How to Build the $3M Shop

Space is not the silver bullet.  

For both Adams and Juke Ball, co-owner of Juke Auto in Austin, Texas, a move from their smaller, original shops to larger facilities played an undeniable role in boosting revenue. Both hovered below $2 million before moving their operations, and reached $3 million within the first two years at their new shop locations. 

Yet, both are quick to credit a focus on shop efficiency as the ultimate catalyst in reaching $3 million. 

Jake Hammer, owner of Everett Street Autoworks in Portland, Ore., agrees. A repurposing of, and expansion into, Everett Street’s parking garage allowed the shop to add eight lifts and double its working space, but Hammer spent years refining the shop’s processes and procedures in order to finally reach that $3 million milestone. 

“More space can be a curse, and feel like it’s two steps forward and one step back. Without that physical constraint, now you’ve got room to be more sloppy,” Hammer says. 

Ball notes it was an initial lack of efficient standard operating procedures that nearly tanked his business after moving to a larger location, and Hammer notes it was a slow and steady focus on fine tuning his shop’s processes for maximum output that ultimately grew his shop’s revenue. 

And over at Adams Autoworx general manager and COO Melissa Brunson found that the move to a larger facility helped force the shop’s KPIs to the forefront of its processes. With more space the shop could hire additional help, but needed to crunch numbers in order to justify the new expense. 

“It came down to a question of, ‘How much labor do we need to produce with these extra people in order to keep them busy?’” she says. “If we don’t have the work to meet that, then maybe we don’t need that body.”

Brunson says the new focus has become a key motivator in working collaboratively to meet the shop’s core KPIs. “As a team we don’t want anyone to have to leave, so we’re all making sure the cars are inspected correctly, so we can get jobs sold correctly, so we procure parts correctly to  keep the technicians busy to get those hours sold.”

Work smarter, not harder. 

The parameters may look different for each operation, but Adams, Hammer, and Ball are all in agreement—to grow, you’ve got to learn to say no.

Each has taken concerted measures to set boundaries on the customers their shops will service, prioritizing ARO over car count in the process. 

When two of Ball’s employees left to start their own shop, taking a percentage of his clients with them, he noticed an unexpected spike in revenue. Many of his customers with older vehicles and strapped finances had disappeared from his base. That’s when he decided Juke Auto would no longer service vehicles more than 20 years old. 

“I had to see it to believe it, but that’s the change that launched us forward,” says Ball. “Suddenly the repairs were more straightforward, we could give better turnaround time, and that’s when people started telling their friends.”

And for Hammer, who says car count’s never been an issue for the shop, a focus on ARO meant a change in scheduling. Hammer dropped Everett Street’s maximum scheduled car count from 200 to 150 to build a customer base that values trust more than price. “It’s been years in the making, but we’ve retrained our customers to schedule further out,” he says. While customers may venture out to other shops for more convenience Hammer says they typically return with a better understanding of the shop’s service value. 

To ensure top-spending regulars aren’t stiffed in the scheduling process, Hammer’s advisors consult shop records for a caller’s average RO. “If Mrs. Jones, who comes in religiously, has four cars and an RO of $800, that’s someone who values our service and is going to get fast-tracked.”

The creation of a customer avatar also proved critical for Adams. With a narrow shop space, Adams quickly ruled out service for larger vehicles like Sprinter vans and large pickup trucks. But when Brunson came on as general manager, the two put their heads together to define the shop’s ideal customer, then used the 80-20 Pareto principle to “cull the herd” by eliminating the least profitable 20 percent from the shop’s customer base. 

“I had to learn to listen when Melissa said, ‘We’re not going to work on that car, Bill—even if there’s nothing in the parking lot—because we’re not going to make money on that car. It doesn’t fit the formula, so we’re not doing it,’” Adams recalls. 

Switch up your leadership style. 

While the majority of Ratchet+Wrench’s 2021 Industry Survey respondents described themselves as “directly involved” leaders (shop owners who get dirty out on the shop floor and lead by example), the survey’s most profitable shops were guided by visionary leaders who are focused on the shop’s big picture.

Learning to step back from the day-to-day and entrust their teams to do their best work was critical for both Adams and Ball. 

“It all comes down to moving at the speed of trust,” says Adams, who had already tapped Brunson to fill his shop’s GM role, but struggled to “get out of the way.” Adams began to shift away from day-to-day operations shortly after moving to the shop’s new location, and just over a year after Brunson took the reins, the shop hit its $3 million milestone.

And without a shift from hands-on leadership to a visionary role, Ball says his shop could have never sustained its initial success. With a larger space and business pouring in, he says the process of organizing the shop’s workflow chaos was more like trying to make a 180-degree turn on a container ship than in a canoe.

“Initially I’d been able to lead by force of personality, but in the new shop I didn’t have a personality big enough,” Ball says. “It was absolute mayhem and I was watching my team turn gray with strain and stress.”

Ball dedicated his efforts to putting talented shop managers in place, finding that the more he took himself off the workfloor the better the shop flowed, yet still struggled to keep himself out of the mix. “They have no power if I’m still coming down trying to solve everything for them. I had to learn to roll with their decisions and make space for them to take charge.”

These days, Ball doesn’t shy away from helping out, but he’s careful to defer to his management team for direction and take a subordinate role, whether he’s asked to man the front counter or fill in as the shop porter.

“The worst thing that can happen to a shop that’s learned to run itself is to have an owner poke their head in and disrupt the flow of everything,” he says. “If I’m really there to help, I need to be taking direction.”

