Why Your Automotive Shop Isn’t Profitable

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Why Your Automotive Shop Isn't Profitable

Up until about a decade ago a repair-focused automotive shop could pay its bills and thrive in a competitive market. And marketing was optional (other than a Yellow Pages ad).

But that’s no longer true.

Automotive shop profitability depends on a few key factors. One of the most significant factors is knowing how to shift your focus from repairs to maintenance.

Many of you know this because you have shop-management training. But it is not obvious. I still hear shop owner say that they do not want oil changes.

Out with the old…

With training you quickly learn that what was once a successful automotive service business model doesn’t work anymore.

So why do we keep trying to make our businesses run on a broken system?

…In with the new

Repair work will always be an important part of a shop’s revenue. What I do want to emphasize is the success a shop can experience from a business model that centers around maintenance.

Here’s why:

Quality manufacturing

New cars are of better quality. They don’t break down as often, and they don’t need as many repairs.

If you keep relying on a business model that depends on a steady stream of repairs, you’ll have more tumbleweeds moving through your lobby than customers.

Marketing is a must

In a business model that relies on repairs, you can do passive marketing—or none at all. You simply wait for people to come to you. In a maintenance-centric business model, service-reminders are a must.

Lots of maintenance

Better-quality cars don’t need as much maintenance service, either.

Profit margins

Profit margins are lower, as the price of parts has gone down dramatically, which means profit margins have gone down, too. Maintenance has a higher profit margin (60%) than repairs (40%), and maintenance is predictable and recurring.

Diagnostics

Cost estimates are a challenge. Customers don’t want to pay for diagnostic testing services, but they’re a must if you want to accurately diagnose the problem—and how much time and money that problem will take to fix.

Promoting the maintenance your customers need will help take your business to the next level. It will offset the fewer repairs vehicles need, increase customer satisfaction, and grow profits.

In the next few blogs, we’ll dive deeper into how a shop can successfully deliver a maintenance-centric service, and drive profitability through a customer relationship management system that delivers on its promises.