It seems that lately everyone wants to build high performance engines and sell high performance parts. But it has not always been that way. In the 1950s and ’60s, high performance engine builders were racers first and to feed their need for speed they built their own high performance parts. Many started small businesses producing parts for friends and fellow racers and a cottage industry bloomed.
Today, that industry accounts for billions of dollars in sales every year. But the people who profit from the majority of these sales are no longer the same as those engine builders of years past. Or are they? Many of the legendary manufacturers still exist. They profit from their sales, but it’s to whom they sell that brings up hours of debate today.
Yes we’ve all seen the ads, the promotions, the magazines on the newsstands and the catalogs, offering high performance parts to the masses at extremely attractive prices. Some so low, that the public can buy them cheaper than the local machine shop or parts store from the local WD. Yes, the end is near and the only ones who will survive in the parts business are the catalog houses.
If you believe this, close this magazine immediately. Forget this article and in doing so you will be helping to make this prediction come true.
The attitude that seems to prevail today in some shops is nothing but doom and gloom. “I can’t raise my labor rate. I can’t charge more than the guy down the street. I can’t sell parts. I tell them to buy their parts from so-and-so.” This is a losing attitude that will ensure their failure and add another nail to the coffin they’re helping to build for this industry.
As a salesman for an engine parts warehouse and as a manufacturers rep I’ve called on hundreds of shops. No two have the same idea how it should be done. Or, for that matter, how to make a profit on parts sales, especially performance parts. Still, I’ve seen some that were highly successful and they might just have a plan that will work for you.
The first thing these successful shops have is a plan. In other words, a well-thought out method to promote parts sales as an additional “profit center” in the shop. Could any of these work for you?
Plan 1: Selling Your Knowledge. This is really my least favorite plan, but I include it because it is an honest effort to profit from parts sales. It just doesn’t include the sale.
This shop owner recognized that people are just naturally trying to save a buck, like we all are. So when the customer starts picking his brain, trying to take advantage of his knowledge from many years of building high performance engines he turns this into a chance to profit. He offers to supply the customer with a shopping list of the parts he will need in exchange for one hour of shop time.
This fifty, sixty or even seventy dollars is really a good deal for the customer in comparison to the costly mistakes that are made when customers purchase mismatched or inappropriate parts causing poor performance, motor failure or just the inconvenience to the shop while they have to wait for the correct parts.
I stated that this is my least favorite because it’s taking the job only half-way. If you can sell yourself as the expert who can choose the right parts, for a nominal price, you can also convince the customer he should allow you to supply the parts for the job.
You’re asking for the same thing: “Let me supply you (Mr. Customer) with the part numbers or the parts. It may seem to cost you a little more than you see in the magazines but it will actually be cheaper than if you purchase the wrong parts and are unhappy with the performance of your engine and have to make changes or repairs later.”
Or: “Let me use my experience as an engine builder to put together your engine using the right parts. Don’t let the ‘buff’ magazine ads persuade you into buying the parts they want you to buy.”
Your customer gets a truly custom-built engine, not the “belly button” engine from last month’s Super Rod magazine. You make more money. You are not waiting for him to get those parts, holding up progress. And his buddies are so impressed with this good running, properly matched combination, that soon you’re the expert and you don’t have to sell your expertise as much. This is the reputation many high performance builders have already established.
Plan 2: Check All Appropriate Boxes. I know of at least one high-end performance shop owner who has looked at all the labor truly performed in the shop and has written a work order to capture and charge for all services rendered. Instead of your normal 8-1/2? X 11? work order, his is printed on 8-1/2? X 14? stock.
Many of these services relate directly to the parts. When you sell the customer a set of pistons, for example, you spend a small amount of time inspecting and then measuring the piston before boring and honing the block. Now, if you are selling the piston for a profit and at the same time charging for boring and honing the block and fitting and aligning the rods, it’s reasonable to assume that you will inspect and measure that set of pistons as part of the job.
