If your shop isn't using at least one mark up matrix to get the most out of your parts sales, then you might be leaving a lot of money on the table.
In fact, auto repair shops have an amazing opportunity to maximize their profit margin on parts sales in particular. Especially when you consider the tools available to support and simplify the entire process. Gone are the days of using pen and paper or busting out the calculators.
Cloud-based shop management systems have made it easier than ever to not only manage your shop, but really get the most value out of the work you're already doing.
Using a parts matrix in particular is one of the most important aspects in making sure your shop is profitable. By building streamlined process for marking up parts, shops can ensure grow your shop’s profit margin while staying fair to customers.
What is an Auto Parts Markup Matrix?
An auto parts markup matrix is a powerful tool for optimizing your parts pricing and increasing your gross profit.
When it comes to providing parts for a repair, auto repair shops can build multiple markup matrixes to determine the best markup percentage to apply based on different factors, like how much it costs your shop to purchase the part from your selected vendor.
In our latest Auto Repair Industry Index shops were achieving an average 35% with just 3 markup matrixes. There's a lot of room to grow their profits!
Why should shops use a parts markup matrix?
It might be easy for a shop to leave parts markups up to individual service advisors. However, this can result in widely varied processes based on each employee’s unique experience.
You want to build a consistent, reliable mark-up process to save your team time, while maximizing profit yet remaining fair to your customers.
With a detailed parts markup matrix in place there’s no more second-guessing.
Instead of spending precious time figuring out the right markup for every single repair order, the perfect markup percentage can be applied every single time -- both saving time while maximizing profit margins on every repair order.
The Price is Right: Efficient Parts Shopping
Before you decide how much to mark up a part, you obviously have to buy that part (or find it in the inventory). When shopping for parts, getting good deals is important, but so is having an efficient process for finding those deals. Efficient shops strike a balance between quickly finding parts and snagging good deals.
There are various ways to quickly shop around and find the best deal on parts. Some shops still send their part’s person to the local auto parts shop or scrapyard to find those hard-to-find parts.
These days, many auto repair shops save themselves a lot of hassle by turning to shop management systems that enable them to swiftly compare prices from multiple vendors at once. With online parts houses, repair shops can earn back the time they would have spent sending someone to hunt down these parts and making these comparisons in person.
Mark Up Parts By Just the Right Amount
After comparing prices and deciding which parts to purchase, it’s time to find the markup “sweet spot,” where it’s a good deal for your customers and your business.
As a general rule of thumb, the more expensive a part is, the less you can mark it up.
Consider this: fast food companies make some of their highest profit margins off of their least expensive menu item—soda. If a cup of soda costs the fast-food company $0.25, charging a dollar for it gives them a 75% profit margin. But a 75% profit margin on a hamburger that costs the fast-food company $7 to make would hike up the price to $12.25, which is probably more than most customers are willing to spend.
If you double the price of a $10 wiper blade, the customer won’t bat an eye. But if you try to mark up the price of a $400 alternator by 100%, it’s a different story! The customer will balk at the $800 price tag and probably go ask another shop for a second opinion.
Reach the Right Pricing With a Parts Matrix
Marking up Parts with a Simple Calculation
A simple calculation is used when you markup parts in a certain price range by a specific amount.
But you can also use a compound calculation for parts markups. With a compound calculation, parts are marked up by different percentages within specific cost ranges. For example, if you sell a job for $20, you could mark up the first $10 by 10%, and the last half by 20%.
Marking up Parts with a Complex Calculation
While compound calculations are more complicated, using them for your markup matrix can give you an edge when it comes to increasing your gross profit margins. Some shop owners that use complex calculations in their parts markups have been able to increase their profit margin by about 8% to 10% when compared to using a simple calculation.
Find the Right Markup Matrix For Your Shop
Ultimately, each shop has unique needs and preferences, and it’s up to you and your team to determine which type of calculation to use when building your parts matrix. But no matter which calculation method you choose, an automotive markup matrix can be a game-changer.
When he set off to create Tekmetric, founder and CEO Sunil Patel had an ace up his sleeve: experience running his independent auto repair shop.
Running a repair shop is the background of everything we do. It's that partnership between Tekmetric and the auto repair shops that leverage the platform daily that enable us to build the absolute best tool for the job: running an independent auto repair shop.
So we set out on a mission to deepen our connection with our customers and understand each shop's unique challenges and wins by visiting as many customers as possible.
