Because many collision repair shop owners don't know the true cost of their materials, the Automotive Service Association (ASA) introduced a new tool to help determine profit margins based on percentage comparisons.

Downloadable for free to ASA members, the Gross Profit Calculator operates via the Microsoft Excel format and includes two worksheets listing more than 100 materials in common industry use, such as sealer, tape and drill bits.

Specific line items are customizable, allowing users to enhance the calculator to match specific business practices. The calculator is set up to show various gross profit levels by displaying the results in several percentage increments; sliding the cursor across the page shows margins.

From there, users can track actual material usage, ensuring that the correct figures are included on the invoice for each particular job: If the shop uses a half-tube of seam sealer and several feet of tape on a vehicle, the appropriate pricing should be reflected on the bill.

"Body shops have got to start treating their materials like a part," Proctor asserts. Hospitals do this for products and services provided to patients. "They know how much they paid for it and what they're selling it for," he says.

"In order for any business to become and remain successful, knowing your numbers is key," says Proctor, owner of A.C. Proctor Paint & Body Shop Inc. in Augusta, Ga. "Using ASA's Gross Profit Calculator tool allows body shops the opportunity to easily calculate the necessary numbers to be profitable."

Most shops don't know their numbers, Proctor says. "You've got to get paid for what you do, and most shops don't want to take the time to do it. Tools like this work; once you download it you're able to use it, and you can customize it to your particular application."

The calculator is the brainchild of Michael Anderson, co-chairman of ASA's Estimating Subcommittee and owner of Wagonwork Collision of Alexandria, Va.

"It's just working smarter, not harder," says Anderson, noting that he devised such a system for Wagonwork more than a decade ago. "I wanted consistent pricing throughout my business," he says.

"It's a tool my employees just plug in. Once a month, my parts department knows that they have to check the pricing." The company also e-mails the sheet over to its high-volume jobbers to have them enter pricing updates. Tracking the costs is a must to ensure a profitable operation. Otherwise, "An invoice will come across my desk and I'll find that my seam sealer went up and I didn't know it," Anderson says.

"It is imperative as business owners that we run our collision repair shops as businesses. To do that we need to have a better understanding of the financial aspects of our businesses," he says.

"Understanding the difference between markup and gross profit is certainly an area that has the potential to be misunderstood in our industry — especially by our insurance partners. Using this new tool provided by ASA will allow us as business owners to ensure that we are collecting and maintaining our desired gross profit — which, as we all know, is the key to building a budget and financial forecasting," says Anderson. "It's important for an estimator to ask the technicians meaningful questions" about the amount of materials being used by each person involved with a repair.

"If you're using three drill bits on your job and you're not charging money for it, you're losing money on that job. It's important that you have accurate pricing," he says.