Aro & car count critique my numbers

[alfredauto]

Until I got on this forum I pretty much ignored the ARO and car count numbers except to try and increase both. Are there any benchmark numbers? My ARO for 2014 is $275. Car count was around 2100. Billed labor hours was 2400. Parts/labor looks like 4:1 I'm not sure if I'm reading it right. We do a lot of tires which are free installs and sell some cars which are parts only. I have 2 people working full time, I'm one of them. I have a part time secretary. What do you think? We are in a rural area.

These numbers came off my Mitchell yearly sales report.

[SMMotors]

Man that's tough question because your a tire store and rural area. To put it in perspective , in my area ( southern ca in metro area that has money) are goals are ARO $450 parts GPM 60% car count 250/month.

 

I've read/heard that a tire store should average out at 40% GPM but will have a much higher gross sales due to the large ticket price of tires with lower profit.

 

Your billed hours looks low, but if your working I. Your business and not on it, it will always be low. You have to figure how many days your open then do the calculations. I'm open 1965 hrs/ year in theory after holidays and vacation time. That means my guys should hit that plus some in a perfect world. Doesn't always happen but if your not tracking it, you have no way to improve it.

[bstewart]

I think SMMotors said it pretty much correct.

You do tires and car sales which will skew the numbers. Can the program separate out your tire only jobs and your car sales jobs?

 

2400 hours / 2100 car count = 1.14 hours per repair order, low for general repair but probably more normal for your shop. Average for general repair across the US is about 1.5 hours/RO and an ARO under $200.

Your ARO number looks pretty good compared to your hours/RO, but I'm wondering how much the car sales are bringing this up.

2100 car count / ~250 working days = 8.4 cars/day, not bad for 2 techs.

 

I'd definitely focus more on increasing your hours/RO and ARO before spending advertising dollars on increasing car count.

Perform courtesy inspections on EVERY vehicle, and notify EVERY customer about EVERYTHING that their vehicle needs. Make it a policy and stick to it!

It's a fact that the average vehicle in North America needs AT LEAST $500 in unperformed maintenance, it's your job to FIND and SELL this!

This will cause your hours/RO and ARO to go way up, without increasing car count.

 

Finally, I would break down your numbers by month, and then compare them to that same month for the previous year or two, to eliminate seasonal increases and decreases.

You obviously want to be improving over the previous year's numbers. A good goal to have is 10% over the same month last year.

[TheTrustedMechanic]

Until I got on this forum I pretty much ignored the ARO and car count numbers except to try and increase both. Are there any benchmark numbers? My ARO for 2014 is $275. Car count was around 2100. Billed labor hours was 2400. Parts/labor looks like 4:1 I'm not sure if I'm reading it right. We do a lot of tires which are free installs and sell some cars which are parts only. I have 2 people working full time, I'm one of them. I have a part time secretary. What do you think? We are in a rural area.
These numbers came off my Mitchell yearly sales report.

Don’t know, don’t really care what my ARO and DCC are year over year but I am a one man shop, estimated 240 working days. I averaged 2.5 cars a day for a yearly total of 602 cars. My average RO was $382. With tires and auto sales included in your numbers it looks like yours are low. If you want to track your numbers using Mitchell, I would recommend utilizing some type of miscellaneous item to enter your car sales. DO NOT enter them as parts for the system to treat like a brake rotor or spark plug. It is throwing your mechanical repair numbers off to enter a “part” sale of say $4995 that your cost was $3900. If you have the ability perhaps you can set up a taxable miscellaneous item in order to be able to pull your numbers more accurately. If you are pulling double duty as service advisor and technician in addition to your technician your billed hours are still low. But the typical efficiency of a one man shop is almost always reported as 50% in the forums I have read. So for 100% efficiency for your technician, and for you as S.A./Tech your billable hours would be around 2900 for a 50 week work year. That puts your operation at 2400/2900 or 82.75%. That gives you room to increase your efficiency but is not a bad efficiency. Most management gurus will tell you that your efficiency should NEVER be less than 100%. But think about it, you will always have down time for wrong parts, delayed deliveries, broken bolts, no shows, slow times, etc. So in order to make up for these lost efficiency incidents you have to overcharge your customers pretty badly in order to maintain an efficiency in excess of 100%. Reasons, opportunities and other ways to offset the lost productivity incidents can be discussed and argued ad nauseum but let’s just agree that an ethically run shop will enjoy increased productivity through proper tooling, education and streamlining, not overcharging their customers. We all know the 1.5 hour job we can complete in .75 and examples of that same 1.5 hour job that legitimately required 2.5 to complete. It all comes out in the averages, not in charging every customer 2.5 hours to make up for the one that took We also know the jobs where ‘trick tools’ or just better tooling helps with cutting times required and we enjoy the return on our investments with 4 hour jobs done in 3 hours for example.

