I sell parts below cost and pay my customer for the labor I have in it. That way everyone is happy😁I also pay my guys a base pay of $269k a year, full benefits, bonus pay and 6 months paid vacation every 4.5 months all because they took a 4hr training class so now they are really valuable to me. That's how you do business boys!
To go to work for you Eric, I’d be happy with $50K, no benefits and free coffee, doughnuts and Mrs. O lunches 6 days a week! I’d sleep in the back on a cot. Bring my own little set of tools. As long as I could crack jokes once in a while and borrow your one-liners. 👍🔧
Another thing that is stupid is management pushing wallet flushes (eg injector flushes, De carbs). Most of the time, these jobs are not done correctly due to most workshop either not having the right equipment to carry out that service or equipment that is broken or missing adaptors. Wallet flush sales are normally prioritised over more important jobs like brakes due to stupid bonus system that a lot of service advises get which reward selling wallet flushes.
You might need to do another video on the difference of gross margin and net profit on a spreed sheet to show how it breaks down. I'd hate for someone to think they understand the difference after this one video and goes and makes an ass out of themselves to their boss 😂
It’s all in the leadership. Used to work in a shop in the wrong part of town. It was one of the most expensive shops in town period but it had 1st class staff , they catered to the customers equally all where treated as our #1 customer. So make the customer feel like a king and they will gladly pay
I know right! Shops charging 160/hr and 30-60% parts mark up paying employees Under 30/hr and bitching about their bottom line when a 200$ part accidentally gets broken.
Yeah that makes sense. You've got no skin in the game except your tools. The equipment in a full scale shop exceeds the value of your tools by a land slide. All the expenses associated with running a full scale shop exceed your whole salary by a landslide. If you want 60% of that, open up your own shop and you'll have an eye opening experience when you realize what an asinine thing that is to say.
This reminds me of when I work at "National Tire and Battery. " Their minimum mark up is 60% over whatever the cost is therefore they refuse to buy good quality parts and only buy parts from auto part distributors that they. Have a fairly large contract with. Where i'm located the contract was anf probably still Is with O'Reilly I remember one time the only way to get any form of suspension parts on this particular luxury vehicle was to get it directly from the dealership and for a. Control arm it was going to cost the customer nearly a thousand dollars for 1controlalarm..... can you say service denied...
I charge list price on parts. Sometimes I have 90% markup other times it's 10% but it's the price they would pay walking in off the street and buying the part themselves. So I just go with that. Not my fault I'm buying a $100 oil filter for $37 because of the Volume I get
List price is the suggested price that you sell the part to the customer for. A lot of times it is over retail price. Sometimes by a little and sometimes by a lot.
@@tywonpool You have confused retail with wholesale. That 20 dollar air filter was probably 2 dollars to the original purchaser. Then marked up a few times before it hit the store shelf at 20 dollars retail. A shop would then buy it at 15 dollars wholesale and sell it for 30 dollars to get their 50 per cent margin.
I agree with you on the main point of this! Profit $'s is what pays the Bills and Employees. Not %'s! Our SMS has a target number it strives for but our Manager has full reign to dial it back to keep it within reason and something she can sleep at night after making the Sale. I like the direction you're going on this. For the next one can you talk about shop overhead and employee loaded costs!
Lean manufacturing principles can be applied to service industries as well. Always be queued up with work. You’ll maximize your man power and equipment.
In Australia, the supplier normally gives you the ‘ list price’ ( retail public price) , Then give you a % discount depending on turnover. Discounts can be from 15% to 70%.
I know CVS won’t put something on the shelf unless they are making 60%. Also I worked at advance auto parts about 10 years ago, we paid a dollar a piece for every cheapo brand filter in the store.
I don't have to watch the video in order to know that YOU ARE RIGHT. My shop has the lowest markup of any of the competing local shops; however, my LABOR rates are the HIGHEST in our area. My customers appreciate that we get paid for our knowledge and our skills. The also appreciate that the part they can buy for $20 bucks I'm am NOT charging them $70 for.
When I buy parts I get the receipt that lists net cost and list cost. I pay the net and charge customers list price. I only worry about if I make enough money to pay off my parts bill. Anything else is gravy.
I keep it simple: I charge the listed MSRP for all parts. Fortunately I have very little customer dissatisfaction with my parts pricing... except those customers who insist on providing their own parts. That is something, because of past bad experiences, I will not do. The only exception I make is for those customers who provide their own OEM filters and oil but, that's as far as I will deviate from my policy. Just too many people who tried to take advantage of me by installing the Dorman mass air flow sensor they provided (for example) and then expecting me to warranty the part and the labor when it fails on their way home.
We install customer supplied parts, but explicitly state that there is no warranty, either parts or labor. That element is clearly written in bold print right in the job title so there is no mistaking it.
Net profit is what matters at the end of the day. Keeping the lights on, paying for uniforms, payroll taxes. Parts markup is whatever the market will bare. Quote the o.e. part, customer balks at the price offer the other options. The ton of bills that still have to be paid even when the vehicle count drops.
