How to Start an Auto Repair Shop (9 Step Guide)

See how your shop stacks up against thousands of auto repair shops nationwide

You track your ARO. Maybe you watch your car count week over week. You know when a month is good and when it's below par.

But here's a question most shop owners can't answer quickly: Compared to shops like yours, are your numbers strong, average, or quietly underperforming?

There's a real difference between a number that's improving and a number that's competitive. A shop can grow ARO year over year and still be well below what high-performing shops are seeing in their market. Without an external reference point, you don't know which situation you're in.

That's the problem benchmarking solves, and it's the reason the data matters more than the direction.

Internal Tracking Tells You the Trend. Benchmarking Tells You the Truth.

Internal performance tracking is essential. If you don't know your ARO, car count, parts margin, and effective labor rate, you're managing without the most basic tools. But internal tracking has a structural limitation: it can only tell you how you're doing relative to your own history.

That's useful for spotting momentum — a rising ARO, a growing car count, tighter parts margin. What it can't tell you is whether your baseline is strong or weak relative to the market.

A shop with a $580 ARO that has grown from $520 over two years has made real progress. But if top-performing shops in their region are averaging significantly higher, that progress hasn't closed the competitive gap. It's just moved in the right direction.

The fix isn't to stop internal tracking. It's to add an external benchmark so you know what the target actually looks like.

➡ See how your ARO compares →

The Problem With Benchmarking From Anecdotes

Many shop owners get their benchmarks the informal way: conversations with peers at trade shows, numbers shared in coaching groups, or revenue figures posted in forums. These have real value, but they're also limited.

Self-reported numbers skew high (people share their wins). Peer groups are small samples. Industry averages from trade associations are often lagged and lack the granularity you need to compare fairly — a six-bay shop in a suburban market shouldn't be benchmarking against national averages that include dealership-adjacent shops in metro areas.

The more useful comparison is data drawn from shops operating in similar conditions, at similar scale, tracked in a consistent and anonymized way.

What Good Benchmarking Actually Looks Like

Effective benchmarking for an auto repair shop compares you on the four metrics that most directly drive profitability:

• ARO: Are you getting full value from each car that comes through your door?
• Car count: Is your volume where it needs to be to support your revenue goals?
• Parts margin: Are you protecting margin as supplier costs fluctuate?
• Effective labor rate: Is your real revenue per labor hour aligned with your posted rate?

Each of these metrics has a different lever. If your ARO is lagging, the fix usually involves inspection completion rates or customer communication. If your car count is stagnant, the issue is typically acquisition or retention. If your parts margin is eroding, your pricing matrix needs a look. If your effective labor rate is low, it's often a discounting or packaging problem.

Benchmarking tells you which problem to solve first. That's valuable when you have limited time and you're trying to prioritize.

How the Tekmetric Shop Index Works

The Tekmetric Shop Index is a free benchmarking tool built from data collected across more than 12,000 auto repair shops. Enter your shop's metrics and get an instant comparison showing where you stand on each of the four key measures. No Tekmetric account is required. Anyone can use it.

The output isn't a vague grade — it shows you where each metric ranks and gives you a clear picture of where the gap is largest. That's the signal that tells you where to focus first.

➡ Benchmark your shop now →

What to Do After You See Your Rankings

The benchmarking data is the starting point, not the finish line. Once you know which metric is your biggest gap, you can start asking the right questions:

• If ARO is lagging: How consistently are your technicians completing and sending digital vehicle inspections (DVIs)? Are customers seeing and approving the recommended work?
• If car count is flat: Are you actively pursuing new customers? Are return visit intervals optimized? Are declined jobs being followed up?
• If parts margin is soft: When did you last review your parts pricing matrix? Is it adjusting for recent cost increases from your vendors?
• If the effective labor rate is low: Are service writers building jobs accurately? Are discounts being applied consistently or inconsistently?

Each of these questions points toward a workflow, and Tekmetric's reporting is built to surface the answers at the job, technician, and service writer level. But even before you get to that step, knowing which question to ask is most of the work.

➡ Benchmark your shop now →

The Shops Getting This Right

High-performing shops don't treat benchmarking as a one-time exercise. They check their rankings periodically, track how their numbers shift against the industry baseline, and use the comparison to coach their teams with context.

"You're at 85% DVI completion" is a data point. "You're at 85% completion, and top shops are at 95%" is a coaching conversation with direction.

"Seeing them take the shift to Tekmetric and then grow profitability in the same four walls has been phenomenal. Some of them are just exponential."  — Matt Schwab, Clutch Automotive, Tekmetric Customer

Takeaways

• Internal tracking shows you direction; benchmarking shows you position.
• The four metrics — ARO, car count, parts margin, effective labor rate — are the right comparison points.
• Good benchmarking data is consistent, anonymized, and drawn from shops with similar operating profiles.
• The TSI tool is free, built from more than 12,000 shops, and gives you an instant read on where your gaps are largest.
• Your benchmark result tells you which lever to pull first — and that's where the work starts.

