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The automotive shop industry has grown tremendously between 2018 and 2023. It reached $59.1 billion in revenue, the result of a compound annual growth rate of .5%. Vehicle ownership drives a considerable amount of this growth, and it will increase through 2028.

This exciting, growing field offers tremendous potential for new auto repair shop owners. However, competition is fierce. Nurturing successful business growth comes down to running it optimally. In this guide, you’ll discover what you need to know about building an auto shop and how to thrive in this industry. 

How Do You Run an Auto Repair Shop?

Running a profitable auto repair shop long-term revolves around establishing solid relationships with your customers. Over 60% of customers say that they like to get their work done at the same shop, and 96% go to three or fewer locations when they need to get work done on their car. Gaining customer satisfaction through expertise and communication plays an important role in keeping your customers happy so that they return.

Proper auto shop management and best practices, such as improving productivity and rewarding loyal customers, keep your business competitive. Many strategies that strengthen your business will also incentivize customers and encourage them to return. Since customers do not want to go to numerous auto repair businesses, proving that your business is one they can rely on encourages this loyalty which strengthens your ROI.

To build a quality business, a business plan that emphasizes customer service and retention will take you far. You can incorporate a few central strategies into your plan to keep your customers happy.

G2 is a peer-to-peer review site that scores different platforms and tools just like Tekmetric based on reviews from users, just like you.

Leveraging all the data, reviews and input they collect throughout the year, G2 analyses the results and announces the clear software leaders in a number of categories.

And Tekmetric was named a leader in not one, not two, but FIVE categories for Auto Repair Software, and has been awarded five new badges from G2 for their 2023 Summer Spotlight!

That means its.. TIME FOR SOME BURNOUTS! LETS GO!

Those five categories include:

1. Auto Repair Software Momentum Leader 
2. Auto Repair Software Small Business Leader
3. Summer 2023 Auto Repair Software Leader
4. Best Relationship With Users
5. Easiest To Do Business With

Sorry for the humble brag, but honestly, this is all because of you, the users of Tekmetric!

Shop owner's, service manager's and technician's love for how easy Tekmetric makes it to run your shop is the star of the show here.

“Receipts.” We all know the literal meaning of this term—those pieces of paper or emails/texts a retailer sends you as proof of purchase, in case you want to exchange or return an item down the road.

In a casual sense, “receipts” also mean “proof” in the event of a dispute. For example, if your dog could talk and claimed he definitely did not steal the pizza from the picnic table, you could show him “receipts,” which could be a photo your astonished friend snapped of him while he was dragging the pizza away. Busted!

Ok, but in all seriousness, as a business owner, you interact with receipts in two ways:

1. You give receipts to your customers once their repair work is finished
2. You get receipts when you purchase items for your shop (like parts)
   

Even though receipts exist in practically every industry, there’s a huge difference between the receipts customers get from an auto repair shop versus the receipts they’d get from a restaurant or clothing store.

Look at it this way: you don’t go to a restaurant and get an estimate for how much your food will cost. You see the prices on the menu, order, and then pay at the end. But in the auto repair world, we have to scope out the work with an inspection and estimate. That’s where the shop and the customer come to an understanding of the repair work that will occur, and get a preview of the cost, before any work gets done.

Without a solid inspection and estimate process, there can be a higher risk of misunderstandings and miscommunications, which can diminish customer loyalty and lead to credit card chargebacks. For example, a customer could misunderstand the severity of the need for a repair and decline it when they get their estimate, and leave a negative online review that their car still has issues. Or, a customer could say they don’t want a particular repair, but a service advisor misunderstands them. The repair happens, and the customer is upset when they get the final bill because they’d communicated that they didn’t want the repair.

That’s why estimates and receipts are extra important in our industry—they protect shops and customers. They give your customers peace of mind; they have a record of what repair work they got done on which day, and how much they paid. And in the event of a customer claiming a certain repair didn’t happen on a particular day, you could pull up your copy of the estimate and the receipt and set the record straight. You won’t have to deal with a frustrating back-and-forth process that can stretch out for days.

But beyond literal receipts, there are other elements of safeguarding your business. After all, protecting your business isn’t just about protecting it from financial and legal standpoints, although those are two important areas. You also have to think about things like your team’s productivity, employee management, healthy margins, and more. Auto shop management software is a great core tool that can help you safeguard your shop from multiple angles.

Auto repair shops might bulk order carbon copies, or you might find a template online and print as many copies as your shop needs. Or, if your shop uses digital templates, you might have to deal with time-consuming digital file management.

Filling out the forms over and over, be it by handwriting or typing, can become tedious. And both options are less than ideal for record-keeping.

Paper can get lost, and digital files can become overwritten or corrupted. Both approaches are inconvenient and ultimately slow things down at your shop. And the impression you give during the payment process can determine whether those customers return or not.

Here are four reasons why a shop management system is better than an auto repair invoice template approach for your business.

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By streamlining your auto repair shop workflow, you can help your shop create a memorable customer experience that will keep them coming back next time they have a problem.

From the moment customers walk in the door to when they pick up their vehicle, your shop’s service advisors play a crucial role in creating a smooth, enjoyable experience.

Shop management software makes it easy to establish a standardized intake process so that shops can provide the same level of care to their customers every single time.

Service advisors can build repair orders in seconds, apply the right digital vehicle inspection templates with just a few clicks, and quickly text or email the results to the customer for approval.

This frees up their time to focus on the customer directly, address their concerns, and create a stress-free experience. If things go well the first time, and customers feel like they can trust your shop's recommendations, work they'll more than likely come back for future repairs.

There are many reasons you might want to sell your auto repair shop.

You might be ready for another venture; you might be trying to fund your retirement; or you might just be curious about the value of your business if you do decide to sell. 

