How To Make A Profit – Auto Repair Shop | Capital One

How To Make A Profit – Auto Repair Shop | Capital One


I’ve been historically
tracking data
and performance data
on businesses,
and what I’ve identified
is that labor gross margin,
which is basically the crux
of the business profit
in a collision center,
that profit level has been
declining for 15 years.
I’ve got more businesses
making less than 50%
on gross margin on labor
than I have businesses
making over 50%.
That’s just not something
that’s gonna be sustainable
with some of these new costs
coming on board.
In order for a business
to be sustainable,
you have to have
a 75% margin on labor,
because 75% provides you
enough profit
to be able to create
a safe, constantly maintained,
and improving work environment
for the employees.
Figuring out your real cost
of delivering
that labor-capable resource,
which it isn’t just their wage,
it isn’t just their benefits
and taxes;
it’s what do I have to invest
in that labor resource
to make that labor resource
capable.
The best strategy
for people going forward
is to recognize
this is gonna happen
and start pricing in a way
to create enough
of a profit margin
to absolutely assume
that you’re gonna be
investing in labor.
One of the single secrets
to the businesses
that I’ve worked with
that transforms them
from somebody getting by
to becoming a business
that accelerates their growth
and truly understands
the business
is when they grasp
the concept of job costing,
truly understanding
what it costs completely
to deliver that car
back to the customer
so that they know that
they made enough money
to cover those costs completely
in an ongoing way, right?
‘Cause if you do a job
and you go, “Wait a second.
I didn’t make any money
on this one,”
so stop fixing
those kind of jobs.

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