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Matrix Pricing for Auto Repair Shops [Template]

Jul 28, 2016 8:22:00 AM / by Brian Paulson posted in automotive repair shop

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What is Matrix Pricing?

Matrix pricing is a system that uses multipliers to determine the selling price of a part used in a repair order. Many auto repair shop management systems have the capabilities to program a parts pricing matrix, but they are not always used to the fullest extent, or they're not programmed properly based on strategic calculations. 

If you’re failing to price your parts accordingly, you may be losing out on thousands of dollars in potential profit year after year.

How a Price Matrix Works

Matrix pricing typically works on a sliding scale -- the lower the cost of a part, the higher the multiplier based on a margin calculation. As the cost of the parts rise, the markup drops.

Below are tables we use to help our automotive repair shop clients see the benefits of matrix pricing, one for pricing aftermarket parts and one for using OEM parts from a dealer.

 

AFTERMARKET PARTS MULTIPLIER

PROFIT

$.01 - $11.00

= X       3.33

70%

$11.01- $30.00

= X       2.94

66%

$30.01 - $130.00

= X       2.50

55%

$130.01 - $200.00

= X       2.00

50%

$200.01 - UP

= X       1.81

44%

 

DEALER PARTS MULTIPLIER

PROFIT

$.01 - $1.00

= X       3.50

71%

$1.01- $5.00

= X       3.25

69%

$5.01 - $50.00

= X       2.25

55%

$50.01 - $100.00

= X       1.82

45%

$100.01 - $175.00

= X       1.62

40%

$175.01 - UP

= X       1.54

35%

 

Matrix pricing is a gradual method for growing profits over time. It may take up to a year to see a boost to your bottom line; however, in our experience, this strategy is key to improving your gross profit margins.

Successful auto shop owners implement matrix pricing on parts from the beginning, but it's never too late to start using the strategy. 

For more advice on boosting profitability at your shop, check out our free eBook: 10 Traits of Successful Auto Repair Shops and start boosting your shop's performance!

 

10 Traits of Successful Automotive Repair Shops

 

 

Brian Paulson

Written by Brian Paulson

Brian received his Bachelor’s degree from the University of North Dakota with a double major in accounting and financial management. He’s a member of both the National Society for Tax Professionals and the National Society for Accountants and serves on the board of directors for the Professional Association of Small Business Accountants.

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