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.
If you take away anything this month, it's that the Tekmetric Mobile app is now yours! We’re thrilled to have launched this across iOS and Android to make your techs’ lives easier, cutting their inspection time in half. As well, it delivers increased customer trust, ultimately driving up your bottom line.
Other top release highlights include improving the efficiency of Smart Jobs, adding fresh permission settings for increased financial control, speeding up the process of finding parts across your inventory, and making the 10DLC registration process simpler.
If you’re using Tekmessage, please complete your 10DLC registration ASAP.
Starting December 1st, this requirement will be enforced.
Save Time and Drive More Revenue With The Tekmetric Mobile App
Perform inspections from any mobile device, complete with photos and videos, building customer trust and increasing job approval. Tekmetric customers using it today have seen their inspection times cut in half. As well, shops that share digital vehicle inspections (DVIs) with their customers, see an average increase of $15k in revenue per month. With real-time synchronization your team stays coordinated, whether they're under a vehicle or discussing repairs with customers at the front desk.
Minimize the impact of time consuming tasks with these enhancements to our Smart Jobs feature.
Have you ever built a job using Smart Jobs, only to realize you accidentally selected the wrong part? Now you can instantly search PartsTech again without leaving your current job screen - ensuring you always quote the right part at the right price for your customer.
Oil changes are a necessary maintenance to keep any car running. So, it’s no wonder that repair shops offer oil change promotions to get new customers in the door. These promotions are usually for the standard 5 quarts, but what happens when a customer’s car requires extra oil? Smart Jobs will automatically calculate the adjusted price for the extra oil and add it to the estimate. This means no more hassling with a calculator to calculate the additional price tag. Smart jobs will simply provide clear and accurate estimates every time.
Starting December 1st, 10DLC registration will be required for all businesses using 10 digit phone numbers for application-to-person (A2P) messaging. This requirement will impact all customers using Tekmessage. So, we’ve made it easy for you to complete this registration in-platform. This process should take no more than 10 minutes and can be done from the Tekmessage Integration Card on the integrations page.
To ensure your service is not interrupted, please be sure to check your status and complete your enrollment ASAP. The approval process typically takes 2 to 3 weeks. Learn more about 10DLC and how to do this here.
Ensuring shop fees are consistent across all of your locations is critical, especially for maintaining customer trust. This process is now easier than ever to manage using the Multi-Shop dashboard. You can create new fees, edit existing fees, and delete fees across all of your locations. Need to maintain shop-specific pricing? No problem. Individual shops can manage their unique pricing details without impacting universal pricing.
Who’s this for?: All customers with the Multi-Shop add-on.
We heard you when it comes to wanting more control over your finances in Tekmetric, especially for those with lots of employees accessing the platform. Within the payments permission, there’s a new sub-permission for engaging with accounts receivable. By checking this box, the employee will have the ability to send repair orders to accounts receivable.
Tip: This will default to “on” for newly created shop owners and shop admins. If you had employees with the payments permission “on” at the time of the release (10/28/24), this sub-permission was defaulted to “on”.
View Inventory Across All Your Locations From One Place
Locating parts across your network can be extremely cumbersome, especially if you have to hop in and out of shop views. Your Multi-Shop account now brings inventory from all your locations into a single view, saving you time & getting your team back to work quickly. Filter by shop, status, and part type to find what you need in a snap.
Who’s this for?: All customers who have the Multi-Shop add on.
Payment methods aren’t simply about an exchange of money. They're personal. And in the ecommerce environment, offering the right payment methods is like extending an invitation — it lets your customers know they're welcome here and they can expect a seamless experience.
Buy now, pay later (BNPL) methods provide even more convenience and flexibility, allowing customers to break their purchases into smaller payments. When you add BNPL to your menu of payment options, you open the door to even more customers and to higher-value sales. In fact, a recent survey found that more than 70% of businesses using BNPL report higher conversions, average order value, and customer acquisitions.
We've partnered with Stripe to make Affirm’s BNPL payment methods available to your customers. Businesses that offer BNPL through Stripe on average see a 24.5% increase in sales. Adding Affirm to your mix of payment methods can help your business:
1. Boost Conversion
A $400 price tag, for example, might discourage some customers from clicking buy, but when they can split that cost into four $100 payments, the transaction may be more appealing. That's how BNPL methods can help motivate your customers to make an order, driving up your conversion rate.
2. Increase Your Average Order Value
BNPL methods may encourage your customers to order more lower-value goods at one time, increasing your average cart size. It may also encourage them to purchase high-value goods, such as luxury items or furniture. In either case, your customers have greater ability to place higher-value orders, which can help drive revenue.
3. Reach More Customers
BNPL methods can help you tap into new market segments by making a purchase easier on a customer's budget through a series of smaller payments. These payment methods are especially attractive to younger customers who may not have a credit card or the ability to pay for large purchases in a single payment.
The flexibility of buy now, pay later is a huge benefit to your customers—one that can inspire them to make a purchase. And—maybe the best part—this all happens without extra work on your part, and Affirm takes on any potential risk.
With Affirm, you get paid in full immediately, while your customer owes only a portion or nothing up front. Affirm handles underwriting the customer and collecting payments, and assumes liability if a customer files a fraud-related dispute, so you can focus on growing your business.
Click here to learn more about how Tekmetric and Stripe can help you optimize your checkout
While it’s important to focus on customer service and providing reliable repair work, your shop’s entire repair process, from beginning to end, should be consistent. If your shop has stellar processes for greeting customers, writing estimates, selling work, and completing work, you can stick the landing with a solid check out process.
If done the right way, your shop’s invoicing process will enhance the efficiency in your shop while leaving a positive, lasting impression on customers.
The invoices your shop hands out are a representation of how transparent your shop is. Your customers will gain visibility into exactly what they’re paying for. And the more they can understand an invoice, the more they can answer the question we’ve all asked ourselves when we’re customers, “Okay, what am I paying for?”
So, why not end on a strong note? Make your shop’s customers feel more at ease with easy-to-understand invoices.
Here are four ways to simplify your shop's invoicing process.
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