Reach Your Parts Profit With No Auto Parts Markup Chart
Every successful auto repair shop owner knows that money made from parts can account for half your business’s sales revenue. Previously, shops had to rely on an auto parts markup chart to find the right profit per part. Then Shop-Ware’s automotive shop software made the process far more efficient.
We made it effortless to do these calculations when we created the Parts Gross Profit Optimizer for auto parts pricing. Since then, our most successful shops have been making thousands of dollars more each month, with far less work when they build estimates.
Here are some examples of how shops are using the Optimizer setting and how it affects their results:
With a Parts GP target of 48% and an exception on dealer parts at 10%, this shop was within 2% of its target of 46.52% in July 2022. Its GP has increased 16% since it moved over to Shop-Ware.
With a Parts GP target of 54% and an exception rate for tires at 36%, this shop’s GP has increased 9% since it moved over to Shop-Ware.
Why the Optimizer Outsmarts an Auto Parts Markup Chart
As you know, a traditional parts matrix is a simple spreadsheet that sets mark-up amounts for parts of different prices. This allows a shop operator to achieve a specific gross profit percentage on each part sold, if their staff doesn’t deviate from the numbers provided.
Building a parts matrix makes for a repetitive, time-consuming process. Meanwhile, Shop-Ware’s exclusive Parts GP Optimizer puts software to work, applying an algorithm that taps into the shop’s sales history to hang a custom, perfectly smooth pricing curve for every part cost, down to the penny.
That way, your auto parts inventory management software helps you stay on track to hit your monthly goal.
The idea that your parts pricing can change from day to day may raise questions, but that flux is precisely what’s missing from a traditional, stagnant auto parts markup chart.
Why the Optimizer is superior to an auto parts markup matrix
- Staff spends less time and effort doing math equations based on an auto parts markup chart.
- The algorithm never makes a multiplication error since it works like a calculator.
- Because the curve adjusts every day, you always hit your parts GP target.
Some days, you sell lots of small services with lower-end marked-up parts. Then you’ll work on a few big jobs with more expensive parts. Regardless of what best shop management software you use, your line graph will always bounce up and down.
That is normal. Missing your overall target is not.
See how the line rises at the end of the month as a shop hustles to get more cars fixed and out the door? That’s the difference between a good month and one where you fall short.
No matter how good your service advisors are, they cannot see all the data for a month and make this correction.
However, if staff strays from the parts matrix and overdiscounts too often, your shop will miss its targets, regardless of which parts pricing methodology you use.
You may wonder if this means you could charge customers more for the same part at the end of the month to make up the difference. Shop-Ware never looks at the prices that a shop charges their customer.
However, the Optimizer works within the price range you’ve set, adjusting well before the end of the month so you don’t have to overcharge anyone to catch up. Auto repair parts markup matrix simply cannot do that for you.
See the payoff right away
We tracked data from 150 Shop-Ware customers who apply best practices for the Parts GP Optimizer after abandoning the auto parts matrix markup chart. They noticed they recorded 1.72% more in profit within their second month of use. That translates into thousands and tens of thousands of dollars for their businesses.
In July 2022, they collectively saw a 3.46% increase.
If you have any doubts about why an automated price calculator is better, here’s the difference. The Optimizer uses the computer’s brain to go out and look at all of your purchase history to figure out HOW it can hit your target.
Using random price points from each of the rows on this price matrix example, you can see the Optimizer’s level of profit ($3,529.14) compared to what a parts matrix delivers ($2,63.06). You end up with $666.08 more in parts profit!
Even better, this is just based on this profit derived from 6 parts! What difference would THOSE numbers make to your shop! What will your new level of profit be? We can hardly wait to find out!
The Optimizer delivers the best results for YOUR shop
If you’ve been using a parts matrix for years, it feels second nature to do those calculations, but they eat up valuable time on every estimate. The Optimizer is one more tool that can streamline your processes and eliminate human error.
You simply enter two data points as your highs and lows for each part. While it sounds tedious, you only do it once, unlike how you repeat a multiplication over and over again with a matrix.
Next, you enter your desired Parts GP percentage in two seconds.
Then, you set up your exceptions for tires, filters, batteries, etc. and decide when to opt out of group and optimized prices.
The Optimizer will always tell you the truth about where you stand. However, if you consistently discount, the Optimized prices would ratchet up beyond reason, and the entire concept would fail.
After you turn on the Optimizer, you can still go into the catalog and add parts to exception groups. Remarkably, within five minutes of hitting the final button, your system will be completely updated.
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