35% markup is more what I’m used to, but the last time I was in a independent shop where I could see the markup was 13 years ago. 10-20% on engine and transmission jobs just so you get the work.
I’m glad your looking at these groups like this THEY SUCK! This industry has turned into a numbers games and it’s just stupid. It’s not all about how much you make on every job worry about taking care of the customers and they will return over and over in the long run you gonna be ok.
It sounds like you're talking about a matrix. In that aspect, yes I agree. Use a matrix... As far as engines. I run a small shop. Too much heavy line work sinks the ship. I tell people straight up we prefer to not do heavy line but we will and we'll be the most expensive around. They say no, makes room for easier work. They say yes, we make good profit. Win/win
I’ve watched your last few videos and while I agree with you that OEM parts are good parts the majority of the OEM parts I deal with (building engines) you can get the same exact part with the same exact oem part number stamped on it for half the price . Allot of OEM manufacturers source components from the same places the other brands do . I charge my wholesale to the retail cost which is very minimal… maybe 8-10% but perhaps I’m far too generous for knowing all the information from experience receiving many different brand parts and comparing them. The true high quality parts I see are the parts most customers simply can’t afford as anything really good is much more than oem (engine parts) because of the low quantity produced
Mike, you got it! Always look at profit. The automotive business is not full of educated people. And in the age of technology, the first thing a customer does with an estimate is they check the internet to see if there getting overcharged.
Management mistaking margin for profit is a common problem. Margin covers all the administrative costs related to the part. Ordering, billing and such. That's pretty much a fixed amount rather than a percentage. It covers warranty costs which are significantly higher with the cheap parts you can get away with selling at a high mark-up. Then there are the reputational costs of cheap parts and/or high markup. Hard to quantify those but if you're spending a significant amount on advertising........
60% margins are insane. TP I worked at was hitting 74 to 76% GP and it was stupid expensive for the quality and most of the work comes back due to bad diagnostics of some of the techs. 60% gross is crazy. At 60% net, what the hell is the GP. Is business really coming to the point where it's free to start a business and run a business. If you have a shop raising your profit is not going to fix why your losing money. Train your techs, let some go. We all know finding a good tech is hard. If it was that easy business would be nothing more than a high school diploma.
The shop I work at as a semi mechanic, they charge 40% markup and my position here is engine rebuilds which after all said and done it's around 4-6,000$ in profit for getting the parts and putting them in
the 60% margin is the low hanging fruit that that most shops going to these crash course one day classes dont know how to price correctly and telling them to raise the pricing to higher, more industry level standard is the quickest way to get them to see profit and an impact. There is a parts matrix in place for this reason, its not 60% across the board, a 20 dollar part and 60 dollar part in my matrix are two different Margin amounts. There are so many numbers that go into the overall health of the business, Margin, Profit, and many other KPI's. There will never be just one you need to look at to tell the whole story. Not even the Net at the bottom of the P&L
This is why when my car breaks down I just buy a new one because maintenance costs at shops are out of control. Small pick ups for 2-6k all day. Cheaper to run them into the ground than fix
So every time you car breaks down it costs between 2 and 6k? Yeah I'm sure that's the cheap way out. Then you find that cheap little vehicle needs work and then what
@Georgiabrat starters and alternators both have two bolts, what sane person goes to a shop for that. Battery is even easier. Water Pump has more bolts but still enough you can count on both hands.
I feel like shop management doesn't think too hard about minimizing come backs. Cheap parts at higher margins instead of better parts at lower margins that bring in more cash and reduce come backs and wasted hours and parts to replace defects never made any sense to me. You can still make the same amount or more money because you sell a higher priced higher quality product. It's the difference between selling basic bottled water at 50 cents a bottle making 40 cents profit and selling Fiji water at 3 bucks a bottle and making 1 dollar a bottle. I can sell less Fiji water and end up making more money then the guy selling the cheap stuff even though it's a 80% profit margin vs a 30%.
Once again great video Mike as always like I said before I know NOTHING about business or profit margin so what would say is a good profit margin, just curious?
I agree .I'm paid hourly 22 an hour with no health insurance and only 40 hours of vacation time no sick time a year and for ever year I get one day added to that .we charge 85 an hour labor .and 60-80 percent mark up on parts . It's a 3 bay shop with 3 mechanic s and a secretary slash service writer . I have been a mechanic for 10 years .i have spent thousands on tools and I feel like it's not worth being a mechanic and working for someone else . If you are going to profit as a mechanic you need your own place . Here in New England no one wants to pay people a decent wage . I have a few friends working at dealership who get paid hourly not flat rate . And one guy makes close to 30 an hour . With full benefits . But yet he is unhappy with management and is concidering leaving to go to independent shop . I feel like us mechanic s aren't appreciated and a service writer gets more respect ..
You mentioned that 60% margin in one of you videos a couple years ago, which sounded a bit high to me. I don't remember you having a problem with though. What changed?
