Reasonable markup on parts

Reasonable markup on parts

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Josho

Original Poster:

748 posts

67 months

Friday 17th June 2016
quotequote all
What would you consider to be a reasonable mark up on parts?

I'm going to be launching a garage (currently mobile) soon and am trying to devise a strategy to do so.

It would be far easier for us to just have a bench mark 10-20%.

As anyone in the trade know this does cover the running expenses. I have to earn £60 (more sometimes!) in a day to cover expenseses before I even make any money. (Van costs, insurances and fuel)

I'm not trying to be rich from it, other investments will do that hopefully but I do like to earn £200+ a day for me to take home (after everythings paid) which I think is reasonable considering what I've been through to get where I am.

Just wondering from a customers point of view what you think is reasonable. Charging RRP over a %'age would normally be slightly worse off for the customer but it's a pain for the MRS working all the costs out.

Cheers.

marshalla

15,902 posts

171 months

Friday 17th June 2016
quotequote all
Bear in mind that your parts prices need to be competitive. If you're regularly more expensive than the prices anyone can find online, they'll want to supply the parts themselves. Better to build a decent margin into your hourly rate, if you can, IMHO.

EnthusiastOwned

727 posts

87 months

Friday 17th June 2016
quotequote all
marshalla said:
Bear in mind that your parts prices need to be competitive. If you're regularly more expensive than the prices anyone can find online, they'll want to supply the parts themselves. Better to build a decent margin into your hourly rate, if you can, IMHO.
This.

I've looked into this previously and realistically you'll be making 5-15% margin on parts to be in line with the going market rates. Subject to the prices you can buy at.

Josho

Original Poster:

748 posts

67 months

Friday 17th June 2016
quotequote all
Hmm, fair enough.

I have lost a job or two on parts prices purely because I refuse to buy st anymore.

I remember doing a belt and pump change on a 1.8T one of my first jobs. All fine for 2 years til the metal cheap st pump seized and took 8 valves out.

The stupid thing is genuine was about £30 more in parts overall.

I have also lost a job over £20 quids worth of stretch bolts I insisted on changing because I've drilled out too many snapped stretch bolts to bother with not changing it. If they want to skimp on that what else will they moan about.

Kitchski

6,417 posts

201 months

Friday 17th June 2016
quotequote all
One thing you need to bear in mind is that if you supply the parts, you're liable for them if they go wrong, so if you do introduce a margin into the prices it needs to cover the fact you might lose money should there be any issues.

For example, say you fit a new wishbone to a car. You buy them at 'trade' from the local factor, and sell them at the factor's retail sales price (or at least you should be, morally speaking) of £50. You've added £10 onto the price, though in the scale of the job, £10's worth of time probably covers your time on the phone ordering them, the interaction with the driver delivering them, and your time spend scratching off all the bin location labels the factors had stuck on! £10 gets you about 10 mins these days!
Anyway, you've got your £40 wishbone and £10 profit to add to your business, plus the profit you've made on your labour (assuming you know your hourly labour cost, right?) Your customer comes to collect car, pays, is happy with service blah blah and drives away feeling relaxed that their car is well. You did the job properly, cut no corners and did your best to make sure the customer was happy. It's all you can do.

Say for example, the labour was £50 too, so the customer's bill was £100. Say for example, your labour costs you £25p/h and it was an hour's work. You have £100 in your hand, which you spent £65 to make. Then deduct £10 for all the faffing around sourcing the wishbone. £90-£65=£35 profit.

Then you get a call the next week (if that call takes 10 min, that's another £10, remember). Your customer has a knock from the suspension, can you have a look? So, being a decent guy you ask them to bring the car in so you can check it out. You spend 10-15mins checking the car out (another £10-£15) and find one of the bushes has failed already! Faulty part most likely. You apologise to customer, and make sure everything is right with them. Then you keep car, and ring factors (another 10mins on phone - £10) explaining that you have a failed wishbone. The factors offer to either send you a replacement if you are claiming parts only, or if you want to cover your labour, you'll have to buy another one, fill out various forms etc and keep the whole ordeal going even longer.

Now it's £90 minus another £30 of faffing around, which is £60. The job cost you £65. You would now already be better off financially if you hadn't started it in the first place. The customer holds you fully responsible though.

You either opt to just take the factor's offer of a replacement arm (which could fail again, of course). In this instance, you swallow labour (another £25), they swallow the part themselves. The job has now lost you £90, taking into account your labour to replace the failed wishbone.
Or, you opt to buy another wishbone, at £40. You send the old one off for warranty, and put in a claim of £25. The part manufacturer decide they will pay you £10, take it or leave it. You leave it, and hang yourself from the broken 2-post ramp you can't afford to fix using the rear seatbelt from a Vauxhall Corsa.

