Automotive Service Profitability Depends on Customers: Here’s Why

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Automotive Service Profitability Depends on Customers: Here's Why

We know that automotive profitability depends on pricing services correctly and adopting a maintenance-based business model.

The average net profit for automotive service owners is not even 5 percent. If you fall into this category, you need to make some changes and get your fair share of market profits!

In a recent blog (“Must-Have Skills for Automotive Shop Owners and Managers”), we showed you a simple way to lock in your business’ success by setting prices according to a simple guideline:

  • 70% Gross Profit Margin (GPM) on tech labor (When you bill $100, you pay out $30)
  • 50% GPM on parts
  • 40% GPM on sublet

You’ve probably already realized that to meet these profit margins, you’ll have to raise prices.

And lose customers.

But it’s OK to lose some of your customers

Yes, you’ll lose some customers if your raise your prices, but they are probably the bottom 10% of your customers base anyway—the ones that are least profitable.

With the other 90 percent of your customers, you can now focus on this sales mantra:

Offer 100% of services needed
100% of the time to
100% of your customers.

And you’ll still increase profitability.

SI Auto Pro “Auto Care Made Easy”, previously licensed and distributed under the Mitchell1™ and Snap-On™ brands, is designed for automotive service and tire dealers using Mitchell1 Manager™/Shop Key™, R.O. Writer™, AllData™, MaxxTraxx™, Costar™, Lankar™, PACE Yes™, NapaTracs™, and other shop management computer systems. blog.AutoSI Auto Pro.com | Testimonials since 1999