Transparency- an awful thing to say . People understand a business needs to make profit. If you establish a reasonable margin that’s profitable then it can be openly represented . This adjustment to margin based on taking the consumer’s price threshold temperature to find the upper limits is shady at best. This practice is why consumers distrust the repair industry. Playing around with semantics of margii ii n and profit is still the industry’s way of justifying the shell game being played. Honest work, reasonable profit and transparency is a means to sleeping well at night. It’s possible to operate a business without giving your customers the BUSINESS from behind.
Yeah I was wondering that myself. I use a sliding scale matrix that varies the markup depending on part cost. Where I need to do work is to try to negotiate better pricing from my parts vendors and see if they will offer me a parts rebate...
These groups only look at the gross margin in the right now and not over the warranty period. They may get their 60% gross on the initial sale of the job but may end up losing out on the back end because they have to warranty the cheap part multiple times over the warranty period.
They get a free replacement part, labor reimbursed and another chance to find something else to sell. It's a win for the shop and an annoying inconvenience for the customer who, after two or three times, will probably look for another shop.
@VashthStampeede nah, you definitely don't get your labor reimbursed all of the time. Some vendors offer labor reimbursement but it is limited and usually is just enough to cover your tech. These days techs command such high salaries that you literally make nothing on the labor for warranty work. Most of our vendors are $50/hr and that is what I pay my techs, so there's nothing left for the shop. And there is still overhead that a shop must incur during such work, so you end up just absorbing the cost. But it keeps your tech happy, so it's worth it.
The funniest thing ever is if you get a dash camera, you’ll see they double or triple the labor time, and when you look up the part numbers and what they cost for a professional account you’ll realize the mechanics make around 800$ an hour. They have all these bullshit excuses like paying for the shop, but it’s made me always work on my own car because I no longer trust any of them. It’s the only legal way left to rob people
Where did you learn math? A 60% margin on a part that costs you $20 would retail for $32. 60% margin on a part that costs $60 would be retailed for $96. Profit margin is defined as the difference between cost and revenue expressed as a percentage of cost.
You are conflating margin with markup. Margin is confusing at first. A 60% markup of a $20 part is $32. Math: ($20 * 0.6) = $12. ($20 + $12) = $32. A 60% margin on a $20 part would sell for $50. Proof: ($50 * 0.60) = $30 profit and ($50 * (1 - 0.6)) = ($50 * 0.4) = $20 cost. 50% margin of a $20 cost is $40, consisting of $20 cost and $20 profit. Remember, Gross Margin is a percentage of the sale price, not the cost. It is the profit amount of the sales price.
Dishonesty and lack of integrity = loss...simply put...A business will always lose when they're focused on how to make up for day to day losses in terms of not learning how to properly bill for labor. Stroke the vendors and destroy integrity. Profits are timeless when they are based on truth...it's really not that complicated, but overthinking usually ends in the same manner...EMPTY
I understand, Instead of charging 120$ an hour for labor you should charge 40$ an hour for labor then you have more customers and then you will make more money
If you pay $60 and charge $150 that's 250% mark up.. Part cost 60, mark up 60% would be 96. Gross profit 36 which is 60% of 60. Any other way is over complicated. Shops should charge 20% above retail price at local part store.
Mark up and Gross Margin are very different animals. $150 * 0.60 = $90 profit. $150 * 0.40 = $60 cost. In order to pay the technicians a handsome wage, one must charge accordingly. If you are running with a 20% GM, then your technicians are going to be broke because the business cannot afford to pay them fair wages. The business must make money to pay operating costs, wages, benefits, etc.
I see what you are trying to say here, but you are wrong on the metric of margin. True, if I make 50 dollars on an alternator that is more than 30, however, spending a higher amount of purchase cost, takes from my return on investment of that dollar. GPM is a key metric That being said, 100% hear you on using quality parts, one way or another.
There isn't any investment in parts to justify a return. The shop orders the part on credit. And typically gets paid for it a day or two later when the customer picks up their car. Shop has already got paid for the part way before they have to pay for it.
@@mattt4183 I get what you are saying. Do you see, though, that a business, in order to run needs to make a certain amount of money from the purchases they make in order to meet expenses?
Idk after being a mobile mechanic for 2 years and having guns and bear spray pulled on us and being ripped off for like a hundred grand and I'm in Canada so I'm now like oh well customers it's eat or be eaten..
Really ur only margin should be what the store discounts ur part if the akebono brakes are 79.99 at advance auto and on my account its 60.99 i make 19$ people gotta quit screwing people
@@tywonpool that’s not what he’s saying. Parts stores usually discount for commercial accounts. He charges the list price of the part for the consumer, so he still makes money. I can see that working for some things and not others
I totally agree, as a consumer (and small engine shop). I think marking up parts 150% or whatever is just plain greed. I do think all the associated costs involved in sourcing, stocking, inventory of parts should be covered and perhaps a little profit over that. I sell my parts in a repair job at 25% over what I pay except for larger parts, where I'll lower that percentage to a reasonable amount. I think shops should make profit on actual work done - parts have no actual physical labor involved and don't deserve to be used as a profit generator.
@@mph5896 Aside from stored and retrieved from storage, all other work involved is NOT physical labor - it’s administrative. Sitting at a computer is not the same as doing a brake job.
