Are you trying to make your auto repair shop more profitable but don’t know where to start? It might seem easy, but there are a lot of things to think about if you want to see a real change in your shop’s profits.
In the past, keeping track of money and making reports was a big job that took a lot of time. But now, with new technology like auto repair shop management software, it’s much easier to track important numbers. You can even connect it with QuickBooks to save time on doing all the work by hand. This can help you focus more on growing your business and make your auto repair shop more profitable!
5 Tips to Make Your Auto Repair Shop More Profitable
Let’s face it: drivers depend on us to keep their cars running so they can safely travel with their families. But we can’t do that if we can’t keep our shops open and our staff happy. So, how do you make your auto repair shop more profitable?
A survey showed what the most common auto repair shop looks like. Here’s a quick snapshot:
- Most shops are independent, general repair shops (84% of them)
- They earn between $1 million to $2.5 million a year
- Their shops are about 2,000 to 5,000 square feet
- They have 3 to 6 employees, including the owner
- They have 5 to 6 bays and 3 to 4 lifts
The good news is that more and more shops are making over $1 million, and that number has grown by more than 5% from last year!
Shops that use smart tools like the best shop management software are seeing their profits grow. By making effective strategies and smart investments, you can increase the profitability of your auto repair shop too!
1. Make Smart Financial Choices
It sounds easy, right? But there’s a lot more to think about than you might think. As a business owner, knowing where your money is going is super important. By keeping track of what you spend, you can make better choices to help make your auto repair shop more profitable.
Take a look at your expenses and ask yourself if you’re spending money on things that help your business.
For example, if you’re spending $200 every month on tools and supplies, maybe it’s time to think about spending a little more upfront on higher-quality tools that will last longer. Or, instead of buying expensive machines, you could rent them only when you need them.
Finding ways to save and spend smarter can help you increase the profitability of your auto repair shop!
2. Use Auto Repair Software to Track Numbers
First things first, say goodbye to messy spreadsheets and the old way of doing things. Instead, use software that can do all the hard work for you. With the right shop management system, you can set it up to automatically track and report important numbers.
The software can break down your information in many ways, like by service, type of customer, or even how much money you’re making per job (called average ARO). This helps you easily make smart choices about staffing or how to market your shop. When you know the facts, it’s much easier to make decisions that will increase the profitability of your auto repair shop.
And there’s more! You can also check your shop’s balance every day with just one click. The software can give you an end-of-day payment summary so you can see how much money you’ve made that day.
This helps you know what to expect for the next day, so you can feel confident about your business and go home with peace of mind. Keeping track like this can help you stay on top of your finances and make your auto repair shop more profitable!
Why Having the Latest Financial Information is Important as a Shop Owner
Reason | Explanation |
| On-the-fly decision-making | You’ll be making quick, spontaneous decisions. Having updated financial data helps you make more informed choices. |
| Shows professionalism | Being aware of your shop’s financial performance demonstrates you’re serious about your business. Industry leaders always know their numbers. |
| Never get scammed | Knowing your finances prevents others from taking advantage of you, like selling you unnecessary parts or insurance. |
3. Keep an Eye on Your Spending
As a business owner, it’s really important to know exactly where your money is going. By checking your financial numbers every day, you can see patterns, stay updated on what’s happening, and make smarter decisions quickly.
At first, it might feel like there are too many numbers to keep track of, but don’t worry—you don’t have to remember everything. There are a few key numbers (called KPIs) that are important for you to know. Here are some that can help you make your auto repair shop more profitable:
| Financial Metric | Explanation |
| Net Profit Margin | Measures profit compared to revenue. It helps in making decisions to improve business performance. |
| Gross Profit Margin | Indicates profit on work done before other costs are accounted for. Useful for setting pricing and service strategies. |
| Inventory Storage Status | Tracks parts and available storage space. Helps with inventory management, purchasing decisions, and shop layout. |
| Parts and Labor Margin | Ensures enough profit from parts and labor. Suggested margins: 50% for parts and 60% for labor to maximize profitability. |
| Average Repair Order (ARO) | Measures average revenue per repair. A higher ARO indicates more profitable repairs and helps identify improvement areas. |
By keeping track of these numbers, you can make better decisions to keep your business running smoothly and help make your auto repair shop more profitable!
4. Offer Best Customer Service
Your employees are the heart of your business, but your customers are what keeps your shop running. Giving great customer service is one of the best ways to keep your current customers coming back and to attract new ones.
Here are some simple but effective ways to make your customers feel special:
Offer Referral Rewards
People trust recommendations from friends and family, so when your customers tell others about your shop, reward them! You could offer discounts or small rewards for every new customer they bring in. This can help bring more people to your shop and increase the average money you make per order (ARO), which can make your auto repair shop more profitable.
Advertise Coupons in the Local Papers
People love convenience, and if your shop is close by, they’re more likely to keep coming. By offering coupons in the local newspaper, you can attract new customers who live nearby. If your services are great, they’ll keep coming back, which helps make your auto repair shop more profitable.
Train Your Staff to Value Customers
Negative reviews online often mention rude employees, so it’s super important to train your team to treat every customer with respect and kindness. When customers feel respected, they are more likely to come back and tell others about your shop. In addition, good reviews help you stand out from the competition and grow your business.
By using these simple ideas, you can make your customers feel valued and boost customer loyalty. This helps you increase the profitability of your auto repair shop and attract more business!
5. Smart Credit Management
You’ve probably heard about people struggling with too much credit card debt that seems impossible to pay off. If you’re not careful with how you manage credit and loans, it can hurt your business. If you have any credit cards or loans for your auto repair shop, here are some things you should keep in mind to make sure they don’t become a problem:
Hire an Accountant
Having someone who understands numbers and finances is one of the best things you can do for your business. An accountant who knows about the auto repair industry is even better. They can help you stay on top of your finances and avoid mistakes that could hurt your business. This can help make your auto repair shop more profitable.
Keep a Logbook
Tracking your expenses can seem hard. If you’ve ever tried to go through months of financial statements, you know how tricky it can be. Keep a separate sheet or logbook for credit card expenses. This will make it easier to see where your money is going and make sure you don’t miss anything important.
Think Carefully About Purchases
It’s easy to get excited about buying things for your shop, but it’s important to make sure the purchase will help your business. Before you buy something, talk to your team of technicians and managers to get their opinion. When you make smart purchases, you help increase the profitability of your auto repair shop.
