AIA points to challenges ahead for service providers

While independent service providers will continue to face tough competition on a variety of fronts, the aftermarket can still provide amply opportunities for growth and profit if shop owners improve management practices and know how to spot new revenue opportunities.

Dave Meunier, president of Total Automotive Consulting and Training Inc. in Edmonton, Alta. told attendees at the 11th Annual AIA Aftermarket Forum that the potential for profit and job satisfaction has never been better amongst independent service providers.

“What we need to start telling people is that there is between $200,000 and $400,000 of net profit in this industry for each shop right now on the table.”

According to Meunier, the reason why so many shops often have difficulty in getting at the profit that is within the four walls of their business and the shop bays is too many shop owners do not think like business persons.

“The biggest mistake shop owners make is to believe they are technicians who have bought themselves a job,” Meunier added. “What they fail to understand is that they are actually running a business. And what they lack to be successful is the management training and (management) skills to succeed.”

Too often, shops will try to compete on price, a business model that is bound to fail in the long-term. Instead, what shops need to do to be successful is to improve the management of their shops so the resources, staff and technicians can be more effective and profitable. Poor management, according to Meunier, is what huts the bottom-line and makes it difficult to keep qualified technicians.

“I believe there is no shortage of technicians today,” Meunier added. “What we have is a shortage of good managers who can help improve productivity. If you have good management, you will keep good technicians.”

This was echoed by Doug Moody, owner and operator of an Active Green+Ross facility in Barrie, Ont. Moody said he relies on good managers and service advisors to keep a smooth flow of communications between customers and technicians, and to help meet long-term service and revenue goals. He also strongly suggested shop owners use management technologies and take management training in order to understand and communicate more effectively with customers. As well, shops should consider setting an objective business benchmark within a shop management system in order to measure their success.

“Our system allows us to use the gross profit number and we can educate our staff on the importance of that benchmark and to watch that benchmark,” Moody added.

Wm. “Mac” McGovern, director of training and marketing with KYB America said service providers should also focus on developing the revenues available from the vast amount of under-sold maintenance services, some $2 billion worth.

The problem is shops are not training technicians to focus on the sales potential of maintenance work, of replacing worn parts and systems. Too many times, parts are left to fail before they are replaced.

“Some 50 per cent of (a shop’s) gross sales are in parts,” McGovern added. “But (a shop’s) goal is to replace as few of them as possible. They think they are doing their customers a favour if they replace a part at the last possible second.

McGovern said service shops need to set a mission policy amongst all technicians and service staff to sell maintenance and parts; to train technicians to identify worn parts; and to develop ways to sell the parts and replacement work to customers in a way that is understandable to them.