I get it with your point about profit margins, but set that a side for a minute. Lets talk about the trashy poroducts available to repair the cars out on the road. How can a shop provide quality warranty assurance. Rebuilding motors is community service, its a lost tradition thats back breaking and a waste of time and effort. It doesnot matter what your profit margin is parts are made elsewhere your better off getting halve life parts from lqk. Even dealer parts are knock off parts. Fraudazone also fucked up the diagnosis profit with their fake diagnostics.
You have this backwards. 60% Gross Margin means that you are keeping 60% of the sales price and spending 40% for the part. So, using the $50 sales price, you have a $30 profit ($50 * 0.60) and $20 cost ($50 * (1 - 0.60)).
In Texas They base labor rate and parts margine on your zip code. Becuase zip code shows aveage home cost and salarys. Even dealerships 30 min to 1 hr a part have a diffrent rate based off the zip code
60% margin with cheap parts is a loss...... because that thing is coming back in 60 days or less. You warranty the part, labor out of your ass and a dead bay thats not making money.
I’m sorry I’ve followed youre channel for a long time and you’re videos lately are very bitter because you got fired and frankly insulting to business owners. I understand people gouge but I’d love to see youre business model from youre owned shops and wonder why they aren’t open anymore?
Please give me some video Ideas you would like me to cover, FYI, I have always covered both the positive and negative sides of this industry since I started this channel, so It is nothing new, as I am looking at comments from a video I did about 5 or 6 yrs ago about hack techs, 1 comment down in my comment feed on RUclips creator studio
@@flatratemaster honestly would love to hear about the shops you owned and why they are no longer operating. I am a shop owner of 5 years and love it. I am with a coaching company that I also love. What did you like or dislike about ownership etc…
@@jasonladzenski497 I have talked about on stream and in videos, main lesson I learned was leasing the building and not owning it, with almost no other options for relocating is not a good business plan
I have not seen a management company say you need 60% profit on parts I’ve seen them say 60% GROSS PROFIT which is parts cost plus labor cost taken away from what is collected. That should put you at a GP of 60% I kinda think your rant Is really flawed. I don’t know anybody trying to mark up an engine 60% Typically with large jobs, you focus on GP per hour. I dunno man, I used to enjoy your channel, now you just seem bitter and angry 🤷🏻♂️
I have not seen a management company say you need 60% profit on parts I’ve seen them say 60% GROSS PROFIT which is parts cost plus labor cost taken away from what is collected. That should put you at a GP of 60% I kinda think your rant Is really flawed. I don’t know anybody trying to mark up an engine 60% Typically with large jobs, you focus on GP per hour. I dunno man, I used to enjoy your channel, now you just seem bitter and angry 🤷🏻♂️
I sell parts below cost and pay my customer for the labor I have in it. That way everyone is happy😁I also pay my guys a base pay of $269k a year, full benefits, bonus pay and 6 months paid vacation every 4.5 months all because they took a 4hr training class so now they are really valuable to me. That's how you do business boys!
I'm coming to work for you.... LOL
🤣🤣🤣🤣
No sign on bonus?! Bummer
To go to work for you Eric, I’d be happy with $50K, no benefits and free coffee, doughnuts and Mrs. O lunches 6 days a week! I’d sleep in the back on a cot. Bring my own little set of tools. As long as I could crack jokes once in a while and borrow your one-liners. 👍🔧
Is that the new minimum wage requirement in the PRNY?
Video I want see is you rolling the Matco tool box in to a new shop .
Last shop I was at had a 130 % mark up and we were always busy
mark up is different than margin. 130 mark up is about 56% margin
Another thing that is stupid is management pushing wallet flushes (eg injector flushes, De carbs). Most of the time, these jobs are not done correctly due to most workshop either not having the right equipment to carry out that service or equipment that is broken or missing adaptors. Wallet flush sales are normally prioritised over more important jobs like brakes due to stupid bonus system that a lot of service advises get which reward selling wallet flushes.
Good point. I don’t even recommend those anymore, I’ve seen too many cause cats to clog up.
You might need to do another video on the difference of gross margin and net profit on a spreed sheet to show how it breaks down. I'd hate for someone to think they understand the difference after this one video and goes and makes an ass out of themselves to their boss 😂
It’s all in the leadership. Used to work in a shop in the wrong part of town. It was one of the most expensive shops in town period but it had 1st class staff , they catered to the customers equally all where treated as our #1 customer. So make the customer feel like a king and they will gladly pay
Maybe mechanics should do the same and demand 60% of the door rate and 60% of the mark up of parts
I know right! Shops charging 160/hr and 30-60% parts mark up paying employees Under 30/hr and bitching about their bottom line when a 200$ part accidentally gets broken.
Then you can assume 60% of the liability and overhead. You techs think you know what it takes to run a shop but you have no clue.
We already supply our own tools, lets face facts all a shop supplies is hydro and hoist@@keeblertime1486
Yeah that makes sense. You've got no skin in the game except your tools. The equipment in a full scale shop exceeds the value of your tools by a land slide. All the expenses associated with running a full scale shop exceed your whole salary by a landslide. If you want 60% of that, open up your own shop and you'll have an eye opening experience when you realize what an asinine thing that is to say.
