How Much Do Truck Repair Companies Mark Up Parts

Heavy-duty repair shops have two goals: to offer a valuable service and to make a profit.

Newflash: If your shop doesn't achieve the latter, it won't be open long enough to provide the one-time.

We tin can hear y'all now: Whoa, Fullbay, that's intense.

Okay. Let's dorsum up a picayune bit and explain ourselves.

A mistake many shop owners make is the way they toll parts. Some got used to a simple percentage markup structure long ago and take never bothered to make a change. Others may experience that their profits should come from the service they perform, so they basically pass on the cost straight across with no parts markup.

If yous're the store in either of these scenarios, you're leaving profits on the table.

A fresh parts markup strategy is how you can resuscitate your anemic lesser line and take your repair shop from surviving to thriving.

Parts Cost Coin

In that location'southward a reason that simply marker up parts past a pct – l%, for instance – doesn't often outcome in healthy profits. It'southward considering that basic formula doesn't account for the hidden costs the part carries.

Also known as burden charge per unit or overhead, those costs include everything involved in ordering the role. They're things such equally fourth dimension, a computer, Internet connection, electricity, and a phone. If your store keeps parts stocked, in that location's also the cost of infinite to store them until they're needed. Plus, don't forget other overhead costs like:

Insurance
Theft
Unused, outdated parts that you'll have to supersede (with other parts that carry their own burden charge per unit)

For instance, a office the vendor charges $100 for could cease up costing $120 or more afterward your parts managing director orders it and stocks information technology on the shelf.

Parts Markup Strategies

Don't accept a striking-and-miss approach to profits. Put together some parts markup strategies and detect the one that works for you.

For case, y'all could aim to make a certain pct in turn a profit. In general, heavy-duty repair shops should make effectually 45% in profits on parts, so you can base your parts markup on a 45% profit margin.

You tin can too go with volume-based pricing. For that strategy, you lot take a higher markup on slow-moving inventory than on parts with loftier turnover. Some other arroyo is to charge more markup on low-priced items. For example, a commodities or bracket might only cost you fifty cents, but not many people know what small, low-priced parts similar those cost – and they typically don't intendance. Yous'll detect customers are more concerned with large-ticket items than haggling over parts that cost a few dollars. That means you tin easily charge $2.50 for that .50-cent part, which translates into an 80% profit margin.

Calculating Parts Markup

Once you know how much you want to make, piece of work backward from there to determine a assisting parts markup.

Here'southward a formula for computing a parts markup that will return a 45% profit:

Full cost of the role / (100-target profit margin)100 = what yous charge for the part

If you lot accept a target profit margin of 45%, y'all would split the full toll of the part by 100-45 (which is 55), then multiply that answer past 100.

Plugging in our $100 role example ($120 fully burdened) gets united states of america a parts markup of $98.18:

$120/55×100=$218.18

Y'all can use unlike percentages for the target profit margin if you decide not to mark up all parts the same. Applying this equation to each part you sell will guarantee a consistent profit. Plus, it keeps your shop competitive while ensuring you don't get a reputation for over-charging.
Of course, doing the math every time you lot create an estimate or invoice can plough into something of a time-suck. Although it'southward essential to understand how constructive parts pricing works, nosotros've created a tool that will handle the heavy mathematical lifting for yous. Gyre down a little chip to play effectually with the Parts Markup Tool and get a feel for how it works. It'll show you lot what you need to charge to brand a sure amount off each function – and better yet, it lets yous experiment with dissimilar prices and percentages without actually having to experiment on your inventory.

By the fashion, the Parts Markup Tool is one small slice of Fullbay. Want to see what else shop direction software designed for heavy-duty shops can do for you? Requite our demo a whirl and discover out!

Suz Baldwin got her start in the automotive industry, writing and editing for several motorcycle and archetype car magazines straight out of higher. In the years that followed, she'southward written all sorts of copy for brands big and modest while consuming enough coffee to paralyze a dinosaur.