[TheTrustedMechanic]

As BStewart wrote,

“I'd definitely focus more on increasing your hours/RO and ARO before spending advertising dollars on increasing car count.

Perform courtesy inspections on EVERY vehicle, and notify EVERY customer about EVERYTHING that their vehicle needs. Make it a policy and stick to it!

It's a fact that the average vehicle in North America needs AT LEAST $500 in unperformed maintenance, it's your job to FIND and SELL this!

This will cause your hours/RO and ARO to go way up, without increasing car count.”

Every bit is correct. I would however caution you to avoid the EVERY CAR trap. When your customer beings in their car it will need only what it needs, NOT what you need to sell. So often I read the “experts” saying this statistic and their victims believing that every car has to have $500 worth of work found or else the tech isn’t doing their job. The customer who brings their immaculately maintained car to you for an oil change does not automatically need $500 in maintenance. It needs an oil change, nothing more. At least in the owner’s mind, because they follow the maintenance schedule as if their life depends on it. Likewise the jalopy that sees nothing but oil changes when the light comes on and repairs only after something breaks won’t buy your ARO achieving list of ‘needs’.

You will also have to develop your shop’s policy regarding ‘wallet flushes.’ Yes, every maintenance service and fluid flush have legitimate applications. I think most of us would agree that the 100,000 transmission fluid service interval is simply too long, but I also think that some of the flush service kit companies recommending their services at 15K-30K intervals are excessively short and are intended to serve your bottom line, not the customers’ legitimate needs.

You said you are in a rural area and if you get the reputation for selling unneeded services your numbers won’t matter for long, as your business won’t be around for long. But as I wrote, BStewart is absolutely correct about shops routinely overlooking needed services. Imagine how your customer would feel if they just had their car in for service and 3 weeks later they have a problem. Why didn’t you find it and let them know? Sure there are things that you wouldn’t see, couldn’t know about, but your customer won’t know about that unless you build credibility regarding your ability to take care of their car, honestly. So to that end, I would not automatically do an inspection on every car. In fact I have read some articles where shops are prohibited from even opening the hood or pulling the wheels unless it is an integral part of the work authorized. So it has been suggested that you ask each customer, “Is it okay if we do a complimentary inspection of your car and present you with the results and an estimate for any issues we may find?” You build credibility with your customers, you’re looking out for their best interests. They know you will be doing the inspection instead of dropping it on them when they come to pick up their car. They will also be expecting an estimate for other repairs they weren’t aware of. And when they know you looked at their car, if something happens a few weeks later, you have a better opportunity to explain how you did not or could not have uncovered it. Of course you will get the occasional person who will decline the complimentary inspection or will tell you., “Sure, but I’m not fixing anything…” for whatever reason. That way you will know ahead of time not to waste your time with something that isn’t an immediate and desperate need.

[Charlie]

Tire sales can throw off your numbers, artificially increase your ARO and decrease your GPM, ideally you should separate your tire sales and car sales since you are not treating it as a separate business. A metric I find useful is 25,000 per month, per tech, P&L. I have found this is a good expectation of a solid tech. Personally I look to see an average RO of $275 and a GPM of 50% (this includes all repairs). I am also looking for 52% of total revenue to be labor. We have three locations and service about 940 cars monthly in general repair. We also have two dealerships but we treat those cars as a separate customer and charge a discounted ticket (not too much) but to gauge the success of sales they need to pay like everyone else...otherwise why am I selling cars.

 

I do not believe there is any one formula that works for everyone, We use to do a lot of heavy work and at that time my numbers were totally different. In the end you need to be happy, have time with your family and be able to retire well while helping those around you do the same. Keep up the good work!

[flacvabeach]

I would have loved to see this thread eleven years ago when I was getting started. Shows the value of participating in this forum.

[mspecperformance]

your ARO and car count goals will vary and be your business specific. There are different industry benchmarks depending on who you speak to. I am not sure if there is 1 authoritative publication dictating those numbers. Most coaching companies have similar figures. You should start with Average Labor hours per repair order goals and also look to get your parts to labor ratio about as close to a 1:1 as you can. That would mean essentially whatever you are doing in labor say for instance labor rate = $100 and your average hour repair order goal is 2.5 hours which would = $250 then 1:1 on parts is another $250 then your ARO goal should be $500.

 

For instance the goal set for myself is around a 4 hour per repair order goal. When i compute it with my hourly rate and double for parts I want to be reaching about $1000 a ticket. I do decently well on ARO but always room for improvement. My biggest challenge is car count.

[Elon Block]

I would however caution you to avoid the EVERY CAR trap. When your customer beings in their car it will need only what it needs, NOT what you need to sell. So often I read the “experts” saying this statistic and their victims believing that every car has to have $500 worth of work found or else the tech isn’t doing their job. The customer who brings their immaculately maintained car to you for an oil change does not automatically need $500 in maintenance. It needs an oil change, nothing more.

