Do you sometimes worry about the financial stability of your business? You might have reason to if a significant number of your shop customers aren’t paying their statements in full each month, or are actually falling behind in their payments.
At some point, every jobber goes through a time of self-doubt about their financial stability.
This is understandable, given the fact that, on average, 60% of a jobber’s business comes from independent auto repair shops. When a growing number of shops are not paying their statements in full each month or are falling increasingly behind in their payments, it leads to feelings of insecurity.
That’s why a periodic review of your customer base is so valuable. From time to time, you have to determine who you’d like to keep as customers, and who you wouldn’t mind passing off to one of your competitors.
The math makes very clear that some customers are just too expensive to cater to. You can’t make good money from a shop that buys $500 to $1,000 worth of parts per month, especially if they don’t pay promptly. When you factor in the cost of delivery, the paper work (including credits), staff time, and accounts receivable carrying costs, there’s not much left in the way of gross profit.
That’s working hard, not smart.
Nevertheless, some jobbers cling to customers like that, figuring that “a sale is a sale is a sale.” Mathematically speaking, this is not strictly true. Sales are by no means equal. Think about how much better it is to sell to a shop that buys $12,000 or more every single month, and pays for it, in full, on time. Now that’s a client, not a customer!
To determine which shops are clients and which are just customers, it would be a good idea to schedule interviews to see if they’re on track to grow. This investment of time will pay off handsomely if you ask the right questions.
Successful service and repair shops have many common denominators. Your challenge is to strengthen your relationships with shops that demonstrate these traits, embracing them as key clients, and ensuring you get all their business as their supplier of first call.
Here’s what you’re looking for:
Shops that identify external issues that could affect their business.
Not every crisis comes from within the business. We’re seeing more and more that societal, regulatory, and technological changes can be imposed on an industry, bringing tremendous challenges. The best shops become aware of these things early, getting fully informed and involved, and deal with them effectively.
A perfect example of this occurred in Ontario where the Drive Clean emissions testing program ended, leaving a lot of shops in the lurch. The best shops reoriented quickly and didn’t lose business.
Shops that can spot key trends within the industry.
The best shop owners and managers are very conscientious about reading the latest trade journals and attending industry events to find out what’s coming down the ‘pike. They are very aware of the future trends and are now thinking about plans for the next two to three years to meet the challenges coming up.
Shops that track key metrics within their businesses.
The better shop owners know their numbers. They don’t run their business by their bank account balance or a gut feeling. They measure their business in detail, with many producing a full monthly operating statement including balance sheet. They analyze gross profit, productivity, and cash movement within their shop. They compile financial statements at least quarterly. They charge the correct labour rate, and hire competent technicians for their shop. They don’t run their business on price. They focus on quality and service to their client base. By measuring key business trends, they then can make sound business decisions on their shop to meet future industry issues.
Management that can implement solutions to shore up weaknesses.
Progressive owners are in perpetual motion to attack the most cancerous points within their businesses. They also understand “time frame” management. Not all financial or business issues can be resolved overnight; however, a plan to better their future two or three years from now is either in place or vigorously being devised. They know who they are selling to and, thus, the value of what they bring to their clients. I’ll say again that they do not run their business on price, price, price. Similarly, they understand that a jobber can’t always win on price but they do expect value from their supplier.
If you find all these qualities in a shop, hang on to them! Seeing these traits in operation should excite a progressive jobber, because shops like this strengthen the entire aftermarket industry and are solid building blocks for any jobber business.
The first question you should ask yourself is, quite simply, “Am I doing for my own business what the best shop owners are doing for theirs?”
Are you absorbing complex information, identifying new challenges, and devising strategies that turn threats into opportunities? If you aren’t, I have some disheartening news for you. The better shops already know it, and they’re keeping their distance from you. They’re very loyal to jobbers who have their act together.
These are the shops that are looking down the road three or four years. They want to partner up with a supplier who will still be right beside them as the industry changes.
Perhaps it’s time in your jobber business to re-evaluate what you stand for, who you are, and what value you can bring to the table. Why should you have the privilege of selling to the best shops in your market? Why do you deserve to be their first call?
Perhaps it’s time for you to reconsider what it takes to build, sustain, and enjoy a profitable business. Perhaps you need to reconsider what makes a good business relationship.
When jobbers and independent shops come together, speak openly and frankly, and determine how they can grow together, a new and profitable relationship will be forged. This is the kind of relationship that is required in the new aftermarket.
Bob Greenwood is an Accredited Master Automotive Manager (AMAM) who offers personal business coaching and ongoing management training for aftermarket shops, focusing on building net income. He can be reached at 1-800-267-5497 or firstname.lastname@example.org.