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.
We brought our entire team together in person to kick off the year in Houston, and to say I was anything short of blown away would be an understatement.
We pride ourselves on being a remote-first company and we’ll continue to build our team remotely with the best talent from across the world, but there sure was something special about having everyone in person at the same time, in the same place, uniting around the same goals.
When you have the opportunity to gather such an amazingly talented group in the same room, you’ll be surprised by what happens from the brainstorming, to the tactical collaboration – and well, all the fun we had together!
And this wasn’t all just about us. Because in the end, we’re here to support all the amazing independent auto repair shops that do great work every day getting cars back on the road.
Tekmetric's Dedication to Customer Obsession
A dozen of our customer shops were gracious enough to host folks across our teams as we spent time with shop owners, advisors, and technicians diving into the next batches of innovation the industry needs us to build into Tekmetric.
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 enables us to build the absolute best tool for the job: running an independent auto repair shop.
As we continue to build Tekmetric, I’m especially keen to hear more than ever from technicians on this front.
At a time when industry continues to fight to keep up with challenges in educating, recruiting, and retaining top-quality techs, we’re taking a more intentional stance on the role a shop management system can play in helping your shop build and support the best team possible. Be sure to look for more from us throughout the year in this area.
We’ve always started anything we do at Tekmetric with a ‘customer obsession’ mindset – and I’m proud to extend this further down to the technician level this year.
As we grow, I’m also noticing how important it is to spend more of my time transferring real-world shop knowledge to every member of our team. In the early days, our Tekmetric office was the upper level of my shop, and I probably took for granted how easy it was for our team to observe the activities going on downstairs.
It's rejuvenating to now bring over 100 of our teammates to shops and immerse ourselves in the challenges our customers are facing. I smile when I see a well-drawn whiteboard with jobs listed out in columns, color-coded and sorted by promise time.
I think back on the early ideas that went into translating age-old management concepts into better versions of what are now standard features in Tekmetric.
I get even more joy when one of our new product managers builds well past my ideas, or I hear one of our onboarding managers asking a shop owner a question that even I’m not sure I would have thought of.
One thing is certain: the opportunity for our team to connect, collaborate, and brainstorm our next steps as a shop management system has ignited our drive for success.
Driving for Success in 2024
We are growing and maturing in real-time, and the pace of our new thinking and new innovation is mind-blowing.
If you’re a current customer, our doors are always open. Feedback from front-line employees, technicians, service writers, general managers, and of course shop owners, has turned into some of our most powerful features and functionality.
If you want to connect with our team, we welcome you to email us at support@tekmetric.com to set up a time with our product team to discuss ways we can improve, or set up a 1:1 consultation if you need additional support.
And if you haven’t made the switch to Tekmetric yet, what are you waiting for? Book some time with one of our Shop Advisors here to talk through how we might be able to help your shop run better than it ever has.
From our team to yours – thanks for your continued trust and support as we grow Tekmetric. 2024 figures to be a great year for us and for the industry. If there’s anything I can personally do to help your shop measure up to another level, please reach out!
We're happy to announce that our commitment to innovation and customer satisfaction has been recognized! For Spring 2025, G2 has awarded Tekmetric with a range of badges, including Momentum Leader, Best Results, Best Usability, Most Implementable, and Grid Leader.
These awards reflect our customers' experiences and trust in Tekmetric, highlighting their role in our success.
What These Badges Mean
Momentum Leader: We're leading the pack, constantly evolving to meet the ever-changing needs of the automotive industry.
Best Results & Best Usability: Tekmetric is designed to be intuitive and user-friendly, helping you achieve the results you want.
Most Implementable: Change can be scary – That's why we've made it easy to get started and integrate with Tekmetric so you can hit the ground running.
Grid Leader: This badge showcases how our customers describe Tekmetric as the go-to solution for auto shop management.
Thank You to Our Customers
We couldn't have done it without our customers! Your feedback and support drive us to continually improve and deliver the best possible shop management experience. We're excited to continue this journey with you and can't wait to see what we accomplish together in the future. We'll continue to innovate, listen to your feedback, and provide the tools you need to run your shop.
Although our goal is to help you determine the best ways you can enhance your auto repair shop profit margin, we’re still going to shoot straight with you: opening a shop isn’t easy. You’re going to have to put in some hard work, but exceeding your goals will be well worth it. Along the way you’ll learn new things through trial and error and encounter some unexpected challenges, but who doesn’t when they step outside of their comfort zone, pursuing something they’re passionate about?
One question you may have is, "Is it even a good time to start an auto repair business?" That's a tricky question to answer. Coming off the heels of a pandemic in an economy that has seen better times might scare any new business owner. But remember, some of the most long-standing businesses were started during economic recessions.
Although there’s been better times to start an auto repair business, your shop can still be successful. And it’s clear that the demand for automotive repairs isn't going anywhere.
Take a look at these statistics on the latest automotive repair trends:
In 2022, there will be an estimated 76 million vehicles aged 16 years or older in the United States.
It’s estimated that by 2022, 18% of American households will use an auto repair service at least once a year.
The number of vehicles on the road that are 12 years or older is anticipated to increase by 15%.
In the past decade, the average length of time that drivers own their automobiles has increased by 60%.
As you can see, the need for vehicle repairs will likely increase due to the fact that drivers are choosing to stick to their trusty ol’ vehicles rather than opting for a shinier new ride. But regardless of whether the auto repair industry’s profit trends are growing or plateauing, making smart business decisions will not only prepare your shop for future transformation but also help your shop survive disruptive trends in the future.
Let’s get to boosting your shop’s short and long-term profits.
We’ve listed each of these tactics in the order you should take during each of your business growth phases: the seed stage, the start-up stage, the established stage, or the expansion stage. The order of these 10 tactics does not determine their importance; each tactic complements one another to put your shop in the fast lane to success.
Fast Facts
Industry size and past growth: The U.S. auto mechanics industry is worth more than $68 billion in 2022 and has seen steady growth the past five years.
Growth forecast: The U.S. auto mechanics industry is projected to experience continued growth in the coming years and expand by more than 10% by 2026.
Number of businesses: As of early 2022, 264,121 auto mechanic businesses operated in the US.
Number of people employed: As of early 2022, the United States auto repair industry employed about 561,359 workers.
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