Speed Across The Nation: Pricing

Dec 1, 2009

Welcome once again to Speed Across the Nation. This is a unique article format that allows shops from one niche or another to speak to all of our readers across the country. The topics cover a wide range of issues affecting the industry.

In this edition, we talked with a few of the nation’s shops and asked them about their pricing procedures and methods. Take a look at what they had to say.

Terry Simpson
General Manager
The Restomod Shop
Stockton, California

It all started two years ago for the high powered Ford Mustang machine shop to get going. It didn’t take long for this shop to be one of the foremost authorities in Mustang resto-modification, as 95% of their work is dedicated to the Ford Mustang. There are rare jobs that the projects are something else, but it’s rare. In all instances, the Restomod Shop is in a perfect set up for excellence in this tough industry. Sometimes work just flows into their shop when a customer walks out of Mustang Plus and wants something modified on their old Mustang. Mustang Plus is their next door neighbor.

Terry Simpson is the general manager and co-owner of this interesting shop. Just in January of 2008, they started dealing with clientele. A short while after that-¦Well, the rest is history for a severely busy shop. Just like any other shop, there is an essence. The essence of this shop is the pricing. When they first started the hourly rate was an average $69.00, reasonable to any customer that ventured into their shop. But as soon as inflation started kicking in for all costs of parts and materials, their labor rate went up.

Simpson says, “Inflation works with the business.” They raised the rate to a reasonable $74.00 an hour, and it hasn’t slowed them down. Their reasons are simple, Simpson says, “The cost of everything that is costing us to operate everything.” That is the main reason; there are so many cases he couldn’t even describe them all.

Simpson states they are always busy and never have a dry spell. Most of their jobs are very large and take a considerable amount of time. Along comes the profiting of this establishment. They profit by figuring the cost to operate, and they stay within the cost no matter what. Simpson also admits that the workers have to finish the job in the requested time frame and it equals profit.

They are not affected by competitors especially in their area because they are practically the only ones. Simpson says that some of their work is from unsatisfied customers from other shops or the future job at hand. They offer that in full and then some to make sure the customer completely trusts them. They are also not affected by the Internet pricing of parts and materials.

Mustang Plus steps into the picture and provides them with advertisement and a strong customer volume. Simpson claims that 50% of their customer base will go over to Mustang Plus and set up a large account and Mustang Plus will provide the parts to them when they are needed. They also do some of the buying themselves.” Simpson states, “We make a percentage off of whatever we buy.” They charge 10% of price point which is high when the parts are being bought from any retailer. So they charge a mark-up for each part they have to buy for the project. All mark-ups vary because each part has a different price.

Melvin Benzaquen
President
Classic Restoration Enterprises, Inc.
Pine Island, New York

Pine Island is the location of the restoration super shop that gives customers satisfaction all around the world. But, most of his clients are here in the United States where business is most certainly booming. Classic Restoration Enterprises has been open for a respectable 13 years and was opened by owner and president, Melvin Benzaquen. They restore everything including the usual antiques, classics and muscle. They are busy year round, and that brings out busy prices.

All of their prices vary to one thing after another. Benzaquen states, “It always has been time and expense.” He is talking about the time to restore the vehicle and the cost to do it. From the beginning, they try to see what the customer wants and try to provide them with an up-to-task estimate.

Benzaquen admits that it is very hard to nail down a specific price per manufacturer. Whether the estimate is finished or not, there is the hourly rate to start everything off as it should. He has two rates actually. There is a body rate at $75.00 an hour and a mechanical rate running at $85.00 an hour. He has been with these rates for over three years. His six body employees are at an average rate for their expertise. They have the responsibilities of the body and chassis. The mechanics Benzaquen admits, “Are most expensive to hire.” He has six of those also which involves everything mechanical within the vehicle.

This has changed since the past because when the shop first opened, everything was set at $45.00 an hour. One of the main reasons for the lift in the rates are the significant jumps in the cost of parts and materials. Another reason is the cost of his overhead and the large amount of bills that help the shop work on a day-to-day basis.

