The 2017 Shop Performance Survey

They’re not something you can have vague knowledge of, or casually track, or glance over once in a while—for one of the 2017 Shop Performance Survey respondents, KPIs are everything.

“Measuring KPIs is like our scorecard; without it we have no idea if we are winning or losing,” he says. “After I began measuring KPIs, not only did we make more money, but it has helped the morale of our team because they all know where they stand and we can reward our employees when they meet goals.”

It would seem, however, that that sentiment is not shared across the industry. In Ratchet+Wrench’s inaugural Shop Performance Survey in 2015, an astounding 82 percent of the 340 respondents claimed to routinely track KPIs. In 2016, that number dropped down to 76 percent. Turns out, 2017 is even worse for the participating shops, with only 68 percent of shops reporting they routinely track KPIs.

By comparing and contrasting some key differences between 2015 and 2017 respondents, Ratchet+Wrench found, perhaps unsurprisingly, that numbers—namely gross profit margins, net profit margins and annual revenues—have gone down across the board. For a complete examination of all the findings from the 2017 survey, which was sponsored Elite, view the complete report now. In this piece, Ratchet+Wrench looked into both surveys to find the main differentiators and which KPIs are driving the shops that came out of the 2017 survey looking strong.

The Typical Shop

Just over 200 industry professionals completed the Shop Performance Survey, and, while they were evenly dispersed across all U.S. markets, the majority of respondents followed a distinct demographic pattern that also closely aligns with our overall readership.

The Average Shop

Shop Type: Independent repair business (87%)

Work Type: General repair (68%)

Shop Size: 2,000–4,999 square feet (41%)

Number of Lifts: 3–4 (32%)

Number of Bays: 3–4 (28%)

Annual Revenue: $1M–$2.49M (30%)

Average Monthly Car Count: 100–149 (19%)

Average Repair Order: $200–$399 (45%)

Gross Profit Margin: 40–49% (28%)

Net Profit Margin: 10–14% (22%)

The KPI Tracking Mentality

A look inside why some operators stress the importance of KPIs, while others choose to stray.

The Mentality

As KPI tracking rates continue downward, a familiar juxtaposition occurred in this year’s results: The active shops can’t imagine improving daily operations without their measurements; while the inactive 32 percent of shops cite a lack of time, manpower, knowledge or resources to effectively manage their businesses by these numbers.

Why 68% Track

Question:

What is the significance of measuring KPIs in today's auto care industry, and what impact has it had on your business?

Answers:

“We need to know if service advisors are doing their jobs. Tracking car count and average RO has moved us up from $650,000 to $730,000.”
“I have only recently begun measuring in earnest. It has had huge positive impact. I have also retained a business coach and began utilizing Facebook automotive groups, which have been very helpful.”
“I can make adjustments daily, before it hurts my month. If a tech is struggling, I know before the week is out.”
“I have been in business over 40 years. My shop has struggled significantly the last 10 years. I would not have made it this far without tracking performance.”
“I have been able to bring my average repair order up from $389 to over $600 in the last three years. I am trying to work smarter, not harder.”

Why 32% Don’t Track

Question:

Why don’t you regularly track KPIs?

Answers:

“I'm not sure what to track and how to do so.”
“I have been in business 40-plus years. I have a good feel for what’s going on daily.”
“After 26 years, the money, jobs and customers still keep on coming and I am aware of my business.”
“We don't have the time to do this.”
“Too much hassle. We pay a liveable wage.”
“Haven't been able to agree on key indicators and method of tracking.”

KPI Tracking Trends

A look at the trends affecting business owners’ willingness to track KPIs and how they’ve changed between 2015 and 2017.

Independents Fall Further Behind

A huge driving factor behind the 2015 survey’s high KPI tracking rate was the willingness of independents to track KPIs—that was not the case in 2017, with the rate dropping 16 percent. MSOs, dealerships and franchise shops consistently reported better profit margins across the board, and KPI tracking rates could very well be why.

