I am new in business. Need advice to increase profits.

[Zenoo]

Hi my name is Zenas and I am 26 years old from Alberta, Canada. I started my own automotive repair shop in December 2023. After running it for 1 year I made a little bit of profit. I needed some advice on how I could increase it. Its a 3 bay shop with two 2 post hoists and one 4 post hoist with alignment. I am the only mechanic in the shop as I can't afford to hire anyone at this point. I am charging about $120 per hour for the labor and very minimal mark up on parts. The shop had no customer base when I got it so it took me sometime to build returning customers. If I try to increase the prices on parts the customers run away. Seems like they are calling around the city and going to the cheapest person. My monthly over head cost is about $7000. Whatever I make in a month goes back into next month's rent. Any advices on how to manage this properly from other shop owners?

[Freestate Auto and Truck]

What matrix are you pricing your parts at? Our company marks up a minimum of 50-65% on aftermarket parts, 30-40% on special order and dealer parts. (We are located 10 minutes from D.C.). We offer a 2 year/24k mile warranty and remind our customers that we offer that warranty only for parts that we supply, no warranty on customer supplied parts. Our labor rate varies from $149-185 depending on whether it's a standard vehicle or a larger fleet vehicle, but we also keep our labor rate a bit higher as a cushion to cover payroll, parts, rent, etc.  and also so that we can offer our loyal customers a 10%-15% discount depending on their affiliations. We work with multiple different referral and affiliate programs such as AAA Automotive Program, Costco Auto Care Program, and RepairPal for referrals as well. Maybe try targeting a specific consumer in your area, ex. 1/2 off oil change for local teachers to pinpoint your desired customer base. You could also get certified to become a state inspector, or Uber/Lyft if you have them in your area. Hope 2025 is a great year for you!

[willydmax]

I was a one man shop with 2 bays for about 10 years and just last year hired my 1st tech. I made money from day one but my overhead was extremely small compared to yours. I started out small with no debt and bought tools as I went along. I also didn't have issues with having enough work. My focus has been quality and honesty. Sounds like you need different customers. Whenever I have someone complain about price I usually don't end up working for them. They are the price shoppers and are only loyal to their wallet. Don't let them persuade you to lower your markup, that's a dead end street. You may need to raise your prices which may scare those price shoppers away and attract good customers that don't ask how much is it going to cost but when can you do it. If you could bill 30 hours a week that's $14400 a month. Some weeks I would bill 30 and some I would be able to bill 40 plus, just depended on the jobs. It takes some serious organization when you're by yourself to bill 30 to 40 a week. I usually don't work late either. My production went up when I switched to Shop-Ware for my management system. Wish you luck! 

[Mike the Mechanic]

I purchased my shop from my friend and boss in 2000. There were 4 of us. My brother wrote service, 2 techs and myself. In 2005 I joined ATI. Today there are 13 of us and we purchased our own property in 2006. With the cost of overhead and the high rate of inflation you must find a way to charge more for your service. We do not quote jobs broken down. We quote the finished job. Do not make it easy for people to shop around. We charge $48.75 per 1/4 hour. Seems a lot less than $195 per hour. We use a parts matrix. This allows you to charge more for low price parts. a 20 cent fuse should sell for $2. A 10 X mark up. Obviously you can not charge this for a $100 part. Your average margin at the end of he day needs to be above 50% and shoot for 65%. How are you calculating your margin? Part cost X 1.5 is not a 50% margin.  Part cost divided by decimal percent  yields the correct margin. $12.50 cost divided by .50 % margin is $25 . You cannot survive on the suggested margin of the parts store or dealer. Remember your competition is manipulating the hours charged for jobs even though they may have a lower rate. Also if you cater to cheep customers that is all you will ever have. Never sell on being cheep. Always sell on the high quality parts and skills you provide. You must take off your mechanic hat and put on your businessman hat. If you do not learn how to charge appropriately you will never grow and likely not survive. 

[jfuhrmad]

A few things:

1) You May know how to fix cars but you will have some learning when it comes to sales and business.  That’s ok, but recognize that and grow your skills in those areas.

2) You need to be cool with sending price shoppers to other shops.  That’s the symptom of a trouble customer.

 

3) It might help to have a few word tracks.  When questioned about parts prices I’d say “you can buy a steak at Walmart for $10 or a steak at a steakhouse for $40.  This is the steakhouse.”  Most people understand that and you’ll be surprised at how many people will chuckle and give you the work.

 

4) Inspect every car and do not break down the prices for each repair when talking to the customer.  Simply tell them the work that needs to be done and then say “looks like it’s gonna run about $3200 for everything, I can start on it today should I get the parts coming?”

if they can do it, cut the job down to the safety items for them and repeat the process with the smaller job.  It’s nuts, but it works.  I learned that from a guy on here 10 years ago.

That’s the fastest way to fix your profit problem along with a strong parts matrix like mentioned above.

 

[JustTheBest]

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[CallNous]

Zenas, you're in survival mode right now, I get it. I've been there. A few things that come to mind:

You don't have a pricing problem, you have a positioning problem.

If customers are shopping you on price, you're attracting the wrong customers. Price shoppers don't build a business, they just keep you busy and broke.

$120/hr labor with minimal parts markup means you're competing with the guy down the street who's also desperate. Raise your labor rate to $140-150 and mark parts up 40%. You'll lose the tire kickers. Good...they weren't profitable anyway.

Your real constraint is time, not money.

You're one guy with three bays. Every minute you spend answering phones, ordering parts, or writing invoices is a minute you're not billing $120/hr. That's the leak.

The phone is probably killing you and you don't realize it.

When you're under a car at 9am and the phone rings, what happens? Miss it? You just lost a $400 job. Answer it? You just stopped billing.

Track your missed calls for one week during your busiest hours. Multiply that number by $400. That's what you're leaving on the table every month.

Most solo shops lose $2-3K/month+ just from calls they can't answer during peak times. At $7K overhead, you can't afford to keep bleeding calls.

What I'd do if I were you:

Track how many calls you're missing. That number will tell you if you need better systems or just better pricing.

The goal isn't to work harder. It's to capture the revenue that's already trying to reach you.

[Zenoo]

Hey guys thank you for all the valuable knowledge and help! Its been 1 year since I made that post and here is the update. 

I kept the labor rate the same and marked up the parts by 50%. In the beginning I lost a lot of cheap customers but eventually the good customers started to come who dont question the price of every single part. The business started to make some good profits and overall im happy now. During the busy season I have been booking 1 week out so I think now its time to hire someone. Im planning on hiring an entry level tech that can do oil changes, tires etc while I focus on bigger jobs. 

[JustTheBest]

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[Rosie]

Hire an AI Advisor to answer calls, book appointments and handle work orders and invoicing so you can stay under the hood. Never miss another call, thats lost revenue you can't afford. Spend a couple of hundred a month to make an extra $10000. I can help you, just ask!

[Riccardo]

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[JustTheBest]

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[AltusB]

Zenoo:

Good to hear that you raised your parts margins and business is good.

If you have not done so yet, you should attend some manager and service advisor classes either live or online to get more information to grow your business. Maybe even join a 20's group. Sign up for some to the newsletters and magazine, many of which are at no cost. 

Seek out a mentor, as well. 

Keep up the good work.