WHAT IT IS: The average total cost of all repair order
HOW TO CALCULATE IT: Sum total cost of monthly repair orders ÷ # of orders
INDUSTRY AVERAGE: $200–$399. For shops averaging more than $1 million in annual revenue, the average ARO jumps to $400–$599.
OPTIMAL BENCHMARK: $400+. The most successful shops maintain at least $1 million in revenue per year and are able to assess their growth opportunities using that figure. ARO is a huge factor in profitability and growth, and tracking it is as simple as using a spreadsheet and understanding why the numbers are the way they are. Shops with high AROs don’t necessarily sell more repairs; they simply work smarter and understand what it takes to maximize revenue from every invoice.
HOW TO IMPROVE ARO: By empowering your technicians with increased inspection times, you’ll find more work for service advisors to sell and for your techs to repair. Everybody needs a few oil changes per year, but that’s not where you’ll make your money. That’s low-hanging fruit.
Thorough inspections coupled with detailed paperwork will help convince clients that the work you’re advising, in order to avoid future problems, is worth their time and money to repair. Many clients may not understand what’s wrong with their cars; a thorough inspection process will help bridge the gap between the unknowable component creating issues under the hood and the tangible, repairable problem when it shows up on the inspection form.
Many shops use five hours as a benchmark for the technicians’ average repair order. That may only account for 20–30 minutes per inspection, but you can (and should) bill for that as .2 of a labor hour. Your technicians are working, after all, and time is money.
ARO is also compounded by a thriving customer base; most shops lose an average of 18 percent of their customers per year, so capturing new ones with a clean shop, a knowledgeable staff, and effective print and digital marketing is key.
