Sky High ARO

Sept. 21, 2020

How to take this KPI to the next level.

The Experts: 

Jake Hammer 

  • Everett Street Autoworks 
  • Portland, Ore. 
  • Shop Type: General repair 
  • ARO: $425
  • Car Count: 640 per month 
  • Labor Rate: $120 

Dave Toole 

  • Toole’s Garage 
  • San Carlos and Burson, Calif. 
  • Shop Type: General repair 
  • ARO: $925 (San Carlos only) 
  • Car count: 280 per month (San Carlos only) 
  • Labor Rate: $186.87 (San Carlos only) 

Parker Davis 

  • Broad Stroke Associates 
  • Snohomish, Wash. 
  • Shop Type: BMW and Audi specialist 
  • ARO: $1100 
  • Car Count: 85 
  • Labor Rate: $152.60 (posted door rate) diagnostic rate is higher, typically 1.5 x door rate 

Bill Adams

  • Adams Autoworx
  • Castro Valley, Calif. 
  • Shop Type: General Repair 
  • ARO: $960
  • Car Count: 272 
  • Labor Rate: $187.50

Rob Sperring 

  • Grand Rapids Motorcar
  • Grand Rapids, Mich. 
  • Shop Type: General repair 
  • ARO: $725.63 
  • Car Count: 221 
  • Labor Rate: Varies, roughly $119 for door rate 

Jake Hammer, owner of Everett Street Autoworks in Portland, Ore., sees an impressive 640 cars per month at his general repair shop. This falls into a higher car count model. That being said, Hammer is trying to shift toward a high average repair order (ARO) model. 

“We’re a higher car count shop, but it wasn’t a strategic decision. For us, we’ve never had a problem bringing in customers so when we were looking to grow, that was the easiest route,” Hammer says. “Now, we’ve hit capacity and it’s hard to get more parking spots, so we’re shifting our focus to ARO.” 

With vehicles going longer without maintenance needs, many shop owners are making the most of when their customers come in by focusing on ARO.  Hammer, along with three shop owners with AROs above $900, share their tips for becoming a high ARO shop. 

Target the right customer. 

[Parker Davis,  Broad Stroke Associates) 

We had a low labor rate and running oil change specials—we were attracting the bottom of the barrel. We would write it all up and they wouldn’t buy any of it. We’re not doing that ever again. What we did was we brought our labor rate up and started charging the right margin on parts. We started pursuing customers that had the same values as us and wanted to keep a car in great condition. To do this, we changed our marketing. We do not discount market anymore. The only offers we run are $50 off for first time clients. We never talk about price—we talk about warranty.  

Find and explain all work. 

[Dave Toole, Toole’s Garage] 

High ARO starts with the tech. A good quality tech and a good quality inspection is key—all cars need work. If they don’t see it, it doesn’t get estimated. Then, it’s all about transparency with the customer. Where we are, our clients appreciate pictures and seeing everything. Then, it’s the advisor’s job to do just that—advise. What’s super important? What can wait?   

Earn customers’ trust.

[Rob Sperring Grand Rapids Motorcar] 

You need to set up that personal relationship—they have to trust you. Have little conversations with them. Ask them if they’re married or if they have kids. Walk around the vehicle with them and show them what needs to be done. Another thing is that you need to touch base with them. You need to reach out within a few hours and keep them updated. Set up the expectation from the start. We first send out the digital vehicle inspections, then we email a quote and then we call the customer. 

Keep in mind staff’s capacity.

[Bill Adams, Adams Autoworx and Tireworx Inc.] 

It comes down to basic accounting.  It forces you to look at your mix of cars and what everyone in your shop can handle. For example, if your least experienced tech needs to work on 20 cars per day for quick services, how do you support that? Do you need 60 cars per day? That’s impossible. You need to figure out where adding one more car lowers your ARO.

You should have someone that writes up all of the work orders for the service advisor. A big mistake is treating your sales advisor as anything other than a salesperson. If you throw everything—writing and selling—on the service advisors, they will cherry pick the work because they don’t have the time. If you have someone else—it could be the general manager, junior advisor or a parts person—write up the work, this allows the service advisor to sell more to the client. 

Get your team on board.

[Jake Hammer,  Everett Street Autoworks] 

In order to be successful with a high ARO model, systems and processes that are replicable are essential. As the leader, create a system that ensures each and every car gets the proper inspection and proper post repair check. For us, we had a lot of meetings that focused on why showing all of the work to the customer was good so our staff saw the value. We updated our comp plan and showed what an increase in ARO would do for their compensation. We set goals as a team now and we celebrate when we’re successful.

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