The auto repair industry is expected to hit annual revenue of $78.4bn in 2022 as per IBISWorld. However, despite the massive growth in the market, it can be difficult for auto repair shops to hold onto their share of profits.
Running an auto repair business is no walk in the park and the burgeoning competition has made this task even harder. However, there are different ways that auto repair shops can boost their profitability.
In this post, we are going to discuss 5 simple ways to make your auto repair shop more profitable. But first, let’s get our hands dirty with the basics.
Understanding the Profit Margin for an Auto Repair Business
Simply put, the margin of an auto repair shop is the percentage of sales that are profitable.
Profit margins are calculated based on the net income and revenue of your auto repair business. To gauge the actual performance of your auto repair shop, it’s recommended that you always opt for net income.
This is how you calculate it:
Profit margin = ((Revenue – Expenses)/Revenue) * 100
The higher the result, the better it is. However, to do a comparative analysis of how your auto repair shop is faring, you can compare the result with the average profit margin in the industry.
You can also do a time-centric analysis and compare your margins for each quarter.
How Can I Make My Auto Repair Shop More Profitable?
To make your auto repair shop profitable, you can employ the below-mentioned five different strategies.
1. Decrease Labor Costs
Let’s start with the most important one first. To run profitable auto repair workshops, you need to double down on costs.
One of the most significant cost heads that you are going to have is labor. To perform all kinds of repairs at your auto shop, you will need to build a complete team of technicians and auto mechanics.
So how can you manage labor times at auto repair shops?
Actually, creating a schedule for labor at auto body shops can really boost efficiency. To run a lean, efficient and profitable auto repair shop, you will need to create a schedule and track the amount of time taken to perform a repair.
The less the amount of time, the better will be your efficiency levels. To do this, you can use time-tracking tools like automotive repair shop software. You can also use software to track the detailed service history of a customer.
This will help your labor in quickly tracking any job and getting up to speed on it. It also improves customer satisfaction levels. Moreover, the space you work in will also influence costs, so make sure you invest in a well-designed carport. Having a dedicated space for vehicle inspections and repairs will help you significantly improve efficiency as well as reduce the time spent moving vehicles around the shop.
2. Build a Strong Online Presence
To become the preferred auto repair shop, you first need to put it on the radar of car owners! And the best way to do that in this day and age is through a strong online presence.
To get started, you will have to build a business website. The majority of vehicle owners are under 40, and this demographic interacts with brands online.
To add more fuel to the fire, COVID-19 has completely changed buying patterns.
Companies with strong business capabilities and online presence have managed to increase profits.
When setting up a website, you should ensure the following:
- Your services are clearly listed on the website
- You have your contact information and locations displayed upfront
- A mobile-friendly interface
- Customer reviews
Apart from the website, you can invest in digital marketing. Some digital marketing tools that you can use include social media marketing and engine optimization.
Digital marketing if done properly is an excellent way to build a base of customers.
3. Build Customer Loyalty
In addition to getting new customers, you will also need to focus on retaining existing customers. This can be done through a loyalty program.
Loyalty programs are a great way to get repeat customers. These programs include incentives like a free service after a select number of services or discounts for customers visiting auto shops again and again.
You can also leverage your existing customers to get new ones through a customer referral program. Through this, you can offer customers discounts on services for referring new customers.
This way you will be able to make more money and improve your profits.
4. Automate Your Processes
You can improve your margins by reducing overhead expenses through automation. Modern-day technology and software have the ability to accelerate business processes and inject efficiency.
This lowers your costs and gives you a higher net profit margin. Driving down your costs also improves your financial position and reduces the need for auto repair loans.
For example, automotive repair software is one example of such technology. Using this, you can:
- Automate labor task scheduling
- Track labor and service times
- Generate comprehensive reports on performance
- Manage your inventory levels
- Automatic parts ordering
- Generate financial reports
- Maintain a database of customers and service history
- Offer customers with Digital Vehicle Inspection to streamline processes
Automating these processes reduces the need to spend more money on hiring staff. By reducing your turnaround time through automation, you can also free up time to service more customers.
You can also reduce the amount of time it takes you to service each customer. A quicker service time will help you maintain your base of loyal customers and double down on auto repair shop profit.
5. Invest in Your Team
This has to be, hands down, one of the most underrated strategies to build more profit for your business. But look at it this way, the more you invest in your employees, the better will be the service.
And we already know what better customer service translates into…higher profits for the business! And when it comes to the automotive repair industry, investing in technicians and auto mechanics is even more important.
The nature of repair jobs is technical so you need to make sure that your team is able to do it right. If the customers have to keep coming back to you for the same issue, this means that your team has not properly troubleshot.
This can result in poor satisfaction levels among customers, leading to bad reviews and word of mouth.
Remember, as a new or expanding business, customer reviews are of the essence. You need to make sure that you are offering customers the best possible quality when it comes to service.
It’s also recommended to not charge flat fees from your customers. In fact, your can segment your customer base. For luxury car repair you can have different rates as compared to repairs for hatchback cars.
The goal is to become the top choice for customers for regular maintenance and repairs. So remember, you have to put your best foot forward and offer nothing less than excellent services.
And a team that is well-trained and qualified is the best tool to do this!
Wrapping it Up
To wrap it all up, if you’re a small business owner in the automotive repair industry you need to realize that you don’t have a lot of leeway when it comes to spending money.
You’re going to have to cut back where you can and spend your money very wisely. That part is what makes the automotive repair industry so tough. The competition is cut-throat so to maintain margins, you need to double down on costs and focus on boosting revenue at the same time. Moreover, you also need to invest wisely in auto repair shop tools as they can also have an impact on your margins.
But there are ways around it, and you don’t have to let those challenges keep you from growing your business and enjoying a higher income. In this post, we have discussed five simple ways you can use to make your automotive repair shop more profitable.
But in the end, remember that you need to focus on keeping your customers happy, have a well-trained team and invest in automation.
