Need to increase your auto repair shop profits? While it takes some extreme discipline and patience, your shop can be more profitable with just a few changes. Here are 6 ways to reduce cost and increase revenue that actually impact your bottom line.
Why Do You Need a Business Plan for Your Auto Repair Shop?
A business plan is important for all businesses, auto repair shops included. Starting any business involves taking risks. Therefore, having a plan and executing the plan right is crucial for business success. Auto repair shops should have a business plan for the following reasons:
- To understand the market – failing to understand the market before launching a business often leads to imminent failure. Entrepreneurs should understand the demand for auto repair services within their location before opening an auto repair shop. Satisfying a known need is easier than creating a need and convincing customers.
- Identify the source of financing – a business plan lays down everything about the business, including the source of financing. Running a cash-strapped business increases the chances of failure.
- Clarity on what should be done – having a business plan makes it easier for entrepreneurs to explain their business model and where the business is headed. A business plan identifies possible obstacles and strategies to avoid these challenges. Businesses also get clarity on their hiring, branding, and marketing practices.
6 Ways to Increase Auto Repair Shop Profits
1. Take a Disciplined Approach to Your Finances
No amount of tips or secrets will increase your profits if you don’t treat your finances with discipline. Driving more customers and increasing margins will be moot if you spend all that extra revenue right away. To increase your auto repair shop profits, follow these rules:
- Reduce Expenses. It never hurts to look through your expenses and cut extra services that aren’t contributing to your bottom line. For example, some shop owners cut their monthly trash pickup bill in half by switching to an every-other-week schedule or switching to a smaller dumpster. Other shop owners have cut the expense for off-site storage by selling off old items. And still, others have reduced expenses by price-matching their laundry services.
- Save, Save, Save. The last 20 years have been challenging for small businesses, from the 2008 financial crisis to the Covid-19 pandemic. We’ve all learned that it’s crucial to make hay while the sun shines! In addition, saving money every month is a long-term and foolproof plan that will prepare you if and when disaster strikes. Kurt Krans operates an auto shop that has been profitable for 33 years straight. Although more details are given in his interview with Ratchet and Wrench, Krans’ thoughts on saving money can be summed into one quote.
“Saving for the business’s future should be an expense of running the business, because it is absolutely essential. If you set an amount aside every month, and treat it as overhead, and factor that into all of your finances, you can maintain that.”
- Practice Patience. Increasing profits is a long-term game that requires discipline and patience. It can be incredibly tempting to buy that new TV for the waiting room or buy flashier uniforms for your technicians. Those purchases can add great comfort and service for your customers, just make sure you have the money before investing.
2. Schedule Appointments
Reducing idle time in the garage is key to increasing profitability. You’re already paying for the lights to be on all day, so if you don’t have cars in bays, you’re spending money without getting anything in return.
Scheduling repair appointments helps control labor costs. Make more accurate predictions of who needs to be in the shop and when, order parts in advance, and control your work mix.
One way to schedule appointments is to send out direct mail postcards that remind customers when their next oil change is due. Plus, you can add a link to a web page where customers can schedule their appointment online.
Customers will appreciate the convenience of pre-scheduled appointments. It reduces wait times since their vehicle has priority, and they can choose the time of day that works best for their schedule. Plus, regular maintenance reduces long-term costs for the customer and extends the life of their vehicle.
3. Inspect Every Vehicle
My mother-in-law took her car to the local shop for a state inspection and tire alignment. After a quick inspection, it was clear that her car needed new spark plugs and brakes! While she wasn’t expecting to pay hundreds of dollars on car repairs that day, it was clear that completing these repairs quickly would extend her vehicle’s life, so she obliged.
That inspection resulted in her local shop receiving 10x more revenue than what was initially expected! A quick inspection, like Firestone’s Courtesy Check, could lead to the same bump in revenue for your shop.
Now, not every customer will go from an $80 bill to an $800 bill. My mother-in-law consistently experiences excellent service from this shop (and her alignment was thrown in for free), making those extra repairs easy to agree to.
4. Reduce Fees on Card Transactions
Are credit card transaction fees eating into your revenue? Spend some time researching merchant services for small businesses. Rather than paying a flat rate for both debit and credit transactions, services like Transnational will charge the wholesale cost of running a card plus a flexible processing fee. This pricing structure accounts for the card type (debit vs. credit) and results in savings for your auto repair shop.
5. Invest in Current Customers (and Employees)
It’s more expensive to attract new customers than current ones. So while you need a healthy mix of both new and returning customers, you can increase your auto repair shop profits by focusing your advertising on repeat purchases.
One of the best sources of new customers is your current ones! Encourage a referral program for your auto shop that rewards customers with discounts or gifts. Often the only barrier to getting referrals is just a quick question as they are checking out, “Do you know anyone who could use an expert oil change?”
To retain employees, invest in training and tools to help your technicians be more efficient and improve their work atmosphere. This can reduce turnover and improve the productivity of each employee.
6. Generate New Customers with Local Coupon Advertising
Is it possible to spend money on advertising and increase profits at the same time? Absolutely! The key is to find an advertising program that is low-cost and incredibly effective.
A program like Register Tapes Unlimited at IndoorMedia can bring tens of thousands of dollars in profit to your business year after year. Targeting shoppers at your local grocery store, the RTUI program puts your auto repair shop’s coupon right in the hands of qualified local car owners.
This Valvoline location receives a minimum of 10 grocery store receipt coupons a day. Multiplied by their average ticket of $70, and Valvoline makes $21,000 in revenue each month!
Over the year, this equates to $250,000 in revenue just from their RTUI program! After subtracting the cost of service & goods, the cost of the discount, and the cost of the advertising program, Valvoline has still made a hefty profit.
How to grow auto repair business: more strategies to consider
Other strategies to grow an auto repair shop include:
Social media branding –
managing social media platforms may seem challenging, but it is worth it. An active social media presence is crucial for all auto repair businesses. Social platforms make it easy for successful auto repair shops to share customer experiences, market their services, and more.
Word-of-mouth marketing –
while digital marketing is undoubtedly effective, auto repair shops shouldn’t ditch traditional marketing alternatives yet. Word-of-mouth marketing is as effective as user-generated reviews. Customers tend to trust reviews from their friends and strangers.
Waiting-lounge amenities –
all customers love freebies, discounts, and complementary services. Installing comfortable furniture, offering complimentary refreshments, and providing Wi-Fi boost customer loyalty.
Email communication –
email marketing is an old yet effective marketing strategy for all businesses. With the right email list and correct message, a car repair business can attract more customers and build customer loyalty. Emails should provide value and shouldn’t appear spammy.
The auto repair market is among the most competitive industries. Starting an auto repair business requires a thorough analysis of the customer base, marketing strategies, and emerging trends. Having a business plan makes it easy for starting auto repair businesses to wade through this tough environment.