Sharp Auto
New member
Hello - I have started a new auto shop in Chattanooga, Tenn and am interested in seeing how much parts and labor should be marked up to at least break even.
Auto Parts Mark-up
- Thread starter Sharp Auto
- Start date
Labour will be whatever you desire it to be, I would go with whatever is comparabe to other shops in your area. Generally parts suppliers will tell you what suggested retail price is and then give you a resellers price. You can mark your parts up to whatever the market will permit as well. So really it is up to you, I would suggest calling around to see what some other local shops are doing - you can call on the sly and ask what they are charging for various parts, then call your suppliers and ask what your price on those parts would be; then go from there as a benchmark.
To get customers in the door you could chop up your door rate a little as an incentive; but again entirely up to you. Here in Northern Canada our shop labour rate is 105 an hour for commercial, 100 an hour for private. Parts markup varies depending on price 15-40 percent.
Good luck.
To get customers in the door you could chop up your door rate a little as an incentive; but again entirely up to you. Here in Northern Canada our shop labour rate is 105 an hour for commercial, 100 an hour for private. Parts markup varies depending on price 15-40 percent.
Good luck.
Falcon67
Well-known member
When I worked the counter, we gave commercial operators 10% off sell price and they usually costed those parts to the customer at what ever our books said was list price. That came to around a 30% markup more or less for the commercial client. The price spread varies depending on the part and the maker, usually. But our price to the public was generally 20% lower than mfg list. This was mid 1970s - I'd bet you'll want 35~40% to cover todays expenses. I got $3/hr to work the counter and run parts, don't think you'll find that kind of deal these days. Overhead for a repair business has got to be a hella lot higher now that it was in 1975.
If you're new you to need offer something the other guys don't, like a cheaper labour rate to bring in customers. The going rate where I am is $90/hr for most places and another $15 or so for dealerships. My son opened a shop a year ago and charges $65/hr, he also has a senior rate that's even less, you need volume.
jimindm
Well-known member
Your labor should somewhat be based on what it costs you to open the door every day. Pick a number of billable hours that you can charge per day. Every shop is different. Do you have a guy that is only turning wrenches, that does not have customer interaction, does not have to answer phone, if so they should be close to billable time for hours worked. On the other hand if you are interupted with phone calls, customers dropping off, picking up cars, writing estimates, etc, all of that time builds up. A 4 hour job maybe 5.5 or 6.
Do not figure parts in your number. As you buy them, you sell them. No real overhead Parts bill might be thousands one month and hundreds the next. I mostly double my cost on parts depending on price. Most you can. As the cost goes up, the markup goes down.
Do not get to caught up in what other shops charge. Take a AC charge for example. Shops near me charge 50 -110 to hook up the machine. Some charge by the pound others charge by ounce, some just charge a fixed price for freon. In the end an AC charge is very close to the same overall price, shop to shop.
Just remember you are the boss, figure out what you have to make everyday to open the front door. You will get customers and you will lose customers no matter what. You have to do what makes you happy. If every one gave away oil changes, does that mean you have to give them away too. Think outside of the box. Its easy to do what everyone else is doing. Do what you have to do, to make ends meet, and to take some home for yourself.
Do not figure parts in your number. As you buy them, you sell them. No real overhead Parts bill might be thousands one month and hundreds the next. I mostly double my cost on parts depending on price. Most you can. As the cost goes up, the markup goes down.
Do not get to caught up in what other shops charge. Take a AC charge for example. Shops near me charge 50 -110 to hook up the machine. Some charge by the pound others charge by ounce, some just charge a fixed price for freon. In the end an AC charge is very close to the same overall price, shop to shop.
Just remember you are the boss, figure out what you have to make everyday to open the front door. You will get customers and you will lose customers no matter what. You have to do what makes you happy. If every one gave away oil changes, does that mean you have to give them away too. Think outside of the box. Its easy to do what everyone else is doing. Do what you have to do, to make ends meet, and to take some home for yourself.
csp
Well-known member
46Nash I had the same thought.
