Auto Service World
Feature   February 1, 2001   by Auto Service World

MYOB: BUSINESS QUIZ: How Good A Garage Owner Would You Be?

Do you know what it takes to run a repair garage? In a financially successful jobber business, counseling the customer is everything, and understanding the financial guidelines for your customer’s business is step one in understanding your customer.

Do you know how the numbers in your customer’s business should really work? If you can give the correct answer to the following installer questions, I’m confident you are well on your way to being the best in your trading area. If you can’t, well, don’t you think you should learn? After all, this is the type of business you are depending on for your future financial success. Feel free to take as much time as you like.

1. In a properly managed general maintenance and service business, what should the average gross profit percentage be for the following revenue categories?

Oil ____%

Tires ____%

Batteries ____%

Aftermarket Parts _____%

Dealer Parts ____%

Maintenance Labor ______%

Diagnostic Labor ____%

Total Shop Sales, including Labor _______%

2. What are the total retail dollar sales required in the following installer business operations:

(A) Gross profit demand of $28,956.00 operating at 56%: $_______________

(B) Gross Profit demand of $37,522.00 operating at 63%: $_______________

3. Johnny the technician is presently earning $700 gross weekly. If I want my payroll percentage to remain at 30% of total gross profit, and my overall gross profit in my bays is 65%, what total dollar sales would Johnny have to produce to earn $950 gross a week? $________________

4. As of today’s date, what is the minimum Ontario employer burden percentage for a typical automotive maintenance and service shop? _______________%. What is a safe rule of thumb percentage to use in the year 2001? ____________________%

5. What are the recommended annual inventory turnover guidelines for an independent shop for the following product categories?

Oil __________

Tires ______________

Batteries ___________

Parts __________

6. What is the minimum number of labor hours required to be produced per work order? ______hrs.

7. If a shop has three technicians earning $14, $18 and $24 per hour respectively, what should the shop’s hourly labor rate(s) be? $______________/$____________

8. In a shop averaging 63% total shop gross profit and netting 2.5% of sales, how much, in total sales, has to be made to replace a $500 bad debt? $_____________________.

9. What is the accepted minimum shop efficiency percentage required to move a shop forward? ______________%

10. What is the actual average installer shop efficiency? ________%

This kind of knowledge is just a sample of the critical facts required to run a successful installer business. Many installers themselves do not know the correct answers; therefore the only thing they rely on is the price of parts. There is an opportunity for the jobber to step in and counsel the installer on moving up to the next level. When an installer knows these guidelines and begins to manage the shop to the right plateau, net income increases for both parties. This occurs even as parts pricing becomes much less of an issue, because it proves to the installer where the real money is to be made.

The successful jobber today is a counselor to the installer. A mental partnership must be formed as first call must always be earned. What value do you bring to the table for your installer? To understand the level of value to deliver, you must understand the installer’s business.

If your jobber business is to grow and be profitable, the very best installers must be your customers. There are too many jobbers for the number of good installers in this country, so therefore your jobber business must stand out from the crowd. Pricing can’t get any lower–it’s already too low and so are margins–so in order to get the right level of gross profit required in the jobber business, you had better understand what gross profit is required in the professionally run installer business and how it is made.

For the answers, visit our web site at, click on Ontario and look under “Published articles”. You will find the answers under “Jobber News February 2001.” Or, you can check on page 29.

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