How can I tell if an auto repair shop for sale is really profitable?

A shop’s summary may show a healthy profit that belongs to the current owner and no one else. The owner may turn wrenches, write up service orders and handle the phone, all for no wage. When you step in, those jobs either cost you your time or cost you a salary. The checks below test whether the profit stays when the owner leaves.

Put a wage on the owner’s hours

List what the owner does in a normal week: diagnosing, repairing, writing up orders, ordering parts, handling customers. Then decide who would do each job after the sale and what that person would be paid. If you plan to do some of it yourself, price your own time honestly. Your accountant can help you restate the numbers on that basis.

Personal costs and add-backs

Owners often run personal vehicles, phones, family members or travel through the shop. A seller may add some of these back to show a higher profit. Ask for the support behind each one and decide which you accept. An add-back that the business will still pay for after the sale is not really an add-back.

Reliance on a few accounts

Find out how much work comes from one or two fleet or commercial customers, and how those relationships are held. If they are with the owner personally, they may not follow you. Ask whether any arrangement is written down, and meet the customer before closing if the seller agrees.

Match deposits to invoices

Ask for bank statements alongside the shop’s sales reports and see whether deposits line up with invoiced work. Differences deserve an explanation. Then look at the revenue split in how to read a shop’s labour, parts and tire sales, since the mix affects how steady the profit is.