You have to know what overhead is needed to cover to determine any markup. It's all part of a business plan that should have been established first.
Are you in the business to break even or to profit? Why settle for break even, unless you have some other sort of income to pay your personal bills and put food on the table.
You have to know what overhead is needed to cover to determine any markup. It's all part of a business plan that should have been established first.
Are you in the business to break even or to profit? Why settle for break even, unless you have some other sort of income to pay your personal bills and put food on the table.
double your parts cost and add a little.....just noticed jimindm's post. Its about spot on to what our shop does. Dealer parts dont get doubled, and usually sold less than list on those as well.
Remember if you are offering a warranty, parts will fail and it will be no fault of yours or the customer. You need to recoup as much as that loss as possible and you do that by making money on the part that you sell.
Many (but not all) parts houses will offer a warranty on parts and labor. The downside is labor claims are usually a bunch of paperwork and they dont pay the shop rate, but it will help you recoup some of the costs. Dont make a habit of it or they may cut you off. We save it for instances where their part fails and does serious damage. (I had a continental tbelt tensioner fail on a Honda and wipe out the head. < they paid for all the damage)
This really should have been all figured out long before opening the doors.
Remember if you are offering a warranty, parts will fail and it will be no fault of yours or the customer. You need to recoup as much as that loss as possible and you do that by making money on the part that you sell.
Many (but not all) parts houses will offer a warranty on parts and labor. The downside is labor claims are usually a bunch of paperwork and they dont pay the shop rate, but it will help you recoup some of the costs. Dont make a habit of it or they may cut you off. We save it for instances where their part fails and does serious damage. (I had a continental tbelt tensioner fail on a Honda and wipe out the head. < they paid for all the damage)
This really should have been all figured out long before opening the doors.
I disagree:
I owned an AAMCO Trans for 18 yrs and made a lot of money and yet gave the customer what he paid for, nothing less.
"Volume" in the auto repair business will kill you. You want"quality" high tickets and low car count thus keeping your parts cost under 20%. Do a five year projection. Sell quality, dependability and mostly "yourself".
If a customer says he can get the same for less, let the job go.
When I had a transmission ready to be repaired (disassembled) a requirement of my center manager and builder was to invite the customer in for a "bench" review. Sometimes this would take as much as 1-2 hours to go over needed parts.
Face it, the auto business has the reputation as a "rip off" and in some cases if not most is correct.
Therefore it is vital to build that customer confidence. Don't just telephone the customer and tell him the amount of the bill. Any idiot can do that. Treat him as you would like to be treated.
And yes I know there are AAMCO's which are not on the up and up also.
God Bless
John
VWPORSCHEGT3
Banned
you need to figure out what your overhead is first man... that means anything that causes money to go out the door
He is right.
Get someone, your account etc:, to make up a business plan, preferably five year.
John
Fedwrench
ALLIANCE MEMBER
You need to get yourself a shop management software system. There are unseen costs from insurance to keeping the lights on. Consider becoming a NAPA car care center or align yourself with a different parts brand.
GeorgiaHybrid
Well-known member
First off, what part of Chattanooga are you located? Hixon, North Shore and way out Branierd Road will pay a higher rate than Rossville, East Lake, East Chattanooga, etc. The rates in town range from $50 and hour to $75 an hour at independent shops and around $90 to $110 for the dealerships. Parts are bought at commercial discount and sold at list.
79firebird
Well-known member
Avrage shop rate where i am is $75-90 a hour markup depends on part and cost. Dont go with napa ive been screwed by them. eg ordered a hood retail was $300 my cost was $55 i sold it for $125 Still cheaper then any one eals and i still made money
I disagree with you disagreeing
You ran a "chain" shop, that alone will get you business. If you open "John's Auto" on some back road where you can afford the lease, what do you do to bring people in? You have to offer something to get the ball rolling. When I say volume I don't mean you have 100 cars backed up down the road, just a steady flow to keep you busy. You can charge $120/hr and work 2 hours a day or a reasonable rate and stay busy. Naturally your overhead costs have to be considered, you have to make money but starting any business takes time to get off the ground.
