The Parts Pricing Trap: How Small Discounts Kill Your Blended Margin
Most performance shops and race teams think they have pricing dialed in because their labor rate looks solid and customers aren’t complaining. But when profit at the end of the month doesn’t match the workload, the problem is often hiding in plain sight: parts pricing.
This is what we call the parts pricing trap, and it’s one of the most common profit leaks we see in shops that sell parts and labor together.
What Shops Get Wrong About Margin
Most business owners think margin is simply how much they mark up each part. But that’s not the number that matters. What actually determines profitability is your blended margin, the margin on the entire job once parts and labor are combined.
Here’s how the trap happens.
You price one part at a healthy margin. Another part is discounted “just a little.” A third part barely gets marked up at all. On paper, it feels like you’re still around 25–30%. But when those numbers are blended together, your real margin can drop into the teens.
And at that level, you’re barely covering overhead and labor burden.
The $10 Problem That Adds Up Fast
Shops often tell themselves two things:
“I’ll make it up on labor.”
“It’s just one small part.”
Neither of those is true.
Labor already carries its own costs: wages, payroll taxes, insurance, training, downtime, and raises. It can’t absorb losses from underpriced parts forever.
And that “one small part” doesn’t stay small when it happens repeatedly. A $10 undercharge across 300 jobs is $3,000 in profit gone. Not revenue. Profit.
Even tiny parts consume real resources: ordering, receiving, stocking, installing, and tracking. If your markup doesn’t cover that, you’re paying to touch the part.
What Proper Parts Pricing Actually Requires
To price parts correctly, emotion has to come out of the equation. Pricing should be based on real numbers, not whether the customer is “good” or whether the discount feels small.
You need to understand:
Cost of goods sold: what the part actually costs you
Labor burden: wages plus taxes, insurance, training, and downtime
Overhead: rent, equipment, software, admin staff, supplies, and shop space
Once you know those numbers, markup becomes math instead of guesswork.
A Real-World Example
Take a track prep package with five hours of labor and $210 in parts. If you undercharge fluids by just $18, your blended margin can drop from 32% to 24%. Do that 50 times a year and you’ve given away $900 in profit.
That’s money the business needed to stay healthy, invest in equipment, and pay people well.
Why This Matters Long Term
You can’t help customers if your business isn’t profitable enough to survive. Consistent, data-backed pricing protects your margins and removes the stress of constantly second-guessing invoices.
No more mystery profit leaks. No more random discounts. Just pricing that actually supports your business.
If you’re unsure where your margins are slipping, this is exactly what we help with. We break down your cost of goods, labor burden, and overhead so your pricing makes real money, not just looks good on paper.