Last Updated on August 2, 2023 by John Robinson
Running an auto shop can be a license to print money if you provide a high-quality service to your clients. With more than 234,000 auto shops nationwide, there’s significant competition you need to overcome. Reputation is everything within your local community and further afield. The way you run your business will determine how profitable you are. In this guide, you will learn how to increase profit in auto shop.
Ways to Increase Profit in auto shop
Before discussing how you can make changes to boost your profitability, it’s essential to consider your auto mechanic insurance options. Comprehensive insurance policies protect your business from lawsuits and support your employees if they’re injured on the job.
Investing in the future of your business now through the right insurance is crucial for protecting you for many years to come.
Here are the main ways you can increase the profitability of your business.
1. Charge by Customer Segments
Across many markets, you will find that customers are charged by segments. You should not be charging a flat labor fee for every customer.
Is it fair that someone with a luxury car pays the same in labor charges as someone with a small Ford Fiesta?
Charging for labor by customer segments increases your margins and, therefore, your profitability. You can even divide your teams between various segments if you have the workforce.
If you’ve always stuck with a flat rate, making this type of change may be intimidating. However, it’s a widely accepted way of charging customers within the auto business.
2. Provide a Personalized Service
Did you know that 91% of customers expect a personalized brand experience?
Excellent customer service has always been important within the automotive industry. Take it to the next level by incorporating a Customer Relationship Management (CRM) system to provide a tailored service for your regular customers.
Part of offering a personalized service includes:
- Addressing your regulars by name
- Cultivating a personal relationship between them and their regular mechanic
- Offering a drink while they wait
- Giving tailored advice on auto maintenance free of charge
These may seem like little additions, but they make all the difference. Make every customer feel like a friend, and they’ll keep coming back.
3. Offer Booth OEM and OES Parts
The quality of spare parts has advanced over the years. More and more drivers are content with taking after-market spare parts from well-known brands. These parts are lesser in price and come with more significant margins for your workshop.
The best strategy is to give customers the option of both OEM and OES parts. Explain to each customer what the differences are and empower them to decide for themselves.
4. Think About How to Upsell Your Customers
Every customer sees their vehicle differently. In many ways, the vehicle and how they care for it reflect their personality and priorities.
Learning more about your customer and carefully pitching extra services and other accessories can increase your margins. On average, upselling increases revenues by 10% to 30%, so it makes sense to offer tailored packages.
Not everyone will take an upsold package, but you will see your profits spike if you practice offering a clear and personalized approach.
5. Develop a Customer Retention Strategy
Acquiring a new customer is challenging. Approximately 82% of companies agree that retaining an existing customer is cheaper than acquiring a new one.
Existing customers are a gold mine for referrals. Customers who love your services are more likely to recommend your company to others. Word-of-mouth marketing is the most effective form of marketing there is.
Customer retention is not rocket science. It’s simply a matter of providing quality, professionalism, and friendliness.
6. Ensure Your Quality of Repair Remains High
The top reason customers continue to return to the same auto shop is that they are getting exceptional quality in their repairs. The reputations of auto shops are built and destroyed based on the repair quality.
While some shady mechanics use lower-quality materials or pay little attention to their work, this is far from the norm.
Drill quality of repair into your team. If something does deteriorate sooner than expected, offer to fix the problem for free or at a severely discounted rate.
Standing by the quality of your services is key to developing trust within your community.
7. Reduce Costs Through Efficiency
You can increase your margins without raising your prices. One of the best ways to slash your costs is by improving your technicians’ efficiency.
Invest in increasing the proficiency of your technicians. If a mechanic excels on a particular type or model of car, ensure they are assigned to these jobs. An expert can always service a vehicle in less time and with fewer problems than a novice.
The best way to service more vehicles without any monetary contribution is to wield your manpower intelligently.
8. Set Customer Reminders for Regular Servicing
Cars last longer when they are serviced according to a consistent schedule. Tracking the age of each vehicle and any existing problems empowers you to send out customer reminders when their car is due for servicing.
You can issue email or SMS reminders to your customers at scheduled intervals whenever their car is due for servicing. It’s an excellent way of showing your customers that you care. While some mechanics may say that major repairs yield better margins than regular servicing, the returns you get in terms of customer trust more than make up for these differences.
Reminders can be fully automated, so there’s no need to add extra tasks to your day.
The key to boosting the profitability of any auto shop is not to increase your prices but to concentrate on the quality of repair, efficiency, and the development of long-term relationships.
Auto shops are pillars within the communities they serve. Maintaining a positive reputation for being the best at what you do is the most effective way of increasing your profitability. Without the support of your community, you’ll find your business stagnating.
What are you doing to increase the profitability of your auto shop?