BillK
Well-known member
Sharp,
If you are not already a member, you really need to sign up on the iATN web site www.iATN.net . It is free and their Shop Management Forum ( and all of the other forums) have a wealth of information that money just cant buy. Ask your question there and you will see what I mean.
If you are not already a member, you really need to sign up on the iATN web site www.iATN.net . It is free and their Shop Management Forum ( and all of the other forums) have a wealth of information that money just cant buy. Ask your question there and you will see what I mean.
Generally parts should sell at list.
There are cases that going above or below make sense.
Below list is when your cost is less than half and the part is an expensive one you make customer feel good, you make some still (and the some is not a trivial amount because of percentages of big numbers can still be big numbers), and often times you will have more labor on those jobs to get even more margin.
Above list when part is cheap and you have more time invested in getting and handling part than the part costs and odds are you don't end up with much billable labor to make up for it there. Even the small jobs need to make something to the bottom line but not all of them will but done right build goodwill.
Sometimes losing a little while working is better than making nothing doing nothing, do it too often and it is called a charity.
There are cases that going above or below make sense.
Below list is when your cost is less than half and the part is an expensive one you make customer feel good, you make some still (and the some is not a trivial amount because of percentages of big numbers can still be big numbers), and often times you will have more labor on those jobs to get even more margin.
Above list when part is cheap and you have more time invested in getting and handling part than the part costs and odds are you don't end up with much billable labor to make up for it there. Even the small jobs need to make something to the bottom line but not all of them will but done right build goodwill.
Sometimes losing a little while working is better than making nothing doing nothing, do it too often and it is called a charity.
long handles
Well-known member
Charge your cost for parts and don't charge for labor, and you'll have more customers than you can shake a stick at.
Seriously, if your goal is to at least break even, your business won't even make it a year.
Good rule of thumb is that an employee needs to bill ~3x his wages.
Sounds like a case of ready, fire, aim. This is all stuff that should have been worked out well before starting the new shop.
People complain about what things cost but look at the guys that own many of these businesses - they aren't getting rich, they do okay but most aren't swimming in cash, and the ones that are will bail out as soon as they can figure a way releverage the money into something bigger.
Sounds like a case of ready, fire, aim. This is all stuff that should have been worked out well before starting the new shop.
People complain about what things cost but look at the guys that own many of these businesses - they aren't getting rich, they do okay but most aren't swimming in cash, and the ones that are will bail out as soon as they can figure a way releverage the money into something bigger.
trainer
Well-known member
If you never ever get a complaint about your prices then you aren't charging enough. That said, there is one shop locally that i won't use because they charge far too much for very, very average work. (I was charged $800 in labour for a simple four wheel disc brake job ....all they did was change pads and rotors)
Keep a close eye on your revenue and expenses, especially for the first few months. If you identify an area that is losing money or not producing as much as you neeed, then make changes.
If you accept credit and debit cards, then understand what the fees will be and make certain you cover that.
Keep a close eye on your revenue and expenses, especially for the first few months. If you identify an area that is losing money or not producing as much as you neeed, then make changes.
If you accept credit and debit cards, then understand what the fees will be and make certain you cover that.
stingray1966
Well-known member
AAMCO Trans
I remember when Tony opened the very first AAMCO on Front st in Philly way back in the early 60s
I remember when Tony opened the very first AAMCO on Front st in Philly way back in the early 60s
nehog
Well-known member
When I buy from CarQuest, my invoices have my price (trade) and the MSRP price. (As well, they give me the % markup, but that's useless since they supply MSRP.) Customer always pays MSRP around here, but as for labor I can't tell you. Part of that is experience, and how good you are.
