How to Sell an Auto Repair Business (3 Step Guide)

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June 14, 2023

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Read time: 3 min

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. 

Selling your automotive business

1. Be Tenacious About Gross Profit Margins (GPM)

The old business adage said it best: “It’s not what you make, it’s what you keep.” 

Potential buyers know the ins and outs of how to value an automotive repair shop that’s on the market. They’ll want to see what your shop’s gross profit margins (GPMs) are, not your shop’s revenue.

Your shop’s gross profit margins will give them an idea of what you were able to take home—and by extension, what they can expect to be able to take home if they go through with the purchase. 

Here are some strategies to start increasing your GPM today:

  • Increase prices on your parts or labor. A parts matrix and a labor matrix that’s built into a cloud-based shop management system can help you mark up your prices without sticker-shocking your customers. 
  • Ensure all cores and unused parts are returned. Reports within a shop management system, such as Tekmetric’s Parts Purchased Report and Parts Usage Report, can give you a clear picture of how much you’re spending versus how much you’re using. 
  • Cease ineffective marketing campaigns. Tracking the ROI you’re getting from various marketing campaigns by having your service advisors track marketing sources on each repair order can help you pinpoint what’s working and what’s not so that you can put your money where it will yield the best results. 

Tekmetric’s various built-in reports can give you a clear picture of what your margins are, so you can keep adjusting your strategy to get even better margins that will impress prospective buyers.

2. Increase Your Average Written Repair Order (AWRO)

In the majority of cases, your AWRO can and should be higher than you think. 

Let’s do some quick math. It costs drivers an average of 10 cents a mile to maintain their vehicles. If someone drives 15,000 miles a year, and each mile costs them around 10 cents of wear and tear, that person is looking at $1,500 in repairs each year.

Even if we stay on the conservative side, that person is looking at spending $1,000 on annual maintenance. 

When you consider how often each customer visits your shop annually, do those numbers sound in line with your shop’s current AWRO? 

By running thorough inspections on each vehicle, your technicians can catch all potential issues, including budding issues that will need to be addressed down the line.

Digital vehicle inspections encourage technicians to give customers a holistic overview of which issues need work immediately, which issues will need work soon, and what’s good as-is. And with these more thorough inspections, your service advisors can maximize their AWRO. 

Be careful not to prioritize a high AWRO at the expense of customer trust. One great way to balance AWRO with customer trust is by showing customers what work needs to be done ASAP, and what work can wait. 

3. Work to Maintain an Excellent Social Reputation Everywhere

Prospective buyers are going to look at your ratings on various platforms, including Google, Facebook, Yelp, Better Business Bureau, Indeed, and Glassdoor. 

Why?

Because buyers want to invest in a shop that has a strong social reputation among customers and employees, and by extension, the broader community.

Buyers might feel uneasy purchasing a shop with bad ratings. They might back out of the sale, or even try to pay less for the purchase, citing the low ratings as a reason why.

But when you have high ratings on these platforms, you’ll have more leverage to negotiate a higher price. 

👉 Ready to grow your automotive business? [Book a personalized Tekmetric Demo Here]

FAQ

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We are excited to release Tekmetric Multi-Shop Plan, the industry’s first multi-shop offering that gives auto repair shops the capability to access real-time data reports – from all locations – in one, central reporting suite.

Tekmetric Multi-Shop plan provides the tools shop owners need to monitor shop performance and manage processes across all locations. Through Multi-Shop, shop owners can track more than 16 reports with countless metrics in one central location.

It also enables easy, real-time analysis at all levels, including the entire organization, small groups and individual locations.

The new plan also offers a custom side-by-side analysis report, so shop owners can drive key business decisions and replicate the processes from high-performing shops throughout their organization.

New! Tekmetric Multi-Shop Plan

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Whereas traditional methods of payment require dipping a card in the same terminal as other customers or the hand to hand exchange of cash or check, the ability to pay by text message through SMS mobile payments takes the complexity and headaches out of the payment process for owners, service writers, and guests alike.

For auto repair shops in particular, giving guests the ability to pay by text not only streamlines the guest experience but also frees up service advisors from having to do a bunch of data entry, giving them more time to help other guests.

Here’s how text-to-pay works on our Integrated Payments, Tekmerchant. As you’ll see, we’ve built in opportunities to enhance efficiency while strengthening the relationship you have with your guests at each step of the process.

Step 1: Complete the Repair Order & Send the Invoice

By connecting Tekmerchant to Tekmetric, service advisors can quickly review the invoices of completed work and simply click a button to text the invoice to the guest.

Since the invoice is automatically generated from the repair order and is easy to edit within Tekmetric, the service advisor can reduce the time they would usually spend writing invoices.

Step 2: Collect Payment

Once the invoice is sent, the guest will receive a link that takes them directly to their invoice and pay screen. From there, they can review the work that was completed and make their payment, prompting them to input their billing information.

The customer inputs their card information, including their billing address, making it a verified payment.

At this point, all the service writer has to do is make sure that the payment has been approved and that everything checks out.

Pro Tip: Enhance Guest Service with a Call or Personal Text

Because service advisors and guests both have access to a digital invoice, it gives service advisors the opportunity to add a human touch to the payment process without the guest coming into the shop.

Consider having service advisors give guests a call or send a personal text message at this part of the process.

While this may seem like an extra step, it gives service advisors a chance to check-in with the guest to ensure all approved work was completed, which is a big step towards avoiding chargebacks.

Calling the guest is also a good chance to remind them of any maintenance that may need to be taken care of in the future and any upcoming deals or events. If the guest is too busy to take a call, Integrated Payments has a Text-to-Pay feature giving them the freedom to pay when they have time.

If everything looks good on the invoice, the guest can easily pay and move on with their day. You get paid fast and the guest is able to pay at their convenience.

Step 3: Return Vehicle to Customer

Once the payment has been processed, all that’s left to do is to return the vehicle.

Pro Tip: Add a Key Drop-Box for Convenience

Some auto repair shops use a key drop-box or locker to make vehicle returns more convenient for their guests and service advisors.

Most contactless drop boxes use programmable codes, so you can put the guest’s keys in a locker, send them the code, and let them pick up their car when they’re ready.

With a key drop-box, everyone wins: service advisors don’t have to worry about staying late; shop owners don’t have to worry about paying a service writer overtime, and your guests don’t have to feel rushed to make it back to the repair shop before closing time.

Turbo-charge Your Payments Processing

The Integrated Payment text-to-pay feature makes life easy for your guests and service advisors, and can potentially save you time, money, and headaches.

Starting a business can be a big risk. But if you map out a plan and execute it right, the outcome is well worth it. Having a solid automotive repair workshop business plan in place is especially important if you ever plan on owning multiple shops. 

When you realized that you wanted to be a shop owner, it’s likely you considered the good you can do for both yourself and other people. Helping customers get their vehicles back on the road, and helping service advisors and mechanics grow in their careers is an exceptionally rewarding aspect of owning and operating a repair shop. 

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