Parts pricing, and the margin nobody looks at.

A flat markup is the wrong shape

Most workshops apply roughly one percentage to everything, which over-prices expensive parts and under-prices cheap ones.

The cost to you of handling a part is not proportional to its price. Sourcing, ordering, receiving, storing and returning a small item costs about the same as a large one, so a flat percentage means a low-value part barely covers the work of obtaining it while a high-value one carries a margin the customer can easily check online.

Banded parts pricing fixes both ends: a higher percentage on inexpensive items, tapering as value rises, with a minimum cash margin so nothing is handled for nothing.

Price against what the customer can see

Customers can look up a part in seconds, and a margin that looks indefensible on a screen becomes an argument at the counter even when it is fair.

That does not mean matching an online price, because you are not selling the same thing: yours arrives correct, fitted, warranted and today. It does mean knowing what the visible price is on the parts customers actually check, which is a short list dominated by common consumables.

On those, a smaller margin defended confidently beats a larger one that has to be justified every time. On the parts nobody can price, the market is your supplier network rather than a website.

Customer-supplied parts

Every workshop faces this and the ones without a policy handle it inconsistently, which is worse than either answer.

• You lose the parts margin, which on many jobs is a meaningful share of the total.
• You carry the risk if the part is wrong, poor quality or damaged, usually without recovering the labour.
• Warranty becomes complicated, because you cannot warrant a component you did not supply.
• Diagnosis is undermined if the customer has already decided what to fit.
• The job takes longer, because a part that does not fit is discovered mid-job rather than on the shelf.

Declining outright is a legitimate policy. So is accepting with a higher labour rate and no warranty on the part, stated in writing before the work starts. What causes trouble is deciding case by case at the counter.

Warranty is part of the price

A part supplied and fitted by you carries an obligation, and that obligation has a cost which belongs in the margin rather than in a surprise later.

A failed component within warranty usually means the part is replaced free and the labour is your problem, unless the supplier covers it. Whether they do, and on which lines, is worth knowing before you choose where to buy rather than after something has failed.

This is also the strongest argument against the cheapest available part on jobs with significant labour. A budget component on a two-hour job is a saving of very little against a risk of two hours you cannot invoice.

Review the bands, not the parts

Parts pricing has the same failure mode as tyre pricing: it is set once and then drifts as supplier costs move underneath it.

Reviewing a handful of bands twice a year is tractable in a way reviewing a catalogue is not, and it catches the situation where a supplier increase has quietly turned a healthy margin into a thin one on a whole category.

The number worth watching is margin by category rather than overall. An average hides a category being sold at close to cost, and that is usually the category somebody is winning work with.

Know what parts actually contribute

The reason to do any of this is that the contribution is usually larger than assumed, and nobody can act on a number they do not have.

Splitting revenue and margin into labour and parts, by job type, answers it in an afternoon. Most workshops find at least one category where parts are carrying the job and the labour is close to break-even, which is useful to know before deciding to compete on labour rate.

It also changes how you think about the work you accept. A job with poor labour margin and strong parts content is a different proposition from the same job where the customer brings their own.