Tuesday, 23 February 2021 19:23

The Numbers Game: Are You Winning?

Written by Toby Chess


...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...

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