How to Increase Profit Margin in Auto Repair

by Linda Ray
Track labor costs to find ways to increse your profit margin.

Track labor costs to find ways to increse your profit margin.

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Just because you have a lot filled with cars waiting for service, doesn’t mean that your auto repair shop is profitable. To increase your margins, schedule your operations so that you can provide effective customer service that adds to your image and reputation and allow your technicians sufficient time to make the proper repairs. Stock high-margin parts and keep meticulous books so that you can continue doing the things that make you money and adjust your practices where necessary to increase profits.

Schedule Appropriately

Creating schedules that allow enough time for repairs to be performed properly, yet keeps your technicians busy with sufficient work is tricky. Track the work done in the past to gauge the number of repairs your techs can perform in one day and then schedule repairs so that you have enough cars and trucks coming in and going out in the same day. If you have too many repairs promised to customers, something is going to be missed or insufficiently repaired. If you schedule too lightly, you’ll have technicians sitting around with nothing to do. Set daily goals for your staff and then schedule no more than that amount of work for each employee.

Focus on Labor Costs

Shopping around for cheaper parts so you can increase your profit margin on your sales may increase your profits slightly, but focusing on controlling your labor costs results in much greater increases in profit margin. According to Body Shop Business, profit margins on parts sales typically average between 20 and 28 percent, while labor profit margins range between 50 and 65 percent. Focus instead on reducing your labor costs by adjusting the benefits you provide, lowering wages or increasing your retail labor prices. Additional strategies might include adding hours to your technicians’ schedules and using outside sources to pay for training, such as government programs or vendor-supplied training.

Inspect Vehicles

Customers don’t appreciate leaving a shop only to have something else break down soon after. By adding a little time, anywhere from 30 to 60 minutes, to each repair order, you give technicians time to inspect each vehicle for additional problems. Present your findings to customers who often will give you the go-ahead to make the repair while you have the car or truck. Inspections, followed by reports to the customers, decrease the number of vehicles you have to process each day and increase customer satisfaction, leading to return business and reduced marketing costs.

Reduce Marketing

It costs less to keep customers than it does to attract new clients. While you need to maintain a marketing presence online and in your local advertising mediums, by focusing on customer service and referrals, you can increase your profit margin and reduce your advertising costs. As car and truck manufacturing improves and consumers tend to keep their vehicles longer, competition in the repair industry will continue to grow and thrive, according to the Small Business Development Center. As the number of available shops increases, it becomes even more important for you to ensure that your customers are treated fairly and not sold parts and service they don’t need. In addition to providing an inspection, minimize turn-around time in your shop and create customer loyalty. Set up a referral program that rewards customers for sending you new business.

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