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Posted (edited)

Hi guys I am new to the forum. I thought this would be a great place to talk to other shop owners about questions we have. Sometimes Alldata doesnt have everything you need and Google and Youtube actually come in handy lol... but hopefully in the future can have some other great minds help us.

My boyfriend & I started our shop in January. I asked a good friend of mine (she does bookkeeping & accounting) how people markup on parts. She said 47%.

 

When I call Napa, O'Reillys etc I ask for list price, but then list isn't what the "average Joe" can walk in and get it for. I cant go off of average joe price because we wouldn't still be in business. I cant sell it at manufacturer list either because that would mean taking an arm and a leg...

 

I meet in the middle, on small stuff markup more cause not a lot of room to move, and big stuff markup less. And dealer I just sell it at what dealer would sell it at, because I don't want someone going into our place or the dealership stating I sold it at less or more than dealer or vice versa. And then aftermarket parts I sell lower than MSRP. So if we do 20% markup we lose money, 45% on small stuff, 30% on bigger items? What does everyone mark their parts up? And just an FYI our labor rate is competitive from the rates other shops charge we are much lower at $80.00/hr whereas others charge $100.

 

Can someone please explain to me auto parts markup or how they markup or how I am doing it is okay for an auto shop?

 

Amanda S

Edited by PARKSINDUST
Posted

I want to say first that i dont think there is one right answer to this question, every business and situation requires different standards. You need to find out what works best for you and how to remain profitable without taking advantage of anyone.

 

In the case of my business every job and situation is different, we mark up dealer parts from 15 to 50% and aftermarket parts from 50% to 150%. Lesser expensive parts are marked up higher than more expensive items, but once again every job is different.

 

Good luck

 

 

Hi guys I am new to the forum. I thought this would be a great place to talk to other shop owners about questions we have. Sometimes Alldata doesnt have everything you need and Google and Youtube actually come in handy lol... but hopefully in the future can have some other great minds help us.

My boyfriend & I started our shop in January. I asked a good friend of mine (she does bookkeeping & accounting) how people markup on parts. She said 47%.

 

When I call Napa, O'Reillys etc I ask for list price, but then list isn't what the "average Joe" can walk in and get it for. I cant go off of average joe price because we wouldn't still be in business. I cant sell it at manufacturer list either because that would mean taking an arm and a leg...

 

I meet in the middle, on small stuff markup more cause not a lot of room to move, and big stuff markup less. And dealer I just sell it at what dealer would sell it at, because I don't want someone going into our place or the dealership stating I sold it at less or more than dealer or vice versa. And then aftermarket parts I sell lower than MSRP. So if we do 20% markup we lose money, 45% on small stuff, 30% on bigger items? What does everyone mark their parts up? And just an FYI our labor rate is competitive from the rates other shops charge we are much lower at $80.00/hr whereas others charge $100.

 

Can someone please explain to me auto parts markup or how they markup or how I am doing it is okay for an auto shop?

 

Amanda S

Posted

Low working wages in the area, still crawling out of an economic recession, and a competitive auto repair market here. We charge 30% mark up on MOST parts. You mark up large parts here ($200+) it will throw your estimate to high and say bye bye to the repair job. Every customer seems to be a price shopper and they know the fair market price before they call or enter the door. I don't lose out on too many jobs with this method ($60/hr labor + reasonable 30% mark up). It would help to charge more, but it is either win the bid, or sit on the computer all day.

Posted

All great comments. Pricing is one of the most difficult things about business. Too high, we chase people away, too low, we go broke. You need to look at your Cost of Doing Business: What it takes to keep the doors open. After that, you need to add a percentage for return on investment, known as profit. Profit only happens when your gross profit dollars exceed your breakeven.

 

Please don't base your price structure or labor rate by the guy down the block. I know that Coke compares prices with Pepsie, but not all of what we sell are commodity items.

 

You need to be smart and have a strategy when setting prices. Those items and services that are most compared by consumers must be priced competitively, that's basic economics. But other types of repairs, such as brake line repairs, welding, specialty work and other difficult repairs are priced at a higher margin. That's also a law of economics. Brain surgery is worth more than cleaning bathrooms, right? At least I hope...

 

Overall we need to achieve a profit, if not we will not be around for long.

 

These days, I agree, so many people are questioning price that it makes me nuts. My advise, be competitive when you need to be and be very profitable when you need to be.

 

I hope I summerized my thoughts clearly.

Posted

thank you for all the feedback! it helps a lot. Its harder explaining it to my other half/ business partner :) about price markup still and trying to be competitive and stay in business

Posted

Joe brings up a really good point, especially for all of us with a highly competitive market. Normal repairs have to be priced within a reasonable amount in order to stay in business. BUT on a specialty niches, you can, no you must charge more. Thats the only way you will stay in business and make alongside the low ballers. Trust me I know, I am in a very competitive market dealing with offroad and diesel performance. Everyone her is a DIYer- they can do it better than you, faster than you and cheaper than you...BUT run into trouble and the internet idiots can't give them a good answer, you are a GOD then. SO, for all those idiots that ask you every question under the sun, and have NO intention of using you are purchasing anything from you...You have to have a way to make up that time you lost and were unprofitable.

OK I will get off my sopabox now...just my nickels worth of advice from the school of hard knocks.

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  • 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.
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