Parts store ownership

[rtauto3000]

Hey guys, looking for some advice if you can give any. I have an opertunity to buy a napa parts store and a carquest both guys are ready to retire. I already have a 3 bay shop with 3 full time guys plus my self.

What i am wanting to know is there any other shop owners out there that also have a parts store plus a shop? if so is it worth it or more of a head ache? Any profit in? do the other shops around your town buy from you? I havent got to see either guys year end numbers. I have got them to give me numbers and looks like with out there buildings and looks to be about $250K worth of inventory.

[bstewart]

I'm curious to see what others say about this.

I'm a Parts Tech by trade (I'm from Canada, you guys don't recognize Parts being a trade in the US) and I have a federal certification.

Part of the in class training is learning how to run a parts store (it's basically a compressed business management course).

I could go on for hours about things like profit margins, inventory control and marketing (not the same as advertising).

 

The main things I'd be looking at are:

- The gross and net profits over the last few years (GPM for a part store should be ~30% or you'll go broke)

- Average turnover and how much dead or low turning inventory they have

- How much space you would be getting (whether there's too much or too little space, there's usually too little)

- How does the supplier upchain take care of their stores (Give you room to make good profits vs list while still being competitive, good return policies for obsolete/dead stock, having a good warehouse network to get parts to you quickly etc)

- How extensive is your trade customer base (your bread and butter, the guys who will call on you daily)

 

There's more but this is just off the top of my head. It's no small undertaking, but it could (and probably should) easily be more profitable then your 3 bay shop.

[bstewart]

A couple of quick tests to determine the viability of a business:

Current ratio = Current assets / current liabilities (this should be at least 2.0 in a healthy business)

 

Acid test ratio (quick ratio) = Quick assets / total liabilities (this should be at least 1.0)

Quick assets are cash + accounts receivable + notes receivable + other liquid securities (basically anything that can quickly be converted to cash in hand)

 

Equity to liabilities ratio = owners equity / total liabilities (higher is better)

 

Gross Turnover = Total cost of sales for 1 year / average monthly inventory for same period (jobbers should be 4.5-7.5, you should shoot for 6.0)

To find avg monthly inventory, add the inventory on the same day of each month together, then divide by 12

[rtauto3000]

I'm curious to see what others say about this.

I'm a Parts Tech by trade (I'm from Canada, you guys don't recognize Parts being a trade in the US) and I have a federal certification.

Part of the in class training is learning how to run a parts store (it's basically a compressed business management course).

I could go on for hours about things like profit margins, inventory control and marketing (not the same as advertising).

 

The main things I'd be looking at are:

- The gross and net profits over the last few years (GPM for a part store should be ~30% or you'll go broke)

- Average turnover and how much dead or low turning inventory they have

- How much space you would be getting (whether there's too much or too little space, there's usually too little)

- How does the supplier upchain take care of their stores (Give you room to make good profits vs list while still being competitive, good return policies for obsolete/dead stock, having a good warehouse network to get parts to you quickly etc)

- How extensive is your trade customer base (your bread and butter, the guys who will call on you daily)

 

There's more but this is just off the top of my head. It's no small undertaking, but it could (and probably should) easily be more profitable then your 3 bay shop.

 

 

The main things I'd be looking at are:

- The gross and net profits over the last few years (GPM for a part store should be ~30% or you'll go broke)

Comercial shops they are %30 mark up Cash Customers are %40

- Average turnover and how much dead or low turning inventory they have

Very good question i will have to ask them that one

- How much space you would be getting (whether there's too much or too little space, there's usually too little)

There is never enough spaces

- How does the supplier upchain take care of their stores (Give you room to make good profits vs list while still being competitive, good return policies for obsolete/dead stock, having a good warehouse network to get parts to you quickly etc)

I Know carquest does take care of them and does have a good return policy

- How extensive is your trade customer base (your bread and butter, the guys who will call on you daily)

Napa has more of the commerical shops in the area which is about 5 in this small town

 

There's more but this is just off the top of my head. It's no small undertaking, but it could (and probably should) easily be more profitable then your 3 bay shop. We are both doing about the same numbers right now. Parts store did 500K last year in sales and i fell 10K short of that mark so close in sales but expenses add up quicker in the shop so i would say he makes 15 to 20k more a year

 

Thank You for your info and replaying to my post I am waiting on Napa to see what there numbers are. And i also know neither on of the stores push stuff as hard as they should.

[alfredauto]

The parts stores near me that do the best never say no. One store only sells at a 50% profit. Take it or leave it. Another store strives for 50% but they will always sell a part unless its at a loss. They do better. I'd rather gross 300k a month at 30% than 100k a month at 50%. Its not like a shop that only has so many labor hours a month to maximize, the amount of parts handed over a counter is really unlimited.