KPI Tracking by Business

2017

Independent, single location: 64%
MSO: 96%
Dealer-owned: 79%
Franchise: 100%

2015

Independent, single location: 80%
MSO: 95%
Dealer-owned: 88%
Franchise: 93%

Size Doesn’t Matter

While shops with more employees, more square footage, more bays and more lifts led to higher revenues, profits weren’t necessarily up. In 2015, 52 percent of respondents said their shops hit an overall net profit margin above 15 percent—in 2017, only 43 percent of shops hit those margins. Not only are smaller shops less likely to track KPIs, but even the shops earning more than $1 million per year were less diligent.

Shop Size

2017

Under 2,000 square feet: 56%
2,000–4,999 square feet: 63%
5,000–9,999 square feet: 71%
10,000–14,999 square feet: 76%
15,000+ square feet: 87%

2015

Under 2,000 square feet: 66%
2,000–4,999 square feet: 79%
5,000–9,999 square feet: 89%
10,000–14,999 square feet: 93%
15,000+ square feet: 93%

Number of Lifts

2017

0: 43%
1–2: 43%
3–4: 63%
5–6: 79%
7–8: 91%
9 or more: 85%

2015

0: 50%
1–2: 59%
3–4: 79%
5–6: 87%
7–8: 98%
9 or more: 98%

Number of Bays

2017

1–2: 44%
3–4: 53%
5–6: 70%
7–8: 72%
9 or more: 87%

2015

1–2: 55%
3–4: 72%
5–6: 86%
7–8: 89%
9 or more: 94%

Annual Revenue

2017

Under $250K: 37%
$250K–$499K: 53%
$500K–$749K: 71%
$750K–$999K: 73%
$1M–$2.49M: 83%
$2.5M+: 91%

2015

Under $250K: 39%
$250K–$499K: 68%
$500K–$749K: 81%
$750K–$999K: 92%
$1M–$2.49M: 94%
$2.5M+: 100%

Individual KPIs Still Lagging

KPI tracking is down overall, but there are notable standouts when it’s broken down by individual KPIs. While just 84 percent of shops were tracking net profit margin back in 2015, that rate dropped 12 percent in 2017. On top of that, efficiency and productivity tracking is still low.

What is Being Tracked in 2017?

Repair Sales Volume: 90%
Gross Profit Margin on Parts Sales: 90%
Maintenance Sales Volume: 89%
Overall Gross Profit Margin: 86%
Gross Profit Margin on Labor Sales: 83%
Effective Labor Rate: 78%
Technician Productivity: 76%
Technician Efficiency: 75%
Overall Net Profit Margin: 72%
CSI: 43%

What was Being Tracked in 2015?

Repair Sales Volume: 95%
Gross Profit Margin on Parts Sales: 93%
Maintenance Sales Volume: 93%
Overall Gross Profit Margin: 93%
Gross Profit Margin on Labor Sales: 87%
Effective Labor Rate: 77%
Technician Productivity: 82%
Technician Efficiency: 81%
Overall Net Profit Margin: 84%
CSI: N/A

The Big Picture

The 2017 survey looked at 14 metrics many identified as being critical to business success, and several of them stood out—in both good and bad ways.

The Maintenance Mindset

In the February 2017 issue of Ratchet+Wrench, John Bridgwater pointed out that as vehicles become more and more dependable, maintenance will be what drives independent repair shops if they want to remain competitive with dealerships. However, one notable difference over the 2015 survey was how much less of a focus maintenance work was for shops—there was a 7 percent decrease in shops where maintenance work made up at least 40 percent of sales. The shops that focused more on maintenance saw higher overall gross and net profit percentages, but slightly lower gross profits on labor.