OP
Sharp Auto
New member
My shop is in Tiftonia on Cummings Hwy. Sharp's Automotive. Used to be Sharp's Tire and Alighment before Leo Sharp passed away. My son, his brother, their mother and I tok a leap of faith and assumed the business. Sharp's has been open for 70 years. I've been finding out that we are selling our service and parts at too low of a price. We were at $60 for labor and only marking up parts 20%. That is not keeping the doors open. Thanks for interest. Would like to talk more. Where are you at?
csp
Well-known member
Did you assume ownership of any prior financial data that you could use to determine what their markup was and if it was profitable?
hifi_hokie
Well-known member
Even Excel would be helpful, to at least lay out a P&L, play with some variables and see how things get affected...
Lots of free templates out there to use/tweak as needed
GeorgiaHybrid
Well-known member
Not far from you...Live in Trenton and work in Rossville. In fact, I will be driving by your place on the way home tonight as the wife and I are going to eat Thai tonight in St Elmo. Dad's garage was in East Chattanooga back when it was hwy 58 before they moved the signs and made it hwy 17.
You need to market the folks over in Cummings Cove with some advertising if you need much more than $70/hour in that area. North Dade county and Tiftonia are not what you call "rich" areas. Shoot me a PM with a phone number and I will give you a call.
mrpowderkeg
Well-known member
When I sold auto parts while in college, the general thing was the shops selling the parts they bought from us for 3 times the cost of what they purchased the parts for.
fordbroncodave
Well-known member
- Joined
- Sep 15, 2009
- Messages
- 4,555
usually around here, most shops charge their customers list price for the part that was installed. now, the auto parts store that sells to the shop, they generally get a good deal on the part if they hold an account.
SO, the customer is paying for the entire part and possibly then some.
nothing wrong with this method but don't be rude to them if the part fails and they want you to replace it again
SO, the customer is paying for the entire part and possibly then some.
nothing wrong with this method but don't be rude to them if the part fails and they want you to replace it again
The more you buy from a supplier the better price you will on the parts.The volume drives the discounts.Think about this for a minute: why would a shop that buys $300.00 a month in parts, think he can get his parts for the same price as a shop that buys $3000 a month. Align yourself with a supplier and stick with them. Be it NAPA, The Zone or whomever. I know NAPA has a great AUTO CARE program that allows you to offer your customers a nation wide warranty. It also allows you to tie into the NAPA store computer to check parts yourself and see your price and list price. The NAPA Auto Care program also has a rebate every 1/4 depending again on volume. Most NAPA stores are very interested in your business and usually have an outside salesman that will call on you weekly. Napa is also very interested in the well being of your business and are constantly providing training (not selling) classes for your techs. They also provide training classes for the business owner and his sales staff. Get yourself educated.
Again check your suppliers and see what they can offer you, you may be surprised.
Again check your suppliers and see what they can offer you, you may be surprised.
Northstar
Well-known member
Get your suppliers in line ASAP. Open charge accounts if you can, or pay COD-either way has advantages. We give a discount of 1% additional if your charge is paid in full each month, done as a credit for the following month's bill. COD is nice because you can never be past due on your parts bill.
as for markup, I wouldn't charge over your supplier's list proice. As a business practice, I would even tout that to show that you don't overcharge. You charge the same price as any person buying the part directly. FInd your wholesale suppliers. For FoMoCo/Delco parts, find your local Factory Motor Parts warehouse. There's others too. Even dealer parts can be bought at a decent discount if you search them out. Check out the dealers and find who's the big guns for wholesale parts selling. Many dealerships are part of LMGs (Local Marketing Groups) who band together and sometimes even pool deliveries to farther out shops. We have a general discount of List -20%, but go as deep as -37% to some of the largest shops in the area, especially since we can buy at higher volume and deeper discounts ourself. We don't share our suppliers with our buyers. That's for us to know, plus a shop that spreads its buying out does less volume with a supplier and may get a lesser discount then.
