I own a marketing company. You would think it would be my job to sell you on marketing, right? The truth is, we turn away a lot of potential clients because they’re not ready for marketing.
Shop owners, and any small business owners for that matter, tend to think they need marketing when they’re struggling in business. Marketing makes a good business better, but it can break a struggling business.
In this article I hope to open your eyes to a few things that, when you get them right, allow marketing to make an incredibly positive impact on your business.
4 Things to Correct Before You Start Marketing
1. Your Comeback Rate Is Too High
Auto repair shops are in the business of fixing cars. It makes sense that you have to actually fix the cars with expert craftsmanship to have a successful auto repair business.
I just saw a discussion in an industry Facebook group about an acceptable comeback rate and the general consensus was anything less than 3% was acceptable. No one is perfect and no shop is going to have zero comebacks, but you know when it is unacceptable.
It doesn’t matter how great your marketing is, it can’t outpace the attrition caused by poor quality work.
Marketing is expensive. You rarely make back your cost of acquisition on a single visit. You have to build lifetime value, and that’s only done by creating raving fans who bring you their car and refer their friends for years and years.
If your work isn’t up to par, fix that problem before you market your shop. Get training, hire the right techs, create a company culture of excellence. Do this first.
2. Your Service Advisors Have Poor Phone Skills
This is one of the most common reasons we see marketing “fail”, and we often don’t catch this until after we’re working with a new client and we start listening to phone call recordings.
You have to be very honest with yourself about this one because most shop owners think their service advisors are pretty good. But are they really? Do they answer the phone the same way when you’re not standing there as they do when you are? Do they ask for the appointment every time? Do they turn seemingly price shoppers into customers?
Spending marketing dollars to send more phone calls to a mediocre service advisor is money wasted. Sure, you’ll get more sales just due to the volume of additional phone calls, but could you have gotten the additional sales by spending those marketing dollars on service advisor training instead? And THEN pouring fuel on the fire later by investing in marketing?
It’s rarely a question of will marketing increase revenues because it almost always does. The question is – “Is this the smartest way of increasing revenue that leads to the most profits over the long-term?”
If you question your service advisor’s phone skills, spend money on training them before you spend money on marketing.
3. You Have a Low Average Repair Order (ARO)
I recently found myself doing sales calls while J.R. was on vacation. One of the people I spoke to was a shop owner who was looking to grow his revenue.
As I spoke to him, I learned that he sees about 60 cars per week and has an ARO of about $300.
I don’t want to assume that everyone who is reading this understands the terminology I’m using here, so let me explain ARO. Your ARO, or “average repair order”, is the total revenue divided by the number of repair orders in a given time period. Here’s some simple math.
If you worked on 10 cars and the total amount you collected on those 10 cars was $5000, then you had a $500 average repair order. $5000 divided by 10 = $500.
Most auto repair coaches agree that the average repair order of a healthy shop is around $700 minimum. Specialty shops are usually double that.
So when this shop owner told me his ARO was $300, I knew he was leaving a lot on the table.
Doing things like following the 300% rule (100% vehicles get inspected. 100% of what’s found is quoted. 100% is presented to the customer.) will get your ARO where it needs to be.
This shop owner already had enough cars, and cars are what marketing gets you. He just needed to change his business practices to increase his average repair order, which is good for the shop, good for the tech, and good for the client when done ethically.
If you have a low ARO, spend your money on coaching, not marketing.
4. You Have Low or No Profits
When a factory is losing money on every widget they produce, they can’t make it up with volume. More volume equals more losses. So when your auto repair shop is not profitable, more work is going to leave you more broke.
Obviously, there are some cases when more work will actually make you profitable, but that’s rarely the case because most shops in this situation don’t have enough gross profit, much less net profit. If your gross profit is good (55% or better) and your net profit is low, and you have lots of capacity to do additional work, then marketing will actually help you. If you don’t understand what I just said, stop reading and find some basic business training.
Most auto repair professionals agree that a healthy shop should have a 20% profit margin, but the statistic I’ve always heard is the average shop is the United States operates at around a 5% net profit margin. Basically, this means they are broke by the time they pay taxes and debt repayment.
People get caught up on gross revenue, but that’s a vanity number. A shop doing $300k at 20% net is making more money than a shop doing $1M at a 5% net. Remember that.
As a business owner, you have a moral responsibility to run a healthy, profitable business. If your profit margin is low, fix that before you do marketing.
You can get help understanding these numbers from your local Small Business Development Center, programs like 10KSB, or from a business coach who specializes in auto repair shop owner coaching.
Yes, I Want You To Do Marketing
So why did I write this article discouraging people from the very thing we sell at Shop Marketing Pros?
It would be easy for us to take the money and run when someone comes to us thinking they need marketing but in reality they need to fix their business. It would be a quick “win”, right? Wrong. That’s how small-minded people think.
I’m not looking for wins, I’m looking for win/win/wins. I need to win, my team needs to win, and my clients need to win. Anything short of all three wins and I’d be out of integrity. I’m not ok with that.
When we take on the client who isn’t ready for marketing, it’s a short-term engagement. When instead we give the prospect the resources to fix the problems in their business first, they come back to us later and we have a long-term relationship where everyone prospers.
I want you to understand that I want you to do marketing. I’ve seen marketing take good shops and propel them to places the owner never thought they could go. But I want the marketing to actually work for you, and your business practices need to be solid before that can happen.
If you’ve read this and you agree you’re not ready for marketing and would like to talk through the process of getting things corrected in your business, I’m happy to talk and recommend you to people who can help. Go here to send me a direct message.
