Sub Contract refers to the jobs that you take in and undertake a 3rd party to conduct on your behalf. An example of this might be the fitting of windscreens for instance.
Example:
A) Sub contract Gross Profit = R784 B) Sub contract Sales = R5,223 C) Gross Profit on Sub Con = 15% (A ÷ B X 100)
Profitability in this area of the business varies greatly between manufacturers. For some truck manufacturers it can be as low as 5% and for some car manufacturers it can be as high as 25%.
There are many reasons for this high tolerance in performance and one of the main reasons being breakdown and recovery.
Discussion:
There are some dealers that do not make any profit margin from Sub Contract sales and research confirms that fear is the key to this shortfall. In other words, the Service Receptionist simply does not add any profit margin to the invoice when recharging the work on to the customer.
This is a thoughtful yet dangerous action to take after all, your dealership is still liable for the work that has been carried out!