But what if the customer hands you a set of slugs and has come to your shop for the above stated labor? That’s where the additional list of labor services come in. You check the box for “Inspect and Measure Pistons” and charge for the corresponding amount of time. If you spend 15 minutes inspecting and putting a micrometer on the piston and pin, that’s 1/4 hour or $15 in an area that gets $60 per hour shop time.
Look around, what else are you handling and checking for free? The potential for additional profits is pretty great. If this notion seems petty or unreasonable, just point out to your potential customer that these services are performed at “no charge” when you supply the parts. This could more than offset the difference in mail order parts prices.
Plan 3: Discount for Labor. I often hear engine builders say they increase the price of their labor if the customer supplies his own parts. It usually ranges from 10 to 15 percent. But how do you do that if you’ve already quoted a job (I’m sure some do)? Maybe you quoted both parts and labor and now he stands before you with the motor and all the parts. How comfortable is it to say you have to charge more for the labor you’ve already given a quote for?
I think a lot of shops would like to charge more but usually don’t because they don’t want to lose the labor too.
Try this: Take your price sheet and go down the line increasing prices by 10 percent. When you quote a job put in a 10 percent credit for customers who purchase parts from your shop. What if they don’t buy? Well, you make more money on the job. You could give it up or some part of it in a form of customer appreciation if needed.
Either way you’ve done a lot better job of marketing and promoting your business. I can’t think of anything more negative than trying to get more money out of the customer “after the fact” for the same job.
Another thought on this matter: how are you going to explain this invalidation of your quote to the official from the Better Business Bureau or the small claims court judge? And even if you’re not or can’t be turned in, this is going to be the customer from hell. He’s going to milk you for all you’re worth, now that he’s paying for more.
Plan 4: The Package. This might be considered another way to accomplish Plan 3 and it contains some all-around good advice:
Offer the customer a packaged price on the block and rod work if they buy the engine kit from you. Offer a kit price for the parts and a kit price for the labor.
I worked for a production engine remanufacturer that also sold kits. If the customer chose to just have the machine work done with us, we had a packaged deal when they also purchased the engine kit. It included cleaning the block, boring and honing, installing cam bearings and freeze plugs, checking the line bore and deck, hanging and aligning the pistons and rods and reconditioning the rods as needed. It also included fitting pin bushings on engines so equipped. This package onlycost a little more.
Again, I’d start by increasing the price of these individual labor items, add them up and round off to a profitable number. Consider one price for 4-cylinders, one for Straight-6s, and another for V6s and V8s.
The worst that will happen is you will find you make more money now on individual operations.
While we’re on the topic of packages and kits, let’s take a lesson from the Kit Warehouses and the PERs. Don’t get caught up in quoting prices on too many individual parts. Quote kits or packages or, better yet, complete engine jobs. And under no means supply part numbers unless you are practicing Plan #1.
There will always be someone out there that is cheaper. Why make it any easier for them? I knew an engine builder who became fed-up with supplying part numbers and making few sales. He made up his own numbering system. It was easy. He assigned big block Chevy part numbers to small block parts. Needless to say, the local low price shop had a bunch of unhappy customers and a high return ratio.
Plan 5: The Direct Approach. I recently talked to a shop owner who finally said, “Enough is enough.” He told me if the customer shows up with parts in hand, he sends them packing. “Where did you buy the parts? Let them do your machine work,” he says. If the customer asks for a call with the sizes so he can order the parts, he’s informed of his two choices. Pack it up and get it out of his shop, or give his shop a chance to quote parts. If he can’t be competitive, not cheaper, but in the ballpark, then he’ll consider letting the customer supply the parts.
You may or may not adopt any one or more of these plans, but I implore you to develop a plan and stick with it. Unlike many professions (yes, this IS a profession and not just a great way to meet people), labor rates have gone up little in the past 25 years. And to lose profit from parts sales only compounds the problem.
Saving your business and securing your future is in no one else’s hands. At the rate business is declining, can you wait another day to take control of your profits and your future?