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A local small engine repair shop advertises a special on walk behind lawn mowers: "Tune up, $60 plus parts".

I called them and asked what the special included, they answered "we clean the bottom and sharpen or replace the blade, change the oil, and check to see if the carb is set correctly, clean and regap or replace the spark plug, clean or replace the air filter...."

Hmm, 15 minutes to do the cleaning and blade, five to change the oil, five to check the carb, five to check the air filter, five to check the plug...just over a half hour...sixty bucks.

Their parts prices: Replace blade, $22 to $31. Spark plug, $5. Air filter, $6.35. And the capper...$4.95 for 21 ounces of bulk 30 weight oil.

For those who service your own equipment, look at all the money you save. :thumbsup:

Well, for those that are not mechanically inclined, or just don't have the time, it really isn't that bad of a deal. Besides, they're running the business to make money. That $60 isn't pure profit. After employee pay, taxes, insurance, etc, I'd be surprised if he nets more than $20 off the job. Not to mention all the hassle and aggravation he takes for running a business. Customer service can be a pita sometimes.

You should spin that and say, look at all the extra money you could make if you wanted to do this in your local area. :biggrin:

Sounds like they may be hurting for bussiness. Going rate here is $75 plus parts.

indypower said:

Sounds like they may be hurting for bussiness. Going rate here is $75 plus parts.

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At $60-75 an hour, they are cutting their own throat...I am retired from my full time job, but do mechanical and carpentry work as a sideline. For my 36 years of experience, my customers pay me $25 an hour and 25 cents per mile, materials are billed at my actual cost. And I don't lose money doing this...I get more job offers than I can accept, for obvious reasons. If I billed $60-75 per hour and marked up materials 2X or 3X nobody would want to hire me.

The net profit after all expenses and overhead for a tier III dealer (over $1,000,000 annually) is about a 2-3 percent margin. tier I dealers ( under $500,000) have a much higher profit margin. he may be a tier II dealer ($500,000-1,000,000) trying to reach tier III status. The tier II to tier III level has to be completed within about 12-18 months or you go belly up.

ILENGINE said:

The net profit after all expenses and overhead for a tier III dealer (over $1,000,000 annually) is about a 2-3 percent margin. tier I dealers ( under $500,000) have a much higher profit margin. he may be a tier II dealer ($500,000-1,000,000) trying to reach tier III status. The tier II to tier III level has to be completed within about 12-18 months or you go belly up.

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? ? ? ?

JDgreen said:

At $60-75 an hour, they are cutting their own throat...I am retired from my full time job, but do mechanical and carpentry work as a sideline. For my 36 years of experience, my customers pay me $25 an hour and 25 cents per mile, materials are billed at my actual cost. And I don't lose money doing this...I get more job offers than I can accept, for obvious reasons. If I billed $60-75 per hour and marked up materials 2X or 3X nobody would want to hire me.

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On the surface I will have to agree with what you are saying...
The biggest problem is that no matter how bad a deal may sound... someone will, for whatever reason, find a way to justify it... and with a broad enough market place there will be enough cash flow to keep every excess around...

There are a few people that have not actually studied economics who perpetuate the idea that - if you do not make a profit on everything that crosses your path- you are loosing money... (Those folks are usually in marketing, not accounting.)

Thankfully that is not how all things actually function.
But there will always be a few of those people coming and going through your life...
... I try to enjoy all types. :smile:KennyV

They are probably just looking to get other business. There is nothing wrong with this. Get the people in here on a great deal and then show them how good and nice they are, hopefully they come back. It's called advertising.

I was in a public business for 15 years and the only thing i will say is the same thing i said when i was in business everyone should be required to run a business for 6 months then they would under stamd things a little better. And i bet they wouldn't go to walmart and get there oil and new spark plug and air filter and go to there local shop and ask him to install it.

Well I guess the title of this thread allows a little expansion on what makes a deal...

If in a market place a business survives, with competition, it is either doing enough things right... or there is such a demand for that product or service that it is of no matter how the business operates.

A deal is very subjective... a deal to one person could look terrible to another... We all shop where we do for some reason... :wink:KennyV

ILENGINE said:

The net profit after all expenses and overhead for a tier III dealer (over $1,000,000 annually) is about a 2-3 percent margin. tier I dealers ( under $500,000) have a much higher profit margin. he may be a tier II dealer ($500,000-1,000,000) trying to reach tier III status. The tier II to tier III level has to be completed within about 12-18 months or you go belly up.

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From your example of a Tier III dealer grossing $1 million per year and netting 2%-3%, it looks like the owner is buying himself a low-paying job. Would you like to run a million dollar business for $20K-$30k per year?

I'd agree that a very small business could have much lower overhead than a large business. A guy running a small engine repair business could operate from his home (if permitted by zoning) and use a pickup truck or van he already owns for pickups and deliveries. Good margins, but not much room for growth. To get bigger means taking on more expense, which means lower margins, and volume must be raised a lot to compensate for those lower margins. I think that's what you mean by Tier II must quickly transition to Tier III: You can't take on the higher expense/lower margin model without a large increase in volume.

I think many small repair shop operators would get a shock if they did a Break Even Analysis of their business.

A lot of tier II owners can't cash the paycheck after they right it to themselves. The checks get written and then put in a drawer to be cashed later when profits are better.

Take your car to the dealer lately ? No different....Considering overhead that guy isn't making very much. You can't compare what it costs you for self performed service to what it cost a shop with employees and overhead...And believe me there are plenty of people that will pay it....Think about it for a minute all of the expenses to run a shop and then get a small return on your risk and investment. After taxes of course...