Find extra cash in your shop.

Aug 17, 2020 | general

Going into the busiest quarter for tire shops means an opportunity to prepare and plan using targets and strategy.

I always start with the low hanging fruit and typically that involves setting up rules in the existing shop management software or point of sale system.

Looking at your annual average parts gross margin % on your financial statements gives you the average points you earn on parts.

But you have time now to dig a little deeper, so I suggest you extract a report from your software that shows the total parts sales for your whole year; include the cost, sales price, quantity sold etc.

Now you can export this in excel and start experimenting with applying varying “levels” of points goals across ranges.

Customers typically won’t question the lower costs on a quote from a shop, so you need to ensure your achieving the highest amount of points on these low cost items to balance out the high cost items where you’re limited to the amount of points you can achieve.

However too often I see shops “afraid” to charge a fair amount of points on even expensive items.

You see you have to cover the costs of rent, utilities and all the other shop expenses just to keep the doors open; so you have to have a fair minimum markup even on a very expensive part.

Set this up in your system and follow it religiously, no exceptions and you will see returns in the form of increased bottom line net profit.

Conversely if there are items you have worked with suppliers to negotiate amazing prices on, then you need to ensure you still receive the “extra benefit” for this and not pass it on to your customer.

So there are exceptions to every rule, but only when they work in your favour.

Another example, if you can get a dealer part for $400 from your supplier, but the dealer themselves sell it to the customers for $900 then you need to markup more than you might on any other $400 part.

See my matrix below, a $400 part falls under a rule of 44 points; so if this was sold according to the matrix the price would be $724, but that’s still less than the dealer.

You need to override this and sell the part for at $900.

Product price matrix example: