General auto repair shop profitability and payback
Illustrative case · Three-bay independent mechanical repair shop with two technicians and an owner service adviser · United States · illustrative case, no city selected
Explore this business · Profitability and payback
The base case produces $491,738 in first-year sales and $5,182 in EBITDA after the paid owner allowance. Year 1 cash changes by −$18,673 after working capital and scheduled debt. First-year EBITDA is positive in this case, but it is not spendable owner cash. Debt principal and working-capital investment still have to be funded; the closing-cash rows show their effect.
Build sales from the operating unit
Labor revenue is billed hours multiplied by the realized labor rate. Parts revenue is an assumed amount per billed hour, with a separate parts cost. This creates a coherent average repair mix but is not a universal parts-to-labor ratio. Diagnostics, maintenance and heavy repairs can have very different parts content.
Reconcile billed hours to authorized and completed jobs. An estimate waiting for approval is not earned sales, and a posted door rate can exceed the realized rate after discounts, packaged services or unpaid rework. Use collected work-order data when replacing the illustrative assumptions.
| Input | Case assumption |
|---|---|
| Service bays | 3 |
| Available paid technician-hours / week | 80.0 |
| Maximum billed share of paid time | 82.0% |
| Mature billed technician-hours / month | 235.0 |
| Customer labor charge / billed hour | $135 |
| Parts revenue / billed hour | $90.00 |
| Cost of parts / billed hour | $55.00 |
| Shop consumables / billed hour | $6.00 |
| Available hours / bay / week | 40.0 |
| Payment processing / sales | 3.0% |
| Input | Assumption |
|---|---|
| Average collection days | 5.0 |
| Material inventory days | 15.0 |
| Opening demand / mature neutral-month demand | 55.0% |
| Months to complete the demand ramp | 12 |
From revenue to operating profit
Both technicians are paid for their scheduled hours, including non-billable time. The owner-adviser receives a separate allowance. Parts, consumables and payment fees vary with billed work; rent, utilities, insurance, software and waste/maintenance allowances remain fixed.
Contribution per billed hour therefore excludes technician wages because they are already counted in the fixed roster. A flat-rate or subcontract compensation arrangement would need a different model. Do not compare this contribution measure directly with a job report that has already deducted labor and then subtract that same payroll again.
| Cost | Monthly amount |
|---|---|
| Primary employee compensation, loaded | $12,757 |
| Support compensation, loaded | $0 |
| Owner compensation, loaded | $6,900 |
| Premises rent | $4,200 |
| Utilities | $850 |
| Insurance | $950 |
| Software and subscriptions | $550 |
| Routine maintenance | $600 |
| Marketing | $650 |
| Waste services | $350 |
| Other operating allowance | $400 |
| Mature monthly fixed operating cost | $28,207 |
| Metric | Year 1 | Year 2 | Year 3 |
|---|---|---|---|
| Sales | $491,738 | $634,500 | $634,500 |
| Variable operating costs | $148,068 | $191,055 | $191,055 |
| Paid roster and fixed overhead | $338,488 | $338,488 | $338,488 |
| EBITDA, after owner compensation | $5,182 | $104,957 | $104,957 |
| Profit after depreciation and interest | −$21,390 | $79,381 | $80,480 |
| Increase in inventory and receivables | −$725 | $0 | $0 |
| Principal + interest | $24,580 | $24,580 | $24,580 |
| Cash change after debt | −$18,673 | $80,377 | $80,377 |
| Closing cash | $66,327 | $146,704 | $227,081 |
EBITDA excludes depreciation, interest and income taxes. Profit before tax includes depreciation and interest; it excludes debt principal. Cash also reflects inventory, receivables and principal repayments. The model assumes no supplier credit or customer deposits.
What happens when demand changes
Demand changes the number of billed hours while the two-technician roster remains paid. Higher demand stops at the productive technician and bay capacity. More inquiries cannot produce unlimited invoiced labor. The volume scenarios do not simulate a technician vacancy, difficult diagnostics, parts shortages or an increase in warranty returns; test those separately when choosing the reserve.
The lower case uses 80.0% of base demand and the higher case 115.0%. These are sensitivity cases, not probability estimates. A negative cash balance is an unfunded requirement and would require intervention; the model does not assume access to an overdraft.
| Case | Year 1 sales | Year 1 EBITDA | Year 1 closing cash | 60-month minimum cash |
|---|---|---|---|---|
| Lower demand | $393,390 | −$63,552 | $648 | −$32,600 |
| Base demand | $491,738 | $5,182 | $66,327 | $51,078 |
| Higher demand | $565,498 | $56,732 | $115,586 | $71,437 |
When the opening investment is recovered
The first modeled recovery of opening project funding occurs in month 40. This is project recovery before financing, not an equity distribution schedule.
Simple recovery includes the opening shop investment and ramp losses before financing, without assigning resale value to lifts or goodwill. The period excludes income taxes and major replacement capex. A positive mature shop margin is not the same as a recovered investment, particularly if the early months have low authorized labor volume.
Owner pay and remaining business cash
The owner’s pay covers service-adviser and management duties. No owner mechanic-hours are included in capacity. If the owner starts doing repairs, estimate the adviser cover required to maintain estimates, approvals, parts ordering and customer communication before assuming that all extra wrench time is billable.
Owner base compensation is $6,000 per month; the budget also includes the employer-burden allowance. Additional owner distributions are zero. The mature monthly cash surplus after scheduled debt, before taxes and incremental working capital, is $6,698. This mature point is different from the opening-year result.
Read the result before adopting the forecast
The base first-year operating result (EBITDA) is $5,182. The lowest modeled cash balance is $51,078, compared with the opening reserve of $85,000. The difference, $33,921.69, shows reserve consumed by the lowest point in the modeled horizon; it is not an additional equipment expense or a loan repayment estimate.
Compare two lift bays with a broader diagnostic/vehicle scope. Quotes must match slab requirements, subscriptions and technician competence; preserve cash for parts and settlement timing.
Owner compensation is included. The same opening funding applies across the published demand scenarios. A higher installed procurement cost needs more funding or less opening cash and a rerun of the forecast. Compare the monthly cash exhibit and scenario period rather than inferring opening-year affordability from a mature-month margin.
See the opening cash trough
View the monthly cash figures
| Month | Lower demand | Base | Higher demand |
|---|---|---|---|
| 1 | $80,283 | $82,668 | $84,456 |
| 2 | $66,996 | $73,623 | $78,594 |
| 3 | $54,919 | $66,091 | $74,470 |
| 4 | $44,052 | $60,070 | $72,084 |
| 5 | $34,393 | $55,561 | $71,437 |
| 6 | $25,944 | $52,564 | $72,529 |
| 7 | $18,705 | $51,078 | $75,359 |
| 8 | $12,675 | $51,105 | $79,927 |
| 9 | $7,854 | $52,642 | $86,234 |
| 10 | $4,242 | $55,692 | $94,280 |
| 11 | $1,840 | $60,254 | $104,064 |
| 12 | $648 | $66,327 | $115,586 |
Sources and scope
- Operating-case methodology · Checked 2026-10-01 · Authored illustrative assumptions and a 60-month model. Budget allowances, prices charged, demand, payroll, rent and financing are not observed local averages.
- BLS — automotive service technicians and mechanics · Checked 2026-10-01 · May 2025 national employee wage benchmark. US employee median, not a customer labor rate. A garage must fund nonbillable time, benefits/burden, premises, tools and administration from its sales margin.