Once you know your gaps, the next step is building a system to close them.

➡ Benchmark your shop now →

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As we progress further into the new quarter, it’s important to take stock of the strides Tekmetric has made, as well as build the momentum to continue providing top-notch service and innovative solutions. From launching groundbreaking new features and building deeper connections in the industry, Tekmetric has kept our foot on the gas in the first quarter of 2024 to measure up – in every way we can.

Supporting Shops with Innovative Updates and Features

At Tekmetric, it’s important for us to provide solutions that are relevant to your shop’s needs. Over the last quarter, we focused our efforts on providing updates and features that you have requested based on what you’re seeing in the field. Whether partnering with another industry powerhouse or helping strengthen reporting capabilities, we launched solutions that help your shop operate more effectively and grow your bottom line.

Sometimes two is better than one – and Tekmetric aims to integrate with a variety of industry solutions so you can access a wealth of information in our comprehensive system. For example, earlier this year we partnered with Advance Auto Parts to integrate MotoVisuals, a cloud-based library designed to provide easy-to-understand overviews of repairs to customers. We accompanied this new integration with a webinar led by Tekmetric’s very own P.J. Leslie and David Lyddall, director of MotoVisuals for Advance Auto Parts. Both speakers discussed their commitment to helping create an excellent customer experience and build customer satisfaction through this solution. The MotoVisuals integration is just one example of how we can continue to measure up together.

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In addition to integrations, we also added new reports and features designed to make your life easier and help your shop run more efficiently. For example, the Multi-Shop Report offers a comprehensive breakdown of payments across all locations, empowering owners to make informed comparisons and strategic decisions. Additionally, the Labor Sales Report was created to provide details of labor sales when looking at employee pay, providing an additional option to accompany the information available in our Tech Report. Finally, our Itemized Tire Tax feature helps ensure that tire shops can provide clear and itemized tax information according to state legislation.

We also recognize the importance of community in the auto repair industry. As we move forward with the industry’s top trends and new product features, we have continued to invest in building connections and stronger relationships with both industry partners and you – our partner shops.

Building Deeper Connections in the Industry

At Tekmetric, we believe in the importance of long-term investments, whether that is in the product we provide, the people we hire or industry trends that we partake in. Our connection to our customers and desire to serve shop owners drives our day-to-day and motivates us to continue striving for excellence.

One of the ways in which we prioritize connection is through the various events we attend year-round across the country. This allows us to have conversations and build deeper relationships with you – the shops that we serve. Additionally, it gives us a chance to discuss what you’re seeing in the field, as well as what features, products and services you need to succeed. These conversations drive our product innovation process, allowing us to continue providing solutions that support your shop’s growth and forward momentum.

At the VISION Hi-Tech Training & Expo 2024, P.J. Leslie, Head of Business Development, was featured on the Kaizen CPAs + Advisors podcast where he gave insight on using Tekmetric’s numbers to continue enhancing the customer experience. Additionally, in March, we sprang forward, with our clocks and innovations, to the Automotive Training Institute (ATI) Super Conference in Grapevine, Texas from March 13-16. At each event, our conversations with shop owners and technicians brought the need for streamlined processes and enhanced customer communication to the forefront. Both needs are priorities that Tekmetric will continue to build on in each quarter of 2024.

In addition to attending events, Tekmetric also aims to support our shop owners in sharing their own insights and lessons about measuring up in today’s industry. For example, this quarter Brian Jesko, the owner of Trinity Auto Haus, joined us for a webinar, “From Technician to Multi-Shop Owner,” where he shared his journey of scaling his local shop and generating countless 5-star Google reviews to attract more business. One of the biggest takeaways from his webinar is the importance of holding a competitive advantage in service experience as opposed to solely relying on competitive pricing.

Continuing Our Forward Motion to Provide Great Solutions

Tekmetric’s product innovation and strong industry connections have paved the way for us to continue our forward motion into 2024 and beyond. This ongoing progress was recently recognized by G2, as they honored Tekmetric with the title of Top-Notch Auto Repair Software for the third year in a row. Talk about a three-peat! Receiving this award three years in a row is an incredible honor and a testament to both our team’s commitment to providing the solutions you need, and the support and feedback we received from you – our shop owners. However, our work does not stop at this recognition. In fact, we are more motivated than ever to continue bringing valuable solutions to meet your needs as we progress through 2024.

As we entered the year, we took a close look at the upcoming trends to set ourselves up for success while also providing valuable insights to the rest of the industry. After all, we’re all in this together. You may have seen some of these insights from our CEO and Founder, Sunil Patel, in his guest article, “Leveraging emerging industry trends in 2024,” with Vehicle Service Pros discussing 2024 industry trends. As a former shop owner himself, Sunil has a deep understanding of how to use industry trends to your shop’s advantage, and his article includes actionable advice on how to apply growth-oriented strategies, maximize value with efficient data use and meet customer needs with modern solutions – all while remaining poised for growth.

