Can't Pay Wages in Your Auto Repair Shop? How Tanya and Godfrey Turned It Around

If you can't pay wages in your auto repair shop, the answer is rarely more work. Look at what you charge for the work you already do, and where that money goes once it lands. Fix your labour rate first, then put money aside before it gets spent. That's what turned GTN Services around for Tanya and Godfrey Nardone, who had been paying their team out of their own pocket.

If you're carrying the business on your own savings and hoping next week is better, you're not a bad operator. You're where plenty of good ones end up when the price has been wrong for too long.

Two months of paying the team from their own pocket

Tanya and Godfrey run GTN Services, a mechanics workshop in remote Western Australia. It's a two and a half hour drive to Kalgoorlie for groceries, and they talk business the whole way there.

For about two months, the business couldn't pay its wages. They paid them anyway, out of their own funds. Tanya was the one looking at the dollars, and one day she'd seen enough.

"I made Godfrey get into the car and we drove around the block so that we weren't sitting in the workshop."

Then she said it out loud:

"We are at a point where we have no money. We can't pay our bills. We can't pay our wages. It's over. You need to do something about this or just shut the door."

She called it an ultimatum, and she meant it. "I'm not going to sit here and do this anymore."

Underneath the wages problem sat a bigger one. They hadn't put their tax returns in for three years. The reason is painfully honest: "Cuz I didn't want to know how much I owed."

Sound familiar? I've had this conversation with more auto repair shop owners than I can count. When the numbers are frightening, you stop looking at them, and for a while that feels safer. The trouble is the debt keeps growing while you're not looking, and you can't fix a number you haven't seen.

What Tanya and Godfrey actually changed

They made two hard decisions, and then they stuck to them.

They raised their labour rate. GTN Services was billing $120 an hour. They went to $150 an hour, a $30 jump, "which is a significant raise," as they put it. For many owners that number alone would be enough to keep them awake at night.

They started putting money aside. Tanya began setting money to one side, so the bills stopped arriving as a surprise.

Neither decision felt comfortable. As they describe it, they both got to the point where they said "shut your eyes, grit your teeth and bloody do it." And then: "A lot of it went against the grain but it was like no, we're going to do it. We're committed."

They didn't wait until they felt confident. The confidence came once they saw the results.

"Everyone's fear is, oh my god, we'll lose all our customers"

I hear that fear every week. You put your labour rate up, the regulars go down the road and the yard empties out.

Did that happen at GTN Services? "No."

They're doing less work and making more money. "But the workshop's happier."

When every hour is worth more, you don't need to cram as many jobs through the door to cover the bills, so the team isn't flat out chasing volume. That's the difference between pricing your work properly and running on a tyre shop mentality, where you discount to stay busy and the whole team carries the pressure.

From no money to $60,000 put aside

The money they'd been putting aside started to add up. In a short period of time, as one of them tells it, "I think we had $60,000, and I'm going, where did that come from?"

Not long before, they were paying wages out of their own savings, with three years of tax returns not lodged. Now they were looking at a balance they couldn't quite believe.

What came with it mattered as much as the number: "I think I just had a sense of relief." And then: "It's working. This is going to work."

"It's not going to be all at once, but I can actually see that we have a really viable business. One that can actually make us money."

Hear it from Tanya and Godfrey themselves. Two minutes, from the drive around the block to the money they didn't know they had.

What this means for your shop

If you're where Tanya and Godfrey were, here's how to make the same changes in your own garage or automotive workshop. They did it as members of The Engine Room, with a business coach who has run an auto repair shop, and you can start on every step below tonight.

If you can't pay wages, look at your price before you look for more cars. Being flat out and broke at the same time is the classic sign that the work isn't priced to cover what the business costs to run. We cover why that happens in Why Am I Busy but Not Making Any Money?

Work out what your labour rate should be, then raise it. Tanya and Godfrey went up $30 in one move and committed to it. Don't announce it to your customers, do it: update the rate in your system and invoice at the new price from the next job. Start with How to Work Out What Your Labour Rate Should Be, then read How to Raise Your Labour Rate Without Losing Customers.

To see what a rise is worth, use your own hours. As an illustration only, a shop selling 100 hours of labour a week that adds $30 an hour brings in an extra $3,000 a week from the same hours. The wages and rent haven't changed, so almost all of it is profit.

Put money aside before it gets spent. The wages crisis and the unlodged tax are both cash flow problems at heart. How Do I Fix Cash Flow in My Auto Repair Shop? walks through how to stop every bill from catching you off guard.

Pay yourself, too. Using your own funds to cover the team means the business is taking from you instead of paying you. Why Isn't My Auto Repair Shop Paying Me? explains where that money is going.

Questions auto repair shop owners ask

What do I do if I can't pay wages in my auto repair shop?

Get the real numbers in front of you first, including any tax you've been avoiding, and speak to your accountant about what's owed and when. Then look at your labour rate. If you're busy and still short, the work is underpriced. Borrowing to cover wages buys you a week; fixing the price fixes the reason you're short.

Will I lose customers if I put my labour rate up?

For Tanya and Godfrey, no. They raised theirs from $120 to $150 an hour and had the same fear. They ended up doing less work for more money, and the workshop was happier for it.

Should I close my auto repair shop?

Not before you've fixed the price and looked at where the money goes. GTN Services was one conversation away from shutting the door, and today they can see "a really viable business." Closing can't be undone, and changing your labour rate can be done this week.

Where to start tonight

Pull up last week's invoices and count the labour hours you actually billed. Then write down your current labour rate beside it.

Multiply those hours by $10, $20 and $30. Each answer is what that week would have been worth to you at a higher rate, and it's money you're currently paying the team from your own pocket instead.

Tomorrow morning, open a separate account and move something into it, however small, then do it again every week.

Related questions:

• What Is Effective Labour Rate and How Do I Calculate It?
• How Should I Charge for Diagnostics?
• Should I Discount to Win More Customers?

See what changes for the people who do this work. On our Our Clients page, auto repair shop owners, named and on camera, tell you what actually changed in their shops and their numbers.

More on this topic: all Pricing articles.

Whenever you're ready, here's how we can help.

• Not ready to spend anything yet? Start free with Shop Talk, a 30-day reset for auto repair shop owners on our YouTube channel, and our free resources for auto repair shop owners.
• Want to stop carrying the business on your own savings? The Engine Room. It changes how the whole business runs, from your numbers to your pricing to your team, delivered online with one-on-one coaching on demand from a business coach who is a current or former auto repair shop owner.
• Running an auto repair shop under $50,000 a month? Auto Superstars Academy builds the foundations first, with the same one-on-one coaching on demand.