Retail

Vehicle Inspections Can Boost Revenue, Business Value

Michael McGregor
Posted on October 11, 2019

Being human, we all can have preconceived notions about other people, and often will view them through the prism of our own experience.

As an independent tire dealer, you encounter people from different backgrounds — and who drive different kinds of vehicles — every day. Trying to discern who will be a “good customer” and buy tires, repairs or recommended maintenance items based on how they look or speak, or even by the condition of their car, is an impossible task.

But there is one acceptable way that you can “pre-judge.” That’s by offering almost every customer who comes into your store a comprehensive vehicle inspection for $39.95. Let me explain.

When a random customer visits your store, it’s a selling opportunity. You want to satisfy the customer’s immediate need, but also make sure that his or her vehicle is in safe driving condition, with no pending problems on the horizon. A customer whose car breaks down on the freeway after leaving your shop will ask, “Why didn’t you find the problem?”

The reality is that every shop cannot possibly perform a comprehensive vehicle inspection on every car, price out that inspection, contact the customer for approval, and have the car ready at the time promised, on that day. There are not enough resources in the shop, nor hours in the day, to do that. And not every customer wants this anyway. It’s a waste of time if the customer isn’t interested in what you find, and it can demoralize your shop’s staff, which has done all that work to end up with no sale.

So how do you pre-judge who is worth spending time and energy on? Customers who say “yes” to a $39.95 comprehensive vehicle inspection are telling you they:

  • are interested in keeping their vehicle in top condition;
  • have the time to spare for an inspection;
  • are more likely to authorize — and pay for — a repair that day.

Now, what about customers who decline a comprehensive vehicle inspection for $39.95? Simply tell them that every vehicle gets a complementary courtesy check that covers the basics like brakes, tires, wipers bulbs and other items.

Don’t get me wrong: You will still want to check out every car and you will generate a lot of sales based on those courtesy checks. You just want to be smarter about where and how you spend your time.

How did I arrive at $39.95? There’s no exact formula. However, I recently walked into my local tire store and asked the salesperson there what the dealership charged for a comprehensive vehicle inspection. “We charge $9.95,” he said. That was the same amount I charged for a comprehensive vehicle inspection at my store way back in 1994 — 25 years ago!

I thought, “There is no way that $9.95 covers the time and effort required to inspect a vehicle.” I then thought, “Someone is afraid to raise a price and educate their sales staff on the value of that inspection” (see my December 2018 MTD article, “The power of pricing,” for more insight).

The salesperson then told me that 80% of his dealership’s customers who were presented with the comprehensive vehicle inspection offer bought it. I thought, “There you go. It’s too cheap.”

Eighty percent is way too many. An acceptance rate of 25% to 35% would be about the right mix, with the remaining customers getting a courtesy check.

Now, this store does not offer comprehensive vehicle inspections to everyone who walks in the door, because I’ve taken four different vehicles to it, and the offer was never made to me. A comprehensive vehicle check should be presented 100% of the time, within reason. (A simple counter card would be the best way to explain the service, with vehicle inspection information on one side and courtesy check information on the back.)

If you implement offering comprehensive inspections, you should track the service, measuring how well your staff adheres to selling it, as well as incremental revenue from the inspections and resulting sales. Then see if you have any positive change in store morale as your sales team gets smarter about selling in a more focused manner.

A store that’s open six days a week with 30 customers per day and converts 25% to a paid $39.95 vehicle inspection will generate over $90,000/year in incremental revenue off the paid inspection alone, not counting the add-on tire and service sales from them.

I have yet to encounter an independent tire dealer selling inspections in this manner. Now, what does this have to do with mergers and acquisitions? Inspections, presented properly and done well, drive revenue and profits. Profits drive business valuation. Higher valuations, in turn, result in larger transactions. And if you’re not selling comprehensive vehicle inspections, you’re leaving money on the table. ■

Michael McGregor is a partner in Focus Investment Banking LLC (focusbankers.com/tire-and-service) and advises and assists multi-location tire dealers on mergers and acquisitions in the automotive aftermarket. For more information, contact him at michael.mcgregor@focusbankers.com.

Related Topics: Michael McGregor, retail, vehicle inspection

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