How to Use an Auto Parts Markup Matrix to Maximize Your Shop’s Gross Profit

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October 19, 2023

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Read time: 3 min

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.

By streamlining the process of marking up parts you can save time and keep your team happy while hitting your profit goals.

👉 Ready to grow your automotive business? [Book a personalized Tekmetric Demo Here]

FAQ

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One multi-shop operator switched to Tekmetric and doubled monthly revenue in two years. He shared how in a recent Tekmetric and PartsTech webinar.

Auto repair shops are under more pressure than ever. Tighter margins. A technician shortage that isn't going away. Customers who expect speed, transparency, and a frictionless experience every time they walk through your door.

Yet many shops are still running on disconnected systems, manual workarounds, and processes that haven't changed in a decade. The result? Bottlenecks that bleed time, stall revenue, and cap growth — often without the shop owner even realizing it.

This is the problem a recent ShopOwner webinar, sponsored by Tekmetric, tackled head-on. The conversation centered on one deceptively simple idea: the connected shop.

In this article, you'll learn what a connected shop workflow looks like in practice, how one multi-shop operator doubled monthly revenue after switching to Tekmetric, where the most common operational bottlenecks are hiding in your estimating process, and how features like SmartJobs, parts and labor matrices, and good/better/best estimates can raise your average repair order (ARO) — the average dollar amount collected per repair order — without adding headcount.

What a Connected Shop Actually Means

A connected shop isn't just about having software. It's about having the right systems talking to each other — and having your team actually use them.

John Phelps, director of channel partnerships at Tekmetric, put it plainly: "Just because you have an oven, that doesn't make you a chef. You can have the technology, but if you're not leveraging it properly, what good is it doing?"

That distinction matters. Technology for its own sake is another bill. Technology deployed with intention — one that connects estimates, parts ordering, inspections, payments, and customer communication into a single workflow — is a growth engine.

Tekmetric is built to be exactly that. With 70-plus integrations, built-in digital vehicle inspections (DVIs — digital inspection forms that capture photos, videos, and findings shared directly with customers), real-time reporting, and a native mobile app for technicians and service advisors, it's designed so every step of the repair order (RO) flows into the next without friction, duplication, or lost data.

One Shop Owner Doubled Monthly Revenue After Switching to Tekmetric

Tim Lanier knows what a revenue ceiling feels like. As president and CEO of Lanier Auto Group — which today operates four rooftops in the northern Atlanta suburbs — he spent years running a single shop that simply could not break through a certain monthly revenue level.

"We were stuck," Lanier said during the webinar. "We had our ways of doing things. A lot of copy-paste out of catalogs into the shop management system."

In March 2020, he made the switch to Tekmetric.

"As soon as we made that change, it opened the door to a lot of new possibilities — some of which we just didn't anticipate." He added: "We probably doubled our sales in about two years once we made the switch."

At the time of switching, Lanier's single rooftop was generating roughly $200,000 per month. Two years later, that number had climbed to approximately $400,000 — a structural shift in what the business was capable of, not just an incremental gain.

What unlocked it? A connected workflow that brought parts ordering, DVIs, payments, accounting, marketing, and inventory into one platform. The glass ceiling, as Phelps framed it, became a paper ceiling. And Lanier's team broke right through it.

The Estimating Bottleneck Is Costing Your Shop More Than You Think

When Phelps asked Lanier to name the single biggest operational bottleneck he's had to overcome, the answer was immediate: the estimating process.

"If you don't come up with systems to streamline things, that person becomes the bottleneck in the shop," Lanier said. "Some tickets can take 30 minutes to an hour to find all the parts and pieces you need for big jobs."

His solution? Get technicians directly involved — and give them the tools to act on that involvement.

"We've empowered the technicians by giving them a computer at their bay and a dual monitor setup so they can go straight into Tekmetric, pull up PartsTech, use diagrams and photos to quickly identify the exact part they need, and put the part on the ticket," he explained.

The result: estimates arrive at the service advisor roughly 90% complete. Advisors clean up grammar, add photos, and present. That's it. No back-and-forth. No shouting across the shop floor.