as for markup, I wouldn't charge over your supplier's list proice. As a business practice, I would even tout that to show that you don't overcharge. You charge the same price as any person buying the part directly. FInd your wholesale suppliers. For FoMoCo/Delco parts, find your local Factory Motor Parts warehouse. There's others too. Even dealer parts can be bought at a decent discount if you search them out. Check out the dealers and find who's the big guns for wholesale parts selling. Many dealerships are part of LMGs (Local Marketing Groups) who band together and sometimes even pool deliveries to farther out shops. We have a general discount of List -20%, but go as deep as -37% to some of the largest shops in the area, especially since we can buy at higher volume and deeper discounts ourself. We don't share our suppliers with our buyers. That's for us to know, plus a shop that spreads its buying out does less volume with a supplier and may get a lesser discount then.
Mark your parts up at least 30%, 50% if at all possible. Labor in your area, I would think at least $65/hr, probably a fair bit more. Unless you're a complete outsider, you should be able to talk to some area shops and get an idea what the market is like.
If you have to have a cheap hourly rate to get them in, simply charge a couple of tenths more than suggested "book" time. Gets you the money you need without having to justify your higher hourly rate. Some parts will have better margins-anything you have to get from a dealer won't have much.
The best thing you can do is stay small for now. Low overhead wins.
Establish a reputation for excellent work and customer service.
The best thing you can do is stay small for now. Low overhead wins.
Establish a reputation for excellent work and customer service.
My company manufactures custom machinery, mainly man-lift type machines. I design them and figure out what we should charge for specials.
Roughly speaking, we determine our overhead each year (total expenses minus shop labor) and divide by the number of shop labor hours. This gives us a dollar amount that we charge on top of the actual hourly rate for our direct labor (production workers). We also charge 20% of parts and material for handling / storage / (gravy) and add in 10 to sky's the limit % for profit, depending how much of a pain in the **** a job is. Then we add in one time costs like engineering for the whole project.
So, if our average labor cost is $17 / hr, and we charge $51 / hour for overhead, we effectively charge:
(labor hours x $68 + material x 1.20) x 1.10 (or whatever for profit) + (engineering cost/# of units)
per each identical machine on the same order. When all that is done, we hope we made money....
If you track it all, you should be able to update your rates based on all factors every 3 months or yearly or every 5 years...
Roughly speaking, we determine our overhead each year (total expenses minus shop labor) and divide by the number of shop labor hours. This gives us a dollar amount that we charge on top of the actual hourly rate for our direct labor (production workers). We also charge 20% of parts and material for handling / storage / (gravy) and add in 10 to sky's the limit % for profit, depending how much of a pain in the **** a job is. Then we add in one time costs like engineering for the whole project.
So, if our average labor cost is $17 / hr, and we charge $51 / hour for overhead, we effectively charge:
(labor hours x $68 + material x 1.20) x 1.10 (or whatever for profit) + (engineering cost/# of units)
per each identical machine on the same order. When all that is done, we hope we made money....
If you track it all, you should be able to update your rates based on all factors every 3 months or yearly or every 5 years...
I ran 2 shops, in a 20 year period.
If I ever opened my own shop, I would look to AAMCO, as my first choice.
"JOHN 1" what did you do w/ your AAMCO shop? why?
My sister died of pancreatic cancer and I was just truly devastated for years and needed a long rest.
God Bless
John
Wastedwagesracing
Banned
- Joined
- Nov 21, 2007
- Messages
- 613
I'd also suggest you read and understand the difference between markup and margin.
http://www.buildingtrade.org.uk/articles/markup_or_margin.html
http://www.buildingtrade.org.uk/articles/markup_or_margin.html
Last edited:
DPelletier
Well-known member
- Joined
- Oct 23, 2012
- Messages
- 170
Yep, that's the way to do it; charging more for parts than parts store list prices will just cost you customers and charging less just makes little business sense. FWIW, I was formerly the assistant manager in an large autoparts chain store.
Dave
AeroNautiCal
Well-known member
^^^ This!