Inventory Management

How to Run a Profitable Auto Repair Shop

July 19, 2022 • 5 min read

Chances are, you already know the basics of running your auto body shop. Sure, you’ve picked the right location for your business, hired the right team, and invested in the right supplies, tools, and machinery to get cars serviced and keep your customers happy.

But there’s always more you can do to boost your auto repair shop revenue. And in this article, we’ll uncover six best practices that’ll help you learn how to grow your auto repair business. 


1. Working with the right suppliers

When you opened your shop—and, most likely, several times since then—you sat down and figured out which suppliers were good fits for your business. You reviewed their lead times, their minimum order quantities, how flexible they were, and how easy it was to communicate with them or ask for a favor here or there. 

But if you’re trying to further optimize how to run a profitable auto repair shop, it might be time to review those relationships. Ultimately, you want to ensure the suppliers you’re working with are still helping your business practice optimal inventory control—the crucial balancing act of stocking enough inventory to meet customer demand without spending cash unnecessarily. 

Whether you simply negotiate with your existing suppliers or shop around for new vendors that are more reliable or better priced, you should go into these conversations with a clear picture of what your business actually needs to keep on hand versus what you can special order for your customers. There will be both local and industry standards for this, so lean on your experience and your team’s knowledge to make a plan, then see if any costs need to be cut. 

Related: How To Find The Right Suppliers


2. Keep your cash burn low

Cash burn is negative cash flow—the amount of money your auto body shop spends in a month. Naturally, your business wants to spend as little as possible without sacrificing customer (and employee) satisfaction. 

Some causes of cash burn include:

  • Too high payroll liabilities
  • Overspending on (or holding onto) supplies, materials, and new equipment and machinery 
  • Paying off debts with high interest rates
  • Billing customers late or with unfavorable invoice payment terms
  • Charging too little for popular services
  • Paying too much for off-site storage, human resources services, accounting help, and more
  • Overspending on maintenance or prematurely replacing assets due to poor or disorganized asset management 

To reduce cash burn, don’t be afraid to take a closer look at your balance sheet and your operating expenses. You may need to make tough decisions about what’s not serving your business or your customers. Look at every cost and liability: payroll processing, expensive subscription, carrying obsolete inventory. Don’t forget about MOQs and high credit card processing fees, either. These things all add up. 


3. Improve your team—and their working conditions 

From offering new training and reskilling your employees to implementing software that streamlines appointment scheduling to better organizing your shop’s floor, there are many ways to boost productivity and morale at your business. 

Remember, these improvements have both direct and indirect benefits. You may find that by helping your employees learn more and work in an environment that’s more supportive and less stressful, you not only improve customer satisfaction and quality of service but also reduce employee turnover. And not having to hire and retrain new employees will save you time, money, and stress, too.


4. Focus on accounting responsibilities 

We’ve already discussed how reviewing financial documents like balance sheets and understanding cash flow better can prepare you to run a more profitable auto body shop. But for these numbers and figures to drive meaningful change, they’ll need to be accurate. 

If your books aren’t tidy, you might want to work with an accountant who can help you get a clear picture of your company’s finances. This accountant can also help you claim depreciation on assets like forklifts and other high-price machinery and equipment your team uses daily. 


5. Keep close tabs on inventory

Inventory—the supplies and materials your shop orders to get jobs done—is expensive. Tracking it carefully and ensuring you aren’t buying too much of it are some of the easiest ways to cut costs, especially if you’re dealing with chronic overstocking or inventory shrinkage, or obsolescence

By keeping tabs on your inventory, you’ll get a real sense of what items you need, when, and in what quantity. And once you’re able to correctly forecast demand for inventory, you’ll be ready to practice the kind of airtight inventory control that helps your business thrive without tying up much-needed cash.

Whether you decide to track inventory using an auto parts inventory spreadsheet, a sheet of paper, or an inventory app for mechanics, the most important thing is to remain consistent. 

Related: Auto Shop Inventory Management Software


6. Find creative ways to generate new business

Most auto body shops rely on Google searches and word of mouth to gain new customers. So don’t underestimate the power of both your business’s online presence and the value of a terrific referral. 

Still, there are other ways to generate new business—and getting a bit creative can never hurt. Advertise, create a referral program, pump air in tires for free. Whatever you can do to get customers in your shop—and your competitor’s—is a win. And remember, your best advertisement is a happy customer, and every tip on the list won’t just boost your bottom line but boost customer experience, too.

Experience the simplest inventory management software.

Are you ready to transform how your business does inventory?


About Sortly

Sortly is a top-rated inventory management software system perfect for auto body shops. With key features like barcode and QR code scanning, customizable reports, and low stock alerts and maintenance, warranty, and expiration reminders, Sortly makes it easy for your team to track all the tools, parts, machinery, and equipment your auto body shop needs to get through even the busiest of days. 

Ready to see how Sortly can help make your shop more profitable? Start a free, two-week trial of Sortly today.