Jump to content

keeping cost under control

Recommended Posts

I heard of someone else using this:

20% cost of goods sold

20% production labour cost

40% operating expense - includes non production labour

20% net profit


I don't know if it's accurate or attainable, but just another point of view.

Link to comment
Share on other sites

While preached by many, I feel 20% net is a poor goal unless one likes paying a ton of tax. I try to keep net about 4-5% max. The shop can use a new truck, another employee, and new equipment more than it can use a 35% tax bracket.

I think the point is to have 20% net profit "in hand," then use it at your discretion for shop improvements in the places it will benefit you the most.

Shop tools, building improvements, training, computers, inventory are all good places to look at. How about profit sharing with your employees??


Ps. Canada only has a 15% corporate tax rate, much nicer then 35%!

Link to comment
Share on other sites

The 5% Net profit is a good way to look at it for tax purposes. Just pay yourself more to get the lower percentage of taxes owed. Than put that money in savings just in case it is needed.

Link to comment
Share on other sites

While preached by many, I feel 20% net is a poor goal unless one likes paying a ton of tax. I try to keep net about 4-5% max. The shop can use a new truck, another employee, and new equipment more than it can use a 35% tax bracket.


What! You want less net so you don't have to pay taxes! If your personal tax rate is 35% then you still keep 65%. You are mixing up

business and personal taxes. A business that is Sub-S, LLC or a Sole Proprietor puts all profit to the owner's 1040. When you buy all the stuff you need, what do you do then. Cut your prices?


I must not understand your reasoning.

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?

      Most shop owners would agree that the independent auto repair industry has been too cheap for too long regarding its pricing and labor rates. However, can we keep raising our labor rates and prices until we achieve the profit we desire and need? Is it that simple?
      The first step in achieving your required gross and net profit is understanding your numbers and establishing the correct labor and part margins. The next step is to find your business's inefficiencies that impact high production levels.
      Here are a few things to consider. First, do you have the workflow processes in place that is conducive to high production? What about your shop layout? Do you have all the right tools and equipment? Do you have a continuous training program in place? Are technicians waiting to use a particular scanner or waiting to access information from the shop's workstation computer?
      And lastly, are all the estimates written correctly? Is the labor correct for each job? Are you allowing extra time for rust, older vehicles, labor jobs with no parts included, and the fact that many published labor times are wrong? Let's not forget that perhaps the most significant labor loss is not charging enough labor time for testing, electrical work, and other complicated repairs.  
      Once you have determined the correct labor rate and pricing, review your entire operation. Then, tighten up on all those labor leaks and inefficiencies. Improving production and paying close attention to the labor on each job will add much-needed dollars to your bottom line.
  • Similar Topics

    • By Joe Marconi
      When I started my repair shop in 1980, we mainly worked on three car lines: GM, Ford, and Chrysler. Through the decades, technology has dramatically changed the average automobile. Plus, today, we have many more car models to worry about, then add EVs, hybrids, and who knows what else car makers will throw at us.  
      Is it time to rethink our business model?  Can we really be that shop that works on All Makes, All Models?  
    • By carmcapriotto
      This week Hunt talks about incentivizing key employees with profit sharing and how to hold them accountable for the overall company and its profits. 
      How to motivate key employees to think like owners Pros and cons of giving key employees minority ownership What are alternative options for incentivization? Caveats for expansion and/or quick growth   
      The Show is sponsored by:
      Shop-Ware on the web at getshopware.com
      NAPA Auto Care Repair Shop of Tomorrow at https://repairshopoftomorrow.com
      Hunt Demarest, CPA
      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 carmcapriotto
      Recorded Live at the Transformers Summit with Aftermarket Radio Network host, Hunt Demarest, CPA at Paar Mellis and Associates and host of the Business by the Numbers Podcast. Hunt's firm specializes in automotive repair clients and he gives us an inside scoop on common new client questions and concerns as well as some behind the scenes about his podcast!
      Hunt Demarest, CPA, Paar Mellis and Associates, Business by the Numbers Podcast
      Show Notes
          Finance and accounting with new clients- “I want to know more about my finances, but I don't understand them.”       Clients have to see the value in their numbers themselves       How do you want to make more money if you don't even know how much money you're making right now?       You need to set up your financials in a way that makes sense to you.       Profit is used to pay down debt. Profit is used for your distributions. Profit is used for you to buy inventory and equipment.       Paar Melis gives you a report card at the end of the month. Focus on the red items and that's going to tell you everything that you need to know.       Numbers don't lie, but they can be misleading       Instead of charging credit card fees, instead, raise your labor rate, and raise your parts margin 3%. Now you're making that credit card fee on every person    
      Connect with the Podcast:
      Aftermarket Radio NetworkSubscribe on YouTubeVisit us on the WebFollow on FacebookBecome an InsiderBuy me a coffeeImportant Books
      Check out today's partner:
      Learn more about NAPA AutoCare and the benefits of being part of the NAPA family by visiting www.NAPAAutoCare.com
      Click to go to the Podcast on Remarkable Results Radio
    • By ASOG Podcast
      Watch THIS Before Trying To Open A Business
    • By carmcapriotto
      Guest host and shop tour with Niko Sougias, Charlie's Foreign Car, Encinitas, CA. Niko says customers want explanations about their car repair and he has found a way to connect with them on his YouTube Channel. Find out how he does it.
      Niko Sougias, Charlie's Foreign Car, Encinitas, CA
      Show Notes:  
      Building was built in 1988- waterless car wash on every car, 17 bays, 16,000 square feet in total (with showroom) People want explanations- make videos; technical education should have a time limit (60 seconds)  Most watched video of 2023- control arm bushings Full-time employee (Jax) is the editor of videos   Audio- quality is important with wireless mics Pre-Covid work- maintenance  Post Covid work- boom of work, customers are authorizing more work to be done, almost doubled ARO Challenges- keeping loyal customers happy while being booked 2 weeks out Future think for 2023- monitoring new car sales with interest rates rising  Lead technician is moving to the foreman position  
      Connect with the Podcast:
      Aftermarket Radio Network
      Subscribe on YouTube
      Visit us on the Web
      Follow on Facebook
      Become an Insider
      Buy me a coffee
      Important Books
      Check out today's partner:
      Dorman gives people greater freedom to fix vehicles by constantly developing new repair solutions that put owners and technicians first. Take the Dorman Virtual Tour at www.DormanProducts.com/Tour

      Click to go to the Podcast on Remarkable Results Radio

  • By nptrb, in Automotive Industry,

    By nptrb, in Automotive Industry,

    By nptrb, in Automotive Industry,

  • Our Sponsors

  • Create New...