How to Calculate Profit Per Job at Your Auto Repair Shop
Understanding profit per job reveals which work is profitable and which isn't. Learn the formula and how to improve margins.
Most shop owners know their monthly profit but don't know which jobs are actually profitable. Some jobs lose money. Some jobs are high-margin gold. Without job-level visibility, you're flying blind and can't improve.
The Profit Per Job Formula
Start with the invoice total. Subtract parts cost (actual cost paid to supplier, not retail price). Subtract labor cost (technician wage + payroll taxes + benefits, typically 30–50% of posted labor rate). Subtract overhead allocation (rent, utilities, insurance, tools divided by job count per month). The remainder is profit. Example: a $600 invoice with $200 in parts, $150 in labor costs, and $50 allocated overhead = $200 profit.
Why Labor Cost Matters
Many shops track invoice revenue but ignore labor cost. You post a $100/hour labor rate, but your technician costs you $35–$45/hour (salary + taxes + benefits). A 2-hour job billed at $200 costs you $80–$90 in labor, not $200. If parts margin is low and overhead is high, this job barely breaks even. Knowing this changes how you price and what work you accept.
Parts Markup and Margin
Parts profit = (retail price - cost) divided by retail price. A part that costs you $100 and you sell for $150 has a 33% margin. ($150–$100)/$150 = 33%. Over time, track your actual parts margin by category: brake parts, suspension parts, engine parts, etc. Some shops average 35–45% margin, others 25%. Low-margin parts drag down profitability unless compensated with labor.
High-Profit vs. Low-Profit Work
- Oil changes: low labor time, decent parts margin (40–50%), high volume. Profit: $30–$60 per job. Essential for customer retention.
- Diagnostic and repair: high labor time, variable parts cost. Profit: $50–$200+ per job. Core business.
- Warranty work: low margin, often warranty labor rate (50% of normal rate). Profit: minimal. Only do it to retain customers.
- Fleet work: high volume, lower margin per job. Profit: $20–$40 per job but hundreds of jobs per month. Cumulative profit is large.
- Specialty work (transmission, engine): high labor time, high parts cost, high revenue. Profit: $200–$500+ per job. Most profitable.
Improving Job Profitability
Review your lowest-profit job categories. Are labor times too high (technician is slow or job is harder than estimated)? Are parts margins too low (selling below cost or excess discounting)? Is overhead allocation fair? Streamline workflow to reduce labor time. Negotiate parts pricing with suppliers. For unprofitable work, consider declining the job or raising prices.
Quarterly Review Process
Pull a report of all jobs from the past 90 days. Calculate profit per job. Identify your top 10 most profitable jobs and your 10 least profitable. Ask yourself: can I do more of the profitable work and less of the unprofitable? Are there pricing issues or cost control problems? Use this to refocus your marketing and staffing.
Track every job in <a href='/features'>Mechanics</a> with parts cost, labor time, overhead, and final profit. Generate monthly profitability reports showing profit by job type, technician, and customer. Over time, you'll see which work is truly worth your time and which is dragging you down. Use this data to raise prices on high-demand profitable services and streamline or eliminate low-profit work.
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