How to Protect Your Auto Repair Shop from Chargebacks

“If you are interested in picking up a new hobby like boating, you’ll do everything you can to learn more and more and more. Why can’t you do that with your auto repair shop?

Is it because it’s boring?

Is it because it’s not the same?

It doesn’t excite you as much as your hobby would?

If you take a second and stop to think, you’ll realize you can have any hobby in the world if you focus on your repair shop and get it to where it needs to be.

There is no waiting for the right person to walk through the door. There is no waiting for the right technician."

"It has to happen right now, today."

Tekmetric Co-CEO and Co-Founder Sunil Patel recently joined Kelsey Outram on the LIFT Your Shop Podcast to talk tech, mentorship, and transforming your auto repair business.

From medical school to law enforcement, Sunil tried his hand at a variety of fields over the years, but eventually all roads led him to founding Tekmetric with Prasanth Chilukuri in 2016.

Tekmetric quickly became the preferred shop management system in the auto repair industry.

And if you ask Sunil why, he’ll say it’s all about mindset.

If you’re a shop owner who has been feeling stuck, here are six steps you can take to shift gears.

1. Define Your Goals

“When you really set your mind to something, it subconsciously changes how you behave as a human, as a person. And you hone in on what you’re trying to accomplish and you accomplish that task.”

Here are some examples of goals you might hear people talk about in the auto repair industry:

• “I want to make one million dollars in revenue this year."
• “I would like to add another bay to the shop by the end of the year."
• “I want to open another location in 2023.”

What do these goals all have in common? They are specific, achievable, and easy to track.

In the same way that it’s difficult to plan a vacation without having a travel destination in mind, it’s difficult to achieve a goal if you never set one in the first place.

Knowing where you want to go is the first step toward figuring out a roadmap to get there.

2. Accept That Change is Part of the Process

“Forget about the technology and software and all that for a moment, and ask yourself this: Are you happy with where you are today running your shop? And if the answer is no, then dig deeper.”

Whether your shop is looking to switch parts suppliers or invest in a new shop management system, change can be intimidating.

Many shops experience growing pains, but keeping an open mind is essential to driving your business forward.

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. 

“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.