Pricing markup matrix advice

phynny · August 8, 2013

We use Mitchell and I find myself constantly changing the prices that it spits out even though I set up the pricing matrix... Anyone willing to share how they split it up and what figures they use? I want to give a fair price but I also don't want to short myself,

Jeff · August 8, 2013

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CARMandP · August 8, 2013

I completely agree with Jeff on this one and its been a hard lesson to learn. You MUST make a certain amount of money to stay in business and parts markup is required. I also use Mitchell and have set my matrix up in the normal tables. I would be glad to send you this information if you really want it. Don't really care to "publicly" post that information Like Jeff I compare my prices to what the list price of the part ends up being for an example. This isn't always accurate but is normally a pretty good indicator.

HarrytheCarGeek · August 8, 2013

I use Mitchell also. I dont find myself lowering, more often raising the price. If I find my matrix is far below recommended list I will raise the price. It is all about profit per ro/ hour/ day/ week. I used to find myself lowering prices because i thought it was to high or was afraid the customer would balk at the job. Then a wise old shop owner pointed something out to me. If the customer cant afford a $200 repair odds are they cant afford the $175 either. We have to be profitable or we wont be here next month. Just my $2.98 (2 cents with inflation and health care tax)

This is a great point that must be highlighted!

I make it a point to take at least a day off a month to go price shopping my competition. I also take the opportunity to see their setup and operations and whatever else I can learn from them. I have been doing that for the past year and a half and have learn that I was under-pricing much of my work.

Using this tactic I have been able to raise my gross margin by 3% to 5%.

phynny · August 10, 2013

If you wouldn't mind sharing that would be fantastic. My email is [email protected]

CARMandP · August 12, 2013

Email sent

phynny · August 13, 2013

Thanks a lot, ours is set up almost identically

Exclusive Auto Care · September 10, 2013

I dont have a price matrix in effect. How can I figure the price matrix for my shop?

ATSAutomotive · September 10, 2013

Best thing I did Phynny was get a Service Advisor. His job is not just to create sales but to hold profit margin as well. I average 51.66% parts margin rather than the 27.10% when I was up front. I'm just too nice of a person and help others too much. Very difficult thing to let go of but I found for my business it was one of the best decisions I made.

nmikmik · September 10, 2013

I dont have a price matrix in effect. How can I figure the price matrix for my shop?

If hiring a SA is not in your immediate plans, start with computerizing your shop. Doing it by hand is admirable but also a huge pain if you need to make even a minute change in said matrix. You don't have to spend thousands of $ on it either, at least in the beginning.

https://www.google.com/search?q=auto+repiar+shop+managemant+soeftware+free&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a

http://www.autoshopowner.com/topic/287-what-auto-repair-management-software-are-you-using/

phynny · September 11, 2013

Best thing I did Phynny was get a Service Advisor. His job is not just to create sales but to hold profit margin as well. I average 51.66% parts margin rather than the 27.10% when I was up front. I'm just too nice of a person and help others too much. Very difficult thing to let go of but I found for my business it was one of the best decisions I made.

I agree that if you can't handle it yourself then you should hire someone to do it. I on the other hand, left a job in which I made more in my 1.5 hours of overtime per day then most people make in a week. I only say this to explain that I own a shop because I enjoy the work and like providing a much needed honest service but I'm not in the mood for short-changing my family.

ncsvoboda7 · April 9, 2014

I completely agree with Jeff on this one and its been a hard lesson to learn. You MUST make a certain amount of money to stay in business and parts markup is required. I also use Mitchell and have set my matrix up in the normal tables. I would be glad to send you this information if you really want it. Don't really care to "publicly" post that information Like Jeff I compare my prices to what the list price of the part ends up being for an example. This isn't always accurate but is normally a pretty good indicator.

