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.
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.