Perfectly Avoidable Mistakes Auto Repair Shops Are Still Making In 2021
Auto repair shops have an active trade. What’s more, they can be extremely profitable. However, that relies on the avoidance of mistakes. And, as you’ll discover in this article, most repair shops are not doing a good job on this front.
Struggles can crop up anywhere in an auto repair business. Some find it hard to maintain good customer service while others fail to stock enough parts.
In this post, we take a look at some of the technical and business-related mistakes that auto shops are making and how you can avoid them at your firm.
Mistake 1: Failing To Put Repair Contracts In Writing
In the past, a nod, wink and a handshake was enough to seal a deal. Unfortunately, in today’s hyper-legalistic society, that’s no longer the case. Auto repair shops must ensure that they put all customer agreements in writing.
Start by creating a template for your estimates. You can hand out these documents to customers and then get them to sign them, proving that they gave you permission to carry out the required work.
Next, insert a disclaimer telling customers that costs may vary. Also, add a note that says that you will update the customer if total expenses change. If costs do change substantially, then create a system where you can get customers to sign-off on work remotely (instead of having to travel back to the repair shop). E-signatures are commonplace in the industry today and easy to implement with any customer who has a smartphone or tablet.
Mistake 2: Not Understanding Your Accounting
Auto shop accounting is similar to other businesses. However, there are some subtle differences that you will need to consider. Failing to understand the basics could cause you to lose profitability and, in some cases, face legal consequences.
Outsourcing your accounting to a professional certified bookkeeper is one option. However, bookkeepers will rarely have access to the same detail of information that you have on the ground. Thus, it’s essential that you know how to properly account for expenses so that your taxable profits are not any higher than they need to be.
Start by exploring all the allowable expenses associated with running a repair shop. Include things like:
- Utility fees
- Interest payments on loans
- Carryovers from previous years
The critical element here is to understand precisely what you can claim for. In general, an auto repair shop expense is any payment that is necessary for the functioning of the business. In other words, anything that enables you to make a profit.
Always use accounting software to keep track of your expenses. Ideally, you should integrate your bank account so that you can update your financial position ah hoc. You should also get into the habit of scanning receipts immediately and logging invoices in an archive, connected to your accounting app.
If you are worried about your accounts – or your ability to use software properly – consult with an accountant who understands how it works.
Mistake 3: Incorrectly Pricing
Auto repair shops have a challenge with pricing. Because each job is slightly different, it’s not always clear what the customer should pay.
Generally, you’ll want to break down your invoice into sections detailing each expense incurred as part of the job. Not only does this practice help you, but it also builds trust with the customer too. They’re able to see precisely how their costs break down.
Auto repair invoices usually break down costs in the following manner:
- Service description. Here you list all of the services that you rendered to the customer. For example, you might list “oil change service” at $150 and “engine washing” at $800.
- Parts list. You’ll then want to list all the parts that you used in repairing the vehicle. This could include things like “wipers” for the windshield or new pads for the brake rotors.
- Labor. Lastly, you’ll want to include additional labor costs. Usually, you’ll roll the cost of labor into the service description. However, you’ll sometimes want to list it as a separate item, depending on precisely how you structure your fees.
Under each section, you’ll need to create a subtotal and then a grand total at the bottom so that customers can see how much the entire service costs. You also want to include other items, such as the customer ID, your address, the details about the vehicle being serviced and so on.
This method of pricing is helpful because it prevents both over- and under-charging. If you notice a mistake in any service cost, you can correct this. Typically, you will want to correlate service costs with the amount of labor involved. The more labor required, the higher the fee.
Mistake 4: Failing To Do The Proper Research
Auto repair shops are surprisingly technical businesses. They use a lot of sophisticated technology and each mechanic needs a high degree of skill and experience to do their job well.
Unfortunately, many auto repair shops let themselves down by failing to do the proper research. Sometimes, they can assume that they know how to repair a vehicle, even when they don’t.
For instance, suppose that a customer delivers a thirty-year-old Ford F-150 to the workshop. In all likelihood, team members probably don’t have much direct experience with the vehicle. However, they may simply assume that early models are much the same as later ones and that they can repair them in the same way. And that’s where trouble can start. F-150s aren’t the same across the generations.
To prevent this, build a good stock of Ford factory service repair manuals. Make sure that you have all the literature you need for each repair job you’re likely to encounter. If you need to dedicate additional labor to a job, tell the customer in advance and increase their estimate.
Mistake 5: Failing To Do Proper Market Research
The auto repair shop market is competitive. There may be dozens of shops in your city alone. Thus, in order to survive, you need to put your business cap on.
As billionaire investor Peter Thiel likes to remind people, competition is for losers. The repair shops that tend to do the best are those that have a captive market.
Consider the following:
- The number of repair shops in the local area (the lower the better)
- The number of homes in the local area with vehicles (the higher, the better)
- The income of local residents (the higher, the better)
These three metrics tell you whether you should set up an auto repair shop in a specific location. Clearly, the best scenario is to serve a large, wealthy population in an area that doesn’t have any other repair shops within five to ten miles.
Mistake 6: Failing To Use Effective Marketing
Auto repair shops existed before the advent of the internet. But even then, those that were successful invested heavily in marketing. They understood that every dollar they invested offered a return.
Today, though, many auto repair shops take a short term view. They see marketing as money down the drain and don’t see the tremendous long-term benefits that it can bring. Generally, you should engage in any form of marketing if the revenue it generates is four or more times the initial cost.
Here are some auto shop-specific marketing ideas you might want to try:
- Email existing clients special offers and service schedule reminders
- Host an opening day celebration or charity event
- Give loyal customers discounts off their second, third and fourth vehicle services
- Provide current and past customers with ongoing service updates
- Offer gift cards
- Ask all customers to leave reviews of your auto repair shop on Google
- Distribute flyers to local households telling them about your services and why they should pick you
Once you create a marketing strategy, keep track of the total return on investment. Record the cost of the marketing and then try to see how much it increases revenues above baseline. Remember, for most forms of marketing, you want revenues to be four times the initial cost.
Mistake 7: Avoiding Social Media
Lastly, auto repair shops make the mistake of avoiding social media. At face value, it seems a little strange that you should put your business on social media. However, modern customers expect to be able to communicate with you via these platforms and get quick responses. Often, social media is the best source for leads because prospects can easily message you and ask you about your services.
Auto repair shops can engage with customers on social media to grow their following. You can do things like post car reviews, provide updates about new services and show users how they can fix basic issues with their vehicles. The goal is to make your content as helpful as possible so that customers will consider you before going to any of your rivals. If you can make yourself appear to be an expert, you’ll win more traffic.
In summary, auto repair shops can be successful. However, they need to avoid the pitfalls. If you run a shop, don’t make any of these mistakes.
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