Hey i read through this thread and i myself am struggling with putting a working parts pricing matrix together, i was wondering if there would be anyway you would share your matrix with me as well?? Email: [email protected] it would be much appreciated thanks!

bstewart · April 9, 2014

Here is an EXAMPLE parts matrix, copied from Mitch Schneider's book, From Intent to Implementation:

This is for normally sourced parts

$Part cost Gross Margin Divide By

0.01-5.00 70.0% 0.30

5.01-10.00 60.0% 0.40

10.01-75.00 55.0% 0.45

75.01-200.00 50.0% 0.50

200.01-500.00 42.0% 0.58

500.01-750.00 35.0% 0.65

750.01 and up 30.0% 0.70

This is for dealer sourced parts

$Part cost Gross Margin Divide By

0.01-1.00 70.0% 0.30

1.01-5.00 65.0% 0.35

5.01-25.00 60.0% 0.40

25.01-75.00 55.0% 0.45

75.01-500.00 42.0% 0.58

500.01-750.00 32.0% 0.68

750.01 and up 28.0% 0.72

Note that this is an EXAMPLE, you could start with these numbers, but you would HAVE to adjust them to suit your own shop's desired parts margins.

In fact, you should be constantly looking at your parts margin anyways, and tweaking your matrices to reflect changes in your business environment.

pattersonautobody · June 4, 2014

We use a matrix, we want above 50% profit on most parts. However, if the list price is higher, we go with the list price. Further, if there is a comparable but higher list price from a competing parts store, then we go with the highest of the list prices. Better yet, if you are getting aftermarket OE parts (not "OE equivalent" that's different) from a Worldpac or whatever, sell them at the dealer list if it is higher.

Even after doing all of this, when tires and dealer parts are included, it is hard to crack above 35% parts profit. Any suggestions to make it any higher aside from buy from the dealer as little as possible?

ncautoshop · June 4, 2014

We use a matrix, we want above 50% profit on most parts. However, if the list price is higher, we go with the list price. Further, if there is a comparable but higher list price from a competing parts store, then we go with the highest of the list prices. Better yet, if you are getting aftermarket OE parts (not "OE equivalent" that's different) from a Worldpac or whatever, sell them at the dealer list if it is higher.

Even after doing all of this, when tires and dealer parts are included, it is hard to crack above 35% parts profit. Any suggestions to make it any higher aside from buy from the dealer as little as possible?

We don't use dealer list. I'm the one fixing it if it breaks, I'm the one that determines the price of the part lol.

I've completely stopped worrying about my pricing being too high, the only parts we sell at MAP or list would be performance/diesel but we also charge additional labor. I'm at the highest pricing I've ever been, and while a few months were slow this year I've currently got more work than I can handle (3-4 weeks out). Our car count is up a bit and our ARO for May is around $1,000.

I do good work, when I'm done it's done right. I deserve to be fairly compensated. Of course I'm making sure I'm not using outrageous margins but most jobs run 50-60% on parts.

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xrac · June 8, 2014

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[email protected] · July 3, 2014

I am a relatively new auto shop and I am very busy. The lord had blessed me well. I currently call the autopart store and ask what the customer walk in price is. I add 25% to that and it works well enough for a small overhead low cost shop. So I make the 25% and the discount on the part. I would like to start using a parts pricing matrix.

Could someone email me what theirs looks like so I can get an idea of something better. I am not afraid of raising prices because I have done it a few times already and nobody had really cried yet.

Thank you and God bless.

[email protected]

ScottSpec · July 7, 2014

If hiring a SA is not in your immediate plans, start with computerizing your shop. Doing it by hand is admirable but also a huge pain if you need to make even a minute change in said matrix. You don't have to spend thousands of $ on it either, at least in the beginning.

https://www.google.com/search?q=auto+repiar+shop+managemant+soeftware+free&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a

http://www.autoshopowner.com/topic/287-what-auto-repair-management-software-are-you-using/

There a couple of typos in the search parameters of the first link. repiar and soeftware. Google corrects them without any issue though. And I love it because my SMS site comes up as #3 in the organic search www.smotgoinfo.com

Edited July 7, 2014 by ScottSpec

alfredauto · July 20, 2014

I use common sense when it applies to my pricing matrix. I discount the parts for commonly used items that people see on the front page of the Orilleys flyer and add a little to the more obscure parts. If I charged $8 per quart of oil I wouldn't do so well.

flacvabeach · July 20, 2014

I'm sorry, but using common sense left me with mediocre margins and low profits. Get a management system that employs price matrix and stick to it. Train your SAs that discounts other than planned promotions are not allowed. Fire them if they continue to discount just to make sales. Get a coach who will sit down with you weekly and make you compare your numbers to established baselines. We average 59% or better margin on parts and 56% or better GPM by strict adherence to established processes.

