin targets are hugely important to me. A $72K month at 65% (after mechanic labor at 15% is added in) is $46800 in gross profit. The same month at 60% is $43200; $3600 that could go right into my pocket. For doing the same amount of work.


Anyway, my two cents.



Link to comment
Share on other sites

It was much easier to maintian that type of margin with Midas was strictly and undercar shop. Now that you do everything how has that affected your margins?



I became a franchisee right before the economy collapsed in 2008, so I've never known any of the good times. I took over a franchise that had been horribly mismanaged for years. The previous franchise had managed to give both the shop and Midas a bad name. He had alienated the customer base because he had refused the recognize the changing demographics (shift from caucasion to African American with much lower disposable income). I've never known the good times that I've heard so much about. So, to answer the question, my margin target is 80%. Some things will swing it down. I will sell you tires if you insist, but there is a Costco down the road and they are welcome to the tire business. We don't hit 80% every month but we come close.

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
  • Have you checked out Joe's Latest Blog?

      A recent study, done by Harvard Business School, concluded that the real problem with attracting and retaining employees has more to do with the workplace environment, not pay or benefits. While the study did find that an adequate pay plan and offering an attractive benefits package did help with recruiting and retention, it’s not enough to satisfy the needs of employees, especially those of front-line workers.
      The study also stated that in 2021, many companies were convinced that giving raises, sign-on bonuses, and other perks would solve the worker shortage problem and prevent people from quitting. However, this strategy did not work. So, what does work regarding attracting quality people and keeping them employed?
      Essentially, it all comes down to the culture of your company.  Management: do all it can to consider the individual needs of your employees. Your employees want to feel that they have a voice, that their opinion counts, and that their role in your company is both respected and recognized. Yes, pay and a great benefits package will go a long way toward making your employees feel secure, but that’s only financial security. People want more than money.
      To attract and keep top talent requires creating a company that people feel proud to work for. You need to reach the hearts and minds of your employees. Become a leader that people are enthusiastic about working for. You want your employees bragging to their friends and family that your shop is a great place to work!
      Step one to attracting and retaining quality employees: Create an amazing workplace environment for your employees!  Trust me, happy employees make happy shop owners too!
  • Similar Topics

    • By carmcapriotto
      This week Hunt discusses the actual cost of that aging loaner fleet. Are they really as cheap as you think?
      • What is an opportunity cost? How does that impact the actual cost of my loaner fleet?
      • Does opportunity cost apply to me and my team equally?
      • So, you spend a couple hundred dollars in parts to keep that beater on the road, but is it really "cheaper than a car payment?"
      • How does opportunity cost apply to a tow truck that I also have off the road and not making me money?
      Thanks to our sponsor partner NAPA TRACS
      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
      Click to go to the Podcast on Remarkable Results Radio
    • 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 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 ASOG Podcast
      Should You Fire Someone For Being Late?
    • By ASOG Podcast
      How Her First Job Went Wrong

  • Our Sponsors

  • Create New...