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