Automotive Service Shops: Avoid These Profit Margins No-No’s

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If your shop has been trying to stay profitable in these trying times with little success, I bet you’ve been using one of these less-than-profitable methods of generating revenue.

Automotive Service Shops: Avoid These Profit Margins No-No’s

Using cheap parts

Skimping on parts quality is a no-no. The practice ultimately leads to an unprofitable shop, too, because customers become dissatisfied.

Think about it: You try to make a buck by using low-quality parts, but when a customer’s vehicle breaks down again because of that part, you lose that customer’s business.

Trying to compete with other shops offering really cheap rates

Competing with a shop that offers the lowest prices just to get a bunch of customers looking for the lowest price possible is a lose-lose for everyone.

  • The low price puts you in a tight spot, and you end up delivering lower-quality service to make up for it.
  • Customers come back, but for the wrong reason, because you didn’t do the job right the first time.
  • Customers become frustrated, and they share the wrong kind of word-of-mouth about your business.

The right way to do profit margins

Instead of trying to gain a little bit of profit through low-quality parts or undercutting the shop down the street, focus on providing high-quality work and offering fair prices.

Let the customer know that since you use a fixed margin on parts, you pass on any savings from a lower-cost part directly to the customer’s invoice. At the same time, let them know that your shop’s warranty is based on maintaining the integrity of the vehicle using high-quality parts.

With the focus on the right tactics—doing good work, offering fair prices, and maintaining profit margins—your shop can successfully tackle 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