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 we progress further into the new quarter, it’s important to take stock of the strides Tekmetric has made, as well as build the momentum to continue providing top-notch service and innovative solutions. From launching groundbreaking new features and building deeper connections in the industry, Tekmetric has kept our foot on the gas in the first quarter of 2024 to measure up – in every way we can.
Supporting Shops with Innovative Updates and Features
At Tekmetric, it’s important for us to provide solutions that are relevant to your shop’s needs. Over the last quarter, we focused our efforts on providing updates and features that you have requested based on what you’re seeing in the field. Whether partnering with another industry powerhouse or helping strengthen reporting capabilities, we launched solutions that help your shop operate more effectively and grow your bottom line.
Sometimes two is better than one – and Tekmetric aims to integrate with a variety of industry solutions so you can access a wealth of information in our comprehensive system. For example, earlier this year we partnered with Advance Auto Parts to integrate MotoVisuals, a cloud-based library designed to provide easy-to-understand overviews of repairs to customers. We accompanied this new integration with a webinar led by Tekmetric’s very own P.J. Leslie and David Lyddall, director of MotoVisuals for Advance Auto Parts. Both speakers discussed their commitment to helping create an excellent customer experience and build customer satisfaction through this solution. The MotoVisuals integration is just one example of how we can continue to measure up together.
In addition to integrations, we also added new reports and features designed to make your life easier and help your shop run more efficiently. For example, the Multi-Shop Report offers a comprehensive breakdown of payments across all locations, empowering owners to make informed comparisons and strategic decisions. Additionally, the Labor Sales Report was created to provide details of labor sales when looking at employee pay, providing an additional option to accompany the information available in our Tech Report. Finally, our Itemized Tire Tax feature helps ensure that tire shops can provide clear and itemized tax information according to state legislation.
We also recognize the importance of community in the auto repair industry. As we move forward with the industry’s top trends and new product features, we have continued to invest in building connections and stronger relationships with both industry partners and you – our partner shops.
Building Deeper Connections in the Industry
At Tekmetric, we believe in the importance of long-term investments, whether that is in the product we provide, the people we hire or industry trends that we partake in. Our connection to our customers and desire to serve shop owners drives our day-to-day and motivates us to continue striving for excellence.
One of the ways in which we prioritize connection is through the various events we attend year-round across the country. This allows us to have conversations and build deeper relationships with you – the shops that we serve. Additionally, it gives us a chance to discuss what you’re seeing in the field, as well as what features, products and services you need to succeed. These conversations drive our product innovation process, allowing us to continue providing solutions that support your shop’s growth and forward momentum.
At the VISION Hi-Tech Training & Expo 2024, P.J. Leslie, Head of Business Development, was featured on the Kaizen CPAs + Advisors podcast where he gave insight on using Tekmetric’s numbers to continue enhancing the customer experience. Additionally, in March, we sprang forward, with our clocks and innovations, to the Automotive Training Institute (ATI) Super Conference in Grapevine, Texas from March 13-16. At each event, our conversations with shop owners and technicians brought the need for streamlined processes and enhanced customer communication to the forefront. Both needs are priorities that Tekmetric will continue to build on in each quarter of 2024.
In addition to attending events, Tekmetric also aims to support our shop owners in sharing their own insights and lessons about measuring up in today’s industry. For example, this quarter Brian Jesko, the owner of Trinity Auto Haus, joined us for a webinar, “From Technician to Multi-Shop Owner,” where he shared his journey of scaling his local shop and generating countless 5-star Google reviews to attract more business. One of the biggest takeaways from his webinar is the importance of holding a competitive advantage in service experience as opposed to solely relying on competitive pricing.
Continuing Our Forward Motion to Provide Great Solutions
Tekmetric’s product innovation and strong industry connections have paved the way for us to continue our forward motion into 2024 and beyond. This ongoing progress was recently recognized by G2, as they honored Tekmetric with the title of Top-Notch Auto Repair Software for the third year in a row. Talk about a three-peat! Receiving this award three years in a row is an incredible honor and a testament to both our team’s commitment to providing the solutions you need, and the support and feedback we received from you – our shop owners. However, our work does not stop at this recognition. In fact, we are more motivated than ever to continue bringing valuable solutions to meet your needs as we progress through 2024.
As we entered the year, we took a close look at the upcoming trends to set ourselves up for success while also providing valuable insights to the rest of the industry. After all, we’re all in this together. You may have seen some of these insights from our CEO and Founder, Sunil Patel, in his guest article, “Leveraging emerging industry trends in 2024,” with Vehicle Service Pros discussing 2024 industry trends. As a former shop owner himself, Sunil has a deep understanding of how to use industry trends to your shop’s advantage, and his article includes actionable advice on how to apply growth-oriented strategies, maximize value with efficient data use and meet customer needs with modern solutions – all while remaining poised for growth.
Measuring Up with Tekmetric in 2024
As we continue into Q2 and beyond, Tekmetric aims to continue our momentum, looking ahead to the next solutions we can provide that support your goals as shop owners. We want to be a team that plays our A-game each quarter, and we are excited to continue working with you to take your business to the next level. Cheers to a great first quarter at Tekmetric!
With a complete view of how all your shops are performing and access to the tools needed to make changes quickly, shop management systems help run your shop with smooth and agile business operations, provide a consistent experience for customers, and ultimately maximize revenue and support your shop's growth.
Features such as unified reporting across all your shops and shared customer history work to create seamless processes for managing your business as a centralized organization.
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