WHAT IT IS: The actual profit after working expenses not included in the calculation of gross profit have been paid.
HOW TO CALCULATE IT: Total net revenue – all gross profit expenditures
INDUSTRY AVERAGE: 10–14%
OPTIMAL BENCHMARK: 15% OR HIGHER
HOW TO IMPROVE IT: There are myriad ways to improve your net profit. Here are 8 quick strategies. You don’t need to implement them all to bolster that ledger, but achieving balance between some of these will certainly help:
1. MAKE BUDGETING A PRIORITY.
Budget for as much as you can. That includes ARO, monthly car count, labor rate, and more for what comes through the shop. Savvy number crunchers take into account much of what occurs outside the shop floor, too, such as tool and equipment upgrades, marketing, training and more.
2. IMPROVE VENDOR RELATIONSHIPS.
Healthy vendor relationships make for healthy margins. Foster relationships with those who service your shop and you’ll find direct results in your ledger.
3. HIRE THE RIGHT PEOPLE.
Many shop owners and employees spend more time there than at home, so treating staff like family is a common sense way to build camaraderie and trust—the two things that keep customers coming back.
4. LEARN, GROW & TEACH.
Join a mentorship or peer group and attend industry conventions and training.
5. UNDERSTAND YOUR NUMBERS.
It’s all well and good to record KPIs and monitor budgets and expenses, but understanding how and why those numbers move the way they do is the first step in fixing them.
6. DON’T FOCUS ON PRICE.
Customers understand there’s a cost to doing business. Focus on the needs of your customers and staff above prioritizing price.
7. NEVER STOP LEARNING.
Besides peer groups and industry training, there are endless other resources to help your shop achieve maximum potential. Books on leadership, podcasts on company culture and online webinars and virtual training represent growth opportunities outside the purview of your shop’s regular hours.
8. WORK SMARTER, NOT HARDER.
