The Gross Profit Myth That’s Killing Your Shop
Who should you listen to when it comes to setting gross profit targets?
There are a LOT of opinions out there—trainers, consultants, old-timers, industry “gurus.” Everyone has a number they swear by. But here’s the uncomfortable truth: most of them are teaching the wrong targets.
And if you’re following the wrong target, you’re paying for that mistake out of your own pocket.
The Expense Creep Nobody Talks About
Look at your expense categories over the last decade. How many of them went down as a percentage of sales?
If your shop is like 99% of the ones I’ve seen, almost every category went up. Insurance, rent, utilities, labor costs, parts prices—everything is climbing.
If your gross profit percentage hasn’t kept pace with those rising expenses, there’s only one place those costs can come from: your net profit.
That’s your money walking out the door.
The Inflation Trap
Here’s the math nobody does: If you made $100,000 in 2016 and you’re making $100,000 today, you didn’t stay flat—you went backward. Inflation ate about 35% of your buying power.
This is why you have to measure gross profit, expenses, and net profit as a percentage of sales, not just in dollars. Dollars lie. Percentages tell you whether you’re actually moving forward or slowly dying.
The “Lower Your Prices” Advice Is Wrong
During every downturn, some consultants tell shop owners to accept lower prices and smaller tickets. “Just get cars in the door,” they say. “Ride it out.”
That advice is poison.
If you lower your gross profit percentage, you pay your expenses out of net profit. And whose money is that? Not the consultant’s. Not the blogger’s. It’s YOUR money.
What Actually Works
You can control and improve gross profit percentage—even in a tough economy. But it requires doing the real work:
- Bring in the right customers through targeted marketing
- Deliver exceptional service that justifies your prices
- Train your team and hold them accountable
- Measure everything so you can see what’s working
Parts and sublet gross profit are the easiest to fix—a good pricing matrix handles that. Labor gross profit takes longer, sometimes up to a year, but significant gains come quickly with the right incentive pay structure.
The Choice Is Yours
You can’t just raise prices and keep delivering the same mediocre service to the same low-value customers. That doesn’t work.
But you can build a shop that commands premium prices because it delivers premium value. Shops do it every day.
The question is whether you’re willing to do the work—or whether you’ll keep listening to “gurus” who don’t have to live with the consequences of their advice.
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Ready to fix your gross profit for good? Schedule a free consultation — no pressure, just a real conversation about what’s eating your margins and how to fix it. Or call us at 866.826.7911.