What a deal !!

[jhwentworth]

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.

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.

 

[ILENGINE]

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.

 

[Stewby]

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...