I had a 44 year c areer at a state supported university. I taught mathematics, statistics and computer science courses. In addition, I served as a research design consultant assisting faculty and graduate students with their research. What I observed from the mid 1960s until I retired in 2011 was a change in the expectations for both students and faculty. The first half of my career, the emphasis was on our teaching. The last 20 years, the emphasis was on research, publication, and bringing in outside funding. Student retention was a big issue, because higher student retention rate meant more.dollars from the state. What made the situation even worse was the hiring of year to year faculty to teach freshman classes. Whether or not a year to year contract faculty member was rehired for the next year depended on the faculty member receiving good student evaluations. This translated into keeping the students happy by making the course easy and having low expectations. Even senior faculty often kept the amount of work turned in by the students to be graded to a minimum to allow time for their research. The number of administrators grew exponentially. When I began my career, the college in which my department was housed was administered by a Dean and an Assistant Dean. There were 23 departments in the college. At the end of my career, the college was administered by a Dean, three Associate Deans, a business manager, an assistant business manager, and a fund raiser and the number of departments in the college was 20. Three of the departments were split off into a new college. Itâs no wonder the tuition has skyrocketed. An auto dealership is really pretty efficient by comparison. In most dealerships, there is a general manager, a new car sales manager, a used car sales manager, a service department manager, a parts department manager and possibly a body shop manager. Each department is expected to produce a profit. I decided to retire when we had a meeting of the entire college. The Dean had his entire staff on the stage. We faculty were urged to bring in grant money because the University raked in 46% off each grant for âoverheadâ and that was what supported all this staff. After this meeting, I went to my office and wrote my retirement letter effective at the end of the school year.
I once taught a âreal worldâ economics workshop to 8th graders. One of the exercises was for them to REALLY understand all the costs that went into a Big Mac, and why businesses have to mark up their wares to survive. Opened some eyes (I like to think)âŠ
Itâs starting to sound like the airline industry. They break down costs to make the initial ticket look good and so people are comparing apples-apples (not to mention gouging for every little thing):
Airfare: $100
Bag 1: $25
Bags2-3: $50/ea
Overhead bin: $10
Peanuts: $20
Soda: $5
Adult beverage: $20
Sitting in seat: $100
Breathing air: $25
Breathing air conditioned air: $50
etc
BTW, I completely agree on people not understanding the true costs of running such a business and expecting no markup on partsâŠ
If the public is unwilling to recognize behind the scenes costs of businesses they deal with then in an effort to avoid conflicts and complaint the bills can overwhelm customers with line after line of official drivel @TwinTurbo. Maybe I can develope a computer billing program for shops that will âbaffle them with Bull Sheet.â
But again I am reminded how lucky I was that 60% + of my business was on fleet vehicles and the bottom line was quarterly costs vs down time & mileage.
Nah, just lump it all into Miscellaneous.
âHey, I didnât order any MiscellaneousâŠâ
This kind of stuff isnât limited to customer service related businesses. In my work, we engineer solutions that our factory will build and sell for a profit. Every day we get asked to break costs down to the minutiae of detail for their perusal and nitpicking (ala whatâs your labor rate and overhead, why is this so much, etc). We just donât play that game. If you think you can score a better deal somewhere else, best of luck to youâŠ
John Fogerty CCR âFortunate Sonâ.
Overheard in a fancy restaurant from a table full of questionable looking fellows and the waiter:
$19 for a hamburger!! Why so much?!?!
"Sir, you are not paying for a meal, you are paying for the ambiance."
Who the ___ ordered the ambiance?!?!
Well, the fact that those guys chose to eat at the fancy restaurant, versus Carlâs Jr, tells me that they DID order the ambiance
Itâs called the WallMart model of controlling their vendors.
Our operations are not ala carte. The price is the price. Take it or leave it. Homey donât play thatâŠ
Over the years, weâve had customers leave, chasing price. Theyâre usually back in a couple of years when their current agreement runs out bemoaning the quality issues they are suffering. Then they have the cajones to ask if we can meet their current price. Ahhh, no. Actually, your cost has now gone up since we do not have the volume leverage we had before you bolted in search of the basementâŠ
Markup should be added to the service that you provide. Imagine one customer who need a simple repair of an expensive part compared to another that need an extensive amount of work to replace a cheap part. They could end paying the same despite the fact that far less labor was needed for one than the other. Seems like your profit should come from what you do. You are not parts retailers.
