There are tons of numbers involved when you run an auto repair shop, so many owners just focus on the basics (like sales and expenses).
Beyond that, you may trust an annual tax preparer to handle your financial statements, but do you understand what each line tells you? And wouldn’t it be nice to know that information all year long? Let’s talk about which key performance indicators (KPIs) auto repair shops should keep an eye on to achieve their goals.
At CSI Accounting & Payroll, we’ve been helping repair shop owners understand their business financials – beyond taxes – for nearly 60 years. That means we’ve addressed these questions hundreds of times with the help of our trusted partner, Elite:
- What are short-term goal KPIs for auto repair shops?
- What are mid-term goal KPIs for auto repair shops?
- What are long-term goal KPIs for auto repair shops?
Short-Term Goal KPIs for Auto Repair Shops
Goals are typically aimed to be achieved in a certain timeframe. However, short-term goals may look a little different since they often use immediate metrics.
As a short-term goal, aim to improve or stabilize in these areas within six months. At the very least, you should regularly monitor these areas so you can address any urgent issues:
- Build a cash reserve. Cash flow can be seasonal in your industry. Make sure you save at least three months' worth of expenses to cover you during slower months.
- Control your operating expenses. Keep your costs in check by limiting your operating expenses to 40 percent of your total sales. (But don’t skip investing back into your business in order to make it grow!)
- Build an advertising budget. Don’t go overboard, but also don’t neglect this area. Budget five percent of your targeted sales into short-term marketing efforts, and focus on efforts to maintain repeat customers.
- Improve your closing ratio for phone leads. Phone inquiries should become customers 80 percent of the time. Do this by enforcing mandatory phone training.
- Improve your closing ratio for basic recommendations. Service acceptance rates should be 95 percent. Do this by enforcing mandatory customer interaction training and building trust with online reviews.
- Improve your closing ratio for optional services. Upsell rates should be 50 percent. You may incentivize your staff to help increase your average repair order, and you should ensure each vehicle goes through a multipoint inspection.
- Keep the time per repair order on the faster end. You’ll want your average billed hours per order to be 2.5 - 4.0. A standard orientation process can address efficiency expectations from the start.
You may also choose to set goals for your average car count or repair order revenue, but these will vary quite a bit from shop to shop. Learn how to increase your average repair order here!
Mid-Term Goal KPIs for Auto Repair Shops
Mid-term goals should be achieved – or at least increased – in six months to three years. These goals should include:
- Increasing technician productivity. To optimize the output of your staff versus their available hours, 80 percent is a good productivity goal. You want to get as close to 100 percent as you can.
- Increasing technician efficiency. To maximize your billable hours, 135 percent is a good efficiency goal. Your orientation process can also help you identify the efficiency of new technicians.
- Increasing your gross profit margins on parts and labor. To stay profitable, parts should have a roughly 50 percent GPM, and 65 to 75 percent for labor to account for service orders that don’t involve buying parts.
- Limiting your overall cost of labor. To maintain your profit margins, aim to limit your labor expenses to 35 percent of total sales.
Once you’ve secured your productivity, efficiency, and expenses, you can start to close in on long-term goal KPIs.
Long-Term Goal KPIs for Auto Repair Shops
Now, for long-term goals, it’s all about hitting or exceeding them in three or more years. This means focusing on sustainable profitability and growth, including:
- Hitting consistent annual growth. Year-over-year, auto repair shops should typically aim to grow 10 to 15 percent.
- Increasing net income. For long-term profitability, 20 percent is a great goal.
- Increasing your return on investment (ROI). For every dollar invested in a significant business expense (such as equipment, hiring, & marketing), the return should be at least eight percent over time.
Since these goals can take several years, they’re regularly monitored over time. That’s a big reason why succession planning is most effective when done over a period of about three years, and why banks look at three years of history when you ask for a bank or SBA loan.
Track Your Goals & KPIs With an Expert!
At CSI Accounting & Payroll, we believe tracking these short-term to long-term goals with specific KPIs is critical to the success of your business, and we offer support all along the way with monthly financial statements and meetings, plus addressing your unlimited one-off questions and add-on consulting projects.
Now that you know about these goals and KPIs, are you ready to check out monthly accounting services?
If so, please consider CSI Accounting & Payroll! To see if we can be a good fit for your business, click the button below for a free consultation:
Not ready to talk? That’s okay! First, learn more about what accounting tasks you should be performing daily, weekly, monthly, quarterly, and annually with our free Automotive Repair Shop Accounting Kit.
