Do you want to know how much money mechanic shop businesses make yearly? If YES, here are 7 factors that determine the profit margin for mechanic shop owners. Whenever an entrepreneur wants to start a new business, one of the first questions that they usually ask is how profitable the business is or how much they are likely to make on the average daily, weekly or yearly from the business.
This narrative also applies to entrepreneurs who are looking towards opening a mechanic shop. For us to have an idea of the amount mechanic shops make daily, weekly, monthly or yearly, you should clearly define the service offerings of a mechanic shop.
A mechanic shop offers services such as repairing and replacing automotive engines, performing general automotive repairs, powertrain repair services, brake repair services, scheduled and preventative repair and maintenance services, repairing and replacing automotive exhaust systems, mufflers, transmissions, brakes, performing automotive electric repairs, wheel alignments, radiators, wheel alignment and maintenance services for automobiles.
Please note that a very healthy automotive repair shop can net a 20 percent GPM after everything is paid for, including the owner’s salary. The reality is, most are well below this and majority are in the 5 percent or less.
With that in mind, we can estimate what an auto mechanic shop that offers the services listed above is expected to make but it is important to point that there is no one mold-fits-all when it comes to how much an auto mechanic shop is expected to make. There are some factors that we are going to look into before giving an estimate of how much an average auto mechanic shop can make yearly and these factors are;
7 Factors That Determine How Much Mechanic Shops Make Yearly
Table of Content
- 1. The Capacity of the Auto Mechanic Shop
- 2. The Location the Auto Mechanic Shop is Covering
- 3. The Type of Products and Complimentary Services Offered
- 4. The Management Style of the Auto Mechanic Shop
- 5. The Business Approach of the Auto Mechanic Shop
- 6. The Advertising and Marketing Strategies Adopted by the Auto Mechanic Business
- 7. The Number of Years the Auto Mechanic Shop is in Business
- The Estimated Profit Margin of an Auto Mechanic Shop
1. The Capacity of the Auto Mechanic Shop
One cannot conveniently state the amount an auto mechanic shop is expected to make monthly or yearly if you do not know the capacity of the auto mechanic shop. As a matter of fact, you cannot equate the amount an auto mechanic shop that is just starting out in business with a well – experienced auto mechanic shop that has decades of experience in the industry and one that offers robust services.
2. The Location the Auto Mechanic Shop is Covering
We must not rule out the fact that the location the auto mechanic shop is covering is a major factor that will determine the amount the business is expected to make monthly and yearly. The truth is that, you will struggle to make good money as an auto mechanic if you locate the business in an area filled with low income earners or in a ghetto and a place that automobile ownership is pretty low.
If you locate your auto mechanic shop business close to a highbrow area, auto mechanic village or an area with loads of automobile owners, you are likely going to make good returns from your services.
3. The Type of Products and Complimentary Services Offered
One cannot conveniently state the amount an auto mechanic shop is expected to make monthly or yearly without clearly defining the type of products (spare parts) and complimentary services they offer. An auto mechanic shop offers complimentary services such as providing automotive oil change, lubrication services and change of oil filter.
But a more experienced auto mechanic shop can also provide automotive emissions testing services, rustproofing and undercoating services, automotive safety inspection services, automotive tire repair services (except retreading), diagnostic testing without repair services, emissions testing with repair services, spray-on bed liner installation for trucks, change cabin air filters and transmission flush services et al.
In essence, if an auto mechanic shop sells spare parts and also offers some or all of the above related complimentary services, they are sure going to earn far more than an auto mechanic shop who only offers the basic services such as mechanical and electrical repair and maintenance work.
4. The Management Style of the Auto Mechanic Shop
Another key factor that will determine the amount an auto mechanic shop is expected to make yearly is the management style of the auto mechanic shop.
Trust me, the results you will get when you are good manager with eyes for details, top-notch customer services and aggressive marketing techniques will be far different from what a mediocre or bad manager will make. The idea is that a good manager will not just retain their old customers, they will also keep getting new customers especially through recommendations and referrals.
5. The Business Approach of the Auto Mechanic Shop
There are different business approaches that an auto mechanic shop can choose from and no doubt it will greatly influence the amount they make monthly and yearly. Of course, we know that an auto mechanic shop may decide that they want to work alone and do their marketing alone and they can also decide to partner with other business that will recommend clients to them.
It is easier to find an auto mechanic shop that offers robust services to partnering with transport and logistics companies, haulage companies, companies and car dealerships that will contract their auto repair to them or recommend clients to them. In essence, a well – organized auto mechanic shop that works with others will surely make more money than a solo auto mechanic business.
Another key factor that will determine the amount an auto mechanic business can make yearly is the advertising and marketing strategies adopted by the business. Trust me, there are several advertising and marketing strategies that can help a business increase their earnings, but you may be expected to spend more.
But the results you will make will far outweigh the amount you spent on advertising and marketing. Of course, you don’t expect an auto mechanic shop that is engaging in aggressive advertising and marketing to make same amount yearly with an auto mechanic that is passive with its advertising and marketing.
7. The Number of Years the Auto Mechanic Shop is in Business
Lastly, another key factor that will determine the amount an auto mechanic business is expected to make yearly is the number of years the auto mechanic is in the industry.
In business, the number of years you are in existence will go a long way to determine the amount you will make especially if you are creative and always proffer uncommon solutions to complex auto mechanic problems. This is because over the years, you would have been able to gain the trust of your customers and it will be easier for them to come back and also recommend clients to you.
The Estimated Profit Margin of an Auto Mechanic Shop
Profit margin acts as a measurement of a company’s profitability. It measures how much a company keeps in earnings from every dollar of sales it generates. Unlike profit, which gets measured in dollars and cents, profit margin gets measured as a percentage. To measure profit margin, use the auto repair shops net income divided by the total sales generated.
For example, if the auto repair shop had a net income of $100,000 and generated $500,000 in sales. To determine the store’s profit margin, divide the net income ($100,000) by the total sales revenue ($500,000). The store has a 20 percent profit margin – $100,000/$500,000 = 0.20 or 20 percent.
Having said that, on the average, an auto mechanic shop can earn $100,000 per year or more, and independent auto mechanics that operate from a shop or mobile can make between $30,000 and $50,000 per year. Some auto mechanic shops net about 5 percent on their tax return running the business with a good reputation.
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