There are a lot of moving parts to running a successful shop. You must think about marketing, operations, employee management, tons of paperwork and a growing to-do list. You also have the actual work on cars.
You spend time on client acquisition strategies you hope will lead to lifetime customers, and running a business means there are things you don't bill for in an attempt to secure new projects.
Your goal may be to invest time and energy into operations that make a client say yes. However, you're leaving money on the table and diminishing your profit margins without realizing it.
There are operations shops frequently do not bill for but should. Here is a list of easily missed operations that owners too often are not getting paid for. Billing for these operations could be the key to increasing profit and building a better business.
1. Time Spent Researching for Parts
Cars that need work require parts, and it takes time to research those parts. While this is a normal operation, it's not often billed by shop owners. The time and effort you spend researching for parts can be extensive, and your time is valuable. You should consider billing for time spent researching parts directly and factoring the value of that time into your pricing.
"Time spent researching for parts, making phone calls, doing online searching parts, and ordering should be billed for, but you need the right data," says Hilary Noack, owner of Ink N Iron Auto.
"One thing I do with my employees is to ensure they track every hour. They fill out time sheets so I can go through and see what we're spending time on so that we can take that data and charge appropriately. But the first step is making sure you're tracking and then billing for all the time spent researching because you may be losing money."
2. Costs Incurred from Subscriptions
A great way to create recurring revenue for your shop is through a repair subscription program. Customers pay for regularly-needed services through a monthly subscription. A subscription program spreads a customer's costs to a smaller amount and brings consistent monthly revenue to your shop.
While it may be a great system, there are costs associated with setting up and running subscription programs. You may not be able to bill customers for these costs directly, but you should consider subscription costs when setting your pricing. You can increase your subscription prices to compensate for the expenses.
3. OEM Procedures
Repairing vehicles were reasonably standard for years. There were structural changes, but they weren't overly complicated to navigate. In 1990, things started to change as more vehicles started to be built with unique structural elements. More cars were built with ultra-high strength steel, exotic electronics, and other mixed materials.
OEM repair procedures have always been necessary but are even more essential with the changes to how vehicles are uniquely made. OEM procedures are a way of life for shops, but too many aren't factoring in the associated costs in their pricing. More work and higher costs for parts mean less profit. Factor in costs associated with OEM procedures accordingly to increase profit.
"Listen to your techs," says Noack. "I was an employee in a shop for many years before I owned my business. There's always a disconnect between management and the techs—be more involved with your staff. Ask them for ideas and suggestions and do production meetings to see which efficiency can be improved. Ask them what they need to be efficient."
4. Time Spent Ordering
More complicated vehicles mean more time to find the right parts and order other necessary materials. Add in global supply chain shortages, and much of your or your employee's time could be spent researching and ordering. This time and your effort is an operation that should be billed for and included in your pricing.
5. Initial Assessments
Vehicle assessments changed during the pandemic and continue to change as insurance companies (and your shop) navigate an ever-changing post-pandemic environment.
Initial assessments have historically been free, but that doesn't mean they have to stay that way in your shop. With the extra work involved in assessments, this is an operation you should consider billing for.
"A lot of insurance representatives are doing more things virtually these days, and we're having to take on a lot more of the work when creating estimates," says Cory Scott, owner of Kustom Werx Autobody.
"We've added more work and time to the estimate process and should be getting paid for it. We have to take pictures, research parts, and line things up—we should be charging a flat fee of $200 per estimate for the extra work we're doing."
6. Vehicle Clean-Up and Detail
You want to send a vehicle off in the best condition when delivering it to a client. You may have your employees wash and detail the car, but you're probably not factoring the time, effort, and materials into your pricing.
One operation you should consider billing for is the cleaning and detailing. It's a small cost that could increase profit margins, and customers appreciate a clean car.
"Vehicle clean-up and detailing should be billed for," says Noack. "A car comes in a body shop, and it sometimes leaves a little bit dusty or dirty. Customers appreciate it when you go over the whole car—interior and exterior clean-up. But we should bill for the time spent detailing."
7. Billing and Pay Appropriately
There are a lot of costs associated with running a shop. There's also the consideration of competition, paying employees' salaries, and wanting to build a strong business.
Billing customers considering all factors and paying your employees in relation to value is an operation you should consider to increase your profit margin. Using data to make informed salary and pricing adjustments is an operation that grows revenue.
"Making sure to bill appropriately for material costs, because that's rising all the time," says Noack.
Don't leave money on the table. Think through each of your shop's operations and evaluate what you should be billing for. The customer will pay for quality and value if you provide excellent service. Bill accordingly, increase your profit and build a legacy business.