Demarest: Benchmarking the Industry: Trends Every Shop Owner Should Know

For years, we were asked questions that we couldn’t answer for our clients:

• "Hunt, what is the average gross profit of other Euro shops in my area?
• Are other people raising their labor rates like I am?
• Is productivity as a whole going up, or am I an outlier?"

Over the nearly 20 years that I have been doing this, we have tried our best to offer our opinion on these questions and, for the most part, got them right. We have a unique position to look at the real financial data of clients from every state across the country (and several outside of it as well), which gives us the ability to answer these questions that almost no one else can answer with certainty.

However, with the mountain of data, it proved to be an impossible task to put it into a clean, concise format that shop owners could use to gain an understanding of where they are going right and where they are going wrong.
With the rise of technology, four years ago that dream became a reality, and we were able to release our first-ever Benchmark for Auto Repair Shops to do just that. Fast forward to today, and we have gone from a 32-page report highlighting most of the states and categories around the country to our most recent 46-page report, with contributors from across the country allowing us to gain a higher level of detail and understanding about the industry we have been in for years.

There are many things that have jumped out at me over the four years of doing this, and I implore any shop owner to do the same research on their own with this report. What I am going to talk about is my analysis of the trends and changes from the last couple of years, while also highlighting some things that have remained constant.

Like I always say, numbers don’t lie, but the people reading them often do.
Do you think that my perspective on these numbers as a Certified Public Accountant working with repair shop owners is different from that of a diesel shop owner in Texas reading this same report? Absolutely. So, look at this through the lens of your own business, and I bet you will learn something.
Overall, did we see a major shift in the industry for 2025 as compared to the previous year? Not really. Most of the metrics and ratios have stayed constant, but even with this similarity, there is a lot to gather from it.

Owner pay and profit are almost identical from a percentage standpoint to what we saw in 2024, but how is that possible if sales are up, labor gross profit is up, productivity is up, and profit is exactly the same?

Inflation.

The reason profit is exactly the same, even though we saw an overall lift of almost 2% in gross profit, is that the average shop's overhead rose by the same 2%, meaning you had to increase your sales just to cover the increased costs of operating the same business.

Shops made more money from a dollar standpoint because sales are up and the percentage of net income they kept remained the same, but the rate at which shops made money had not.

Even more surprising is that, as we have learned in the past, the only direct relationship between profit and another metric is generally productivity. Productivity increased 7-8%, most shops are increasing their labor rate by about 5% a year, parts costs have gone up even more (which means parts sales did as well), but we still aren’t making money any faster.

At first, I couldn’t wrap my head around it, but what I discovered could be relevant for any shop reading this report. Again, the reason this is happening in your shop is probably different, but these ideas should get your mind moving in the right direction.

There were two major questions that jumped out at me:

1. How does productivity increase by 20%, but sales per tech have only gone up by 5-6%?

What we are seeing here is the difference between your door rate and what your customers are actually paying you, also known as your effective labor rate.

I was able to pinpoint one of the shops with similar trends, and I looked deeper into the numbers to figure out why this was happening. The issue with this shop was that they did have a massive increase in production but lost a lot of ground on pricing and comeback work, which ended up stifling sales.

They still ended up higher than last year with a 10% sales increase, but this is the definition of working harder, not smarter. How do you produce 500 more hours than last year at a higher labor rate and not see much change? This shop's effective labor rate (between some issues with canned jobs and lower-margin work) fell by almost $20 per hour. Techs did more work. They had more cars in the door. Advisors worked on more tickets. All of that happened, and yet nobody reaped the benefits. Hours without proper pricing are a waste of time and money. Don’t pay to look busy.

      2. How can productivity increase by 20%, but we have virtually no change in profit?

This is the one that really stumped me because it almost challenged a major assumption I have always held: more productivity equals more profit.
There are a couple of reasons for this, and I was not able to identify the most common one, so I’ll walk through what I found.

First, the aforementioned effective labor rate issue has become more prevalent.

One of the most common trends I saw was a changing sales mix and larger amounts of deferred work. If, in the past, you got additional work on one out of every three oil changes and now it’s one out of every five, how much will that pull your effective labor rate down? It depends on how much you discount those services.

The more likely issue here is that we are also seeing massive increases in technician costs.

As highlighted by Promotive in the study, the labor market is getting harder and harder, leading shops to increase wages at a faster rate than we have seen in the past. The smart shops are increasing their team's wages in line with their labor rates, but this year it appears wage growth may have even outpaced that.

While it might look like a loss of profitability, what is the cost of losing a technician because you underpaid them?

Average sales per technician are around $32,000 a month, and the average time to fill a position is around two months. How much is that going to cost your shop if you lose a technician over $3 per hour?

A lot more than you probably thought.

Supply and demand. Wages are going up, and it's getting harder and harder to find technicians. Do we think a further increase is going to be the trend in the future?

Design or Oversight?

Overall, when looking at this report, you should evaluate it through the lens of your own shop but without your preconceived notions of what these numbers should look like.

There will be differences because this is your business and your shop, but look at those differences and determine whether they were by design or simply an oversight on your behalf.

Most shops can identify areas where they can improve, even if it's just a couple of percentage points.

However, "just a couple of percentage points" could be the difference between your shop surviving and thriving.

To get a free copy of PMA’s 2026 Benchmark report, click here.