The prices are not so different from one another. It depends on the project that costs the most money. Benzaquen openly admits that the resto-mod jobs are a lot more expensive and it takes more time modifying new parts compared to a regular coach build. Not everything is at an equal percent of profit at this point because there are overly expensive projects to lower paying projects.

Benzaquen states, “I don’t really pay attention to my competitors.” He also says that the Internet pricing competition really hasn’t bothered him at all. For his shop, the growth has always been up, not down and he usually doesn’t lose any volume in currency. This has to do with all around running of the shop. He manages this by sending his clients a weekly bill for their services to keep the overhead from shooting into the roof. This billing process alone helps with his overhead.

Benzaquen also charges a certain mark-up on all of the parts. The mark-up percentage isn’t described because the price varies from each part that is bought. He also prefers to do the buying himself for one reason: What if the customer buys the wrong part? If the part is wrong, then he charges the customer for that by adding more labor rates and it will aggravate a customer.

Here in lays another valid point for the customer. Benzaquen admits that the customer has the ultimate decision to choose their parts with the flow of the aftermarket. With the aftermarket being such a useful tool, it helps the customer and Benzaquen to find the part for the right price. A lot of times Benzaquen will find out that the manufacturer price will be overly expensive, so he will go on eBay and find the same part for a lesser price. The aftermarket is a powerful tool in this already powerful shop.

Mathieu J. Cama
Owner
Old World Automotive
Lawrenceville, Georgia

It all started about six years ago for Mathieu J. Cama when he realized that starting a business that does nothing but mechanical work on gorgeous Mercedes Benz would be a rewarding entherprise. It is his reality and it is an interesting one. Located within the southern state of Georgia, he rids any competitor of exotics mechanization. Most of his exotics would be the incomparable Mercedes Benz. They seem to be masterful on the outside but on the inside they are nothing short of difficult. Difficult cars make difficult pricing.

Old World Automotive is located within a 1,500 square foot sharing space of Chippewa Falls. To him it is a small shop, but it performs big business. He only works on one job at a time and it usually is a big one. A large job to him would be anything lasting over two months. He does most of the work, and seven months prior to present time, he hired an apprentice. This apprentice used to be one of his customers years and years ago. He openly admits that he needed one more guy and that was it. His decision is justified because of all of the technicalities of his business is difficult to run.

To start with, he doesn’t just have one hourly rate. He has 27 different rates for different makes. The prices range from $75.00 to $135.00. All of these rates are for different exotic makes. Cama states, “My labor rates are based on the complexity of the vehicle.” Then he admits, “The more eccentric they are, absolutely the rates go up.” So he has reason to bump up the rates at any given time for any given make, even though most of his jobs are Mercedes Benz. Those run anywhere from $80.00 to $135.00.He rarely does anything else, but when he does the rates are justified. He says, “Certain models don’t warrant charging certain prices.”

He admits that he has minimal competition in his area what for what he does as a mechanical engineer. He does strictly mechanical, nothing else, no questions asked. After his job is finished he refers his customers to a restoration shop that he knows, and there is a flip side to that. The only real competition he has to deal with are the larger restoration shops that do nearly everything he does and more. Also, the Internet competition doesn’t bother him or hurt financially. It helps no matter how he sees it. Cama notes, “The majority of my clients find me through the Internet.” The Internet isn’t a competition; it’s a useful tool that he cherishes.

The parts situation is the same with him as it is with every other shop. He prefers to deal with the parts himself and with the factory that performs the supply and demand. He only uses genuine parts, nothing more or less. His mark-up varies because of the huge lists of parts are thrown into the project. His mark-up is usually cheaper than the dealer price. He very rarely sells parts and decided to not have a retail shop because of the small space that was available to him. But the parts pricing will never change, and they will always be high, higher than expected anyway.

Cama says that manufacturers, distributors and retail shops have to be on the same level with the pricing. If they don’t stay on high and on the same level then nobody will stay in business.