Mark Anderton

First Landing Autocare - two locations

The Hybrid Shop of Hampton Roads

First Landing Auto Sales

firstlandingautocare.com

hybrid757.com

webuyuglyhybrids.com

firstlandingautosales.com

SES · October 1, 2014

Lively discussion.
Great Info!

Here's a tool that might be helpful as well.

http://www.napaautocare.com/estimator.aspx

cdhowell · November 20, 2014

I recently brought Mitchell into the shop and learning the program. The Rep set up a quick Matrix that left me gasping for air. I too would like to see a copy of some ones working parts matrix if some one is willing to share. 75% mark up on an engine or tranny seems excessive to me. Are you really getting this kind of mark up?

E-mail [email protected]

flacvabeach · November 20, 2014

Sounds high to me. Our matrix in ROWriter is set up to drive us towards a 61% margin (portion of the retail price that is profit) on parts overall. On the high end on engines, trannies etc. our margin is about 20%. Not a great ROI, so we would rather be selling the humdrum water pumps and alternators that are in the "fat" part of our matrix.

xrac · January 13, 2015

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SMMotors · January 13, 2015

On dealer parts I try to tack on a few dollars above list price plus I bump the labor to make up for the lost parts markup. Our worst parts pricing is on the BMW, Mercedes, and VW lines. The dealer only gives us 10% discount off list. Our best dealer pricing is from Ford where we get a 40% discount on most stuff. Everyone else is about 20% off. We have to watch Toyota because they sometimes inflate list price to make you feel better about the discount.

Have you looked at ssf. They are primarily oe euro with a ton of genuine oe parts at 60-80% below dealer for the same part. Now that doesn't happen all the time, but more often then not, it does. I'd be happy to give you my login so you could look around their site and get an idea. It's not open to the public or anyone who doesn't have an account. Let me know.

KMS · January 14, 2015

There are many good matrix ideas said already. You want to make on average 60% on parts. Remember, you don't always have to be the cheapest, you just have to be the best with the highest quality of customer service. Customer service sells your shop not the price of the repair!

ajnealey · March 26, 2015

Been doing a lot of research on parts margins and currently use a matrix for my parts that I'm happy with.

I'm curious though, what are your margins for things like fluids? engine oil, coolant, etc.? I'm getting almost 35% GPM on engine oil, my biggest consumable. And I use a flat 50% GPM for all other fluids.

Oil filters, another big consumable. If I put oil filters through the parts matrix, oil change prices sky rocket. I've been keeping them at list if it's a dealer sourced part or 50% GPM if it's aftermarket.

Also, how about batteries? I'm currently at 30% GPM

Tires? I fluctuate between 10%-20% GPM on my own matrix

Just curious what other shop owners are doing.

Thanks!

AJ

mspecperformance · March 26, 2015

Been doing a lot of research on parts margins and currently use a matrix for my parts that I'm happy with.

I'm curious though, what are your margins for things like fluids? engine oil, coolant, etc.? I'm getting almost 35% GPM on engine oil, my biggest consumable. And I use a flat 50% GPM for all other fluids.

Oil filters, another big consumable. If I put oil filters through the parts matrix, oil change prices sky rocket. I've been keeping them at list if it's a dealer sourced part or 50% GPM if it's aftermarket.

Also, how about batteries? I'm currently at 30% GPM

Tires? I fluctuate between 10%-20% GPM on my own matrix

Just curious what other shop owners are doing.

Thanks!

AJ

I have a similar issue with tires and batteries. I have since changed my strategy on tires and package them with a tire protection program through ATD. I run tires through my matrix which usually leaves me above 30% GP on tires. I have only started doing this and my tire sales were abysmal to start with so I'll know in 6 months or so whether or not my efforts are netting me better results.

