From Startup to Seven Figures: Growing a Profitable Auto Repair Business

I have never met an automotive shop owner who didn’t want to grow their business and reach a level of success that they can be proud of. However, the reality is that most auto repair shops, just as many small businesses in general, struggle with being profitable. And while they may survive the test of time, surviving and thriving are two distinct circumstances. Therefore, the goal of a business owner is not to merely survive, but to thrive. Thrive in their business, financially, and personally.

 

Growing a profitable auto repair shop to seven figures and beyond takes a commitment in many areas. While many people point to financial acumen as the main strategy to attain significant growth and success, the financial performance of any business tells only one side of the story. Most often, financial results are a trailing indicator of what’s happening within the organization.

 

Great organizations comprised of great people and great leadership produce great results. Organizations that struggle usually struggle in areas of leadership, have a poor workplace environment, and have low employee engagement. To reach high levels of financial growth requires more than an understanding of the numbers. In this article, I will outline five key strategies that you can apply today to take your auto repair shop to the growth levels you desire and deserve.

 

Understand Your Business Model and Your Key Profile Customers

Building and growing a sustainable business requires you to identify your business model. While many shop owners may claim that they can work on all makes and all models, I challenge this thinking.  Can your team truly be proficient working on a vast array of vehicle models, and the endless variables that it brings?

 

To be proficient and to be profitable requires you to understand what drives your economic engine. In other words, an auto repair shop business must identify their profile customer, the type of vehicles that fit their profile model, and the type of services and repairs they will offer. To be all things to all people is not a sustainable business model that drives long-term success.

 

Narrowing your focus allows your company to become proficient in the areas that deliver the greatest potential for success and future profits.

 

Build a Strong Team Around You

There is one thing that is consistent in the world of business: You, the shop owner, will only be as strong as the team of people you surround yourself with. The success of your business heavily depends on the people you employ. Nothing works with the wrong people, no matter how creative your strategies are, how amazing your facility looks, or even if you have the most sophisticated equipment. Fancy football stadiums don’t win championships. The right players, with the right mindset and culture, win championships.

 

As a shop owner, you must consistently work hard to be the best you can be. Be the best business owner, the best boss, and the best leader. However, to continue to grow your business you must rely on the abilities and talents of others around you. If your business is reliant on your abilities alone, your business will only reach a certain level of being profitable and then plateau.

 

Always look to hire superstars. But once hired, do all you can to mentor them, coach them, train them, and bring out the best in them. Remember, success is dependent on the people you surround yourself with. 

 

Lastly on this topic, build a workplace where people feel that they are appreciated for the work they do, where praise and recognition are used as motivators, along with financial rewards. What I am referring to here is creating a strong culture of shared values and shared objectives.

 

Continually Improve Processes and Procedures

Growing an auto repair to seven figures and beyond will require building systems and processes. An effective leader builds a workplace where employees are empowered and understand that their work contributes to the overall success of the company. This strategy is dependent on processes and procedures.

 

Every daily operation must be documented: Opening and closing the facility, the customer write-up process, the sales process, and vehicle delivery must be clearly outlined, defined, and executed to the best of the team’s ability. Processes and procedures increase proficiency, which leads to higher morale, and a better customer experience, all leading to increased sales and profits.

 

Work on the Leadership Skills

Leadership is perhaps the most important component of growing a profitable auto repair shop. Too many shop owners never reach their potential simply because they don’t understand their true role. Shop owners are more than just a boss, they must also become leaders.

 

Leaders understand the needs of others. They spend a great deal of time listening to their employees, learning from them, and then putting their employees in positions to win. Leaders understand that to grow to seven figures and beyond takes a well-honed team, made up of engaged employees all working for a common mission.

 

Leaders have a vision that inspires others. They communicate that vision often. Leaders also set well-defined long-term goals. However, a great leader also understands the goals of the individual team members and seeks to align the goals of the organization with the goals of the individual.

 

Great leaders also understand that many times, their decisions will not be right. But fear of failure has no place in the mindset of a true leader. True leaders don’t view mistakes as failures but as learning opportunities. Henry Ford once said, “Failure is simply the opportunity to begin again, this time more intelligently.” 

 

Understand the Economics of Your Business Model

As the shop owner, you must have an above-average understanding of the financial side of running your automotive business. When you combine the strategies above with a deep understanding of your financials, you will grow a profitable business that will grow to seven figures and beyond.

 

The primary financial component to growing an auto repair shop is profit. Profit is broken down into two separate but equally important key performance indicators: Gross profit and net profit. Gross profit is the amount of money left over from your sales revenue after paying for all the costs for those sales (part cost and technician labor cost). Net (bottom-line) profit is the amount of money remaining after all the operating expenses have been paid.

 

Many shop owners determine their company’s growth by an increase in total sales, year over year. While sales growth is an important indicator to track, it is not what will determine your overall financial success or future growth. Bottom-line net profit is the only true indicator of a financially successful repair shop. Let me ask you; would you rather have a repair shop with total sales of $2 million, and a bottom-line net profit of $50,000, or a repair shop with total sales of $1.5 million and a bottom-line net profit of $200,000?  The answer is obvious.

 

You, the shop owner, must do the math to precisely know what margins you need to determine your desired profit. Understanding how to set your labor and part margins, breakeven, and desired profit requires knowing the financial demands for your specific business model. Your margins may differ from other similar auto repair shops. This is an area where a business coach can add valuable help. 

 

Conclusion

If you are an auto shop owner looking for innovative ways to enhance and grow your business, Elite Worldwide can help. At Elite, we have world-class, experienced coaches who understand your business. Our coaches have lived in the trenches and built amazing, successful companies. Elite also has sales and management training, and peer groups that can take you and your business right to the top. No matter where you are in your business career; startup, growth mode, or looking to retire, Elite can guide you and help you achieve your goals and build a more profitable and successful business.