Untitled DocumentBecause so many collision repair shop owners don’t have a handle on the true cost of their materials, the Automotive Service Association (ASA) has introduced a new tool to help determine your profit margins based on percentage comparisons.
Downloadable for free to ASA members, the Gross Profit Calculator operates via the Microsoft Excel format and includes two worksheets listing more than 100 materials in common industry use, such as sealer, tape and drill bits.
Specific line items are customizable, allowing you to enhance the calculator to match your specific business practices. In addition, the calculator is set up to show various gross profit levels by displaying the results in several percentage increments; just slide the cursor across the page to view and select the desired margin.
“It’s simple, simple, simple,” says Carroll Proctor, chairman of ASA’s Estimating Subcommittee. “It’s extremely user-friendly. When you type in your cost it automatically spits out your gross profit.”
From there, you can embark upon tracking your actual material usage, ensuring that the correct figures are included on the invoice for each particular job: If you use a half-tube of seam sealer and several feet of tape on a vehicle, the appropriate pricing should be reflected on the bill.
“Body shops have got to start treating their materials like a part,” Proctor asserts. “Hospitals do things like this” for each of the products and services provided to a patient. “They know how much they paid for it and what they’re selling it for,” he observes.
“In order for any business to become – and remain – successful, knowing your numbers is key,” explains Proctor, owner of A.C. Proctor Paint & Body Shop, Inc. in Augusta, Ga. “Using ASA’s Gross Profit Calculator tool allows body shops the opportunity to easily calculate the necessary numbers to be profitable,” he adds.
“I think it’s unique, because I find in talking to other body shops that most don’t truly know their numbers,” Proctor reports. “You’ve got to get paid for what you do, and most shops don’t want to take the time to do it. Tools like this work; once you download it you’re able to use it, and you can customize it to your particular application.”
The ASA’s Gross Profit Calculator is the brainchild of Michael Anderson, co-chairman of the association’s Estimating Subcommittee and owner of Wagonwork Collision of Alexandria, Va.
“It’s just working smarter – not harder,” says Anderson, noting that he devised such a system for Wagonwork more than a decade ago. “I wanted consistent pricing throughout my business,” he recalls.
“It’s a tool my employees just plug in. Once a month, my parts department knows that they have to check the pricing.” The company also e-mails the sheet over to its higher-volume jobbers to have them enter pricing updates. Tracking the costs is a must to ensure a profitable operation. Otherwise, “An invoice will come across my desk and I’ll find that my seam sealer went up and I didn’t know it,” Anderson reports.
“It is imperative as business owners that we run our collision repair shops as ‘businesses.’ To do that we need to have a better understanding of the financial aspects of our businesses,” he stresses.
“Understanding the difference between markup and gross profit is certainly an area that has the potential to be misunderstood in our industry – especially by our insurance partners. Using this new tool provided by ASA will allow us as business owners to ensure that we are collecting and maintaining our desired gross profit – which, as we all know, is the key to building a budget and financial forecasting,” says Anderson. “It’s important for an estimator to ask the technicians meaningful questions” about the amount of materials being used by each person involved with a repair.
“If you’re using three drill bits on your job and you’re not charging money for it, you’re losing money on that job. It’s important that you have accurate pricing,” he notes.
Anderson conducts numerous industry training seminars throughout the country, and based on his classroom experiences with shop owners he believes “the majority are ignorant in the process of getting their desired gross profit.”
The compiled data is especially useful for backing up your invoices when dealing with insurance adjusters, according to Anderson and Proctor, who had prepared his own spreadsheet program 15 years ago in the wake of a dispute with an insurance carrier over a spate of hail damage claims. “I did a breakdown of everything we used. I want to know if we used a pint or quart of paint” on a job.
“Rarely do I have difficulty getting paid by the insurance company if I can document everything I used on the car,” Proctor points out.
“General Motors knows what they need to get a profit,” he says. “A body shop has to be run like a business. Knowing your numbers is important, and for getting to those numbers this tool will help you.”
