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.
Let’s start off by laying down the foundational launching points for starting your original shop: you found your niche, you got the right advice, you started with the right branding, and you impressed your customers by providing exceptional customer service. But there are four key factors that become extremely important as you go from being a single shop owner to a multi-shop owner.
You’ll want to:
Stay organized as you scale
Create consistency across your locations
Test the performance of each of your locations
Leverage an automotive repair software that will support your team as you grow across multiple locations
To select the management tools that will catapult your multi-shop owner journey, you’ll first need to weigh the pros and cons of each of your shop’s processes and procedures.
From there, you can find a system that will uphold and scale the processes that made your shop so successful in the first place, but now across multiple locations. Later in this article, we’ll specifically dive into automotive repair software like Tekmetric and discuss how it supports you, your team, and your customers as you go from a single shop owner to a multi-shop mastermind.
Here’s how to choose an automotive repair software that makes it possible to grow and easily manage multiple shops.
At Tekmetric, we’ve been busy creating the most requested feature by users: true two-way texting. We’re excited to announce that this November, you and your guests will be able to communicate with each other in a seamless, hassle-free way.
Send and Receive Texts Directly in Tekmetric
Once your shop sets up two-way texting within Tekmetric, your team and customers will be able to have instant, harmonious digital conversations.
On your end, the Tekmessage interface will have a similar look and feel to social media messaging services (such as Facebook Messenger).
Your customers, however, will see the conversations as regular text messages on their phones.
To use Tekmessage, simply click the messaging icon in the top right corner of your shop’s header within Tekmetric. Doing so will open the Tekmessage sidebar, where you’ll be able to see a full list of conversations with guests, send and receive texts, and search conversations.
If you run an auto repair shop, chances are you have customers that think they know what’s going on with their vehicle as soon as they set foot in your shop. Although customers with preconceived assumptions can be frustrating at times, we have to give drivers credit for doing their research, especially now when we have a wealth of information at our fingertips.
You’re probably thinking to yourself, “Yes, but automotive repair estimates online aren’t always the best source of information.” And you’re right. But let’s think about ourselves for a second. As people who have experienced the world and have naturally developed our own worries, fears, and doubts, we tend to trust our own intuition and symptom-research sometimes more than we trust professionals.
And it’s a well known fact that consumers have a hard time trusting the auto repair industry—or any business that gives customers diagnoses for that matter. Just as people look up their symptoms online, and come to a conclusion on WebMD, they tend to do the same thing when something is wrong with their vehicle.
Whether it’s true or simply a situation where someone is convincing themselves they have said illness, the internet isn’t going anywhere. And let’s face it, we’re all guilty of using the internet for quick and easy answers, which is why it’s important to empathize with customers. Just as they may Google their symptoms, it is likely that they might type into the search bar, “Why is my car making a rattling sound?”
Of course, it is highly possible that the results that populate aren’t necessarily what an auto repair pro would point out to them. But whatever they find online still gives them some peace of mind, knowing they are informed before stepping foot into an auto repair shop that they may or may not trust.
It’s inevitable: people feel more protected if they understand—or even slightly understand—the issue at hand first.
Now, take a step back and think to yourself where your customers are getting their car repair information from. If you answered “auto repair estimate online tools,” you’re exactly right.
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