Batteries I try to mark up at least to list+ a few percent. Batteries are a sensitive area since like oil changes, wipers, and tires they are seen as "commodities". Consumer's thoughts are "why buy a gallon of milk for more money." The biggest hit I take is dealer batteries. I work on all German especially BMW and BMWs do not respond well to non dealer batteries. My clientele also expects we use genuine BMW batteries so it leaves me in a pickle when it comes time to mark up batteries without causing a potential problem over price with my customers.

Dino1 · March 29, 2015

We use a Pricing Matrix in Mitchell Manager and usually carry a 56-62% profit on parts. The image below is a snapshot of our Price Markup Matrix.

Edited March 29, 2015 by Dino1

cdhowell · March 30, 2015

Sorry no image.

parkfallsautomotive · March 31, 2015

I am currently using RO Writer Shop Management program. I am just wondering if anyone else out there is using the same program? I am just looking to compare some notes on how others are pricing in their area. We live in a small community but have 9 other shops within a 7 mile radius. If anyone has any input it would be great to hear from other shops. We currently charge $75.00/hr. labor rate and $97.50/hr. for diagnostic rate. We are pretty comparable with the other shops around the area that are our size. You can also email me at [email protected] if you would like. I am really looking forward to networking with others on here.

ATLAuto · March 31, 2015

...I am just looking to compare some notes on how others are pricing in their area. We live in a small community but have 9 other shops within a 7 mile radius...

I would call each shop and anonymously price a standard job (ie an alternator). This will give you a rough idea of their labor rate and parts matrix.

My guess is that most in a small community are not matrixing parts.

carbtech72 · March 31, 2015

What is a good markup strategy for used parts some of my customers just can't afford new parts.

alfredauto · April 1, 2015

Find customers that can afford to pay you. Not to be a snob but used parts are a lot more work for a lot less money. How can you or anyone guarantee a used part? Its impossible. And i guarantee when your looks good used part fails that customer will be back, and if they didnt have any money the first time to fix it right they certainly wont have any to pay you to do the job twice. Stationary body parts are really the only exception.

parkfallsautomotive · April 1, 2015

I agree on the used parts issue. I don't deal in used parts because of the issue that they may not be operable and there is no warranty on any used part. Even still, if the part fails a few months down the road the customer insists that you warranty it. I have run into that in the past where will get a used part and it is broken in some way or it is not functional. We also have gotten out of the habit of allowing customers to bring in their own supplied parts whether they are new or not. You lose on the profit margin and you can not operate or survive on labor time alone. Alfredauto brings up a valid point about someone not being able to afford the work being done. Although I feel for them, we have to make a living too. As much as you would like to help someone out and keep their expenses as low as possible, I have found that it will come back around to bite you if you chose to go the used part direction. As much as I hate to say no to someone or turn them away, I have just gotten in the habit of telling people that is not the way we do repairs. It is either the right way or no way. We do not like to cobble things either. It is a hard pill to swallow but you have to look out for yourself and the success of your business first.

mspecperformance · April 1, 2015

Installing used parts you always lose. You double lose with the comebacks. You exponentially lose if the customer who is already not an ideal on since they want to use used parts decides to blame you and drag your shop name in the mud over a used part not working properly. Remember that its always our fault lol.

carbtech72 · April 2, 2015

I totally agree with you alfredauto. I would love to have good well paying customers. But sometime we have to play the hand we are dealt.

I try to avoid installing used parts whenever possible. And when the customer wants used parts because it's cheaper I usually have them buy the parts themselves. But there are always those few who insist that I buy them. Of course they are fully aware there is no warranty and even sign off on that on the RO. But some days you just need the money and money from a used part is better than no money at all.

cdhowell · April 2, 2015

I think the used parts needs its own thread.

Marksas · April 9, 2015

I'm a little late to this thread but I have had some interesting thoughts as of late. We use RO Writer and It seems like we struggle with parts margins as last year we ended up with a 42% parts margin overall and we really want to be 55-60% we improved it 4% last year after making adjustments mid year. We took the average cost of every part sold which was around $36 excluding oils and filters. We felt like we could increase the margin significantly on a certain sweet spot in which nobody would really notice. Obviously we still have a long way to go and we are continually making adjustments. I remember we we made the first adjustments one of the techs who was involved in it said "I guess we will just have to look at the reaction of the customer and if they say something along the lines of "oh sh... then we may have went a little to far to fast, but it sounds to me like our customers have been getting repair parts on sale". We also made changes to our labor pricing also but our labor margins were 60% after paying hefty EOY bonuses which I am totally good with. I have a very stable technician base.

