Auto Shop Coaching Blog

Top 5 Profit Eaters of Auto Repair Shops

“I don’t understand how I can be so busy and not make any money.”

If you’ve caught yourself thinking this, you are not alone. A lot of auto repair shop owners find themselves working harder than they ever did for someone else – and making far less money! Here are the top profit eaters that we see nationwide. Use them to start identifying why you aren’t making the kind of money you should in your shop.

1. Not Knowing Your Numbers

According to a recent Ratchet+Wrench survey, 32 percent of shops cited a lack of time, manpower, knowledge, or resources to effectively manage their businesses by key performance indicators (KPIs).  This means that these shops don’t know whether they’re winning or losing until it’s too late. One of Peter Drucker’s most famous quotes is, “you can’t manage what you can’t measure.” It’s impossible to know where your shop is struggling unless you track and measure key performance indicators (KPIs). Start by reviewing these 5 KPIs weekly:

  1. Total Sales (parts and labor)
  2. Total Costs (parts, labor wages, service advisor wages)
  3. Gross Profit (Total sales minus total costs)
  4. Billed Labor Hours Per Tech
  5. Clocked Hours Per Tech

These don’t tell the whole story, but they will give you ideas of where you need to start.

What's your target WIN number?You didn’t start your business to just barely get by, or only make ends meet. Get ATI’s WIN Number Drill to find out what you need to make in total dollars to meet your operating and growth needs.

2. Pricing Policies That Don’t Work

If you’re working hard, but barely making ends meet, you may need to revisit your pricing policies to find out where you’re leaving money on the table.  How do you price parts? Do you have a written policy? How often do you give a discount? How do you charge for labor? Many shop owners wing it when it comes to pricing parts and labor. This is a sure-fire way to keep the shop owner working long hours for less pay than their employees.

3. No Defined Expectations

You may have great technicians, but unless you communicate your expectations, you can’t get mad when they don’t meet them. In the auto repair business productivity = profits. Productive technicians know what the owner expects and fulfill those expectations. Job descriptions should be in writing and agreed to by each technician. They should include job duties, skill level, billable hours expected, and how you are going to measure it. Service Advisors should also have expectations written out. Don’t forget to include an Employee Manual signed off by all employees.

4. Rushing Cars Out the Door

It may sound strange, but the MORE cars you rush through your shop, the less money you make. The opposite can be true as well, especially when most of the cars coming in need heavy repair work (such as engines and transmissions). Finding a happy middle that works for your shop of maintenance services and repair work tends to have the highest profit margins.

5. Fear of Change (Keeping The Status Quo)

Has it been years since you increased prices? Are you afraid to hold your employees accountable (because you never have before)? If you know what you’ve been doing isn’t working, it’s time for changes. Fear of change eats into your profits. As the cost of doing business increases each year, profits will continue to shrink if you don’t make THE RIGHT changes.

At ATI, we focus on teaching and coaching shop owners on best practices to get the most out of your automotive repair business. Want to learn more? Find an ATI shop owner event near you.

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Charlene is an Executive Coach at ATI, a Certified Profit First Professional, a former shop owner, and has been coaching since 2014. Charlene helps clients find the right solutions to their challenges and encourages them to make the changes that result in having the life they dreamed about when they got into business ownership.