Commercial repair shops saw profits increase in 2022

PHOENIX — Most commercial repair shops netted profits in 2022 and increased sales by nearly 20% on average, and in turn many raised their labor rates and wages, according to a survey by Fullbay Inc., a provider of commercial shop management software.

Fullbay surveyed more than 1,600 individuals from the commercial freight, logistics and repair industries and sampled more than 500 shops from across North America, Australia, and New Zealand for real-world shop data in compiling its "2023 State of Heavy-Duty Repair" report.

Data were gathered from businesses powered by Fullbay for at least 12 continuous months; survey respondents were a combination of both customers and non-customers of Fullbay.

About 44% of the shops surveyed were independent repair shops; 13% were dealerships; and 14% represented internal fleet repair.

In 2021, shops across continental North America averaged 34% growth over 2020; in 2022, shops' revenue grew another 19%, according to the report.

"While these numbers might suggest shops saw less growth in 2022, bear in mind that 2021 was largely a rebound year after the slump of 2020. Once shops had recovered from their pandemic troubles, they did continue to see steady growth," Fullbay said.

The Southeast enjoyed the greatest year-over-year growth in 2022, with the Southwest and Midwest close behind.

Here are some of the survey results:

More shops are paying attention to their net profits and losses than in recent years, according to Fullbay. In 2020, 20% of shops surveyed said they didn't really know how they were doing financially, but by 2022, that percentage had dropped to 10%.

About 32% of respondents indicated they earned 11% to 20% profit; 20% of respondents reported 21% to 30% net profit; 19% reported a 6% to 10% profit; while 5% saw 41% or greater profit. Only a little over 1% reported a loss.

About a quarter of the respondents reported between $1 million to $2 million in revenues each year, while 20% reported between $500,000 and $1 million; 17% reported revenue between $250,001 and $500,000.

Fullbay noted that most shops that crossed the $2 million revenue mark were at least 16 years old and that shops generally saw revenue increase as they added technicians.

"Our data suggests that, generally speaking, more services — encompassing any repair or maintenance service like mobile repair, tire repair, and welding/fabrication, among others — offer a route to more revenue.

"However, there are two major thresholds to increasing revenue when it comes to services provided. The first is offering more than three services — shops that did this increased their ability to reach $500,000 in revenue. The second is offering more than seven services, which can help a shop earn more than $2 million," Fullbay said.

The sweet spot for the highest revenue potential is servicing four to six vehicle makes and models, according to the report, noting that once shops begin servicing seven types of vehicles or more, their revenue potential drops to the same level as shops servicing three (or fewer) types of vehicles.

Nearly half the responding shops have been in business for three to nine years with 16% operating for two years or less. Older shops — those in business for 30-plus years — comprised just 10% of respondents.

Interestingly, 22% of the newest shops are located in the Northeast, while the oldest shops are mostly in the Midwest.

The Midwest contained the most commercial shops — 21% in total. The Southeast and Southwest regions were close behind, being home to 18% and 19% of the total number of shops, respectively.

Most of the independent repair shops surveyed were small businesses: 46% of respondents had one location and usually employed three to four technicians; 13% of shops operated in two locations, usually with five to seven technicians; and 13% had three locations and usually employed 13 to 20 techs. Those with four or more locations usually employed 40 or more techs.

The West region has the highest average labor rate, at $137 per hour, while the Midwest and Northeast have the lowest, charging an average of $113 per hour.

The report indicated that labor rates increased with the number of techs, as shops that employ 13 to 20 technicians charge the highest labor rates.

Nearly half of shop work is scheduled ahead of time, with the remainder listed as requested or emergency jobs. About 60% of the work comes from repeat customers.

Older shops, those that have been in business 30-plus years, reported 77% of their business is from repeat customers.

More than half the respondents said they service Class 4 and 5 trucks, or medium-duty trucks; with Class 6 through 8 heavy-duty trucks as a close second, with 48% of the market.

About 38% of respondents said they charge nothing to as little as $50 for DOT inspections; 29% charge between $101 and $250; while 19% charge between $251 and $500.

Interestingly, the oldest shops surveyed charge the least for a DOT inspection (an average of $117.30), while younger shops (those between three and five years old) charge the most, about $212.

