AutoLeap recently published its inaugural 2022 State of the Auto Repair Industry Report. The benchmark report, featuring survey results from nearly 300 US and Canada shop owners, reveals many findings that may surprise you!
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Our panel featured three industry leaders:
- Cecil Bullard, CEO of The Institute for Business Excellence
- Diane Freeman, President at the Automotive Aftermarket Retailers of Ontario (AARO)
- Chris Cotton, Owner of AutoFix Auto Shop Coaching
These experts covered the report’s most interesting data, from retirement outlooks to labor rates. Let’s review some of the noteworthy reactions from this panel discussion!
On retirement plans
64% of shop owners surveyed in AutoLeap’s benchmark report plan to retire over the next 10 years.
These findings reveal a shift on the horizon for shop leadership. Each panel member shared what they think these looming retirements mean for many shops’ futures.
- “I think we’re going to see a drop in shops. Combine that with the cost and need for education and tools, and there are going to be quite a few shops that don’t exist in the future if they don’t make changes today,” says Cecil.
- “If we don’t have people to pass these businesses along to or sell them out, big corporations are going to come in and buy these shops up,” says Chris.
- “We are starting to see a decline in the number of shops with the baby boomers beginning to retire,” says Diane.
On small shop outlooks
77% of respondent shops in AutoLeap’s benchmark survey generated less than $1 million in 2021 revenue.
“Those shops that were doing $500,000-$800,000 should be doing $1M to $2M,” says Cecil.
Cecil notes a growing separation between shops setting $9M revenue targets and smaller shops that continue to fall behind. For struggling shops, he suggests a renewed focus on improving parts margins, labor margins, business systems and processes.
» Want more industry report findings? Click here to download the full report.
Diane agrees, noting the need for shops to measure tech productivity. Owners need to focus on their finances and understand their overhead. Hourly door rate is another key focus. “We aren’t charging enough on our hourly door rate. That needs to be increased. If we increase that, the revenue will increase as well.”
Improvements in these areas are possible. Coaches are available if you need help moving your shop in the right direction. “That’s really the tipping point in your business to get you focused and hold you accountable for where you want to go,” adds Chris.
On digital marketing efforts
Almost 64% of repair shops spent more than $2,000 on marketing in 2021, while 85% of respondents reported some marketing spend during the period.
Cecil found it very surprising that some shops do virtually no marketing. With his clients, he uses a sales-based benchmark. “My shops will spend between 6-9% of their gross sales on marketing if they’re doing it the way I’d recommend.”
Most shop owners don’t have professional experience in digital marketing. For that reason, Diane recommends seeking some outside help. “You need to speak to someone who is specialized in digital marketing and go from there to increase your shop revenue.”
On standard labor rates
$120 per hour is the average standard labor rate of survey respondents. However, this figure varies by the type and size of the shop.
This labor rate data drew significant reactions from each expert.
If shops don’t increase their labor rates soon, they will no longer exist. “We are at least $100 per hour less expensive than we should be in comparison to other professional trades. It’s killing us,” says Cecil.
Diane adds that many shop owners are afraid to push the envelope and boost their labor rates.
Chris compares the industry’s labor rates with another tech trade: plumbing. Despite no new technology advancements (like EVs & ADAS in auto repair), the labor rates in plumbing remain higher.
On industry outlooks
Nearly 70% of auto repair shop owners and managers have a favorable or very favorable outlook on the industry over the next five years. Only 12% of respondents had an unfavorable outlook.
Cecil mentioned his surprise at some of the less enthusiastic industry outlook numbers. For shop owners who don’t feel optimistic, he recommends seeking outside resources. Join an association or complete some relevant industry training.
The industry offers plenty of upside for shops ready to execute. “[These numbers] completely blow me away. There is no better time to be in the auto repair industry than right now.”
On staffing shortages
60% of respondents indicated that they struggled with staffing in their repair shop. 74% of respondents indicated that a lack of skilled technicians is a major issue for them.
Each expert tied one of the industry’s top issues, staffing shortages, to the low labor rates discussed earlier.
Diane recommends promoting the upside of what technicians can earn at community events. She recently attended a career fair with high school students and did just that, noting their surprise when hearing some of the potential higher-earning salary figures.
Skilled professionals who may enter the technician trade need to understand that appeal. Diane says increased labor rates and signing bonuses can help. “If we want to attract qualified, skilled labor, we need to pay more.”
On shop management software
Chris says he still comes across many shops that use QuickBooks as their primary point of sale system. But shop management software will pay for itself.
“All of this money is in your business. It’s there, you just have to get it out. If you’re thinking about tools and what to do, you’ll never get it out without a management system.”
Cecil agrees. He recommends management software and coaching to shop owners focused on growth. “You can’t run an automotive business on pen and paper anymore.”
Diane wonders how shops without management software can grow without having access to data insights. “I can’t see any shop today not having proper management software.”
Closing thoughts
In this panel session, Chris, Cecil and Diane add valuable context to AutoLeap’s most surprising survey findings.
Watch AutoLeap’s webinar for more takeaways from the industry’s most comprehensive benchmark report.
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