10 Auto Repair KPIs to Track (and How to Calculate)

The auto repair sector is very competitive, requiring the business to track specific metrics for it to grow. With significant operating costs and increasing competition, it’s even more relevant than ever for auto repair owners to measure and track certain KPIs to maximise growth and profitability.

From productivity, efficiency, labor hours, gross margin, etc. this article discusses the top 10 KPIs auto repair business owners should track and calculate.

1. Utilization rate

Utilization rate is one of the many KPIs auto repair business owners must track to understand if they are hiring too many or too few mechanics to service demand.

Notably, this metrics also shows the auto repair shop’s capacity to turn mechanics’ available time into productive time: the more customers you attract, the higher the rate. In comparison, a shop with fewer customers will see its ratio decrease.

Utilization rate = # hours worked / # available hours

For instance, if a mechanic worked 60 hours a week and registered 40 hours in repairs, then you can calculate utilization rate as follows:

Utilization rate = 40 / 60 = 67%

2. Efficiency rate

Efficiency is another critical KPI to assess an auto repair shop’s productivity. It is important to note that this KPI doesn’t measure the efficiency of mechanics but rather the hours billed.

Increasing efficiency implies increasing the number of hours billed at the front counter or cutting the number of hours worked at the workshop. 

In order for your shop to be profitable, you must make sure that the number of hours worked is at least inferior to the number of hours billed.

Efficiency rate = # hours billed / # hours worked

For instance, if a technician takes 8 hours to complete a repair that was originally billed at 10 hours, efficiency rate is:

Efficiency rate = 10 / 8 = 125%

3. Effective labor rate 

The KPI represents the amount of revenue you create per available labor hour. In other words, effective labor rate tells you how much sales one hour of a technician labor generates.

Logically, the higher effective labor rate, the better. If effective labor rate increases, it may be due:

  • An increase in efficiency rate (you charge more than the time a technician actually spends working on a job)
  • Higher-priced jobs (one hour of work is worth more vs. for a smaller, routine checkup for example)

Effective labor rate = $ labor sales / # labor hours

For instance, if for one repair total labor sales are $1,500 which represents 10 billed hours, ELR is:

Effective labor rate = $1,500 / 10 = $150

4. Hours per Repair Order (RO)

Hours per repair order (RO) offers insight into how much time a repair shop spends on each repair job. This is among the critical KPIs auto repair shop owners should track to determine technicians’ productivity. 

There is no bad or good number for this metric. Instead, its value can tell a lot about what type of services your auto repair shop offers.

For example, you might only focus on small, routine checkups that only takes 2/3 hours. Instead, you could only offer engine tune-ups and large repairs that takes 10-20 hours instead.

Hours per Repair Order = # Labor hours / # Repair orders

So if your auto repair shop performs 120 repairs in a month and records 700 labor hours:

Hours per Repair Order = 700 / 120 = 5.8 hours

5. Revenue per technician

Revenue per technician is a KPI that evaluates the amount fo revenue each technician is generating on average.

It’s important to note that there may be variations when calculating this KPI, as sometimes revenue may include other streams than labor hours (for example car dealership sales, car rental sales, etc.).

If so, we recommend you only use labor sales when calculating this KPI. This will give you a better view on how much a technician actually generates (whilst excluding other sources of income and potential variations).

Revenue per technician = Total revenue / # Number of technicians

For instance, if the business earns a $50,000 turnover over a month from repairs and employs 5 technicians, then:

Revenue per technician = $50,000 / 5 = $10,000

In other words, each technician generates $10,000 in revenue per month.

6. Gross margin

Gross margin represents the amount of sales you make over a period of time, after deducting Cost of Goods Sold (COGS).

For an auto repair shop, COGS include expenses like spare parts, oils, paints, tools, and other consumables used to perform repairs.

It’s important though that COGS doesn’t include salaries, that’s something we will see below instead.

Gross margin = ( Turnover – COGS ) / Turnover

For instance, if your business earns $30,000 in turnover in a month, yet you had to spend $6,000 in COGS for spare parts, then gross margin is:

Gross margin = $24,000 / $30,000 = 80%

7. EBITDA margin

Unlike Gross margin, EBITDA takes into account not only COGS, but all operating expenses (salaries, rent, marketing, etc.).

EBITDA margin = EBITDA / Turnover

where

EBITDA = Turnover – COGS – Operating expenses

For instance, if your business earns $30,000 in turnover in a month, yet you had to spend $6,000 in COGS for spare parts, $10,000 in salaries and another $5,000 in other operating costs, EBITDA margin is:

EBITDA margin = $9,000 / $30,000 = 30%

8. Net Profit Margin

The most critical KPIs auto repair shop owners must track is net profit. This is the bottom line of the business which will define future performance.

Unlike EBITDA, net profit includes non-operating expenses like debt interest (if you took a loan for example), corporate taxes, depreciation & amortization, etc.

Net Profit margin = Net Profit / Turnover

where

Net Profit = Turnover – COGS – Operating expenses – Non operating expenses

Using the same example above, if your shop has a $30,000 turnover, $6,000 COGS, $15,000 operating expenses, and $4,000 in taxes and interest expenses, then net profit margin will be:

Net Profit margin = $5,000 / $30,000 = 17%

9. Cash Flow

Cash flow is arguably one of the most important KPI any business owner should track because it reflects the amount of money flowing through your business. More importantly, it tells us how much cash (positive or negative) your business generates.

Cash flow simply is the difference between positive and negative cash movements in your auto repair shop. For example:

  • Cash inflow (positive cash flows): customer payments
  • Cash outflow (negative cash flows): payment to suppliers, rent to landlord, corporate taxes, etc.

To calculate cash flow, you subtract the cash you had at the beginning of a specific time from the cash at hand at the end. 

Cash flow = cash inflow – cash outflow

For instance, if in a month your auto repair earns $50,000 cash inflows from your customers, spends $5,000 in rent, $25,000 on wages, and made a big order for spare parts worth $30,000, cash flow is:

Cash flow = $50,000 – $5,000 – $25,000 – $30,000 = -$10,000

Therefore cash flow for the month is negative: you spent more than you earned. It doesn’t necessarily mean your business is not profitable. Indeed, in this case whilst the business spent $30,000 in spare parts to cover for a few months, the amount of COGS for the month is different (very likely much lower).

10. Inventory turns 

You must track this metric if your auto repair business also sells parts. This is the rate at which you sell your inventory. Most importantly, this KPI will measure how often your inventory is sold over a given period. 

Tracking this metric will help you know if you are keeping much inventory relative to sales. It also shows how much time you need to clear your inventor and gauge competitive advantage. 

Parts inventory turns = COGS / Average inventory

For instance, if COGS for the month is $10,000 and the average inventory over that period is $2,000, then inventory turns will be:

Parts inventory turns = $10,000 / $2,000 = 5 turns

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