No matter how long you’ve been in the automotive business, it’s clear that today’s culture demands an entirely new business model. Automotive service profitability depends on more than waiting for repairs, word-of-mouth recommendations and a highly trained team. Why? 7 Reasons Why Your Work Shop’s Business Model is Broken.
You’re fighting an uphill battle against a few key factors:
Today’s vehicles are manufactured to a much higher standard. So, they don’t break down as often and don’t require as many repairs. By some estimates, there has been a 75 percent drop in demand for repairs from just 20 years ago.
In the past, to get customers to come to your shop, you didn’t have to do much marketing. You could simply wait for an owner to bring in the car for a repair. Basically, the customers would come to you. You didn’t need to lift a finger. If you were good, a yellow pages ad, word of mouth and need combined to bring in lots of business.
The internet has lowered dealership profits on vehicle sales. To survive, dealerships zeroed in on servicing our best customers and became a mighty competitor. Their strategy includes free maintenance for the first three or so years of vehicle ownership, increasing competition for maintenance type work among local shops.
Newer vehicles require fewer service visits. It’s no longer standard for vehicle owners to visit a shop every three months for an oil change, and most maintenance tasks have longer intervals between visits, too.
Lower profit margins
Replacement-part profits are lower, in some cases 50 percent less than profits used to be. For example, a replacement part that used to cost $180 is now $80 to $90, which means the gross profit decreases from $90 to $40.
Difficulty estimating costs
Drivability issues are increasingly difficult to price. Customers generally don’t want to pay for diagnostic testing. Without it, however, it’s a challenge to properly diagnose the problem. This difficulty often leads to unhappy customers or unbilled parts and labor.
What’s the solution?
Give your customers service recommendations as “due now,” “due in the future” or “never done,” based on their own driving habits and service history. Like a fleet manager, we can help you track, report and maintain vehicles accurately and fairly. Be awesome at the front counter and the experience will be remembered.