Estimating
Recently, I had the pleasure of speaking with a very successful fellow veteran shop owner, that I have a lot of respect for. We don’t agree on everything, and we run our shops very differently from each other, but that’s ok! He made me think and even gave me a new metric to study, that I had never really seen or thought about before. Anyway, we discussed just how many shop owners out there, that DON’T understand their numbers. Its just insane to be honest.
I remembered a quote from a very smart coach I had years back, “Most non-compliance, is due to a misunderstanding!!” Otherwise, when a shop owner doesn’t understand their P&L, they just run their business off their cheque book and saving balances. IMO, the accountants of these type of shops, plain and simple need to be fired. Remember, you’re the customer who pays the accountant, not vice versa! P&L’s must be very easy to read and understand for EVERY shop owner. There are industry professionals out there that will fix your P&L’s. Most of the industry professionals I know, understand most body shop management systems. If you want to achieve a high net profit and free yourself from debt, YOU MUST COMMIT TO MAKING THIS YOUR NO.1 PRIORITY to start with!!
Ok, finally now for Estimating.
We are going to take an example quarter panel replacement on a 2017 Chevy Traverse (see my photos). The car has some repairable damage to the LR door, needs the LR quarter replaced, damage to the LR wheelhouse, damage to the LR wheel, needs the upper and lower rear cover replacement. Not too complex, right?
The estimate the insurance appraiser wrote, without sales tax is $5,692.52 (see photos). The parts total with the car parts, glass kit & Etc. came to a total $2,725.87. Let’s say we can make a 30% GP on the parts or $817.76 Parts Profit.
Labor total came to $2,365.00. Industry average labor GP goal is around 65%. We pay our technicians 35% and the business keeps 65% or $1,537.25 Labor Profit.
Now the estimate has $493.20 for Paint & Materials. Let’s say this job costs us $375 in P&M or we have $493.20 – $375 = $118.20 paint profit.
When we add all the Gross Profits together: Parts Profit $817.76 + Labor Profit $1,537.25 + P&M profit $118.20 = Total Gross Profit for the job $2,473.21.
If we want to know the Gross Profit as % of the job, we divide $2473.21 Gross Profit dollars of the job / $5692.52 total sale less sales tax = .434 or 43.4% Gross Profit! We should always strive for at least 45% overall GP. So, this job is not too far off, right?
I bet once we get this job apart, we can find a few more things to add to get us to 45% GP.
The total hours the appraiser wrote for this job is 43 hours. I remember decades back, as a combo tech getting 43 hours for a job like this and I thought, ‘This is just what the job pays.’
I don’t mind going home tired and I don’t mind going home hungry, but now with the right knowledge I haven’t gone home tired AND hungry in quite a while.