@@Charlie-dv7ev i do
This reminds me of when I work at "National Tire and Battery. " Their minimum mark up is 60% over whatever the cost is therefore they refuse to buy good quality parts and only buy parts from auto part distributors that they. Have a fairly large contract with. Where i'm located the contract was anf probably still Is with O'Reilly I remember one time the only way to get any form of suspension parts on this particular luxury vehicle was to get it directly from the dealership and for a. Control arm it was going to cost the customer nearly a thousand dollars for 1controlalarm..... can you say service denied...
I charge list price on parts. Sometimes I have 90% markup other times it's 10% but it's the price they would pay walking in off the street and buying the part themselves. So I just go with that. Not my fault I'm buying a $100 oil filter for $37 because of the Volume I get
Hahaha the list price is not the price the customer would pay...your kidding yourself. They are likely getting it at the same price as you.
List price is the suggested price that you sell the part to the customer for. A lot of times it is over retail price. Sometimes by a little and sometimes by a lot.
At firestone we used a min 80% and somewhere near 500-800% on most parts, if something cost 20 buck we generally sold it for 120 to 200 dollars
So air filters cost 120? Like to be there when you tell the customer that.
Can’t imagine you guys sold very many recs
Wow no wonder all the firestone in my area went out of business.
@@tywonpool You have confused retail with wholesale. That 20 dollar air filter was probably 2 dollars to the original purchaser. Then marked up a few times before it hit the store shelf at 20 dollars retail. A shop would then buy it at 15 dollars wholesale and sell it for 30 dollars to get their 50 per cent margin.
I agree with you on the main point of this! Profit $'s is what pays the Bills and Employees. Not %'s! Our SMS has a target number it strives for but our Manager has full reign to dial it back to keep it within reason and something she can sleep at night after making the Sale. I like the direction you're going on this. For the next one can you talk about shop overhead and employee loaded costs!
Lean manufacturing principles can be applied to service industries as well.
Always be queued up with work. You’ll maximize your man power and equipment.
In Australia, the supplier normally gives you the ‘ list price’ ( retail public price) , Then give you a % discount depending on turnover. Discounts can be from 15% to 70%.
Same in U.S.
I know CVS won’t put something on the shelf unless they are making 60%. Also I worked at advance auto parts about 10 years ago, we paid a dollar a piece for every cheapo brand filter in the store.
I don't have to watch the video in order to know that YOU ARE RIGHT. My shop has the lowest markup of any of the competing local shops; however, my LABOR rates are the HIGHEST in our area. My customers appreciate that we get paid for our knowledge and our skills. The also appreciate that the part they can buy for $20 bucks I'm am NOT charging them $70 for.
When I buy parts I get the receipt that lists net cost and list cost. I pay the net and charge customers list price. I only worry about if I make enough money to pay off my parts bill. Anything else is gravy.
I keep it simple: I charge the listed MSRP for all parts. Fortunately I have very little customer dissatisfaction with my parts pricing... except those customers who insist on providing their own parts. That is something, because of past bad experiences, I will not do. The only exception I make is for those customers who provide their own OEM filters and oil but, that's as far as I will deviate from my policy. Just too many people who tried to take advantage of me by installing the Dorman mass air flow sensor they provided (for example) and then expecting me to warranty the part and the labor when it fails on their way home.
We install customer supplied parts, but explicitly state that there is no warranty, either parts or labor. That element is clearly written in bold print right in the job title so there is no mistaking it.
I would like to see you open a shop and post how to run a business with real numbers on youtube. I would watch that!!
Net profit is what matters at the end of the day. Keeping the lights on, paying for uniforms, payroll taxes. Parts markup is whatever the market will bare. Quote the o.e. part, customer balks at the price offer the other options. The ton of bills that still have to be paid even when the vehicle count drops.
We work on a "Matrix" certain cost brackets, yield certain mark up... from 1.54% to 3.25%.
35% markup is more what I’m used to, but the last time I was in a independent shop where I could see the markup was 13 years ago. 10-20% on engine and transmission jobs just so you get the work.
In nyc it's more like 300 to 350 percent mark up
Just pricing the bums out of town or under the subways 😂
I’m glad your looking at these groups like this THEY SUCK! This industry has turned into a numbers games and it’s just stupid.
It’s not all about how much you make on every job worry about taking care of the customers and they will return over and over in the long run you gonna be ok.
It sounds like you're talking about a matrix. In that aspect, yes I agree. Use a matrix... As far as engines. I run a small shop. Too much heavy line work sinks the ship. I tell people straight up we prefer to not do heavy line but we will and we'll be the most expensive around. They say no, makes room for easier work. They say yes, we make good profit. Win/win
I’ve watched your last few videos and while I agree with you that OEM parts are good parts the majority of the OEM parts I deal with (building engines) you can get the same exact part with the same exact oem part number stamped on it for half the price . Allot of OEM manufacturers source components from the same places the other brands do . I charge my wholesale to the retail cost which is very minimal… maybe 8-10% but perhaps I’m far too generous for knowing all the information from experience receiving many different brand parts and comparing them. The true high quality parts I see are the parts most customers simply can’t afford as anything really good is much more than oem (engine parts) because of the low quantity produced
Mike,
you got it! Always look at profit. The automotive business is not full of educated people. And in the age of technology, the first thing a customer does with an estimate is they check the internet to see if there getting overcharged.