 

“Is it okay if we do a complimentary inspection of your car and present you with the results and an estimate for any issues we may find?” You build credibility with your customers, you’re looking out for their best interests.

TheTrustedMechanic hit the nail on the head.

 

It's not your fault if you've bought into the ARO myth. Because some misguided training companies

are still teaching these old school, cheesy tactics.

 

So, it can be confusing when you hear them say focusing on your ARO is the way to grow your business.

It's one way. But it's not long-term and it makes running your business profitably way harder than it needs to be.

 

I learned this lesson the hard way.

 

When I was first promoted from tech to management in the 80's, two things happened that caused me

to look at the business in a new way.

 

The first thing that happened...

I was working in a Goodyear retail location as a sales manager and we got a memo from Corporate.

The memo said... effective immediately, the total of each ticket had to be a certain dollar amount.

 

If we didn't hit that number, disciplinary action would be taken against the salesperson AND the manager

that had allowed that customer to get out the door for under that dollar amount.

 

So, if the customer came in for an oil change, you needed to find something to pad their bill.

 

This tactic for creating sales and profits did not go unnoticed by the public.

 

And it didn't take long.

 

It resulted in class action lawsuits against Sears, Goodyear and Firestone for selling unneeded services to drive ARO.

http://www.tirebusiness.com/article/20130913/NEWS/130919945/1996-a-look-into-the-past-goodyear-settles-service-fraud-suit

http://www.nytimes.com/1992/06/23/business/sears-auto-centers-halt-commissions-after-flap.html

http://www.rubbernews.com/article/19990621/ISSUE/306219990/firestone-auto-stores-hit-with-fraud-lawsuit

 

So, managing and selling by ARO to grow your business, delivers short-term results, at best.

 

Let's look at what we're really doing here: We're fixing cars - that's it.

 

The other thing which happened that shaped my philosophy about the business was an article my

manager gave me called: The Customer That Never Came Back.

http://sellmoreautoservice.com/TheCustomerThatNeverComesBack.html

 

Customers can tell when you see a dollar sign on their forehead and you won't even know what happened

until you see their vehicle in your competitor's parking lot. They won't hesitate to give someone else a chance

at their business.

 

An ARO is only a number - a way of measuring what you're billing but if you only have one car a day

that has a $500 ARO, what difference does it make?

 

The only thing that matters is:

How many loyal customers do you have that view your shop - as the shop to be trusted with

one of their most important possessions? And are willing to pay YOU to solve their automotive problems.

 

How do you know your shop is being perceived this way?

 

Look at your bays. And look at your appointment calendar.

 

This is the true measurement of how you're doing.

 

If you don't have bays full of profitable, legitimate work - week in and week out, month in and month out...

something is missing.

[mspecperformance]

TheTrustedMechanic hit the nail on the head.

 

It's not your fault if you've bought into the ARO myth. Because some misguided training companies

are still teaching these old school, cheesy tactics.

 

So, it can be confusing when you hear them say focusing on your ARO is the way to grow your business.

It's one way. But it's not long-term and it makes running your business profitably way harder than it needs to be.

 

I learned this lesson the hard way.

 

When I was first promoted from tech to management in the 80's, two things happened that caused me

to look at the business in a new way.

 

The first thing that happened...

I was working in a Goodyear retail location as a sales manager and we got a memo from Corporate.

The memo said... effective immediately, the total of each ticket had to be a certain dollar amount.

 

If we didn't hit that number, disciplinary action would be taken against the salesperson AND the manager

that had allowed that customer to get out the door for under that dollar amount.

 

So, if the customer came in for an oil change, you needed to find something to pad their bill.

 

This tactic for creating sales and profits did not go unnoticed by the public.

 

And it didn't take long.

 

It resulted in class action lawsuits against Sears, Goodyear and Firestone for selling unneeded services to drive ARO.

http://www.tirebusiness.com/article/20130913/NEWS/130919945/1996-a-look-into-the-past-goodyear-settles-service-fraud-suit

http://www.nytimes.com/1992/06/23/business/sears-auto-centers-halt-commissions-after-flap.html

http://www.rubbernews.com/article/19990621/ISSUE/306219990/firestone-auto-stores-hit-with-fraud-lawsuit

 

So, managing and selling by ARO to grow your business, delivers short-term results, at best.

 

Let's look at what we're really doing here: We're fixing cars - that's it.

 

The other thing which happened that shaped my philosophy about the business was an article my

manager gave me called: The Customer That Never Came Back.

http://sellmoreautoservice.com/TheCustomerThatNeverComesBack.html

 

Customers can tell when you see a dollar sign on their forehead and you won't even know what happened

until you see their vehicle in your competitor's parking lot. They won't hesitate to give someone else a chance

at their business.