Measuring Up with Tekmetric in 2024

As we continue into Q2 and beyond, Tekmetric aims to continue our momentum, looking ahead to the next solutions we can provide that support your goals as shop owners. We want to be a team that plays our A-game each quarter, and we are excited to continue working with you to take your business to the next level. Cheers to a great first quarter at Tekmetric!

In auto repair, a smooth cash flow is the anchor of your business. When something is off within the shop, the first place that can give answers is the shop’s financial data. It’s not just a tool to diagnose problems or spit out a paycheck – it holds the key to unlocking greater efficiency. By taking control of your money flow, you can not only uncover bottlenecks, but also increase profitability and ultimately grow your business.

Understanding the numbers is the first step to maximizing earnings. Don’t limit your financial knowledge to just sending out paychecks and collecting payments. Instead, embrace the numbers, contextualize reports and leverage the information you gain to make strategic decisions that propel your shop’s success.

The road to profitability must include a strong understanding of your finances. Here are four ways to take control of your money flow and elevate your shop’s business:

1. Track your inward and outward flow through detailed reports

The best way you can get familiar with your money flow is by intentionally reviewing the numbers. Whether real-time or evergreen, you can use data and information in all forms to learn the direction of money flow within your shop and how to influence profitability. These numbers can provide clear insights into your shop’s performance and any adjustments you could make to grow your profit. Therefore, it’s important that you review key reports on a regular basis.

For example, when it comes to your inventory, you can review Tekmetric’s Parts Orders section for information on cores and returns. This knowledge is particularly useful for anticipatory orders and core returns that can easily be tracked and returned as needed. If you have anything eligible for return, you can review that information in real-time and make the return when your parts provider arrives to get that credit back on your statement. By strategically tracking the parts you need to keep and those you can return when unused, you can anticipate future needs and streamline cash flow into your shop.

2. Utilize real-time data to make strategic financial decisions throughout your day

Using real-time data of both posted and unposted data gives you a clearer picture of the shop’s finances in real-time, allowing you to make decisions more efficiently and generate more profit to meet your short- and long-term goals. Additionally, it enables you to adjust your operations as soon as a problem comes to light. Rather than waiting until the end of the day, week or month, you can monitor money flowing in and out of your shop in real time and make strategic decisions that directly impact your final profit.

This might include monitoring your end-of-day (EOD) report in Tekmetric and delegating tasks that can help bring in more business to meet your goals. For example, if you review your shop dashboard early in the week and see $17,000 in approved work that hasn't been finished, you can implement some strategies to close out that work by the end of the week, whether it’s calling customers to follow up on an approval or announcing a bonus for your technicians that incentivizes them to finish the work quicker.

3. Provide financing options for customers

In addition to reporting, another way to influence money flow into your shop is by providing financing options for your customers. After all, if you can make a customer’s payment process easier for them, you can create a better cash flow for your shop. Providing financing options allows the customer to get the needed repair done without compromising their personal budget.

Furthermore, when you provide alternative payment methods, you increase sales. For example, at Tekmetric, we have found that a “Buy Now, Pay Later” option can help increase your average RO amount. The national average RO amounts to approximately $260. By contrast, according to Affirm, the average purchase when using a feature like “Buy Now, Pay Later” is approximately $1,800. Customers are more likely to approve higher-ticket items when they have a financial option like “Buy Now, Pay Later,” which helps increase your ARO. It’s a win-win situation for you and your customers. Not only do you reduce friction with the customer through a convenient payment option, but you also increase your cash flow into the shop.

4. Leverage outside resources to monitor your cash flow

As important as money inflow is, you must also monitor your outflow. Without understanding how both elements work together, you cannot accurately measure – or grow – your profit. This may be daunting, but you can ask for help.

Don’t hesitate to leverage outside resources to gain a better understanding of how to interpret money flow and use that information to grow your shop’s bottom line. Whether through free webinars, basic accounting courses or coaching organizations like our partners at Transformers Institute, Shop Fix Academy, Automotive Training Institute, Autoshop Answers, Elite and more, you can utilize external tools to gain invaluable knowledge that helps you run your shop more efficiently.

Bonus tip: Ask plenty of questions

Knowledge is power – and knowledge of your shop’s finances can lead directly to profit growth. Therefore, make sure to question everything. Ask for documentation, whether it’s an explanation of why a part was ordered or a receipt for a new coffee machine in your lobby. Small purchases add up, and if you do not ask questions and track them, you could end up reducing your profitability without noticing.

Do not be afraid to question the validity of transactions or ask for help in understanding the big picture of why purchases were made. Learning to control the flow of money into your shop is crucial, but implementing strategic decisions regarding money outflow is how you make a profit. By asking for help and closely monitoring your data, you will have a better understanding of the money flow in and out of your shop, leading to more efficient processes, a better customer experience and ultimately, more business.