Must-Have Skill for Automotive Shop Owners and Managers

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Average sale per repair order, gross profit margin (GPM), vehicle count, customer retention—these are the four critical areas you need to track to be profitable. Building a reputation for success with repairs and condition-based maintenance is also key.

But what if you’re better at fixing cars than managing a shop? What if you’re a good manager, but have trouble keeping pace with industry changes?

If there’s one key to locking in your business’ success, it’s knowing how to price services. Here’s a simple guide:

  • Price your services at 60% GPM ($100 sale = $40 in parts and labor).
  • Track your progress (get outside help if you need it).
  • Review each line item.
  • Check your margins on each estimate.
  • At the end of every business day, check your margins again against the parts installed and cost of labor.
  • Review weekly margins, and then monthly margins.
  • Continue checking your margins and adjusting prices until you meet your gross profit goals.

The 1 Skill You Need to Know

If that’s not simple enough, here’s another way to look at it:

Estimate your prices based on the cost of the parts and labor, plus the cost for profit.

The general rule of thumb is for a 60% gross profit margin (a blend of 70% on labor, 50% on parts and 40% on sublet), which pays for the costs of doing business as well as a net profit.

In truth, there is really only one way you can be profitable:

You have to know if you’re correctly pricing your services based on costs and profit margin.

And that goes for any service you’re offering: maintenance and repairs.

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