A similar percentage of respondents, 31%, don't charge for diagnostic work, while the remaining 69% charge anywhere from $1 to $1,000. Shops in business over 30 years charged the least for diagnostic work, an average $174.70, while shops between three and five years old charged the most, about $386.70.

About 76% of the shops surveyed raised their labor rates in 2022 and the more techs a shop had, the higher the increase tended to be.

Shops with one or two techs, for example, hiked their rates an average of $7.10 per hour, while shops with 21 to 40 techs raised their rates an average of $14.60 per hour. Shops in the Southwest had the highest overall increase ($13.10 average) with the Northeast a close second ($12.20 average).

Interestingly, large shops with over 21 techs reported the lowest average invoice size ($727), while shops that employed four techs commanded the highest average invoice size of $1,141. The overall average invoice size among respondents was $965. Canada had the largest average invoice size ($1,242) by region.

Of the shops that raised their labor rates, 92% also increased their hourly wages. About 42% of shops that didn't raise their labor rates still gave their technicians a raise, according to the report.

Fullbay said it encourages shops to increase their labor rates, if the market allows, and give their technicians raises.

"Well-paid techs are often happier techs, and happier techs do much better work," Fullbay said.

How much money each technician generates per month depended on geographical location and overall labor rate, but most are bringing in between $5,000 and $20,000 a month. The monthly revenue breakdowns includes:

• Mobile-only techs: $20,001 to $30,000

• Independent repair: $15,001 to $20,000

• Dealership: $10,001 to $20,000

• Internal and external repair: $10,001 to $15,000

• Non-commercial repair: $10,001 to $15,000

• Internal fleet repair: $5,001 to $10,000

Overall, 46% of techs were paid hourly; flat rate (tied to a job's labor rate) came in a distant second at 28%.

The report indicated that the more techs a shop employs, the more payment options were offered; however, the older the shop, the more likely it is to only offer an hourly rate.

Among hourly-rate shops, the highest-paid techs in the U.S. are in the Southeast (earning an average of $46 per hour) and the West ($44.60). The Midwest brings up the rear, with techs earning $35.10 per hour. Techs in Canada earned an average $44.80 per hour.

When it comes to flat rate, the more techs a shop employs, the higher the flat rate. Shops that employed 41 or more technicians paid an average flat rate of $63.60 per hour, while shops with two or fewer techs paid $48.60 per hour.

The oldest shops, interestingly, pay the lowest flat rate ($32.80 per hour). Younger shops, between three and five years old, paid the most ($54.90 per hour).

A majority of employees at the surveyed shops range in age from their mid-20s to mid-40s; only 5% were 24 or younger. About 24% of employees in diesel repair are women.

Nearly half of the techs reported working over 40 hours per week, with 23% saying they work over 50 hours a week — nearly half of those techs are aged 55 or older. Conversely, only 11% of young techs (24 years old and younger) are putting in more than 50 hours a week.

Among technicians, 49% have stayed with their current employer for more than 80% of their career.

Only 21% of respondents had attended a trade school and of those who attended, 44% of them are 55 and older.

Tech efficiency and productivity are separate (but related) concepts — efficiency is how quickly a tech does a job, while productivity is how many jobs that same tech can do in a day. Ideally, a shop wants high rates of both.

The data suggests tech efficiency is tied to the size and age of the shop. Shops that have been in operation for 30 years or more, for example, reported an average of 58% efficiency, while shops 10 to 15 years old reported 85% efficiency.

Independent repair shops reported 81% efficiency compared with dealerships that had 76% efficiency.

A quarter of respondents haven't thought about a succession plan at all, according to the report.

Over 62% of the owners surveyed said they have considered it: 25% plan to pass their shop on to a family member or friend; 23% intend to pass it on to an employee; and 15% are considering selling to an outside party.

Larger shops seem more inclined to have a succession plan. Shops with eight or more techs, in particular, are likely to look for outside buyers, according to the report.

Among independent repair shops, 25% plan to pass the business to family or a friend; 25% plan to transition to an employee; and another 25% are unsure.

Commercial repair shops saw profits increase in 2022