# How to build a parts matrix

A parts matrix is a table that says how much to add to a part's cost to get its selling price, with a different percent for each range of cost. This page explains how to build one and how to check that it makes the margin the shop needs. It names no matrix as the right one.

## Markup and margin are not the same number

Markup is the profit on a part as a percent of what the shop paid for it. Margin, or gross profit, is the same profit as a percent of what the customer paid. A part that costs 40.00 and sells for 50.00 has a profit of 10.00: a markup of 25% and a margin of 20%.

The two are confused because both are called the percent on parts. A matrix is usually written in markup, because that is what is applied to a cost. A target is usually given in margin, because that is what shows on a profit and loss statement. The margin is always the smaller number, and the gap grows as the percent does.

To turn one into the other: margin is markup divided by one plus markup, and markup is margin divided by one minus margin, with both written as fractions.


## Why cheap parts carry a higher markup

Handling a part costs about the same whatever its price. Someone looks it up, orders it, receives it, checks it, and returns it if it is wrong. On a part that costs a few dollars, a flat percent does not pay for that work. On a part that costs hundreds, the same percent can price the shop out of the job.

So a matrix slides: a high markup on the cheapest parts, falling in steps as the cost rises. The steps are the rows of the matrix. How steep the slide should be depends on what the shop sells: a shop that sells many cheap parts makes most of its parts profit in the first rows.


## Check the price against the list price

A matrix works from the shop's cost and knows nothing about the price a customer can find elsewhere. Before a matrix is used, compare what it gives with the part's list price for a sample of common parts. Where the matrix price is well above list, the row's markup is too high for that range of cost or that kind of part. Many shops cap the price at list, or keep a second, flatter matrix for dealer parts and tires.


## Test the matrix on last month's invoices

The margin a matrix makes is not the margin of any one row. It depends on how the shop's parts spend is spread over the rows. Take last month's parts invoices, add up what was spent in each range of cost, and work out each range's share of the total.

With those shares, the blended margin is total profit divided by total sales across the rows. That is the number to compare with the target, and it is what the share column of the calculator shows. If it is low, raise the rows where most of the spend is, not the rows that look low.


## What to aim for

For a general repair shop, the typical range for gross profit on parts is 40% to 50%, and the usual target is 50%. A margin of 50% takes a markup of 100%. A tire shop or a heavy-duty shop runs different numbers.

The range is what the first page below calls typical, and the target is what the other says shops aim for. They are not a survey of what shops earn, and this site does not say what any shop should charge.

- [WickedFile: Parts vs. Labor Margin: Why Most Auto Repair Shops Are Getting It Backwards](https://www.wickedfile.com/blogs/parts-vs-labor-margin-auto-repair/)
- [Elite Worldwide: Keeping Your Shop Competitive and Profitable](https://eliteworldwide.com/info-center/keeping-your-shop-competitive-and-profitable/)

## Check your own rules

Some places regulate how charges are presented to a customer: what an estimate must show, and whether a part's price must be stated apart from labor. A matrix sets a price, not how it is shown. Check the rules where the shop is.


## Try one

The calculator prices a part under a matrix of up to eight rows and shows the blended margin on a mix of parts spend. Its examples are illustrations, not recommendations.

- [Parts markup matrix calculator](https://open.wenmarpro.com/tools/parts-matrix)