With that the aftermarket comes into effect for him and the customer. Cama says, “In the end the purchaser will.” He is referring to the decision to buy certain parts or better parts for his vehicle. The customer will make the right or wrong decision to have Cama mechanically improve the vehicle or he will tell him to sell it. He will tell him to sell it if the topical inspection he makes before the project is even started is bad.

Fred Cappus
Business Manager
Muscle Car Restorations, Inc.
Chippewa Falls, Wisconsin

About 90 miles out of Minneapolis is a 32,000 square foot shop that carries 45 projects, currently. The shop is spread over six buildings which equals six different parts of the shop. The shop also has a website that carries over 40,000 photos and stills of their old and current projects that make this ultimate muscle machine what it is. No matter any of the large machinery and sweet looking muscle cars flowing out by the minute. It’s all scenery for a simple shop that has simple rates.

The business manager, Fred Cappus, started for this company back in 2005. Muscle Car Restorations was founded by John Balow in 1989. Sixteen years later, Fred Cappus took over as the new business manager and has never looked back. Back in 2005, the hourly labor rate was $65.00. Since then, the rate has only jumped up to $70.00 an hour. Unfortunately, the cost of business increases so the hourly rates increase. Cappus admits about the customers concerns, “Nobody likes a rate increase.” There are other factors that figure into this rate increase. A short list would be price of living, gas, insurance, overhead, parts and materials. He also mentioned the changing of the body and paint because of the EPA (Environmental Protection Agency).

Their competition is pretty scarce. Cappus says, “We really don’t have any direct competition.” He also says that they might have to travel 500 miles to find a shop that rivals theirs. For them, everything is done on a national scale. They don’t advertise anything locally. Cappus mentions, “Most people in this town don’t even know that we exist.” They have no bearing on the Internet competition at all. The aftermarket takes control of the customers just like most shops and gives them the opportunity to choose their parts for their vehicle. Cappus and the staff of 22 give the customers that leeway to make the right decision. They leave the parts distribution to the customers themselves. The mark-up depends of course on the part itself, there are so many of them. When in their hands, the parts are bought from the wholesale seller or the distributor, depending on the quantity. If it is large quantity, then they get a discount for their generous service.

Kelley Purdum
Owner
Customs & Classics Restoration ETC
Salt Lake City, Utah

In no less than a few months, Customs & Classics Restoration will have been open 15 years. The passing of years equals a decade and half and still running in a tough market of Salt Lake City, Utah-”a tough market for restoration, claims Kelley Purdum. But that doesn’t really stop them because most of their projects are on a national scale. They keep ahead by having a well trained staff of five, including herself and her husband Chris. They also keep their pricing at an average point where they rarely have to raise it.

They are a standardized restoration shop that sticks to the good old labor rate. They do not charge for different makes and have a set standard for materials as well. Purdum isn’t positive, but she claims that the labor rate back when they opened in 1993 was a 40/15 split. That would mean labor was $40.00 and materials would be $15.00 an hour making the full amount $55.00.The labor rate now is $75.00 making $55.00 to labor and $20.00 to materials. The materials list is almost endless for the restoration business, any restoration business. They compare their labor costs to their peers in their particular area. They compare them and factor in a feasible rate that averaged their peers and so on. Purdum says, “The standard in the industry is to build by the hour.” That is why they only have one rate, a standard rate.

Their pricing methods have not changed over the years. Even though the price itself has changed from a $20.00 difference; the method is the same: one rate for one project and customer. Purdum mentions that the Internet has not affected their costs or pricing. They do not deal with the parts aftermarket as another restoration shops do. It also relates to the price point of the aftermarket. They are not aftermarket resellers. Purdum says, “This price point thing is not relevant to restoration.” With explaining this she says that they can’t put performance parts on the vehicles. They do not want to be dealers by any means possible. They buy what the project needs and they mark-up the parts price for the particular part. She mentions that they do not care what the price of the part is. The customer will pay for it when the time is right.

Thanks for checking in with us and our look at shop owners and their pricing procedures from across the country. Please join us again next time, when we speed across the nation to look at the performance aftermarket’s marketing strategies.