Motor trade sucks.

Serious point is, you have to allow for all this kind of stuff. Ask yourself the same situation again, only with a twist:

Customer rings, says they need wishbone changing. You say "No problem, get yourself a wishbone and bring the car to me. The labour will be £50." They bring car, take car, wishbone bush fails........now they have to pay you to change it again (assuming it hasn't failed because you cocked it up) and the fight is now between them and the supplier of the part. And because retail customers have more time on their hands, they will take the fight all the way regarding refunds, whereas a garage will give up after a while as it's not worth their time to sit on the phone arguing with Malcolm at Auto Parts or whatever.

So as for what a reasonable markup is, think about all that first and ask 'Is it worth it?'

For the record, I run a workshop too. I don't order many parts from the likes of factors as we do more specialist stuff. Occasionally a supplier will supply us a part at trade and insist we sell it at their retail (otherwise they're competing with themselves!) but my view is that the customer shouldn't pay any more than they could buy it for themselves from the place you bought it. I used to work in parts, and on some parts there are 50% margins, on others there are 5%. You take the good and bad.

Best of luck with it. It's a st way to earn a living hehe

singlecoil

29,406 posts

216 months

Friday 17th June 2016
quotequote all
What's your charging basis? Is it so much an hour plus parts? If that's the case, why not just make sure you charge enough in your hourly rate to cover your expenses and let them supply the parts if they want to. Otherwise you go and get them if having them delivered isn't practicable and you charge them for the time it takes.

Charging a markup on parts doesn't really make sense because some parts are quick to fit and cost a lot, others will be cheap but take a long time to fit. It's not a satisfactory way of covering overheads, you should do that with your hourly rate. Time is the only thing you can't buy over the counter at Allparts or wherever.

Steve H

4,499 posts

165 months

Saturday 18th June 2016
quotequote all
EnthusiastOwned said:
marshalla said:
Bear in mind that your parts prices need to be competitive. If you're regularly more expensive than the prices anyone can find online, they'll want to supply the parts themselves. Better to build a decent margin into your hourly rate, if you can, IMHO.
This.

I've looked into this previously and realistically you'll be making 5-15% margin on parts to be in line with the going market rates. Subject to the prices you can buy at.
Absolutely not this!


If you are dealing with customers that want to provide their own parts, you need to find better customers.


singlecoil said:
What's your charging basis? Is it so much an hour plus parts? If that's the case, why not just make sure you charge enough in your hourly rate to cover your expenses and let them supply the parts if they want to. Otherwise you go and get them if having them delivered isn't practicable and you charge them for the time it takes.
Why not let them supply?

Because they do not have the experience or understanding to buy the correct parts or the correct quality, if they did, they would be fitting the parts themselves.

Because when their parts are wrong and the car is stripped on the ramp they will not understand that you need to charge them to put the car back together again to get it off the ramp and then charge them again when they turn up with the right part.

Because when their part fails causing other damage they will be blaming you because you did the job. They will expect it to be repaired for free and even if they supply the replacement parts they won't expect to pay for any labour because it's not their fault it went wrong.





OP, there isn't a single typical markup in the garage trade - it depends on the job/part/supplier. Dealer parts pretty much go out at the manufacturers retail so you make whatever you can get out of them, often less than 10% for dealer-only components but often a lot more for more common items and service parts.

General service/repair parts usually carry a higher margin than most of the posts on here suggest (including yours), Kitchski makes some good points as to why.


On wider advice, i would suggest you get used to seeing a big change in your customer base if you want to make a decent living at a unit. The customers that you would typically attract while working mobile are often not going to be the ones you want in a workshop; if you lose customers because you want to supply quality parts or won't fit their parts - let them go and be grateful you are rid of them.

Look for the kind of customers who know nothing about cars but need a reliable honest garage to look after them, that's where you will make a living.

HTH

Steve H

singlecoil

29,406 posts

216 months

Saturday 18th June 2016
quotequote all
Steve H said:
singlecoil said:
What's your charging basis? Is it so much an hour plus parts? If that's the case, why not just make sure you charge enough in your hourly rate to cover your expenses and let them supply the parts if they want to. Otherwise you go and get them if having them delivered isn't practicable and you charge them for the time it takes.
Why not let them supply?

Because they do not have the experience or understanding to buy the correct parts or the correct quality, if they did, they would be fitting the parts themselves.

Because when their parts are wrong and the car is stripped on the ramp they will not understand that you need to charge them to put the car back together again to get it off the ramp and then charge them again when they turn up with the right part.

