Does your auto repair shop’s growth rely merely on hope, or do you strategize how to drive your business forward?
While many auto repair shops and most businesses operate on hope—whether it’s hoping new target customers and repeat customers show up to spend a lot of money—it’s not an effective plan, says Al Wheeler, Chief Executive Officer of ShopPros, a management and training company that offers a complete business system for independent auto repair shops.
Wheeler, who has 35 years of experience in the automotive industry, understands the challenges that every auto repair shop owner faces. In a recent webinar, Wheeler shared why shops should consider creating a detailed financial plan for growing and sustaining their auto repair business.
“As business owners, we typically spend the majority of our time working in the business and not on the business,” Wheeler says. “I think it’s especially prevalent in our industry because you’re wearing so many hats throughout the day, and our days seem to be consumed by firefighting much of the time. As a result, the business trends really tend to drive us, rather than us driving business.”
The sample auto repair shop business plan discussed in this article outlines a strategy for:
- Discovering the potential in your auto repair shop
- Analyzing the current status of your auto repair shop
- Setting repair shop goals
- Training and planning
- Implementing change
- Monitoring and measuring
Why do you need a business plan for your auto repair shop?
Think of a business plan as a GPS for your auto repair shop. Not only will a business model provide details and direct you from point A to point B, but it also optimizes your route and helps you avoid potential pitfalls along the way.
According to research by Entrepreneurial Dynamics, using business plans helps you become:
- Twice as likely to obtain a bank loan
- Twice as likely to create investment value
- 49% more likely to grow
While goal setting remains an important aspect of this equation, it’s not the same as business plans, which analyze current performance and define specific actions to reach purposeful results. “Keep in mind that setting goals, while important in business, does not constitute a business plan,” Wheeler says.
“Business planning really lays the foundation for continuous improvement,” Wheeler says. “I like to call it a success cycle for your business. What fundamental steps do you need to take to create an environment of continuous improvement within the business?”
Creating a cycle of success is essential for your auto repair shop, and where a clearly defined business plan will play a big role.
- The success cycle starts with a practical understanding of current performance against your desired or optimized outcome. Complete this analysis in thoughtful detail.
- The planning process then kicks in, helping you define specific actions to take advantage of outcomes.
- As results of this success cycle start to roll in, employees across your auto repair shop will begin to believe more and more in the business’s potential. This positive energy keeps the success cycle in motion, resulting in even more growth.
“It’s about establishing (this) success cycle for your business. It builds on belief, establishes potential, and leverages the specific actions you choose to deliver those purposeful results,” Wheeler says.
Can your shop survive without a plan?
According to the U.S. Bureau of Labor Statistics (BLS), approximately 20% of new businesses fail during the first two years of starting operations, 45% during the first five years, and 65% during the first ten years. Only 25% of businesses make it to 15 years or more. Why’s that?
From this industry overview, it’s clear a major reason for failure is their lack of a business plan. This is where an auto repair business plan will help. With the right high-level overview and strategy, determination of how much funding you need, and enough flexibility, your auto repair shop will have a better chance of success. The future becomes much clearer once a business plan is in place to get the ball rolling.
Creating an auto repair business plan
Now that you know why this type of plan is important, it’s time to put pen to paper. Here are some pointers to help your auto repair shop get started:
Step 1: Discover potential at your auto shop
To discover your auto repair shop’s potential, it’s key to establish a ceiling and baseline so you can measure performance.
In the industry, an auto repair shop’s primary revenue producer is billed hours. It’s critical to determine your production capacity because that helps determine the ceiling of your financial plan, Wheeler says. Production hours will drive business potential in terms of revenue and gross projected profit, which ultimately your employees generate. Incorporate this business idea into your auto repair shop’s own business plan and create a more efficient system to generate money.
One of the common elements includes examining relevant benchmarks of other shops of a similar type and size, and their quality work performance.
Step 2: Analyze your auto shop’s current status
Determining the current status of your auto repair shop helps you understand how your shop compares to its potential. This includes analyzing store averages in daily, weekly, and monthly production, revenue, and gross projected profit.
Not only do you want to scrutinize business performance, but also individual performance. This executive summary includes auto mechanics’ average production, service advisor average gross profit, and service advisor billable hours and revenue. Keep these factors in mind when forming the business plan for your auto repair shop.
“This is a good way to effectively establish the baseline in which we’re going to judge performance improvement in those key areas and within our key employees,” Wheeler says.