Yes they are. The parts arenât free. Theyâre paying for those parts, and theyâre putting in the time and effort to source, obtain, and in some cases stock them.
Theyâre entitled to a profit on the parts that they sell you just as much as theyâre entitled to a profit on the labor they sell you. I mean, you donât think tire stores are selling you the tires at wholesale and just making money off the $20/wheel install fee, do you?
I donât really understand your example - if the partâs more expensive than another jobâs part, youâre going to pay more. And the other guy might pay more for labor than you did if your part goes in quickly. Why is this a problem?
You asked âdo all auto parts shops increase their parts costs by 40%?â No, they do not. At the shops my employer operated, our parts markup was 100% over costs. If a set of pads cost us $20, we charged $40. With that pricing strategy, we were able to keep our labor charge comparable to local car dealers at $104 per hour. If a customer complained that he could get the parts cheaper at rockauto or eBay, I would suggest that he go to rockauto or eBay to get them installed.
Ok, my parts are sold at cost. Happy? My labor now has 300% profit added to it. Still happy?
In the end it is the total price you pay that matters. It doesnât really matter how they arrived there, does it?
I always heard and was told that tires have a fairly low margin in most cases. Something along the order of 7%-10%,.
Depending on the industry, thatâs a pretty good markup. Back in high school I worked at Best Buy. Employees got 5% over cost on all purchases. I was all excited, thinking Iâd load my nerdy self up with all sorts of computer geekery. Turns out very little in the computer department was anywhere near a 5% markup. That was a very disappointing discovery.
I kinda get where youâre coming from. Thatâs why that whenever practical, I supply my own parts with the understanding that the part I supply will not be warrantied by the shop. Not all shops are willing to do this though, and thatâs their prerogative. The shop that Iâve been using for the past 20 years or so doesnât have a problem with it, and Iâve never brought in an incorrect part and the parts I bring in tend to be higher-end performance-oriented brands, not cheap Chineseium white box crap, so they have no problem with me bringing in my own parts. Granted, for some parts where I donât have a preference or am knowledgeable enough to have an opinion, Iâll let them handle the entire job.
Oh yeah. I worked for BBY for a while ( I was in Geek Squad), at the time, the employee discount was 10% over cost. Some things you could get a very large discount on (cables, accessories) and some things the discount wasnât much (video games,software, TVâs, laptops, etc.).
I always got a chuckle when you would pull up your own information in the system, and they would give you a list of the items you bought with your discount, and the amount off you got and that was supposed to be some kind of huge favor that the company was doing for you. BBY somehow assumed that if you werenât getting that discount you wouldâve bought from them regardless, which definitely was not true all time, seeing that for most of the bigger-ticket items you could come really close, and maybe even beat the BBY employee cost if you shopped around.
You revived a sad old thread @goodguy but Iâll throw this out to fit the OPâs question. When I warranted a repair for 12 months there was no stipulation regarding the parts which often were only warranted 30 to 90 days and even then the warranty was as porous as cheese cloth so the full cost was usually on ME and there was never any question asked, the warranty repair was made including wrecker fees if/when needed and the car was put ahead of all other work at the shop.
There are so many incidental costs related to automobile repair that filling the invoice itemizing them would be ridiculous to me. When I replaced most water pumps I replaced every bolt that held it on and never billed for it because it would take more time to look up the part number and the price than the part was worth so I just considered the markup on the billed parts would cover it. There are many similar situations in the business.
I was quite successful for many years and look around now and recognize that opening an independent shop would require a small fortune and might not show a profit for a year or two. There will be fewer independent shops and the public will likely pay an even greater price in the future for car maintenance and do some serious searching to find a shop to deal with.
We have to hope that a lot of the independent guys are willing to sell their turnkey shops to younger mechanics on an extended payment basis when itâs time to retire. And thatâs a big risk for the old mechanic unless heâs put a lot away for retirement and doesnât need the cash infusion from selling the shop.