Body shops and the commercial auto repair industry at large pull in billions annually but often run with staggering operational costs from labor, parts, and general overhead. A body shop’s ability to keep revenue up is a means of survival but healthy profit margins are the basis of growth. To run a successful body shop, owners must keep a close eye on the several dozen avenues in which money both comes in and out of their shop. This article is a collection of tactics for body shop owners to maximize their profit margins without sacrificing quality and service.
How to Take Labor Margins and Staff Management into Account
While parts and facility costs will affect a body shop’s profit margins, staff and labor costs are just as important — if not more so. Having high-quality and efficient staff is the most concrete way to increase profit margins as experienced mechanics and technicians are likely to complete jobs faster and with fewer errors. Be certain that your shop’s pay rates are competitive and attractive to experienced workers and reassess your shop’s training structure to be more hands-on. Find out if your state offers subsidized training for auto workers as you may be able to send your staff for specialized training at a reduced cost; some vendors and suppliers are known to offer similar services. Get a general idea how long common procedures like coolant flushes or even more intensive repairs take your staff and use that information to price your services.
Instead of focusing on products and parts, remember that the knowledgeability and skill level of your staff is the basis of a good repair. According to Body Shop Business, labor profit margins for body shops often range between 50% and 65% while margins on parts go from 20% to 28%. Investing in good labor and maintaining a happy, productive staff is one of the best ways to put a body shop in the direction of better profit margins.
Improve Your Retention Rate
A trend report on customer retention from Invesp found that while businesses have about a 20% chance of pulling in a new customer, they have a 60% to 70% chance of bringing back a repeat customer. This is especially true for body shops as vehicle owners should never be a one-time sale. Cars require regular maintenance, so body shops ought to be certain they are homing in on customers that are already in their shop just as much as potential new sales. There are several key strategies to keeping your current customers engaged and willing to return for future services.
Candid and Clear Communication – Be certain that your staff regularly communicates with clients during a job. Make sure that your shop’s training and onboarding procedures are specific about keeping customers in the loop and being transparent about all steps in a repair. It’s also important to continually assess your upselling practices – making sure not to upsell them unnecessarily. Defeat the long-standing myth that independent body shops nickel-and-dime their customers by being candid and explaining why each step of a procedure is necessary.
Testimonials and Referral Incentives – Your existing customers have the potential to be your body shop’s best advocate and marketing tool. Consider offering discounts on basic services like oil changes or coolant flushes in exchange for customer referrals.
As your shop grows, it pays to be on top of your online reviews and to establish processes that help you solicit and respond to them. Consider asking customers to leave a positive review after a successful visit.
Remember that not all reviews are going to be a ringing endorsement for your company, so be certain to directly address bad reviews. Whether good or bad, give personalized responses to reviews as often as possible. Part of the appeal locally run body shops enjoy comes from the personal touches that can be brought to a customer experience. Overall, make sure that your shop’s personality shines through in your online presence just as well as it does in your physical shop.
Plan Future Appointments for Regular Services – While many body shop visits are specifically problem-based, services like oil changes can and should be scheduled in advance so customers keep your shop in mind when it is time for regular servicing to their vehicle. Capitalize on necessary procedures like annual inspections stickers and coolant flushes to keep regular customers as regular as possible.
Digital Services and Software Solutions
Body shops have modernized in parallel with the vehicles they repair. As car companies continue to integrate increasingly complex computer systems and unique parts into vehicles, body shops have shown continued resiliency in their ability to keep up with consumer expectations. Another consumer expectation that body shops met in stride was the demand for digital services during the COVID-19 pandemic. Digital multi-point inspections and procedures are a win-win for consumers and body shops alike as consumers can clearly see their vehicle’s condition and body shops can more meaningfully demonstrate what repairs are necessary or not urgent.
There are several companies that offer digital interfaces for multi-point inspections; one of the most well-known is Bolt On Technology whose digital inspection program allows easy photo integration and tablet use for technicians and mechanics. Compared to traditional paper inspection forms, digital interfaces provide numerous time-saving benefits for your mechanics while giving customers a streamlined look at their vehicle’s servicing needs.
Another software solution that body shops looking to tighten their bottom line may want to consider is management software like ProfitBoost, which allows shop managers and bookkeepers to consolidate parts and labor expenditure figures into an easy-to-read single platform. ProfitBoost gives shops the ability to quickly assess their spending and determine where they can expand or retract to help their bottom line.
Profit Margin Overview and Final Considerations
With overhead and parts costs as a constant necessity, it is a relentless balancing act for even the most successful body shops to keep their heads above water. There is no gimmick or guaranteed trick to increase a shop’s profit margin, but a valuable first step is making sure that your shop offers personalized and professional services at the highest caliber possible. When you make business decisions around this primary goal, you can expect profits to follow.