“If you want to scale, you need somebody looking out from a 10,000-foot view and someone on the ground directing the troops to set strategies you can actually go to war with.” —Bill Adams, owner, Adams Autoworks

Hire with intention.

Every shop owner is on the hunt for top talent—especially in today’s tight labor market—but Hammer, Adams, and Ball find talent alone won’t get you to $3 million. 

“To reach that next level, you’ve got to be staffing your team with thoroughbreds, not donkeys, but you’ve also got to account for team fit,” says Adams. 

With its move to a larger location, Brunson notes the Adams Autoworx team faced new pressure to hire for cultural compatibility as well as experience. “We were forced to grow, but our efficiency depends on talent that can fit into the model we’d already built. We couldn’t have made it to $3 million without strategic selection on both sides of the coin.”

And Ball’s found that hiring with a focus on positivity has made a noticeable impact on his shop’s efficiency, productivity, and overall growth. 

Ball always knew positivity is critical to success in front of house, but when it came to back-of-house hires, he was solely focused on the hunt for blazing fast techs who could turn wrenches, diagnose like a pro, and require no comebacks. 

“I learned fast that a negative hire is going to bring down the guy on either side of him, and eventually that negativity’s going to permeate every part of the shop,” says Ball. 

After cutting a top-performing, but sour tech loose, Ball says he and his team could feel the entire shop change and a more organic, collaborative atmosphere took shape. His team was able to build stronger trust in each other—a factor that also made it easier for Ball to step back and entrust his management team to run the show. 

“There is no breaking the next barrier with negative people and you can absolutely prove it in your numbers,” he says. “Getting rid of someone that was only causing stress told my team, ‘I don’t care how good you are. This shop needs to be a positive place you want to be a part of.’”

Within the week, Ball saw his shop’s stats spike across the board, even without its star workhorse.

Play to your strengths. 

According to the 2021 Ratchet+Wrench Industry Survey, the majority of shops reaching $3 million in sales structure their workflow with one technician per vehicle, completing repairs from start to finish, rather than working in teams or segmenting the work assigned on each vehicle.

Ball, Adams, and Hammer all fall into this majority, but are careful to assign vehicles based on technician expertise. 

Although all three have now taken minor tasks like oil changes and tire or bulb replacements off the plates of their top techs, each takes full advantage of the specialties their technicians bring to the table and schedule work accordingly. At Juke Auto, Ball is quick to assign his Euro, hybrid and electric vehicle work over to his techs who have mastered those repairs, and at Adams Autoworx Brunson notes the shop has one technician whose sole job is dedicated to diagnostics. 

“In the body shop world, you don’t have your detailer lay down paint because it’s not their expertise,” says Adams. “We want each person continually pushing to be great in their expertise so they can increase their skills and their scale, and ultimately boost production for the shop overall.” 

Adams and Brunson have also carried that strengths-based focus through to the shop’s front of house with a major change to its overall sales process that Adams calls its triangle offense. 

Instead of having the shop’s service advisors write up their own estimates, order their own parts and sell the job to customers, now one person writes up every single work order that comes through the shop, clearing a path for advisors to fully focus on sales. 

Once each car is checked in and its inspection is complete, Brunson writes the work order up, estimates the job, sources all the parts, then hands it back to the service advisors to sell. 

“When it comes to playing to your strengths that was a big blind spot we were missing,” says Brunson. 

“We find the biggest bottleneck is almost always at the service advisor and nothing happens in the shop unless something gets sold,” says Adams. “If you give your advisors the space to be a real client-focused customer advocate, then they can create those 50 hours of billable labor at the right gross profit to create an excellent CSI and the rest falls into place.”

Find your new formula.

Nearly 90 percent of Ratchet+Wrench Industry Survey respondents earning at least $2.5 million in annual sales say they log their KPIs,  so it’s no surprise that Ball, Adams, and Hammer are all avid KPI trackers. 

But each was quick to note it’s not enough to track those vital numbers, you’ve got to be prepared to pivot when those stats are missing the mark and, like key shop processes, it’s likely you’ll need to adjust your shop formulas as you grow. 

“As you grow, you find that you run into the same kinds of issues in different ways, and it often comes back  to this idea that your processes and formulas are good until they’re not,” says Hammer. 

As Hammer’s worked to tweak his shop’s scheduling and maximize ARO, he and his team have adapted their production formula to leave space for inevitable unforeseen factors, allowing his team to adjust accordingly. 

“We used to run our numbers based on the number of technicians on and pure car count,” he says. “Now embracing the ebb and flow of factors like type of vehicle and complexity of the repair, rather than sticking to a set number,” says Hammer. With the new model his team will pick up the pace and take on additional jobs or pull back depending on how the week’s average labor hour metrics are taking shape. 

And for Adams, years of tracking have helped he and Brunson define a formula they use as a daily baseline to set expectations and goals for their team. Having determined that each of his technicians and bays are capable of producing anywhere from $500,000 to $600,000, that’s become the shop’s goal and benchmark. Adams also expects 50 hours of work produced per technician per week. 

“Using those KPIs as a model, you can build your formula and adjust workflow to follow from there,” says Adams. “The real key is communicating those expectations and how that formula is going to shape your workflow with your team so they get their role as a piece of that puzzle.”

Beyond the shop’s core benchmarks, Adams says his team has a clear understanding of the steps they’re expected to hit along the way.

“I see guys who think that 60 or 70 percent productivity is a good week, and around here the team would be on edge if that happened because they know I expect more than that,” he says. “For us, that situation becomes a question of “OK what broke down?” because that’s not how we go to war and play the game.”