The focus on dollars is how Discount Tire makes money.
It's dollars over a set period of time, regardless of percentages.
That's how they warranty both the part and the labor
Management mistaking margin for profit is a common problem. Margin covers all the administrative costs related to the part. Ordering, billing and such. That's pretty much a fixed amount rather than a percentage. It covers warranty costs which are significantly higher with the cheap parts you can get away with selling at a high mark-up. Then there are the reputational costs of cheap parts and/or high markup. Hard to quantify those but if you're spending a significant amount on advertising........
60% margins are insane. TP I worked at was hitting 74 to 76% GP and it was stupid expensive for the quality and most of the work comes back due to bad diagnostics of some of the techs. 60% gross is crazy. At 60% net, what the hell is the GP. Is business really coming to the point where it's free to start a business and run a business. If you have a shop raising your profit is not going to fix why your losing money. Train your techs, let some go. We all know finding a good tech is hard. If it was that easy business would be nothing more than a high school diploma.
The shop I work at as a semi mechanic, they charge 40% markup and my position here is engine rebuilds which after all said and done it's around 4-6,000$ in profit for getting the parts and putting them in
I hope you're paid well. Also, semi's are worth a lot more than our sorry cars.
the 60% margin is the low hanging fruit that that most shops going to these crash course one day classes dont know how to price correctly and telling them to raise the pricing to higher, more industry level standard is the quickest way to get them to see profit and an impact.
There is a parts matrix in place for this reason, its not 60% across the board, a 20 dollar part and 60 dollar part in my matrix are two different Margin amounts.
There are so many numbers that go into the overall health of the business, Margin, Profit, and many other KPI's. There will never be just one you need to look at to tell the whole story. Not even the Net at the bottom of the P&L
Absolutely Right FRM Dave Ramsey Agrees 😀😊😀😊
Man and I thought we were ripping people off at 35%
And then Ferrari math. Take the regular price of a part (say a brake rotor), double it and add a zero to the end.
This is why when my car breaks down I just buy a new one because maintenance costs at shops are out of control. Small pick ups for 2-6k all day. Cheaper to run them into the ground than fix
So every time you car breaks down it costs between 2 and 6k? Yeah I'm sure that's the cheap way out. Then you find that cheap little vehicle needs work and then what
@@tywonpool yeah, repair costs are about the same as a new truck or small car these days
@@wecx2375 that’s definitely not true. Unless you are just buying crappy cars that need engines and transmissions, your method makes almost no sense.
@Andrew M you must be like 16, you can find ford rangers , s10 chevys, and small cars that run all day between 2-6k.
@Georgiabrat starters and alternators both have two bolts, what sane person goes to a shop for that. Battery is even easier. Water Pump has more bolts but still enough you can count on both hands.
I feel like shop management doesn't think too hard about minimizing come backs. Cheap parts at higher margins instead of better parts at lower margins that bring in more cash and reduce come backs and wasted hours and parts to replace defects never made any sense to me.
You can still make the same amount or more money because you sell a higher priced higher quality product. It's the difference between selling basic bottled water at 50 cents a bottle making 40 cents profit and selling Fiji water at 3 bucks a bottle and making 1 dollar a bottle. I can sell less Fiji water and end up making more money then the guy selling the cheap stuff even though it's a 80% profit margin vs a 30%.
Once again great video Mike as always like I said before I know NOTHING about business or profit margin so what would say is a good profit margin, just curious?
They're not going to go into "mark-up detail' until you sign up for the full management class.
I agree .I'm paid hourly 22 an hour with no health insurance and only 40 hours of vacation time no sick time a year and for ever year I get one day added to that .we charge 85 an hour labor .and 60-80 percent mark up on parts . It's a 3 bay shop with 3 mechanic s and a secretary slash service writer . I have been a mechanic for 10 years .i have spent thousands on tools and I feel like it's not worth being a mechanic and working for someone else . If you are going to profit as a mechanic you need your own place . Here in New England no one wants to pay people a decent wage . I have a few friends working at dealership who get paid hourly not flat rate . And one guy makes close to 30 an hour . With full benefits . But yet he is unhappy with management and is concidering leaving to go to independent shop . I feel like us mechanic s aren't appreciated and a service writer gets more respect ..
You mentioned that 60% margin in one of you videos a couple years ago, which sounded a bit high to me. I don't remember you having a problem with though. What changed?
nothing changed as a said in the video, using 60% for everything is problematic
Transparency- an awful thing to say .
People understand a business needs to make profit. If you establish a reasonable margin that’s profitable then it can be openly represented . This adjustment to margin based on taking the consumer’s price threshold temperature to find the upper limits is shady at best.
This practice is why consumers distrust the repair industry.
Playing around with semantics of margii ii n and profit is still the industry’s way of justifying the shell game being played.
