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What if I told you that relying solely on store sales growth is a waste of time? A common misconception in the tire industry is that shops need to be constantly busy and grow quickly to be profitable. However, the truth is that stores that focus on their core business fundamentals tend to be the most successful in the long run.
Running a profitable tire dealership requires more than just increasing your car count. Stores that focus solely on sales growth often lose sight of what’s really important – managing their business effectively. Remember the fable of the tortoise and the hare? The tortoise defeats the hare by moving toward his goal with determination and purpose. Store owners should adopt this mindset and not get distracted by busy work.
There are several key areas that impact shop profitability, one of which is parts gross margin. In order to continue to achieve the target, the profit margin target for all parts except tires, batteries and accessories is 54%. But setting a profit target isn’t enough – you need to monitor it regularly. Addressing issues such as employees driving down prices due to dissatisfaction with higher profits – additional training and supervision will keep everyone on board.
Labor is another profit opportunity. Don’t just look at your stated hourly rate—track the actual effective rate. Many stores that list a $139 rate end up with an effective price of just $109 — you can calculate this by dividing total labor sales by billable tech time. For example, $4,600 is equivalent to $109.52 in 42 hours. But if the published rate is $126, the effective rate is 86.9%. Stores looking to make a profit should always exceed 125%, otherwise this labor gap can cause huge losses over time.
You should also utilize a store management system to improve workflow. Make all employees aware of planned work and personal tasks and set expectations around those tasks. When every member of every department knows what is expected of them, their performance improves.
It also helps to have a vision that goes beyond the day-to-day work of the store. Set goals for your personal life and encourage your technicians to do the same to help them gain extra motivation to work hard.
Your goals shouldn’t just focus on sales numbers and volume, but on efficient operations, quality work, and revenue. Simply being inundated with customers doesn’t guarantee success—but running a conscious, strategically managed store does.
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