Modern Tire Dealer

JAN 2019

Magazine for the professional tire industry

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Page 59 of 85

B u s i n e s s I n s i g h t M T D J a n u a r y 2 0 1 9 58 therefore unable to achieve 60% gross profit overall, typically do not offer an inspection consistently. ey either don't do it at all, or they do an inspection without consent (automatic on every car). is is not helpful to the customer (no one likes surprises) and not helpful to the shop (wastes technician time and slows down the flow of vehicles). Asking and informing of inspections is the only legitimate way to balance the needs of the shop (profitability) with the needs of the customer (professional service at a fair price). Mix of sales is the first step of the recipe and the ingredient is inspections. e next step of the recipe is to look at the gross profits of each sales category. As mentioned earlier, 20%-25% gross profit in tires is a baseline. ere are plenty of statistics that show nationwide, this is achievable. Again, if a shop is in a position where they feel they can't get that margin, I point to a simple fact: If you allow your front door (advertising, price shoppers, the internet) to control your tire sales, then yes, you won't be in the 20%+ range. e least grossing tire you sell is the one you advertise. e highest grossing tire you sell is from inspections. You can have an educational conversation with customers on the condition of their tire(s), learn what features and benefits are important to them and recommend the most appropriate tire. Not debate which tire sells for what price. Labor costs should be 100% gross profit. Pay technicians out of payroll, as an expense. Parts must be at or close to 50% gross profit. At the end of the month (not individual part items), if you are selling your parts for less than 50% you are putting your business at serious risk. With Amazon and other major players looking wide-eyed at the opportunity to get involved in selling parts, your margin will shrink when those players throw their hat into the market. If you are only at 40%, you will go down to 35%. If you end up selling parts for 30% margins, you might as well tell the customer to buy their own parts and you can just install them. Just kidding, that's another column for another day. Seriously, you need to make more margins on your parts. Why can every other industry in retail make better margins on parts than we can? How do you get 50% parts margins? You guessed it, inspections. Dirty filters, dirty fluids, burned out bulbs: ese things are not obvious to a customer, yet essential for safe driving and vehicle longevity. ey shop, you should always allow the customer to have the final say in anything that happens to their car. Our job is to educate and offer. e only exception to this is the federal law of "Failure to Inform" where without removing any items, something on a car is visibly dangerous like an axle has popped out. Shops that tend to be "heavy" on tire sales (in reality, they are service light), and a "courtesy" check where you check bulbs, filters, fluids — something quick but ben- eficial to the customer. If the customer does not want this inspection, that's OK! ey either do not trust you yet, or their needs for speedy service outweigh the benefits of an inspection. If a customer doesn't want an inspection, what are the odds they would purchase something anyway? As a reputable

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