Auto Service World
Feature   December 1, 2014   by Murray Voth, TACT

Are You a Dragon?

Many of you are familiar with the television shows Dragons’ Den in Canada or Shark Tank in the United States. Over the course of the last few years I have teasingly asked shop owners if they would consider taking their shop business model...

Many of you are familiar with the television shows Dragons’ Den in Canada or Shark Tank in the United States. Over the course of the last few years I have teasingly asked shop owners if they would consider taking their shop business model to the show to ask for an investment.

Of the hundreds of shops I work with, only one or two said they would with any confidence. I then ask the rest why they wouldn’t do it and they all say it’s not that good of an investment. Of course that opens up the conversation as to why they would bother putting their own money into such a poor investment. In the same vein I then ask them what they would do if they won a lottery prize of $500,000. The majority say they would take a trip somewhere warm, pay off debt and invest the rest. When asked what return on investment they would expect, it is usually more than the return they are currently getting on their business.

What I have discovered is that most shop owners start their business on a shoestring. They rack up their credit cards, push their suppliers to 90 days and borrow from friends and family.

After five to 10 years of hard work and stress they eventually pay everyone off, but in their minds it happened so slowly, they don’t see how much their business is worth. They don’t see it as a lump sum of money that needs to have a return on investment.

What is Your Business?

In a spinoff show of Dragons’ Den called “The Big Decision” featuring Dragon Arlene Dickinson, Arlene visits several businesses that she has committed to investing in. One of the businesses was a three-generation family business on Vancouver Island that had been manufacturing logging boots for decades. They produced a quality product. The decline in the forestry industry, however, was putting pressure on their business. They had decided to get into manufacturing men’s and ladies’ fashion footwear.

This is where Ms. Dickinson comes into the picture. They wanted her to invest in their expansion into these new markets. Among some of the tasks she asked them to do to prepare for her to invest was to attend a footwear buyers’ show in Vancouver to display some of their products.

In an arrogant tone, the owners of the boot company put down the show and did not attend. Their reason for not attending was that they thought no one would get how expensive their footwear was. A pair of logging boots costs $850. Little did they know that this show was attended by top fashion boutiques, department stores and shoe stores. There were shoes displayed that sold for over $4,000.

How many of you are still competing in the cheap oil change market? Did you know that a VW Level One Service is $240 and it is basically an oil change with a tire rotation and a 25-point inspection?

In conversations with a representative of a provincial automotive service provider association it came up that the majority of their members still prefer to use fax to communicate rather than email. A couple of weeks later, I was speaking with an automotive technical trainer and he stated the same. In fact, he estimated that only 20 per cent of the shops he deals with use email. The rest prefer fax. A salesman for a large parts company told me that in one Ontario city there are seven shops he calls on and only two are using computer invoicing systems. The other five are still hand writing invoices.

Many shop owners who are very hard working and very intelligent have not learned how to attach a file to an email or to copy-and-paste a file on a computer from one folder to another. I still find that about half of the shops I work with still do not have a website or any other web presence. Happily it is improving more this year than ever.

The business tracking website Manta lists 16,500 automotive repair shops in Canada, including dealers. The Canadian Automotive Dealers Association claims 3,200 members. So my math shows that there are about 13,300 independent repair shops in Canada. It is my impression that most new car dealers invest a lot in training for their employees. In a conversation last spring with an automotive consultant with over 30 years of shop software and training experience, we discussed the level of participation in management training by shop owners.

His research shows that barely 10 per cent of all independent shop owners participate in training outside of vehicle technical training. That lines up very closely with studies by Stats Canada. Stats Canada finds that on average only 10 per cent of Canadians from all professions take additional schooling or on-the-job training after their initial schooling for their profession. A very good friend of mine in the automotive parts business stated it well.

He said, “Most shop owners are very good at diagnosis and repairing vehicles. They assume that because they are good at that, they are good at running a business.” In fact, he finds that many get offended when invited to take management training.They reply by asking the parts salesman who invites them to the training if he or she thinks they are stupid. That is the last time a parts salesman tries to present a training opportunity to that shop.

I am sure most of you are aware of the shortage of qualified technicians in our industry. Alberta has been suffering the longest. Manitoba and Saskatchewan joined not long after, and then BC and the Maritimes began to notice this challenge. However, it has taken till the last 12 months for this issue to really hit Ontario.

As we all know, it is the resource sector with its high wages that has been drawing all of the trades away from their traditional jobs and roles. I work with some of the better shops in Ontario, and they are now at the $30 plus an hour level for good qualified technicians in many parts of Ontario. However, many shops are at labour rates that are much too low, and their productivity and efficiency are poorly managed. Shops with labour rates as low as $68 an hour that are paying technicians $22 to $25 an hour are going to be suffering very soon from this same shortage. The sad thing is that many of these shop owners think they are being generous at $25 an hour, or even make statements like “that’s all they are worth.”

What a Professional Looks Like

At this point you may be wondering how all of these separate paragraphs are related. What I am doing is building a case for what a professional shop owner looks like. First, a professional shop owner is an investor. The purpose of getting into business was not to fix cars but to create wealth, for themselves and for their employees.

A serious investor or shareholder holds their company accountable to generate the returns required by their investment. Secondly, this top-notch business owner is aware of their business surroundings and the impact the world around them will have on their business. Any human being can put blinders on and just look at what is in front of them. The people I admire and try to emulate take off the blinders, face the truth around them, deal with it and move on. Thirdly, a good shop owner understands how important it is to be relevant.

Just as a cheap shop owner will attract cheap customers, shop owners who do not embrace appropriate business management technology will become irrelevant to the next generation of customers. I have stressed out many a shop owner by asking them how many customers they have under the age of 45. Some of them have said “none,” with terrified looks on their faces. The investment in training shows that you are an adaptable businessperson.

How many businesses or business models no longer exist because they do not adapt? How many shop owners are willing to take responsibility for the current shortage of qualified technicians? How many of us have paid as little as possible for as long as possible, mostly because we did not know how to operate profitably? How many of us have taken the risk and invested the cost of hiring an apprentice? How many of us have undersold the work and knowledge that our technicians bring to the table? And lastly, how up to date is your business with the technology required to service, diagnose, repair and maintain the modern vehicle? Do you have a plan on how to catch up and keep up with the latest training for your team and equipment for the shop?

I see more shops today subletting their diagnosis and vehicle data updating to other shops that have invested in the tools and flash technology. What happens as your customers find out that you do not have the skill yourself? They are going to find that other shop. In the end it is all about the confidence that comes from fiscal accountability, relevance, adaptability, and ownership and staying up to date.

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