Honest work, reasonable profit and transparency is a means to sleeping well at night.
It’s possible to operate a business without giving your customers the BUSINESS from behind.
YES!!! Well said!
Nobody here has ever heard of a parts matrix?
Yeah I was wondering that myself. I use a sliding scale matrix that varies the markup depending on part cost. Where I need to do work is to try to negotiate better pricing from my parts vendors and see if they will offer me a parts rebate...
These groups only look at the gross margin in the right now and not over the warranty period. They may get their 60% gross on the initial sale of the job but may end up losing out on the back end because they have to warranty the cheap part multiple times over the warranty period.
But they probably do a labor claim and get some money
They get a free replacement part, labor reimbursed and another chance to find something else to sell. It's a win for the shop and an annoying inconvenience for the customer who, after two or three times, will probably look for another shop.
@VashthStampeede nah, you definitely don't get your labor reimbursed all of the time. Some vendors offer labor reimbursement but it is limited and usually is just enough to cover your tech. These days techs command such high salaries that you literally make nothing on the labor for warranty work. Most of our vendors are $50/hr and that is what I pay my techs, so there's nothing left for the shop. And there is still overhead that a shop must incur during such work, so you end up just absorbing the cost. But it keeps your tech happy, so it's worth it.
The funniest thing ever is if you get a dash camera, you’ll see they double or triple the labor time, and when you look up the part numbers and what they cost for a professional account you’ll realize the mechanics make around 800$ an hour. They have all these bullshit excuses like paying for the shop, but it’s made me always work on my own car because I no longer trust any of them. It’s the only legal way left to rob people
Where did you learn math? A 60% margin on a part that costs you $20 would retail for $32. 60% margin on a part that costs $60 would be retailed for $96. Profit margin is defined as the difference between cost and revenue expressed as a percentage of cost.
You are conflating margin with markup. Margin is confusing at first. A 60% markup of a $20 part is $32. Math: ($20 * 0.6) = $12. ($20 + $12) = $32. A 60% margin on a $20 part would sell for $50. Proof: ($50 * 0.60) = $30 profit and ($50 * (1 - 0.6)) = ($50 * 0.4) = $20 cost. 50% margin of a $20 cost is $40, consisting of $20 cost and $20 profit. Remember, Gross Margin is a percentage of the sale price, not the cost. It is the profit amount of the sales price.
@@brianpellerin6207 You, sir, are correct. I was indeed thinking "markup". Thank you for the education.
Dishonesty and lack of integrity = loss...simply put...A business will always lose when they're focused on how to make up for day to day losses in terms of not learning how to properly bill for labor.
Stroke the vendors and destroy integrity.
Profits are timeless when they are based on truth...it's really not that complicated, but overthinking usually ends in the same manner...EMPTY
When shops do this stuff it boils my blood and I end up doing my own work.
I understand, Instead of charging 120$ an hour for labor you should charge 40$ an hour for labor then you have more customers and then you will make more money
exactly- you'll have more customers and working your butt off and not making any money
That is absolutely not how that works.
If you pay $60 and charge $150 that's 250% mark up.. Part cost 60, mark up 60% would be 96. Gross profit 36 which is 60% of 60. Any other way is over complicated. Shops should charge 20% above retail price at local part store.
Mark up and Gross Margin are very different animals. $150 * 0.60 = $90 profit. $150 * 0.40 = $60 cost. In order to pay the technicians a handsome wage, one must charge accordingly. If you are running with a 20% GM, then your technicians are going to be broke because the business cannot afford to pay them fair wages. The business must make money to pay operating costs, wages, benefits, etc.
I see what you are trying to say here, but you are wrong on the metric of margin. True, if I make 50 dollars on an alternator that is more than 30, however, spending a higher amount of purchase cost, takes from my return on investment of that dollar.
GPM is a key metric
That being said, 100% hear you on using quality parts, one way or another.
There isn't any investment in parts to justify a return. The shop orders the part on credit. And typically gets paid for it a day or two later when the customer picks up their car. Shop has already got paid for the part way before they have to pay for it.
@@mattt4183 I get what you are saying. Do you see, though, that a business, in order to run needs to make a certain amount of money from the purchases they make in order to meet expenses?
Triple " net " , or double "list" witch ever is greater!
Idk after being a mobile mechanic for 2 years and having guns and bear spray pulled on us and being ripped off for like a hundred grand and I'm in Canada so I'm now like oh well customers it's eat or be eaten..
If the car needs a new engine i tell people to dump the car unless the is sentimental or car is under warranty.
Really ur only margin should be what the store discounts ur part if the akebono brakes are 79.99 at advance auto and on my account its 60.99 i make 19$ people gotta quit screwing people
So garages should sell parts at the same price as the part stores? Good luck with that
@@tywonpool that’s not what he’s saying. Parts stores usually discount for commercial accounts. He charges the list price of the part for the consumer, so he still makes money. I can see that working for some things and not others
I totally agree, as a consumer (and small engine shop). I think marking up parts 150% or whatever is just plain greed. I do think all the associated costs involved in sourcing, stocking, inventory of parts should be covered and perhaps a little profit over that. I sell my parts in a repair job at 25% over what I pay except for larger parts, where I'll lower that percentage to a reasonable amount.