We wanted to understand the unique challenges and victories each shop faces, to truly deepen our connection with you. The results? It blew us away. Your stories, your shops and your teams are the heart of what we do. You inspire us every day to provide the best solutions for the independent auto repair industry.
Tekmetric's Customer Obsession
Whether your shop is general repair, like brakes, fluids and check engine lights, or a specialized business focused on older European cars, there’s one thing that’s always the same: the amazing, critical work your shop does to get people back on the road!
And it’s your amazing shops that use Tekmetric that make all this possible. Our customers' valuable feedback is what helps us develop a better platform, and the proof is in the pudding.
No one knows what it takes to run an independent auto repair shop better than the teams that rely on Tekmetric to power their operations.
Here's what we heard from shops and why they love Tekmetric:
Tekmetric's ease of use and simplicity in running your shop
Everything you need to run your shop is organized, tracked, and maintained in one tool.
Whether you're a shop owner peaking into real-time performance reports or analyzing shop trends, a general manager ensuring cars flow quickly and efficiently through your shops, a service advisor supporting customers, or even a technician fixing cars, Tekmetric can help your shop operate like a well-oiled inline 6.
Tekmetric empowers shop to grow and reach their next level
We constantly hear how shop owners have leveraged Tekmetric to grow their business in ways they never expected.
Whether that means opening and managing multiple locations, simply adding a few new bays moving into a larger location, or even expanding your operations to service more customers, Tekmetric's simplicity and complete control over your shop makes it easy to track, plan, and grow.
Tekmetric's commitment to transparency and communication
Because we're so customer-obsessed, we're always here to help! As a cloud-based solution, Tekmetric helps run your shop by doing a lot of the operational "heavy lifting," so to speak.
Not only do we provide the right tools for the job, but we're here to partner with your shop. Our support doesn't end, and we're always a quick message or phone call away, anytime you need support!
Our Commitment to Shops Like Yours
Because we're here to help your great shop get even better, we're always open to hearing how we can make Tekmetric even better!
Hey auto repair shop owners! When’s the last time you examined your invoicing process?
Your shop’s invoicing process may seem like a small part of your business. But your auto repair shop invoicing software presents an oft-overlooked touchpoint with your customers. If you approach it strategically, your invoicing process can be adjusted swiftly and easily to yield tangible improvements to your bottom line.
For customers, the invoicing stage is likely the cause of some amount of stress; it’s never fun to write a big check to get your vehicle fixed.
For shop owners, the invoicing stage is an opportunity to show customers that they’re being taken care of. According to an extensive JD Power customer survey analysis of auto repair customers, “...Quality work done promptly, explained clearly, for a fair price, and delivered with excellent customer service is what leads to customer satisfaction among American drivers.”
A frictionless auto repair shop invoicing software that connects to the rest of your business allows you to build customer loyalty, as well as upsell, cross-sell, and reach a broader customer base. When you take care in how you invoice, and note the impact invoicing has on everything else, you can turn what is normally a stress-inducing process for customers into a process that builds trust and maintains a positive image for your shop.
Here’s how you can find synergy between your auto repair shop invoicing software and other parts of your process to build customer loyalty, improve your marketing, fuel sales, and grow your business.
Safeguarding the physical and digital confidential assets of your business is of utmost importance for any repair shop owner. However, figuring out the right steps to initiate this process can be challenging.
The Importance of Security
Shop owners must always know who is coming in and out of their shops, this can be monitored by alarms and security camera systems throughout and around the building to insure the physical protection of the digital systems within the shop.
For those who are working in the shop, they should be trained on the protection of proprietary data within the shop by implementing password management, data integrity, and regular system backups.
Finding the Right Tools for the Job
Choosing a shop management system such as Tekmetric can help you manage your shop more efficiently, automate your processes and improve your overall customer communications while keeping your data secure and protected.
Shop management systems have proven to be beneficial for protecting data in the case of natural disasters or fires. When you are looking for a shop management system to protect your data be sure to choose the system that is transparent regarding their systems data backup process and insurance in the event of a breach.
Switching to the Cloud
Deciding to make the switch to cloud-based systems for data storage and accessibility such as Tekmetric can give shop employees and owners peace of mind knowing that their digital confidential assets are safe and secure.
Training and empowering employees on how to protect digital information is equally as important as physically protecting your shop with security alarms, cameras and locks.
By implementing the right processes and tools, shop owners and their employees can be confident that their shop's data is secure, accessible and protected from unexpected crises.
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