 

An ARO is only a number - a way of measuring what you're billing but if you only have one car a day

that has a $500 ARO, what difference does it make?

 

The only thing that matters is:

How many loyal customers do you have that view your shop - as the shop to be trusted with

one of their most important possessions? And are willing to pay YOU to solve their automotive problems.

 

How do you know your shop is being perceived this way?

 

Look at your bays. And look at your appointment calendar.

 

This is the true measurement of how you're doing.

 

If you don't have bays full of profitable, legitimate work - week in and week out, month in and month out...

something is missing.

 

 

I have to disagree here. I believe ARO is a very important metric to follow. You have to remember that billing hours is really a matter of selling jobs at their full value. Us as an industry tend to discount our work just because we are worried we will lose a customer. I was doing this for years and sure I had some happy people but I had empty pockets and my staff and business were suffering. The fact is with the vehicle inspections that we perform on every car we find thousands of dollars of repair work our customers need on 9 out of 10 cars. With that being said there are opportunities to "sell" more work. This is work that the customer needs or may need. We are not looking for things to pad the bill. Our job as automotive repair professionals is to make sure our customer vehicles are safe for the road, safe for our customers and their families and safe for the general public. Our job is not to save them money. I know that I charge a fair price for the work that we perform and we come up with our pricing based on what our cost of doing business is as well as what it takes for us to keep up with the highest standard of service.

 

If ARO is low it is a possibility that our techs/SWs are not recommending needed work. This could be extremely unsafe for the customer and also if the customer finds out something was wrong with their vehicle and not notified it is a black mark against the shop. The other possibility which I'm sure most struggle with is selling jobs at less than full value.

 

As long as increasing ARO in a honest and ethical way is employed I don't see a problem. The art here is really to convey the message to the customer so they are fully comfortable with the estimates you are presenting and trust you enough to pay and keep coming back.

[Elon Block]

I understand. It's frustrating trying to figure out what the solution is. The uncertainty of

not knowing whether you're going to have work or not is scary to say the least.

And it seems like there's lot of information out there when it comes to running a

profitable auto repair business.

Some of it's good. Some of it's not so good. So, it's not your fault if you've tried various

things that didn't work because they make it sound so appealing.

For example, you've got all the companies trying to sell you marketing gimmicks such as

couponing and loss leader advertising. Discounting your services is not the way to grow

your business or your paycheck.

And it's easy to see the articles in the industry magazines that brag about a shop's ARO

but if you look at their business model and/or their reviews.... everything is not always what it appears to be.

So, focusing on the main thing which is: you're getting paid to solve problems, is the only way to go.

Customer comes in for an oil change. Offer courtesy inspection. If nothing needs to be done. Thank them

and tell them you'll see them at their next LOF interval.

If something needs to be done... even IF it's the guy that is behind on maintenance, take the

list of items discovered by your tech and PRIORITIZE the findings for the customer so that:

#1, they don't feel like you are using this opportunity to take advantage of them, which is their worst fear.

#2, you HELP the customer to take this short list of things that need to be taken care of and

chunk it down so they can begin to bring the car back to good operating condition.

If you don't prioritze the findings for the customer... they're going to be overwhelmed and confused at

why they are even able to drive the car considering the long laundry list of things they were just told needs to be done.

Now, using this as your basic business model does require you have processes in place.

For example... you need to have your pricing set up so that you get paid for your expertise

and the customer feels like they are getting a fair price.

Anytime it's not a win-win... someone's going to be resentful.

Shop owners have a gold mine if you're surrounded by box stores, dealerships and large chains

that are doing a poor job. Your competition is your best advertisement.

Because all you have to do is do just a little bit better and treat people right and you'll have bays

full of PROFITABLE jobs and a booked appointment calendar.

What would it be like to be able to legitimately say to anyone that calls or stops in...

"Let me look at the schedule and see when I can squeeze you in."

And then, tell them the first available time for their oil change is next week?

That's absolutely doable... but only if your business is set up so that it's customer-based -

not transaction-based.

I am not talking about giving anything away here.

It's the shop that's perceived as the most trust-worthy - that wins.

And the way you do that is you treat your customers the same way you would if they were

a good friend or family member. And treat each vehicle as if it were your own. (The question

you would ask yourself... "if this were my own vehicle, how would I maintain it. How would I repair it?")

It's not the shop with the biggest ARO that wins. It's the shop with the largest number of

loyal customers coming week in - week out. Month in - month out. Until that becomes the focus...

the struggle will continue.

Think about it... you only need less than 1500 LOYAL customers spending the national

average of $750 year - with YOU - to have a million dollar business.

That's the number to focus on.