Building a profitable repair order

Motor, Mar 2001 by O'Connor, Bob

A parking lot overloaded with vehicles waiting for service and repair used to be considered a sign of success. Today, the goal is to have just the right number of vehicles on hand to provide excellent customer service while maximizing shop profits.

Generally, most shops today don't know how to fully utilize their resources to build a profitable repair order. Building a profitable repair order begins with understanding some of the critical measurable elements and related benchmarks. These include scheduling (car count), hours-per-repair order (HPRO), gross profit percentage and parts-to-labor ratio.

Let's take a look at each element more closely.

Scheduling

The goal here is to schedule the correct number of vehicles to minimize the number to be processed per technician per day, while at the same time, obtaining the desired amount of revenue off each vehicle. These combined efforts must result in accomplishing your daily sales goal without overselling or selling unneeded service.

Scheduling is difficult, and too high a car count results in service advisors) and technicians) working inefficiently and unprofitably. Many repair shops schedule far too many vehicles for each technician available. I often refer to this type of facility as a "zoo."

The most common of this type is one that might be called a "breakdown shop," whereby a vehicle comes in for a problem that requires some minimal diagnosis and minimal repair and then is sent back out onto the road. The main goal, it seems, is to get vehicles in and out as fast as possible, usually the same day. In this type of shop, it's not uncommon for a technician to be assigned to work on six to ten vehicles per day. Generally, these vehicles will return to the shop-or to a competitor-for another problem within a very short time. Returning customers are often heard to say, "I just had it in the shop. Why didn't you catch this problem then?"

Hours-Per-Repair Order (HPRO)

If your focus is on getting as many vehicles as possible in and out of your shop in one day, you can't be expected to have a good HPRO number. While the HPRO benchmark for a profitable repair order is 3.0 to 4.0 hours or more, averages in the industry are running between 1.5 and 1.8 hours. The following example demonstrates the difference between a "zoo" and a shop that focuses on having a good HPRO:

Let's assume that a shop has three technicians served by one service advisor and an owner who assists the advisor. Let's further assume that each technician is to produce 9 hours of sold time per day, for a combined total of 27 sold hours. Below is a table that demonstrates the benefits of a higher HPRO for both the technicians and the advisor:

From a technician's standpoint, shops A and B require him to work on many vehicles in order to reach the sold hours goal. This is very difficult--if not impossible--to accomplish, especially on a continual basis. That's why many shops cannot get their billed hours per technician tip to the benchmark levels of 9 hours or more. However, shops C and D offord technicians a much easier route to the sold hours goal by requiring them to work on fewer vehicles. When asked which shop they'd most like to be employed by, most techs, without hesitation, would choose shop C or D.

From a service advisor's standpoint, the likelihood of writing, estimating, quoting and up-selling the number of repair orders required to accomplish the desired sold hours goal in shops A and B is extremely small. Like technicians, most service advisors would prefer to work for shop C or D, because they'd have fewer repair orders to process on a daily basis. Realistically, a service advisor needs about 45 minutes to write, estimate, dispatch and document a repair order profitably.

You can readily see by the preceding example that a higher HPRO number leads to making both the advisor's and technicians jobs much easier. The question then becomes, How do you obtain 3.0 to 4.0 HPRO?

Vehicle Inspections. If each technician had only three to five vehicles to process per day, they'd each have more time to perform comprehensive vehicle inspections, which often leads to additional repairs and service. It also means that two service advisors (one advisor and one owner, as in the previous example), would have to process only nine to 15 repair orders (four to eight each) per day, meaning more time for estimating and contacting customers to make them aware of technicians' findings.

Presenting customers with these findings will increase the HPRO figure. And a very important byproduct of that is increased customer satisfaction. Inspection reports make customers aware of the overall condition of their vehicles. And if they purchase the additional service and repairs found to be needed, they'll have fewer breakdowns. That may translate into fewer trips to your shop for repairs, but if they're satisfied with the thoroughness of your work, you can bet they'll keep coming in for routine service! Which brings me to my next point.

Maintenance Services. Our audits of thousands of repair orders each year show that one of the most cornmon disappointments at independent shops is poor selling of factory-required maintenance. Developing a marketing program and having advisors and technicians undergo sales training has proven to substantially increase the number of factory maintenance services repair shops sell. It can noticeably boost your HPRO, as well.