Because when their part fails causing other damage they will be blaming you because you did the job. They will expect it to be repaired for free and even if they supply the replacement parts they won't expect to pay for any labour because it's not their fault it went wrong.
It's obviously up to the OP to ensure that they buy the right parts, if that's what they want to do. If he's daft enough to let them buy the wrong parts, or fit unsatisfactory parts then that's his look out, I didn't think he was which is why I didn't mention it.

In any case my main point was not to try to cover overhead costs with mark-up, for the reasons I gave.

Sunnyone

133 posts

83 months

Saturday 18th June 2016
quotequote all
If you are dealing with customers that want to provide their own parts, you need to find better customers.

This, for me, is the best bit if advise. If you want a sustainable business you need to be making s proper margin to pay for your overheads.

It may be hard to make the move away from these existing customers but there are plenty of people out there who have no interest in buying there own parts and expect you to make a markup.

No one likes to feel "ripped off" but you need to make a profit to be a sustainable busines. This will also benifit your customers as you will be around on the long term to provide a good reliable service.

shakotan

10,400 posts

166 months

Saturday 18th June 2016
quotequote all
Any more than a 5% mark-up and you'll price yourself out of the market.

Steve H

4,499 posts

165 months

Saturday 18th June 2016
quotequote all
singlecoil said:
It's obviously up to the OP to ensure that they buy the right parts, if that's what they want to do. If he's daft enough to let them buy the wrong parts, or fit unsatisfactory parts then that's his look out, I didn't think he was which is why I didn't mention it.

In any case my main point was not to try to cover overhead costs with mark-up, for the reasons I gave.
I understand your point and for sure a proper hourly rate is appropriate, as is a sensible markup on parts.

Regarding it being the workshop's responsibility to check parts that they are not supplying are correct, they can't.

Or at least they could but it would involve either sourcing part numbers etc from their regular suppliers and cross referencing them against the spurious internet crap that they have been provided with and hoping that the match is correct. Of course this would take some time which would have to be billed at the appropriate hourly rate as they are making no margin on the parts and it would have to be done a number of days in advance of doing the actual job because there's no point booking a car in for five hours work and allocating the time in the diary and then only finding out on the day that the parts are wrong and you may as well pack up for the day without earning anything.

Hmmmmm, nope, I'm going back to they can't.


shakotan said:
Any more than a 5% mark-up and you'll price yourself out of the market.

singlecoil

29,406 posts

216 months

Saturday 18th June 2016
quotequote all
Steve H said:
singlecoil said:
It's obviously up to the OP to ensure that they buy the right parts, if that's what they want to do. If he's daft enough to let them buy the wrong parts, or fit unsatisfactory parts then that's his look out, I didn't think he was which is why I didn't mention it.

In any case my main point was not to try to cover overhead costs with mark-up, for the reasons I gave.
I understand your point and for sure a proper hourly rate is appropriate, as is a sensible markup on parts...
I'm not going to argue with you about the customer-supplied parts, we are obviously envisaging quite different scenarios.

However, you say he should charge a sensible markup on parts. Do you have a percentage in mind? Should that percentage be increased if it's an inexpensive part that takes a long time to fit? Reduced if it's an expensive part that can be fitted comparatively quickly? Or should it just be luck of the draw?

shakotan

10,400 posts

166 months

Saturday 18th June 2016
quotequote all
Steve H said:
shakotan said:
Any more than a 5% mark-up and you'll price yourself out of the market.
Completely.

Parts supplied as spares command decent margins, parts costed into a job should be only have a small margin, your profit is in your labour.

wolf1

2,979 posts

220 months

Saturday 18th June 2016
quotequote all
Pointless asking the general public how much mark up they want to pay as it'll be 0% as everyone these days wants work as cheap as possible. I spend tens of thousands a year with parts suppliers and as such get a discount to reflect that. With that in mind I charge a mark up on my parts as I run a business not a charity and I also have to warrant those parts I have supplied not just my workmanship. As for the 5% comment it just shows how deluded some people are.

Apart from tyres I never allow customers to supply their own parts as 98% of the time they supply wrong, substandard or incomplete parts which blocks my ramps up. As for the argument about not letting your customers buy the wrong parts, do I bill them for my time researching what part they should buy, holding their hand through the whole process? No I just do not fit customer supplied parts without exception.

You can make the choice to work all the hours god sends, smashing jobs out as fast as you can with the obvious loss in quality for a pittance desperately thinking you have to undercut everyone and be the cheapest on the market, or you can run a successful business where your customers come back year upon year as they trust you and your workmanship.

