10 Tips To Boost Store Margins

The most profitable companies in the world achieve margins over 20 percent like Microsoft, Apple and Exxon Mobile.

For car audio specialists, the goal is to move up by 5 points from where you are.  “If you are doing 10 percent you are in a good spot but not great; 15 percent you get a gold star,” said Ben Vollmer of Businessworx at a Spring KnowledgeFest seminar this month.

If your margins are at 5 percent “you’re in the hospital and hooked up to life support,” he said.

But some of the best shops in the industry are achieving 20 percent margins, said Avidworx’s Marcel Newell.

The first step to boosting margins is to trim down your SKUs.  Vollmer said, “ I was in a store that had a lower end unit from every manufacturer on the planet. You need one or two. He stocked six SKUs and only one deep, instead if should be only one or two units, six deep.”

When dealing with speakers, consumers generally don’t care what a 4 x 6 or a 5 x 7 inch speaker sounds like.  “If he does care about sound quality, he’ll buy what you tell him, if not, he just wants to replace the speakers in his truck,” said Vollmer. So carry only one or two of these sizes.

As a former owner of Audition Audio in GA, he said, “ For 4 x 6 and 5 x 7 I carried whoever had the best deal.  I didn’t care whether it was JL Audio or [XYZ] and my customers didn’t care.”

Here are some other tips:

3. Charge a shop fee.  Customers never complain.  You pay for solder and other miscellaneous items.   One store charges $7.49 per hour as his shop fee.   So for 4 hours a day, that’s about $30 X 300 working days a year, resulting in $9,000 a year profit.

4. Charge for materials, a roll of speaker wire is $200.  You don’t need precut wire hanging on a peg board, as some dealer do, but you need to charge.

5. At a bar, the bartender says ‘Do you want to make that a double for $4?’  McDonald’s asks ‘Would you like to supersize that?’  One store order has a policy where everyone leaves the shop with sound dampening and he charges $10 on labor and $20 for the product. Also everyone leaves with FAST Rings for $20 and then he gets a speaker adapter for $60 in labor and $20 for the product.   $49/pair speakers become a $200+ item.

6. If you don’t want to sell an extended warranty then sell a service plan that includes re-tuning a vehicle.

7. Require a purchase order. Here’s the prices on one dash kit from a distributor over the course of year, $6.24, $8.74, $12.61 and $9.78.   If you order 100 over the year, that’s a savings of $600 if you had a purchase order at $6.24. That’s one SKU!

“Most stores have too much inventory and the easy way to keep track of inventory is to start with purchase orders…..In my company, anything that comes in that matches a purchase order just gets paid. If it doesn’t match, we play slower and we train our vendors that they have to inform us of a price increase, otherwise we hold you accountable. I can’t see anyone getting to 20 percent margins without doing purchase orders,” said Newell.

8. Go to hourly billing. “Who invented the fixed install price? Circuit City.  Where are they today?  Most professions charge by the hour.  Vollmer uses ALLDATA to calculate book rates for an hourly labor estimate.  ALLDATA is what mechanics use to pull your car apart.  “My team said they couldn’t use it.  One of our techs was a certified master mechanic and he showed them how to use the book,” Vollmer said.

9. Change your rates for luxury cars; the liability is higher.  “If someone comes in with a Jaguar and we break something it’s $1,000 right there.”

10. If someone comes in for window tint, give them a 20 percent discount on paint protection.

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