This is the connected shop in practice. Tekmetric's integration with PartsTech means technicians can search multiple suppliers in one lookup, confirm part specifications, and add items to ROs without leaving the platform. What once took an hour can be compressed into minutes — with fewer errors and fewer return trips.

Pricing Consistency Drives ARO Growth

One of the most overlooked drivers of ARO growth isn't sales technique — it's consistency.

Phelps highlighted this during the webinar: if a customer calls back a week later asking for a brake quote and gets a number $50 different from what they were told before, trust breaks down. Inconsistency in how estimates are built — varying labor rates, different parts markups, or service advisors quoting from memory — costs shops money and customers.

Tekmetric addresses this directly. Parts matrices and labor matrices create a consistent pricing foundation so every estimate reflects the shop's actual margins, regardless of which advisor builds the ticket or when. SmartJobs — Tekmetric's proprietary canned job system that automatically pre-populates parts, labor, and job notes for common services — takes this further by ensuring the right components populate every time, on every RO.

"If you're not using SmartJobs, powered by PartsTech, in Tekmetric, reach out to support, get your SmartJobs set up, and you'll be taking a massive step forward,” Jake Benson, director of strategic accounts at PartsTech, said during the webinar.

How to Present Good, Better, Best Estimates Without Starting From Scratch

Economic uncertainty means customers are making tighter decisions. Giving them options isn't just good customer service — it's good business.

In Tekmetric, shops can build a good/better/best estimate structure without starting from scratch three times. Build the base estimate, duplicate it, add parts or labor for each tier, and text all three options to the customer. A built-in checkbox at the job level keeps declined or unchecked options out of close ratio reporting, so advisors aren't penalized for presenting choices.

The same system works for tires, fluid services, brake packages, or any job where tiered pricing makes sense. Shops that present options consistently report higher approval rates and stronger customer relationships — because customers feel informed rather than pressured.

Tekmetric Is Built to Scale With Your Shop

Lanier's growth from one rooftop to four over the last four years didn't happen by accident. He credits systems and processes — and the ability to replicate them — as the core of that expansion.

"Once you figure out your systems and processes, things begin to click," he said. "It all becomes a lot easier."

Tekmetric is built to scale with that ambition. Whether you're running a single shop or managing multiple rooftops, the platform gives ownership real-time visibility into performance across every location — ARO, technician efficiency, close ratio, and more — without requiring an extra step to pull the data.

The connected shop isn't a future state. For shops like Lanier Auto Group, it's already the standard. The question is whether yours is built the same way.

Watch the full on-demand webinar from Tekmetric and PartsTech — How to Simplify Shop Operations and Increase Your Average Repair Order — and hear directly from shop owners and industry experts on the strategies and tools driving real results in 2026. 

If so, we support you.

Every mile you drive toward running your shop like a well-oiled machine is a mile in the right direction.

Choosing and optimizing the right technology to run your shop can lead to growth that accelerates into massive returns on your investment.

Let’s face it, tracking inventory is tricky. It takes keen attention to detail, an ability to anticipate your shop’s needs, great timing, and some serious research skills—not to mention a lot of time on the phone or computer, away from the action of the shop.

Bottom line? Keeping track of inventory is a job that most service advisors and shop owners didn’t sign up for. While some shops have a shop foreman to help with inventory, even the best foreman still needs a solid tracking system.

But when a shop runs low on the right tools and parts, it can mean turning away customers when you could be building loyalty instead. Simply put, without up-to-date inventory records, your shop may have to pump the brakes and turn away customers or delay jobs.

If your team wants to stay ahead in the industry, you probably see inventory upkeep as a frequent task. And without a shop inventory software, you might also spend hours calculating purchases, tracking orders, checking wear and tear to tools, and rotating stock.

Everyone has their own way of conducting the inventory process, but in general, inventory methods fall into three major categories:

  • Pen and paper
  • Excel/spreadsheet/template
  • Shop inventory software

If you’re still using pen and paper or a spreadsheet, it may be time to upgrade or at least supplement your inventory process.

Why Your Shop Needs to Invest in Shop Inventory Software

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