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Business Growth

7 Best Ways To Increase Auto Repair Shop Profit Margin

August 5, 2021

Every business has different ways of generating profits and auto repair businesses are no exception. However, the auto repair business is not as simple as they seem to be. It has several layers and nuances which have to be appropriately understood to make an auto repair shop profitable. Some auto repair businesses see a considerable number of vehicles at their shop but still, fail to make the auto repair shop profitable. This may be because of unnecessary costs that can be easily done away with. There may be excellent services and processes in place but not many people may be aware of it. Therefore many areas need to be looked into to run a successful automotive repair shop. Some people may have concerns regarding how profitable are auto repair shops but if a perfectly balanced approach is undertaken that looks after all aspects of the business then it is surely not a big task to increase auto repair shop profit.

While there may be many such areas and aspects that need to be looked into to increase profit margins of an auto repair shop, we have tried to capture the 7 best ways to increase profits and adding a new dimension to the business helping them take to the next level.

1. Charge labour as per customer segments

Labor charges should be based on customer segments like luxury car segment customer should not pay the same price as for hatchback car customers. It is very well accepted in most of the markets. This will balance your margins and profitability. You can allocate and differentiate your team accordingly like the best ones should handle the luxury car segments. Appropriate labor charges with Good customer service helps in attracting and retaining more customers with better margins.

2. Give the option of OEM & OES spare parts

With the advancement in spare parts quality and driving conditions many car owners are ok with after-market spare parts (OES) from known brands which are of high quality but lesser price and comes with higher margins for the workshop. A better strategy would be to give both the options with proper information to customers so that they have the choice.

3. Have an upsell strategy

Each customer takes care of their vehicles based on their requirements or status but definitely, the vehicle reflects their personality. Knowing your customer and pitching the additional service or accessories while the vehicle comes for servicing or repairs can increase your business and margins. You can create personalize packages with the right messages and notify customers. A clear and personalized approach to customer service can help to upsell thereby increase profits.

4. Focus on customer retention strategy

Acquiring a new customer is not so easy and it’s expensive as well so the best way is to retain existing customers and get a referral through them. A customer referral program helps to popularise an auto repair business and increase the effectiveness of word-of-mouth promotions. Customers who have availed the services of the auto repair shop and are satisfied can suggest some of their friends and acquaintances and they would be rewarded for each of these referrals through discounts whenever they visit the shop next. This creates a ripple effect amongst people and boosts profits.

5. Focus on fixing it right (Quality of repair/service)

One of the top reasons for customers to come back(or be with you) in the auto repair business is the Quality of repair. Workshop reputation is synonymous with repair quality and if it deteriorates then it can spoil the business permanently. Having a fix-it-right approach that vehicle is fixed right the first time itself and has no repeat repair can establish a good and long-term relationship with your customers. Providing a guaranteed offer for the services helps in developing trust among clients and further solidifies the business’s image thereby boosting the profit of the shop.

6. Focus on increasing technician efficiency and productivity

One of the best ways to increase margin is to reduce the cost. It is possible by increasing technician efficiency by training and motivating them to become experts so that the same technician can now do more vehicles or the same work in less time. A good strategy would be to have highly efficient manpower so that your workshop can service more vehicles without any new investment.

7. Remind your customer about due service accurately

Proper and regular maintenance of the vehicles improves their performance and age however tracking and doing the maintenance as per required/recommended intervals is a challenge. If a workshop keeps track of each vehicle usage and reminds the customer at the right time about due service it can help in building a good relationship and also increasing the business. The best time to set, explain, and take customer agreement about the next service due is when the customer takes the delivery of his/her vehicle after the service. This ensures accuracy and becomes the workshop’s responsibility to remind him/her through a phone call, SMS, or email on time. If customers miss the service then it’s a loss of business for the workshop.

The above-listed ways are just a few of the ways by which one can see how profitable are auto repair shops or can become if proper strategies are used and the right areas are focussed upon. There are a huge number of other ways how this can be leveraged to turn auto repair shops into profitable ventures. Along with some of the traditional ways of doing business, companies can also look forward to using technology or analyzing data to make better decisions. Trends and technology change with times and accordingly businesses also need to adapt to suit the times. The areas require the right investment and focus. A lot of innovation is also required to stay ahead of competitors. A right mix of all things is essential to run a successful automotive repair shop.