I think shops should make profit on actual work done - parts have no actual physical labor involved and don't deserve to be used as a profit generator.
@@Rein_Ciarfella But parts do have a physical labor involved. They have to be looked up, found, sourced, stored, warrantied.
@@mph5896 Aside from stored and retrieved from storage, all other work involved is NOT physical labor - it’s administrative. Sitting at a computer is not the same as doing a brake job.
I get it with your point about profit margins, but set that a side for a minute. Lets talk about the trashy poroducts available to repair the cars out on the road. How can a shop provide quality warranty assurance. Rebuilding motors is community service, its a lost tradition thats back breaking and a waste of time and effort. It doesnot matter what your profit margin is parts are made elsewhere your better off getting halve life parts from lqk. Even dealer parts are knock off parts. Fraudazone also fucked up the diagnosis profit with their fake diagnostics.
people are charging more than 2x cost for parts? wtf?
The shop I run has a goal of 80% margin...
Profit is king. Cant take % and put it in the bank. Only take dollars to the bank
Interesting how the unemployed guy, that was fired, tell people how to run shops. Commenting on management services after two one hour classes.
Can someone please explain how 60% of $20 equals $50?
Smart people math😆. Business math, accounting.
You have this backwards. 60% Gross Margin means that you are keeping 60% of the sales price and spending 40% for the part. So, using the $50 sales price, you have a $30 profit ($50 * 0.60) and $20 cost ($50 * (1 - 0.60)).
@@brianpellerin6207 ok thank you!
In Texas
They base labor rate and
parts margine on your zip code. Becuase zip code shows aveage home cost and salarys.
Even dealerships 30 min to 1 hr a part have a diffrent rate based off the zip code
Upmarking dealer part is bad
Meanwhile at the dealer the service department is upmarking their "retail parts" 30% 😂😂😂
What a clown
60% margin with cheap parts is a loss...... because that thing is coming back in 60 days or less. You warranty the part, labor out of your ass and a dead bay thats not making money.
I make zero profit on the parts. Ever. 15 years doing it this was and make all my money on labor. Been eating good for a long time.
No discount on parts after 15 years? Or you're passing your discount to the customer?
Good for you! Thanks very much for being an honest person!
Non profits don't make money either.. You're making it on parts and labor , or just labor ..but you are making money.
curious what business do you own
Pretty sure he means his RUclips channel.
Easy to say for this guy, same reason he doesnt want to open his own business.
.... my shop triples the cost of parts and sells them to the customer. It's a christian brothers.
60% mark up is good. The shops in fl mark parts up like 150%
The shops I worked for it was a 10 percent profit margins on parts that were anything higher and your ripped off people.
as long as day do day jobs
I’m sorry I’ve followed youre channel for a long time and you’re videos lately are very bitter because you got fired and frankly insulting to business owners. I understand people gouge but I’d love to see youre business model from youre owned shops and wonder why they aren’t open anymore?
go'head and say this louder for the people in the back.
Please give me some video Ideas you would like me to cover, FYI, I have always covered both the positive and negative sides of this industry since I started this channel, so It is nothing new, as I am looking at comments from a video I did about 5 or 6 yrs ago about hack techs, 1 comment down in my comment feed on RUclips creator studio
@@flatratemaster honestly would love to hear about the shops you owned and why they are no longer operating. I am a shop owner of 5 years and love it. I am with a coaching company that I also love. What did you like or dislike about ownership etc…
@@jasonladzenski497 I have talked about on stream and in videos, main lesson I learned was leasing the building and not owning it, with almost no other options for relocating is not a good business plan
I have not seen a management company say you need 60% profit on parts
I’ve seen them say 60% GROSS PROFIT which is parts cost plus labor cost taken away from what is collected. That should put you at a GP of 60%
I kinda think your rant
Is really flawed. I don’t know anybody trying to mark up an engine 60%
Typically with large jobs, you focus on GP per hour.
I dunno man, I used to enjoy your channel, now you just seem bitter and angry 🤷🏻♂️
Why are so many repair shops rip-offs?
Because there's an endless supply of suckers out there
@@I_Died_2_Weeks_Ago That answer explains more than you wanted it to.
I agree it is stupid but I want them to keep doing it so I can do side work and comfortably cut their bill in half. 🤑🤑🤑
2nd
If your marking up aftermarket parts to oem part retail prices your a crook in my eyes.
FIRST!!!!🎉🎉🎉🎉
you wish 27 sec n no views
@@jimyep9971 I was the first comment buddd
I have not seen a management company say you need 60% profit on parts
I’ve seen them say 60% GROSS PROFIT which is parts cost plus labor cost taken away from what is collected. That should put you at a GP of 60%
I kinda think your rant
Is really flawed. I don’t know anybody trying to mark up an engine 60%
Typically with large jobs, you focus on GP per hour.
I dunno man, I used to enjoy your channel, now you just seem bitter and angry 🤷🏻♂️