According to Ryan Clo, owner of Dubwerx in Cincinnati and a consultant for the Institute for Automotive Business Excellence, average repair order (ARO) is one of the most important numbers in a business. The way he sees it, ARO is an efficiency calculation. If you are able to work on half the amount of cars but make just as much money, he says, that will only help the efficiency in your shop.
Clo, whose Midwestern shop has an ARO of $550, outlines the five most critical factors that affect ARO.
Running more cars through a business in which you’re losing five dollars a car won’t fix the business.
You’re not taking advantage of the opportunities on each car. Many people think they have to start pumping more cars through the machine, but that just causes the chaos and stress to go up. It’s not about charging more money, it’s about maximizing the work on each car.
There are five key factors that affect ARO that every shop can control:
1.) First is the type of customers. It’s important to note the difference between the discount customer who expects to spend $20 on an oil change but isn’t willing to buy the other repairs needed, and a more quality customer. Advertising and bringing the right customer in the door is step one.
2.) Your shop needs 30 percent new customers. I want to see about a 10 percent growth rate in my shop. A typical automotive shop will lose about 18 percent of their clients per year. Most clients leave you because of indifference; either you’re indifferent to them or they’re indifferent to you. A new customer rate of 30 percent then gives you some cushion to ensure you still hit your growth numbers.
3.) The third factor is a good, thorough inspection of the vehicle. Here’s what is happening in many shops: They’re getting many cheap customers who only want an oil change but not the inspection. They’re defeating the purpose of the oil change altogether. It’s important to inspect every single car and make it a purposeful process.
4.) Next is communication between the front and the back. First, the technician has to estimate what the car needs accurately. Second, the technician needs to be telling the service advisor what it needs, why it needs that, what parts are needed, and how much time the job should probably take. That should be based on experience and book times. The book times are not always 100 percent accurate. The tech should be telling the service advisor why it will take a certain amount of time, even if it doesn’t match up with book time. If the technician gives the service advisor good information, he will feel more comfortable and confident.
5.) Finally, if the work order is written up in a specific way, it’s more likely to sell. Selling is the last component. The first item written on a work order is the item the customer wanted. The customer expects to spend money on that and fix that. Now we have a very high probability they’ll agree and buy the items.
The best time to sell something is after you’ve already sold something. The next items to discuss are safety items. If the car isn’t safe, we should be talking to the customer about that. Those are also high “yes items.” Now, you’re more likely to tell me “yes” a third time. The next pieces are items that could save the customer money.
Finally, we discuss maintenance and cosmetic items. Those items are of low value, and we could easily give up to get those higher value items.
