The KPI: Gross Profit on Parts

WHAT IT IS: The difference between the revenue of a job and the cost of completing it as it relates to parts, excluding all overhead costs.

HOW TO CALCULATE IT: Job (or repair order) revenue – parts

INDUSTRY AVERAGE: 50–59%

OPTIMAL BENCHMARK: 60%+

HOW TO IMPROVE IT: The No. 1 way to increase gross profit on parts is to simply make a parts matrix. A parts matrix is a spreadsheet that describes each mark-up for parts of different prices, allowing shop owners to achieve specific gross profit percentages on every part sold. It can be a daunting task, but you future revenue will show the results.

Every shop is different, but every price matrix should work the same despite varying parts, percentages and costs. It starts with knowing your annual gross profit goal and breaking that down by month, week and even hour to achieve the most accurate matrix for your goals.

These are just examples but they serve to show how effective the matrix can be, and why keen service advisors will be able to effectively upsell more expensive repairs without needlessly fleecing your clients. A parts matrix is a representation of your clients’ trust in your prices and services above anything else—take the time to build it respectfully and it’ll serve that time and effort tenfold.

Adjust the matrix over time based on workload and the most common repairs that exceed the first price threshold or two. See what works. Conform markups to specialties or dealer parts, which are often more expensive, and look for opportunities to save money in the aftermarket by purchasing OEM-like quality parts such as Duralast. During slow weeks or months, tweaking even a small part of the matrix will help you make your gross profit goals over time without overhauling the entire matrix. You may find that some jobs are not worth marking up very much due to minimal gross profit return.

HERE’S AN EXAMPLE OF A SAMPLE MATRIX: