Digital Dealer - November 2019 - 19

over the years - get on the
Everyday Low-Price Chuck
Wagon now, otherwise forgetaboutit. I could write an "If
you..., then you might have
a low ELR bit" - such as, "If
your advisors make copies
of coupons on your copy
machine regularly, you might
have a low ELR." And there
are so many more.
A wise test is to do an
RO survey to check applied
labor pricing versus the flatrate paid every week - CP,
warranty, internal - a sample
of ten or so per author will
do the trick. You won't regret
completing this petite study
my friend.
SOME BODYSHOP
THOUGHTS

Mining every last flat-rate
hour floating around in the
bodyshop is mandatory as
all BS bosses well know.
Amazingly, when I began
in the repair business, the
body rate was higher than
the service labor rate - no
poo. Since the 1980s that
keeps changing for the
worse, to the point that in
some cases the service
rates are some $100 per
hour higher than what insurance will cough up.
Tech output is absolute
king make no mistake, but
capturing admin time, estimating total - no fix time, and
performing scanning by estimators or managers at an
hour a hit, before and after,
is making a big difference for
some aggressive estimators.
Basically, stop giving it all
away. In one shop we raised
the labor rate about $3 an
hour a year ago and kept
the added gross to cover
the ever-rising expenses

and boat payment. All but a
couple of insurances went
along thankfully.
Another key area to help
with labor cost of sale is to
break out prep from actual
painting time, which is about
60 to 75 percent of the total
paint flat rate. An example
is two lower-cost preppers
team with the master painter
dude, and by averaging
the flat-rate pay rates that
lowers the cost of sale, even
after a nice FRH raise for
the guy with the gun. Most
painters want to paint anyway, not play sandman, and
not doing the painting cycle

typical manufacturer markup. Of course, independent
shops are paying far less for
OE equivalent or superior
parts in many cases, which
allows the typical "double
the cost" most calculate - a
50% margin to start the
show.
A profitable approach
many parts gurus take is
to apply a pricing matrix to
non-competitive parts, which
manipulates parts markup
on a curve based on the
cost. Family parts pricing on
everyday items creates a
better margin when applied
properly, and of course, vol-

YOU MAY BE
QUITE SURPRISED AT
WHAT A FEW CRAFTY
ADJUSTMENTS CAN
CREATE IN ADDITIONAL
GP TO COVER THOSE
EVER-INCREASING NASTY
DISBURSEMENTS."
is a waste of real talent.
Also, a clever clock hour
tech pay plan can reap great
benefits to the labor margin,
while making the techs feel
comfy. Adding production
bonuses is the sweet motivator while keeping the cost
of sale sane.
PARTS THOUGHTS

Intriguingly, an independent shop can enjoy a
more than 55 percent parts
gross profit margin, after
the end-of-month-volume
and early-pay extras, while
franchised dealer CP service
parts are too often lower
than the measly 40 percent
margin, the standard resulting from a rounded off 1.67

ume purchasing discounts
can have GP benefits if one
doesn't get silly, such as
buying a two-year supply
of muffler bearings. I also
find that counter people are
quick to hand out discounts
in the retail arena for no
particular reason, rather
than justifying the pricing
structure if pressured, while
wholesale discounting in
some metropolises has
reached an insane 40 percent (no kidding) from retail.
Here, Sundays are spent
at the altar praying that the
factory will continue sending
so-called "back money;"
otherwise parts manager will
begin fleeing to sanctuary

D I G I TA L D E A L E R . C O M

cities in droves.
CALCULATE THIS

I was thinking that it would
be beneficial for you to make
a few easy calculations
in various labor and parts
accounts, just to see what
gross profit growth opportunities may be available after
some pointed tweaks. To that
end, I created a simple-touse Excel spreadsheet you
can play with to examine the
impact of margin adjustments
in various parts and labor
accounts. If you want a copy,
email Ed@NetProfitGroup.
com with the subject line:
"Calculating More Gross
Profit-Why Not Nosy." You
may be quite surprised at
what a few crafty adjustments
can create in additional GP to
cover those ever-increasing
nasty disbursements.
As the late great comedian Nipsey Russell once
noted, George Washington
threw a silver dollar across
the river and politicians have
been throwing away money
ever since - so don't be a
politician. Keep it for yourself
instead!
ED KOVALCHICK has traveled
the world training and consulting in
fixed operations for manufacturers
and dealers. His extensive
background includes master
technician status, independent
shop owner, dealer with all
Chrysler & Nissan franchises,
and founder of Net Profit Inc.,
fixed operations consulting and
training. He is a graduate of the
University of Louisiana and has
served as state president of the
Automotive Service Councils,
and the advisory boards of Wyo
Tech and Virginia College. He
has been a regular columnist and
conference presenter with Dealer
Magazine since 1995. EMAIL:
Ed@NetProfitGroup.com.

NOVEMBER 2019

19
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Digital Dealer - November 2019

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