Simply filling your bays doesn’t mean you’re turning a profitable business. A successful business needs to be aware of their auto repair shop’s profit margins so they can maintain a high return on investment (ROI). Your “profit margin” refers to the percentage of sales that has turned into profits.
For the automotive repair industry, the average profit margin is between 20-28% for parts and 50-65% for labor.
In order to maximize your profit margins, you either need to increase your revenue or decrease your costs. Unfortunately, it’s not as simple as increasing your prices or lowering the quality of the materials your shop uses, because that can be detrimental in the long run.
Instead, here are 3 simple ways you can increase your auto repair shop’s profit margin right now:
1. Drive a Higher Average Repair Order
Without compromising the quality of products or services you offer, it can be difficult to cut costs. But what you can control is how well you promote those products or services during a visit. A proven strategy for increasing your average repair order is cross-promotion and up-selling recommended services.
Try cross-promoting services that could be purchased in tandem, for example:
- Tire rotations and tire replacements
- Oil changes and air filter replacements
- Freon refills and air filter replacements
2. Encourage Repeat Business
In addition to recommending additional services in the moment, be sure not to neglect long-term customer retention. Auto repair shops are a dime-a-dozen, which is why your loyal customer base is so crucial. If you want to maintain a loyal customer’s business, you will want to enhance their experience as much as possible.
Here are a few ways to do just that:
- Build long term relationships with customers: be sure to treat your customers like people and not just another client.
- Offer customer loyalty rewards programs to encourage repeat business: Based on a case study with one of our partners, BayIQ’s marketing software helped them double their number of average visits per year. Additionally, they saw an increase in the average value of return orders which resulted in nearly double the average value per customer per year.
- Remind customers of upcoming regular maintenance: ensure your shop stays top of mind with customers by sending out email and text message service reminders.
By making a few simple adjustments, you can create a loyal customer base while also attracting new business to ensure your shop’s profit margins will always be in good shape.
3. Integrate a Marketing Plan to Bring New Business
While maintaining loyal relationships with your existing customers is crucial, drumming up new customers is also a necessary aspect of driving more revenue and increasing your auto repair shop profit margins. That said, a strong outbound marketing strategy is going to come in handy when trying to encourage new business.
Try integrating things like:
- Auto shop signage
- Sponsor local events to get your name out there
- Run automotive repair advertisements for your shop on social media
- Offer deals and discounts with a specially designed rewards program
Establishing a constant source of new customers will ensure your business stays well afloat.
Increase Your Average Repair Order With BayIQ
These are only the building blocks for driving revenue without cutting quality products or increasing prices. You might find you need an extra hand when it comes to nailing your shop’s marketing strategy to encourage healthy business. BayIQ’s loyalty rewards program and marketing software can help!
BayIQ is an all-inclusive automated marketing platform designed specifically for the automotive repair industry. TheBayIQ software platform can help increase your average repair order (and top line revenue), allowing you to maximize your auto repair shop profit margins without sweating about the details.