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.
As 2023 winds down, it's a great time to reflect on the strides made across the independent auto repair industry.
Throughout the year, we’ve been collecting data, talking to shops that rely on Tekmetric every day, and gaining valuable insight into how your shop can prepare for the best year possible in 2024.
That’s why we released our latest Industry Index Report earlier this year, to give shops and industry resources to not only compare their performance against other shops but also some concrete tips and tricks they can implement at their shop.
This comprehensive analysis not only assesses the industry's vitality but also seamlessly integrates unique Tekmetric’s partner shop data, presenting a goldmine of opportunities for optimizing shop management.
The result is a compelling narrative that provides a bird's-eye view of auto repair in 2023 and delves into Tekmetric-specific data, to offer shops like yours the actionable insights you need for success in 2024.
Here’s how shops can take advantage of these trends in 2024.
Entrepreneurs play a vital role in transforming our lives by disrupting markets and revolutionizing industries. We are thrilled that Sunil Patel, Founder & CEO of Tekmetric is to be recognized as a finalist for the Entrepreneur Of The Year®. 2025 Gulf South program. As the world's most prestigious business award for entrepreneurs, now in its 40th year, Entrepreneur Of The Year is at the forefront of identifying game-changing business leaders. The program has honored the inspirational leadership of such entrepreneurs as Howard Schultz of Starbucks Corporation, Eric Yuan of Zoom, Jodi Berg of Vitamix and Kendra Scott of Kendra Scott LLC.
We're honored to have Sunil recognized among so many other ambitious business leaders in the Gulf South. Learn more about the Entrepreneur Of The Year Gulf South program and follow us along on our journey to the regional awards celebration! Link to full article
Learn more about the story of Tekmetric and Sunil Patel in our latest documentary.
We’re excited to announce that Tekmetric, the leading cloud-based shop management system for automotive repair shops, is joining forces with Shopgenie, the leading auto repair shop CRM, to provide a comprehensive all-in-one solution that optimizes operations and drives growth for auto repair shops. This combination is set to combine the best of both worlds, offering shop owners smarter tools, seamless integrations, and enhanced features to optimize operations and drive growth—all from a single, unified platform.
So, what does it mean for our partner shops? Here’s a few of the benefits you’ll see in the coming months:
Streamline your operations: Managing your shop requires balancing internal processes while delivering top-notch customer service. With the addition of Shopgenie, we’re not just expanding our platform—we’re creating a true all-in-one solution that addresses the real-world challenges you face every day. Soon, you’ll have one platform, one login, and one phone number for all customer communication, simplifying your workflow and reducing complexity.
Enhance Customer Engagement: Keep your customers informed and engaged with automated marketing tools, text reminders, and follow-ups. With integrated communication tools, you’ll deliver exceptional service that strengthens relationships and boosts customer loyalty.
Increase Efficiency & Profitability: Benefit from seamless integrations with CRM, booking, and marketing tools that reduce manual work, streamline operations, and ultimately increase profitability. Plus, you’ll continue to have the flexibility to use Tekmetric’s 70+ integrations in our robust ecosystem, with Shopgenie continuing to build and support integrations with other shop management systems.
Here’s what our leadership has to say:
“This combination sets a new standard for efficiency and customer experience in the industry. At Tekmetric, we are committed to providing shop owners with best-in-class tools to manage and grow their businesses. Similarly, Shopgenie’s ability to solve real-world challenges with intuitive technology has earned it the trust of shop owners nationwide,” said Sunil Patel, Founder and CEO of Tekmetric. “Together, we are building an all-in-one platform that empowers shop owners to attract, retain and serve customers more effectively, driving long-term growth.”
“Tekmetric’s relentless pursuit of innovation and passion for creating products that make shop owners’ lives easier could not be a more perfect fit for Shopgenie and our customers,” said Kieran O’Brien, CEO and Co-Founder of Shopgenie. “Our combined strengths will create a more complete, powerful platform that sets a new standard for auto repair software solutions.”
At Tekmetric, helping shops measure up is at the core of everything we do. With this combination, we’re building a seamless, all-in-one solution to manage every aspect of your shop more effectively. Together, we’re setting a new benchmark for the industry and aim to take your shop to the next level. Learn more at https://www.tekmetric.com/shopgenie.
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