Let us continue — with the help of my friend Bharat R Kanodia — evaluating pros and cons of owning an auto repair business. In the previous article we have learned about 2 ongoing trends in the industry. Let us see 2 more trends here.
Electrification
Demand for electric or hybrid and fuel cell cars is on the rise. Many such cars require expensive parts, special training for technicians, and certified software upgrades from the manufacturer.
On the other side of the coin, however, diagnostic tools have become readily available on the Internet and compatible with consumer mobile devices.
This has simplified drastically the troubleshooting. Let dirty hands and more tech solutions. I would count this as a half point up for the car repair business.
Shortage of Labour
The increase in demand for more software savvy technicians has added pressure on the already short supply of experienced and qualified technicians. This is very much a whole point down.
As the middle class grows in numbers, very few want to have their children to study mechanics and work in a “dirty job”.
So in some countries the industry heavily relies on foreign workers, but when immigration rules are tightened, labour shortage can me a costly headache for the owner of the business.
According to Bharat R Kanodia, auto repair shops sell for 25 to 40 per cent of their annual revenue, plus any excess inventory.
Machinery and equipment are generally included in this rule of thumb.
Only add excess inventory in case the business runs inventory heavy for example a tire shop.
In the US, 75 per cent of auto repair shops have revenue of less than $1 million, which seems to be the tipping point at which the value increases, as buyers want to invest in auto shops where they can hire a manager and be absentee owners.
A few points that appraisers and buyers will be paying attention to and can help buyers maximise the value of the business.
Curb Appeal: No one wants to visit an auto repair shop that’s shabby or in a disarray. If you run an auto repair shop, keep your workplace clean, organised, with a fresh coat of paint and clean uniforms.
Customer Loyalty: Customers appreciate honest and knowledgeable mechanics and auto shops. Having a customer loyalty plan with small facilities like tire storage, drop and pick up, payment plans, etc. will keep the customers happy and returning.
A friendly customer waiting area is always a plus. Moreover, encouraging referral is a good way to drive new business in.
Online Marketing: Positive online reviews, easy and friendly website with strong Search Engine Optimization and published pricing will attract customers and project an image of quality and transparency.
Relationships with Suppliers and Insurance Companies: Good suppliers will help business owners to keep costs low, and insurance direct repair programmes will keep the revenue consistent.
Moreover, this could work well as a route for recurrent business.
In conclusion, we can say that the demand for auto repair shops will never run out. This is one of the few businesses that is almost recession-proof.
This business is built on the oldest currencies known to man.
Trust and Transparency. If you can run a simple but honest operation, customers that need you will keep coming back and bring in friend search time.
(The writer is a member of the International Press Association)
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