“How should I mark up parts in my auto repair shop?” This is the million-dollar question for many shop owners. 

Our survey involving 618 auto repair shop owners and managers across the U.S. found that more than 67% of respondents are not maximizing their profit potential due to inadequate markup practices on auto parts. This oversight is not just a minor hiccup; it’s costing auto businesses between $40,000 and $70,000 annually — a substantial hit to any business’s bottom line.

Many shop owners grapple with the crucial question of how much to mark up auto parts. To help shops begin to approach and tackle parts markup in a healthy way, PartsTech invited Cecil Bullard, the Owner and CEO of The Institute for Automotive Business Excellence, to join us for a webinar series on parts markup. Having coached thousands of auto repair shops across the United States, Cecil shed light on navigating the often murky waters of parts markup and achieving healthier parts margins. 

Implementing a Parts Markup Matrix to Improve Your Parts Margins

The road to improving your overall shop margins is multi-faceted, but Cecil shared that improving your parts margins is the easiest to fix and an excellent place to start. 

The average shop has 38% to 42% parts margins, which is 16% to 20% below the number The Institute’s recommends, which is 58%. 

During the webinar, he introduced participants to the concept of a parts markup matrix. A parts markup matrix is a strategy-based formula for pricing parts. It guides the markup on purchased parts to ensure a healthy profit margin on every repair order. It typically applies higher markups on lower-cost parts and lower markups on higher-cost parts to achieve a targeted overall margin.

Cecil provided a sample matrix with markup multipliers to get you started. You can find this matrix in our web-based quick reference parts markup guide, which we developed with The Institute. It summarizes key insights from the webinar series and includes essential terms, formulas, and the foundational steps for developing a parts markup strategy and matrix. 

“But what if my customers think my parts are too expensive?”

During the webinar, we received many questions about the possible negative impacts of placing a higher markup on parts. Many shop owners are concerned about losing or upsetting customers with higher prices. 

Having helped thousands of shops across the country raise their parts prices, Cecil spent several minutes in the webinar explaining why you can confidently mark up your part prices and let go of concerns about displeasing customers. We encourage you to watch the on-demand webinar recording below to hear his answers. 

Watch Part 1 Recording Here ➝

Watch the webinar recording to learn how to effectively change your parts markup strategy. And get your phones ready to scan a QR code for a free workbook from Cecil! 

(You can also find a summary of Part 2 here).