Average Repair Order (ARO) is a metric used to determine the average revenue generated per repair transaction in an auto repair shop. ARO helps shop owners and managers assess the revenue potential of each job and identify areas for improvement. By analyzing ARO, repair shops can make informed decisions about pricing, service offerings, and efficiency, ultimately leading to increased profitability.
How is the Average Repair Order Calculated?
The formula for calculating ARO is straightforward and provides insight into your shop’s financial performance:
- Formula:
ARO = Total Revenue / Total Number of Repair Orders - Example Calculation:
If a shop generates $10,000 from 50 repair orders in a given month, the ARO would be:
ARO = 10,000 / 50 = 200ARO
This means, on average, each repair order brings in $200 in revenue. Monitoring this metric helps you identify trends and set realistic goals for revenue growth.
Why is ARO important for auto repair shops?
For auto repair shop owners and managers, ARO is a valuable metric for several reasons:
- Profitability insights: ARO reveals the revenue each repair order contributes to your business, helping you gauge if your current pricing structure and services are profitable.
- Service quality analysis: A consistent ARO indicates stable customer satisfaction, while fluctuations may reveal issues in service quality or sales practices.
- Operational benchmarking: Shops with a higher ARO tend to maximize their service offerings per visit, reducing the need for multiple trips and increasing customer satisfaction.
By understanding ARO, shops can optimize their pricing and service strategies to align with customer expectations and business goals.
How can you increase your shop’s ARO?
Increasing ARO is achievable through several targeted strategies:
- Upsell maintenance services: Offering preventative maintenance or additional services during a repair can help increase the order value.
- Enhance staff training: Equip your team with sales techniques to recommend additional services or products that benefit customers.
- Use digital inspections: Digital vehicle inspections (DVIs) allow you to transparently share issues with customers, increasing trust and encouraging them to approve additional services.
Each of these methods contributes to a higher ARO, leading to increased revenue and customer satisfaction.