Step 3: Set goals for your auto shop team
Team involvement remains necessary to achieve individual and store-level goals. “This is where it’s critical to have team involvement and remember the SMART acronym—specific, measurable, achievable, relevant, and timestamp goals,” Wheeler says.
To remain on track with your automotive repair shop business plan, set specific monthly, weekly, and daily goals, both at individual and store levels. It’s important to involve your team in establishing these repair services goals and possess effective ways to measure them.
Step 4: Train and plan for auto shop growth
Training and business planning become critical components of facilitating change. Investing in your team as part of your own plan not only shows you care but allows them to grow in knowledge and skill.
Planning becomes part of the long-term business strategy. While many shops set business plans and goals around needing more car repair services completed, which drives sales, shops should first build the underlying fundamentals for a great customer experience
“We don’t need more cars for the sake of cars,” Wheeler says. “We need more cars to develop long-term loyal customers, and if we don’t have a conversion strategy for those guests, more cars are not going to sustain our growth.”
Step 5: Implement change to grow your auto repair business
A business plan won’t become effective unless it’s put into practice. To do this, good communication and accountability remain key.
“I’ve seen companies develop these great missions and vision statements, only for them to become artwork on the wall,” Wheeler says. “They really don’t have any substance behind them, and they aren’t lived out each day.”
Step 6: Monitor and measure your auto shop’s performance
To measure success, your auto repair shop needs to set relative benchmarks so they can obtain broader insights into the business and performance. This information will help you determine next steps on how to attract customers and generate new business. An excellent way to do this within your automotive repair shop business plan is by investing in automotive repair business software, such as AutoLeap.
While it’s important to monitor and measure repair services goals in your new plan, it’s also important to communicate with your team in daily or weekly meetings.
“What we’re doing in this business plan is essentially establishing the playbook in which you’re going to operate your auto repair business,” Wheeler says. “It’s going to drive the customer engagement system within your shop, so your business plan really should strive to eliminate randomness in your auto repair business. Nothing should happen by accident, everything should be intentional around achieving your objectives.”
Step 7: Adapting to the changing auto repair industry
Your auto repair shop must keep up with the changing dynamics of the automotive repair industry, technology, and customers’ behavior. Within the plan you put together, your auto repair shop must prepare for the electrification of vehicles and equip itself to deal with the latest technology, such as Advanced Driver Assistance Systems (ADAS). How will your business plan account for these emerging vehicle technologies and the potential customers they draw?
“I understand changing an operating system is painful, but in many cases, it’s going to be necessary,” Wheeler says.
An auto repair shop should consider:
- What could you be doing based on your existing staffing by location?
- A performance dashboard that can provide relevant data at a glance.
- A plan built and owned by the business with discrete actions.
- Standards/goals set for every tech and advisor to measure performance and reward/recognize high achievers.
- Benchmarking against every competing auto repair shop gives you insight into your relative performance and identifies areas to improve.
- Effective technology and systems that ensure great customer experiences.
Your auto repair shop business plan, much like other goals, is only effective and only as good as it’s acted upon, Wheeler points out.
“It’s kind of like Newton’s first law that we all learned in school—objects in motion will remain in motion until acted upon by an external force,” Wheeler says. “In other words, your business will continue on the path that it’s on unless you engage the energy necessary to change that trajectory…If you think you can do better, then I think one of the energy components that you can use, or should consider, is a comprehensive business plan.”
Now that you’ve learned the steps to prepare an auto repair shop business plan and explored several benefits, it’s time to execute on this clear vision and grow your business.
Customers with older vehicles are more likely to need auto repair services. Why is this? For one, older vehicles tend to break down more. Warning signs like check engine lights will appear more frequently, requiring a visit to your shop.
To write a business plan for your auto shop, you will need to:
- Analyze your shop’s current status
- Set SMART goals for your shop team
- Include plans for training and growth
- Prioritize communication and accountability
- Establish and measure performance benchmarks
- Account for evolving industry trends
Auto repair shops’ profitability depends on many factors. But the revenue potential is significant. Nearly one third of surveyed shops in AutoLeap’s 2022 State of the Auto Repair Industry Report generated $1 million or more in 2021 revenue.
Successful promotion helps maintenance shops earn new business. Targeted email marketing and aggressive word-of-mouth outreach are two widely used strategies. Referral programs, organic SEO and active social media presences also help attract new customers.
You can promote your car repair business by:
- Launching social media accounts and posting regularly
- Targeting local search terms with paid marketing
- Sending creative promotional emails to your target customers
- Creating a referral program
- Building up your organic keyword rankings
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