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My cousin owns a mechanic shop in Newark NJ, it is a tough way to make a living but he likes the work. Anywhoo- I was visiting him last week, where I saw him in action at his shop during his "Slow August" marketing campaign, I want to share some war stories with you from what I saw:
He hired a couple of guys to pass out flyers promoting an Oil change special for $21.95. Now, that price seems cheap to me so I asked him what was the deal, how could he offer such a deal?
He tells me that the $21.95 is the cost of the Oil and Filter, he chucks the cost of labor for doing the oil change to a marketing expense. So in other words, he pays the customer to give him a shot at becoming the customer's mechanic.
The cost breaks down like this: 5 Quarts of 10w30 Bulk motor oil at 3 dollars a quart = $15. Plus Group 7 or Wix Oil filter 6 or 7 bucks = $21 to $22 bucks.
As I am hanging out a customer comes in with a 2008 Toyota Matrix, the prospective customer asks for the Oil Change Special which my cousin readily did process the work order.
Once on the lift, as one of the mechanics is changing the oil, the mechanic gives the car an inspection and sees that the car needs front brakes. The mechanic tells my cousin that the car needs front brakes which he relays to the customer with a quote for the cost of the job.
He quotes the customer about $200 bucks for the front brakes, which the customer agrees to have done.
Looking back, I was wondering how is it that they make money to stay in business, he tells me it is very rough but he is staying in business strong for he is following a very basic formula, his goal is to make 8% net profit per annum.
Here is how that job broke down:
AC Delco Professional Pads: Sell Price: $79.97 Cost $60.00 Markup 33%
Labor to resurface front rotors and change pads: Sell Price: $102.00 at about 1.5 hours. Cost $80.00 Markup 25%
Oil Change parts sell price: $21.95 Cost $22.00 Markup 0%
Labor cost to change oil $21.45
Total bill to customer $203.92 * 7% sales tax = $218.19
Total job costs: $183.45
$203.92 - $183.45 = $20.47 Gross profit. That's about a 10% markup on the whole job!
Damn, talk about a tough business!!!
He hired a couple of guys to pass out flyers promoting an Oil change special for $21.95. Now, that price seems cheap to me so I asked him what was the deal, how could he offer such a deal?
He tells me that the $21.95 is the cost of the Oil and Filter, he chucks the cost of labor for doing the oil change to a marketing expense. So in other words, he pays the customer to give him a shot at becoming the customer's mechanic.
The cost breaks down like this: 5 Quarts of 10w30 Bulk motor oil at 3 dollars a quart = $15. Plus Group 7 or Wix Oil filter 6 or 7 bucks = $21 to $22 bucks.
As I am hanging out a customer comes in with a 2008 Toyota Matrix, the prospective customer asks for the Oil Change Special which my cousin readily did process the work order.
Once on the lift, as one of the mechanics is changing the oil, the mechanic gives the car an inspection and sees that the car needs front brakes. The mechanic tells my cousin that the car needs front brakes which he relays to the customer with a quote for the cost of the job.
He quotes the customer about $200 bucks for the front brakes, which the customer agrees to have done.
Looking back, I was wondering how is it that they make money to stay in business, he tells me it is very rough but he is staying in business strong for he is following a very basic formula, his goal is to make 8% net profit per annum.
Here is how that job broke down:
AC Delco Professional Pads: Sell Price: $79.97 Cost $60.00 Markup 33%
Labor to resurface front rotors and change pads: Sell Price: $102.00 at about 1.5 hours. Cost $80.00 Markup 25%
Oil Change parts sell price: $21.95 Cost $22.00 Markup 0%
Labor cost to change oil $21.45
Total bill to customer $203.92 * 7% sales tax = $218.19
Total job costs: $183.45
$203.92 - $183.45 = $20.47 Gross profit. That's about a 10% markup on the whole job!
Damn, talk about a tough business!!!
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