Every shop owner loves it when customers keep coming back – unless they’re coming back because the repair you did didn’t stay repaired. You know comebacks cost something, but have you ever considered how much they really cost you? It’s not just the cost of replacing a part.
There’s the time you’re tied up handling the comeback transaction and warranty claim, and there’s the labor time to do the job again. And while you’re redoing the job, your bay is tied up and unavailable for other jobs, jobs that you’d be getting paid for.
How many comebacks you have depends on several things, including the quality of parts you use. Let’s get out the calculators and do some math on the cost of comebacks.
The first part of our cost of comebacks calculation figures your profit on a job. Let’s use a hub assembly as our example and look at the profit on an economy hub first. We’ll enter the hub cost (in this case $120), the labor rate (say, $70), the hourly cost of our tech ($18), and the estimated hours for the job (2). So we make $131 on that job.
Now let’s do the same math with a high-quality hub. The only number we have to change here is the hub price – $153. The rest are good as is. Our total profit of $174 is higher than for the economy part. So with that math done, we know our profit number per job and we can calculate what those comebacks cost over a year.
Let’s start with the economy hub again, and let’s say we do three hub replacements per month, or 36 a year. We’ll use 8% as the return rate on economy hubs. That’s an industry average.
Based on those numbers, the comebacks cost you nearly $378 in lost profits, plus the $378 you lost because your service bay wasn’t available for other work. Those cheaper hubs dinged your profit by over $750 for the year. For the year, we made about $110 on each unit, or kept 84% of the profit.
How are those numbers different for a high-quality hub? Just change the estimated return rate to 2%. Wow! Your lost profitability and lost opportunity are way less, and your profit went from 84% to 96%. The total annual profit difference? More than $1,300. That’s just the dollar cost. How about the cost of your reputation of comebacks?
You want good word of mouth and online reviews, that positive buzz brings in more customers. But when you disappoint a customer, they’re going to tell people, lots of people. On average, they’ll tell from 8 to 16 people. That can really hurt your reputation and business. And odds are, you won’t even know it’s happening because most of those customers won’t complain. They just don’t come back.
When you choose cheaper parts, you might make more money upfront, but it’s going to cost you in the long run, both in terms of profit and a damaged reputation. Do the math yourself for your shop and see how much those comebacks really cost you.
To use the “Cost of Comebacks” Calculator, visit Timken.com/comebackcalculator.
This video is sponsored by the Group Training Academy.