Whether you're actively in the market to sell your shop, or you just want to know how to value an automotive repair shop just in case, you’ve come to the right place.

How to value your auto repair shop

The industry standard for establishing a sale price for an automotive repair business is to use total owner benefit (TOB) multiplied by four (or TOBx4).

So, if you took home an average of $50,000 a year for the past three years, the price of your business will likely be valued around $200,000. Keep in mind this TOB value does not include property value.

For those who are reading this with the hopes of selling in the near future, that valuation method might seem low to you. And it is.

The good news is that you can go above and beyond the industry standard, and sell your shop for a higher value, if you stay on top of your numbers.

Not only will diligent reporting and good customer service increase your TOB, but you’ll also have more leverage when negotiating offers from buyers.

Here are three steps you can take to improve the valuation of your business and secure the money that you worked hard to earn. 

Maintaining an efficient workflow is crucial to the success of any auto repair shop. A breakdown in workflow can lead to delays, a frustrated team, and unsatisfied customers. One key area where workflow can break down is during the inspection and estimate process. 

By investing in a more modern, cloud-based shop management system, you can establish a transparent, replicable digital vehicle inspection and repair estimate process, and streamline parts ordering so that service advisors can dispatch repair orders quickly to technicians. 

Parts management is a critical function of any auto repair shop business. The only way to guarantee that you’re making a profit on the parts you sell on repair orders is by having an air-tight system for managing and tracking those parts from purchase to sale to reconciliation. The final step of making sure that each and every parts transaction is accounted for is probably the most important step—and the most misunderstood.

Some of the issues your auto repair shop will run into if you don’t carefully manage parts include:

• Un-billed parts (forgetting to collect payment on parts)
• Inconsistencies between your cost of goods sold and accounts payable
• Inability to track and receive return credits
• Inability to detect theft before it gets out of hand
  

Many of these issues can be avoided by using purchase orders to reconcile the parts you sell on repair orders.

But many auto repair shop business owners still wonder what some of the best practices are when it comes to parts management. How often should you be reconciling parts payments? Who should take on this task: you, your service advisors, or a dedicated parts manager? How do you make sure you’re getting the best value for the parts you buy and sell? How do you ensure that each and every part is being billed?

Let’s answer some of these questions, and unpack the best practices for parts management.

Inventory can include items like oil, tools, and large equipment. It also includes stock items, or parts which are sold to the customer during the course of repairs, such as gaskets and timing belts.

Inventory management and parts management go hand in hand, but outside of labor profits, the profit a shop brings in ultimately comes from parts markup at the point of sale. Consequently, there’s very little room for error in managing parts.

Simply put, mismanaged parts means money left on the table and unhappy customers—a combination no shop owner or automotive team wants to experience.

A good auto parts inventory management system should let you:

• Know what parts you have in stock and how many you have

• Track what sells and what sits on the shelf longer than it should

• Help you plan for growth.

With the right auto parts inventory management system, your shop can go from disorganized to a well-oiled machine generating more and more profit.

These methods can get complicated and ineffective pretty quickly. For one, they’re prone to mistakes—what if, for example, a technician forgets to scribble down the latest status of a repair on the whiteboard?

If that happens, a service advisor might not realize things are moving ahead of schedule and might turn down a walk-in customer.

These methods also take up a lot of time. If you circle around the shop for updates throughout the day, for example, that’s time you could instead use to ramp up your shop’s marketing efforts or grow your business.

Why You Want Mechanic Repair Scheduling Software

With automotive repair scheduling software, you and your team gain more control over your shop’s time.

Instead of painstakingly getting disparate updates from around the shop, you all can check the status of each repair from any device connected to the internet.

Another advantage of automotive repair scheduling software is that your team will make fewer mistakes when it comes to giving customers status updates about their vehicles.

Before contacting a customer, a service advisor can check the system to have a more accurate estimate of how much time is left on their repair.

A capable mechanic scheduling software creates a streamlined process that ultimately leads to faster turnaround times, and, as a result, fewer missed opportunities. Going one step further and introducing online scheduling even helps provide a more modern customer experience.

Technicians and service advisors won’t have to go back-and-forth giving each other updates; they can efficiently move through each repair, opening up the shop’s schedule to take in more repairs.

And the more cars your shop can take in, the higher your shop’s Car Count and profit potential.

When customers walk into your auto repair shop, they’re trusting you and your team with the health of their vehicle, one of their most expensive assets.

They’re coming in with a problem or set of problems and expect your team to effectively fix those problems in a reasonable time frame.

And modern expectations for customer service have shifted as our technology has evolved. Customers don't want to have to find time for a phone call when they can just get texted updates about their repairs, and digital tools make it easier for shops to build transparency in their process.

Modern auto repair shop software not only makes it easy but lays the foundation for a modern customer experience at every step.

Offering a Modern Auto Repair Shop Customer Experience Starts with a Modern Shop Management System

We're big advocates of modernizing your auto repair shop, and we don't necessarily mean replacing all your racks, updating all your compressors, and swapping out your alignment rack. Sure those might help, but we get those can be really big investments.

That's why we're focused on the behind-the-scenes operations of your shop, the overall management and flow of repair orders. Modern shop management software enables owners, managers, service advisors, and technicians to gain visibility into, and control over, their individual part of the process with specific functions:

• Cloud-based shop management
• Real-time control
• Digital Vehicle Inspections
• Built-In Payment Processing
• Digital Shop Communications
• Efficient Parts and Inventory Management

While all of these directly work to modernize your shop operations, they also work to modernize your shop experience for customers.

When your shop is using Digital Vehicle Inspections instead of paper printouts, you're not only making it easier for your technicians and service advisors to communicate and collaborate, but you're also modernizing how your shop interacts with customers, by emailing or texting results and approval requests.