The garage trade is full of ten bob toms and funnily enough they don't seem to last very long before they have to go under and start again somewhere else. The good garages are always there year in year out.

Steve H

4,499 posts

165 months

Saturday 18th June 2016
quotequote all
singlecoil said:
I'm not going to argue with you about the customer-supplied parts, we are obviously envisaging quite different scenarios.

However, you say he should charge a sensible markup on parts. Do you have a percentage in mind? Should that percentage be increased if it's an inexpensive part that takes a long time to fit? Reduced if it's an expensive part that can be fitted comparatively quickly? Or should it just be luck of the draw?
As per my previous post really, parts from any main dealer would have a RRP on them, you would charge that. Parts from other suppliers would depend on what their RRP is and how much discount you are able to get, other factors may also be considered.

Time to fit is irrelevant as that's covered within hourly rates/labour charges.


shakotan said:
Completely.

Parts supplied as spares command decent margins, parts costed into a job should be only have a small margin, your profit is in your labour.
Wow, thanks for telling me how my profit is allowed to be made bow.

wolf1 said:
Pointless asking the general public how much mark up they want to pay as it'll be 0% as everyone these days wants work as cheap as possible.
Apparently laugh

singlecoil

29,406 posts

216 months

Saturday 18th June 2016
quotequote all
wolf1 said:
Pointless asking the general public how much mark up they want to pay as it'll be 0% as everyone these days wants work as cheap as possible. I spend tens of thousands a year with parts suppliers and as such get a discount to reflect that. With that in mind I charge a mark up on my parts as I run a business not a charity and I also have to warrant those parts I have supplied not just my workmanship.
All that sounds fine to me, but IIRC the OP is concerned about situations where he isn't getting a discount that the customer can't get, whereas you are. So in your case bringing the price the customer is paying up to the price they would have to pay if they bought it themselves makes good sense.

But I gather he is in the position where he wants to add a percentage to his cost for a part which will then be more expensive than the retail price. That would be a bad thing, because if he fits, for instance, a Bosch wiper blade to a car and asks retail + X%, the customer may will think the only reason he fitted that part was in order to get that X%.



Steve H

4,499 posts

165 months

Saturday 18th June 2016
quotequote all
That's not how I'd understood the OP's post but if you are right I can see where you are coming from.

That said, if he can't get better than 10-20% off the retail price of most (non-dealer) parts he needs to renegotiate with his suppliers.

singlecoil

29,406 posts

216 months

Saturday 18th June 2016
quotequote all
Steve H said:
That's not how I'd understood the OP's post but if you are right I can see where you are coming from.

That said, if he can't get better than 10-20% off the retail price of most (non-dealer) parts he needs to renegotiate with his suppliers.
Agreed. Moving to a premises it's time for him to raise his game, and his prices by the sound of it.

crossy67

1,570 posts

149 months

Saturday 18th June 2016
quotequote all
wolf1 said:
Pointless asking the general public how much mark up they want to pay as it'll be 0% as everyone these days wants work as cheap as possible. I spend tens of thousands a year with parts suppliers and as such get a discount to reflect that. With that in mind I charge a mark up on my parts as I run a business not a charity and I also have to warrant those parts I have supplied not just my workmanship. As for the 5% comment it just shows how deluded some people are.

Apart from tyres I never allow customers to supply their own parts as 98% of the time they supply wrong, substandard or incomplete parts which blocks my ramps up. As for the argument about not letting your customers buy the wrong parts, do I bill them for my time researching what part they should buy, holding their hand through the whole process? No I just do not fit customer supplied parts without exception.

You can make the choice to work all the hours god sends, smashing jobs out as fast as you can with the obvious loss in quality for a pittance desperately thinking you have to undercut everyone and be the cheapest on the market, or you can run a successful business where your customers come back year upon year as they trust you and your workmanship.

The garage trade is full of ten bob toms and funnily enough they don't seem to last very long before they have to go under and start again somewhere else. The good garages are always there year in year out.
Great post.

I put 30-50%on parts depending on the liability I am exposed to. I charge less per hour labour than my local competitors so make some of this up on parts but am still cheaper than most round here. I am turning customers away. You're supposed to be working for your self to make more money for the extra responsibility and work you do, not less.

POORCARDEALER

8,427 posts

211 months

Monday 20th June 2016
quotequote all

Very easy to make nothing at all running a one man workshop as your chargable hours dwindle away as you are busy chasing parts, answering the phone etc etc

I had one to prep our own cars, 1 mechanic, building rented etc, cost to run incl wages was £22 per hour x 40.