...what was on the estimates for corrosion protection items.
I took three of the middle range estimates, $3,900 to $4,300, and looked at the corrosion protection lines. The line items for this repair were as follows:
- Estimate 1: $46 for materials and $20 for labor
- Estimate 2: $39 for materials and $40 for labor
- Estimate 3: $37 for materials and $28 for labor
Before moving forward, I want to share a simple business equation: sale minus cost, divided by the sale, equals gross profit percent.
Say a shop does 100 cars per month with an average repair of $2,000, which would translate into $200,000 per month. Using a cost of labor, materials, parts and sublet of $120,000, let’s see what the gross profit percent would be.
$200,000 minus $120,000, divided by $200,000, equals a 40% gross profit.
Now add $25 of materials to each repair that were used but not included.
$202,500 minus $120,000, divided by $202,500, equals a 40.7% gross profit.
Remember, the cost of materials stays the same because the products were used, but not charged for in the original estimate.
I want to spend a little time on cost recovery programs.
There are a few cost recovery programs on the market. The one I am most familiar with is PROS from Kent Automotive.
Features I think are important to a shop include web-based inventory control, tracking capabilities, OEM parts (clips) cross referencing...