What Is My Auto Repair Shop Worth?

Auto repair shops are among the most commonly sold small businesses in the country. The industry is massive, fragmented, and increasingly attractive to private equity firms and consolidators building multi-location platforms.

If you're thinking about selling your shop, here's how to understand what it's worth.

Typical Valuation Ranges

Most auto repair businesses sell for 2x to 3.5x SDE (Seller's Discretionary Earnings) or 3x to 5x EBITDA for larger operations with management in place.

Factors that push toward the higher end:

• Multi-location operations
• Consistent revenue growth over 3+ years
• Diversified service mix (not just oil changes)
• Recurring revenue from fleet contracts or maintenance plans
• Strong online reputation (Google reviews, Yelp)
• Real estate included or favorable long-term lease
• Experienced technicians who stay with the business

Factors that push toward the lower end:

• Owner is the primary technician
• Declining revenue
• Deferred equipment maintenance
• Short-term or unfavorable lease
• Heavy competition in the immediate area
• Environmental liabilities (underground tanks, waste disposal issues)

What Makes Auto Repair Shops Attractive to Buyers

Recession-resistant demand. People need their cars regardless of the economy. Repair and maintenance spending holds steady even during downturns.

Aging vehicle fleet. The average age of vehicles on the road is now over 12 years. Older cars need more repair work, and this trend favors independent shops.

Fragmented industry. Most auto repair shops are single-location, owner-operated businesses. PE firms and regional chains see this fragmentation as a roll-up opportunity.

High barriers to switching. Customers who trust their mechanic are reluctant to switch. A shop with strong customer loyalty has a real competitive moat.

Recurring revenue potential. Fleet contracts, maintenance packages, and commercial accounts create predictable revenue that buyers will pay a premium for.

Key Metrics Buyers Evaluate

When a buyer looks at your shop, they're focused on:

Revenue Per Bay

Industry benchmarks suggest $150K–$250K+ in annual revenue per bay for a well-run shop. If you're below $150K per bay, there may be utilization issues. Above $250K signals a high-performing operation.

Gross Margin on Parts and Labor

Healthy shops run 50-60% gross margins when combining parts markup and labor revenue. If your margins are below 45%, buyers will question your pricing strategy or parts sourcing.

Average Repair Order (ARO)

Higher AROs generally indicate a shop that does meaningful diagnostic and repair work rather than just commodity services. An ARO above $400 is strong for a general repair shop.

Technician Retention

Experienced technicians are extremely hard to recruit. If your team has been with you for years, that stability is a significant asset. If you have high turnover, buyers will discount accordingly.

Customer Concentration

If 30% of your revenue comes from one fleet account, that's a risk. Diversified customer bases are more valuable.

Environmental Considerations

Auto repair businesses have unique environmental liabilities that affect value:

• Underground storage tanks. If your property has or had underground fuel tanks, environmental remediation may be required.
• Waste oil and fluid disposal. Buyers will want to see proper hazardous waste handling and documentation.
• Phase I environmental assessments. Most buyers (and their lenders) will require a Phase I environmental site assessment as part of due diligence. It's smart to get ahead of this before going to market.

Unresolved environmental issues can delay or kill a deal. Address them proactively.

The Real Estate Question

Many auto repair shop owners also own the property. This creates options:

1. Sell both together. Simplifies the deal but may limit your buyer pool (not every buyer wants to purchase real estate).
2. Sell the business, lease the property. You retain the real estate as an investment and collect rent from the new owner. This is often the most tax-efficient approach and creates ongoing income.
3. Sell both to different buyers. You might get a higher combined price by selling the business and real estate separately, but the complexity increases.

The right approach depends on your tax situation, retirement plans, and the local real estate market. Discuss with your CPA and broker before deciding.

How to Increase Your Shop's Value Before Selling

1. Invest in your team. Hire and retain ASE-certified technicians. A strong team is your most important asset.
2. Build fleet and commercial accounts. Recurring B2B revenue is worth more than walk-in consumer revenue.
3. Upgrade your equipment. Modern diagnostic tools and lifts signal a well-invested operation.
4. Get your books clean. Separate personal from business expenses. Track revenue by service category. Maintain 3 years of accurate financials.
5. Build your online presence. 100+ Google reviews with a 4.5+ rating matters more than you think. Buyers check.
6. Secure your lease. If you don't own the property, negotiate a long-term lease (5+ years with renewal options) before going to market. Short leases scare buyers.

Ready to Find Out What Your Shop Is Worth?

I provide free, confidential valuations for auto repair and automotive service business owners in California. If you're thinking about selling in the next few years, schedule a call and I'll give you an honest assessment.