	Percentage of Overall Sales Volume in Maintenance Below 40%	Percentage of Overall Sales Volume in Maintenance Above 40%
Overall Gross Profit Margin Above 40%	54%	67%
Gross Profit Margin on Parts Above 40%	47%	54%
Gross Profit Margin on Labor Above 60%	40%	39%
Overall Net Profit Margin Above 10%	42%	60%

——————

The Car Count Myth

In the January 2017 issue of Ratchet+Wrench, notable auto repair consultant Maylan Newton had a challenge for every shop owner in the county: Make a few simple changes to raise your shop’s gross profits by 20 percent. And the first step toward accomplishing that, he says, is striking a balance between ARO and car count. Maylan says many shop owners believe increasing car count will lead to improved profits (car counts went up over the 2015 survey), but that’s not necessarily the case. As car count trends up, ARO is likely to go down and you’ll need to rely on improved productivity and efficiency to achieve higher profits. The 2017 survey data backs that up: Shops with higher car counts saw improved gross profits, but only because efficiency and productivity were high, as well.

	Car Count Under 100	Car Count 100-199	Car Count Over 200
ARO Above $400	54%	51%	42%
Efficiency Above 80%	34%	40%	56%
Productivity Above 80%	33%	41%	58%
Overall Gross Profit Margin Above 40%	40%	59%	73%

——————

Don’t Spread Yourself Thin

In March 2017, Ratchet+Wrench spoke with three of the most impressive shops that filled out the 2016 Shop Performance Survey to nail down what leads to a high overall net profit margin. Adam Liu, whose shop boasts a net profit margin of 22 percent, said part of his shop’s turnaround was producing more with less. Instead of trying to be Shop A (13 employees, $2 million in revenue, low efficiency, low net profit), Liu switched directions to be Shop B (seven employees, $1.5 million in revenue, high efficiency, high net profit). The 2017 survey reflected the 2015 one, as Ratchet+Wrench found that shops with fewer employees had smaller annual revenues, but higher net profit margins. Here’s what the typical shop looks like for various staff sizes.

The Average Shop: 1–4 Employees

Annual Revenue: $250,000–$499,000
Efficiency: 80–99%
Productivity: 90–100%
Overall Net Profit Margin: 20%+

The Average Shop: 5–8 Employees

Annual Revenue: $750,000–$999,000
Efficiency: 80–99%
Productivity: 80–89%
Overall Net Profit Margin: 10–14%

The Average Shop: 9+ Employees

Annual Revenue: $1 million–$2.5 million
Efficiency: 80–99%
Productivity: 90–100%
Overall Net Profit Margin: 10–14%

——————

A False Correlation

When it comes to pricing your services, Cecil Bullard pointed out in Ratchet+Wrench’s August issue that shop owners often mistakenly believe that labor rates and customer loyalty directly correlate. While increased labor rates will certainly drive away a portion of your customer database, it also allows you to paint yourself as a more professional operation and raise your ARO and gross profits. Compared to the 2015 survey, posted labor rates trended upward in 2017, with 8 percent more of shops setting their labor rates above $100. The result is improved profits and CSI scores for those shops over shops with smaller labor rates.

The Average Shop: Labor Rate Under $70

Annual Revenue: Under $250,000
ARO: Less than $200
Gross Profit Margin on Labor Sales: Less than 50%
Overall Net Profit Margin: 5–9%
CSI Score: 80–89%

The Average Shop: Labor Rate Under $70–$99

Annual Revenue: $250,000–$499,000
ARO: $200–$399
Gross Profit Margin on Labor Sales: 60–69%
Overall Net Profit Margin: 15–19%
CSI Score: 90–95%

The Average Shop: Labor Rate Under $100+

Annual Revenue: $1 million–$2.5 million
ARO: $400–$599
Gross Profit Margin on Labor Sales: 60–69%
Overall Net Profit Margin: 10–14%
CSI Score: 96%+

Technician Stats

While technician efficiency and productivity were two of the least-tracked KPIs in both the 2015 and 2017 surveys, our data demonstrated the individual performance of techs is critical to the success of your business. It should be no surprise, then, that in 2015, when respondents were more likely to track KPIs, high efficiency and productivity rates were much more likely.

2017

Average Technician Efficiency