My thinking is our customers aren't going to the parts store to pickup parts to repair the car themselves so they don't know how much parts cost. I have no problem explaining to those few that want to question why they can buy a part for 50% or less than I charged them. It's no different than you going to a restaurant or bar and ordering a drink. The markup is huge. I can buy a six pack of beer for what most places charge for one beer but we pay it all the time. Even the dealers are doing away with published list prices and are using a pricing matrix. I recently had to take a vehicle to a GM dealer for some repairs to a reverse sensing system only because we were so busy that we simply could not get to it in a timely manner and it was one of collision shop vehicles. When I received the bill they had charged us 30% ABOVE list for the parts. When I questioned it they assured me that they did not charge me "inflation" on the parts. So why should we be worried about what list is? And they had the vehicle for 3 weeks and could not fix it. We ended up fixing it as we had a little more time at that point. I am still waiting for my "Inflation" rebate check from them.

We would always find ourselves adjusting prices because we felt some were too expensive. That's part of the reason I don't write service as I have way to many "friends". After hiring a new Service Writer who is totally green we never told him we could adjust prices to see what the reaction would be. What's interesting is that he has no problem selling with our matrix and not adjusting prices so in essence we have convinced ourselves that we should adjust prices. We rarely adjust prices now but still need to work on the matrix. I would love to see what some shops best practice is for parts matrix because we know we can improve in this area.

xrac · April 9, 2015

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KMS · April 10, 2015

They are way to many shops out there worrying about how to profit correctly. Just charge what you need to charge. You will be higher, lower, and equal to other shops. My rule of thumb is find a profit margin you are most comfortable with. Try not to piss customers off though. My goal is 60%. Some jobs are more and some are less. Just play around with it and see what is working best for you.

Gary A · April 11, 2015

We took the average cost of every part sold which was around $36 excluding oils and filters.

I've never heard about this before. Sounds like a good idea. How did you go about getting the average of every part sold?

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[email protected] · March 30, 2016

Can someone please email me a part matrix that works for them .I would like to get above a 50%. I plan on expanding here in the next year and need to start preparing for changes. Thank you.

[email protected]

HarrytheCarGeek · March 30, 2016

Can someone please email me a part matrix that works for them .I would like to get above a 50%. I plan on expanding here in the next year and need to start preparing for changes. Thank you.

[email protected]

Read the thread, bstewart, answered your question on post #13

lakesidetire · April 8, 2016

Can any or all that will email me a good working up to date price matrix you are using on Mitchell's 1. Thanks guys . Email is [email protected]

degeorge · April 10, 2016

I sure would love to have the price matrix that is being spoken of here in this thread. In a small farm community and people are very price conscious and at times will drive a distance to save a buck or two. Please help if you can.

[email protected]

Thanks all!

sparkerauto · September 6, 2016

sorry or bringing up an old topic but I have a question. im confused with the matrix. If the part was 5 dollars and I divided that by .3 it would be $16.66. How is that 70% of 5 ? Or am I looking at this wrong ?

bstewart · September 9, 2016

sorry or bringing up an old topic but I have a question. im confused with the matrix. If the part was 5 dollars and I divided that by .3 it would be $16.66. How is that 70% of 5 ? Or am I looking at this wrong ?

When you take $5 and divide it by 0.3 to get $16.66, you're saying that the "profit margin" is 70% of the total amount of $16.66, while the "cost" is the other 30%.

16.66 - 5 = 11.66 profit dollars

11.66 / 16.66 = 70% profit margin

In other words, when you talk about "margins" you're referring to an amount based from the final selling price.

When you talk about "markups", you're referring to an amount based from the cost. (To reach 70% profit margin, you need have a cost markup of 3.33 times, ex. $5 x 3.33 = $16.65)