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Can Your Auto Repair Shop Survive Another Financial Downturn?

Joe Marconi
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Joe Marconi Grand Master

Joe Marconi

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Due to COVID-19, many repair shops experienced a severe economic downturn, some with a drop in sales over 50%.  Without a strong cash reserve and/or SBA funding help, many shops would have gone under. 

My 40 years as a shop owner has taught me to always have a cash reserve.  However, never would I have ever imagined a downturn like the one with COVID-19.

So, how do we plan for the next financial crisis.  And, it will happen. Perhaps not as bad as the the virus crisis, but it will happen.

Here are a few things to consider: Have a separate, and hard to access, cash reserve bank account that has least two months of expenses. Also, secure a line of credit for at least one to two months of expenses.  Also, know your numbers, keep payroll in line, and make sure your prices are fair to you too, not just your customers.  Keep in good standing with all your vendors and keep your credit score high! 

The bottom line here, is truly the bottom line.  To weather the next financial downturn, you need a strong balance sheet and net profit to the bottom line.

What other strategies are you considering or implementing? 

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  • Have you checked out Joe's Latest Blog?

    • Joe Marconi
      Raising Labor Rates and Prices May Not Achieve Profitability
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      Most shop owners would agree that the independent auto repair industry has been too cheap for too long regarding its pricing and labor rates. However, can we keep raising our labor rates and prices until we achieve the profit we desire and need? Is it that simple?
      The first step in achieving your required gross and net profit is understanding your numbers and establishing the correct labor and part margins. The next step is to find your business's inefficiencies that impact high production levels.
      Here are a few things to consider. First, do you have the workflow processes in place that is conducive to high production? What about your shop layout? Do you have all the right tools and equipment? Do you have a continuous training program in place? Are technicians waiting to use a particular scanner or waiting to access information from the shop's workstation computer?
      And lastly, are all the estimates written correctly? Is the labor correct for each job? Are you allowing extra time for rust, older vehicles, labor jobs with no parts included, and the fact that many published labor times are wrong? Let's not forget that perhaps the most significant labor loss is not charging enough labor time for testing, electrical work, and other complicated repairs.  
      Once you have determined the correct labor rate and pricing, review your entire operation. Then, tighten up on all those labor leaks and inefficiencies. Improving production and paying close attention to the labor on each job will add much-needed dollars to your bottom line.

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