Business Management: Is Your Business Too Busy To Make Any Money?
One of the critical elements that independent shop owners must realize is that there are times when the shop can be too busy to make money. It becomes dangerous when this is a constant. Management see...
One of the critical elements that independent shop owners must realize is that there are times when the shop can be too busy to make money. It becomes dangerous when this is a constant. Management seems to concentrate more on getting more customers rather than concentrating on making “profit” from the customers it already has. Everyone in the shop is running around trying to please everyone that comes through the door, to insure the needed cash flow hits the bank account “today”. This is a sure signal that the business is heading for trouble.
The most important profit on a sale comes from the billed labour component. The correct number of labour hours billed per vehicle service, based on the manufacturers’ recommendations, is critical to the shop’s bottom line.
You’re in the “knowledge” business, not the “commodity/volume” business, therefore your responsibilities to your customer/clients go a lot further than just “selling them a job”.
Consider the reality that the average customer/client is unenlightened regarding proper service and maintenance of their current vehicle.
Consider that to properly advise and educate the customer/client, the front counter person should be aware of how many kilometers are driven each year, how the vehicle is used (highway, city, off-road driving), whether the customer/client owns or leases the vehicle, what the customer/client’s expectations are regarding the vehicle and the service history of the vehicle.
Consider how many labour hours billed a year the vehicle needs to insure it is in safe, reliable condition at all times throughout the year, for the customer/client.
It is the front counter person’s job to slow down and clearly communicate to the customer/client the needs for the vehicle based on the manufacturer’s recommendations. Your shop is the messenger of the news, not the maker of the news. When the shop is “too busy”, everyone says there is no time for this. It sounds like the shop is working hard and not necessarily smart.
Do this test to see how you are faring:
1) Take a random 5 to 10 of your customer/client base that you have had for at least three years, where they still have the same vehicle, and examine the past two years’ work done on each customer/client’s vehicle. Add up the total number of labour hours from the work-orders/invoices that was billed on each vehicle during those two years.
2) Calculate the total kilometers driven by each customer/client over that service period (ie. 35,000 km, which works out to 17,500 per year) and record what interval was the vehicle at when the vehicle came into the shop.(ie 60,000 km, or 130,000 km).
3) For the same period of time, look up in Mitchell on Demand or Alldata, the service requirements that were recommended by the manufacturer for the same kilometers driven and service interval, and add up the total minimum labour hours the manufacturer recommended that should have been spent to ensure that vehicle was properly looked after.
How did you make out? If you’re in the ballpark, (10% difference) well done, it looks like your system is working and you have a good relationship with your customer/clients. However, if you are severely short in billed time (you did not get all the work), it may be time to slow down and examine your internal system of how you are dealing with your customer/client base. Do you counsel them, or do you sell them? Do you have a trustworthy relationship with them? Is there room for improvement?
Now move on to the second phase of the test:
Take the same vehicles and examine what the manufacturer recommends for the next two years, based on the kilometers driven. (Use the history here). Calculate the available labour hours to be billed. Now be very aware of your progress with these customer/clients when they come in. SLOW DOWN. Take the time to educate the customer/client. Show them what the manufacturer recommends by printing out the appropriate service intervals. You’re the messenger here, that’s all. Based on your expertise, and understanding of the customer/client, are these service recommendations a good investment for the customer/client to make? If so, point out how the relatively small investment to maintain the vehicle makes sound financial sense to the customer/client rather than spending a substantial amount of money, or increasing their debt load, to buy a new vehicle. If it is not a good investment, counsel the customer/client that it is time to replace the vehicle, and you would be happy to advise them based on their needs.
Your customer/clients are usually too busy to look after their own vehicle. Set up the system to manage these high-tech machines for them. Many vehicles are outright abused by the customer/client because of ignorance of the vehicle service/maintenance requirements the manufacturer recommends. Take the responsibility to insure your client base gets an excellent return on their investment. When you do, I’m confident you will also see the bottom line grow.
When you accomplish the right level of labour service with these clients, now carry on and make it a system of doing business with the rest of your client base.
It’s up to management to make things happen. It’s up to management to make sure the right system is in place. Take your time, and be patient with yourself to see this through. Give yourself a year of thorough dedication to make this happen. If it was easy everyone would do it, but the best thing is that your customer clients will notice the personal attention you are giving them, and that makes you distinctly different in this industry. Being distinctly different gets people talking positively about your business. Now you’re making a dent into your marketplace.
Some people dream of success; others wake up and work at it each day.
Robert (Bob) Greenwood is President and C.E.O. of E. K. Williams & Co. (Ontario) Ltd. Bob has over 26 years of Business Management experience within the automotive industry, counseling individual shops in Ontario, and has developed Business Management courses for the independent maintenance and repair sector, proven to enhance the shops profitability and grow the business with a controlled, focused procedure. Bob has also worked with wholesale jobbers to do a better job for the installer by providing valuable insight as to the real challenges faced by the retailer today — and challenges the jobber to move to a new level of thinking and operating, where a proven vision for the industry enhances the profitability of both businesses.
E. K. Williams & Co. (Ontario) Ltd. offices specialize in the independent sector of the automotive industry, preparing analytical operating statements for Management purposes, personal and corporate tax return completion, business management consultation, business management and employee development courses, and industry specific software.
Bob can be reached at (613) 836-5130, 1-800-267-5497, FAX (613) 836-4637, or by E-mail, firstname.lastname@example.org.
Visit E. K. Williams & Co. on the Internet at www.ekw.ca and sign up for their FREE monthly Management Letter sent to you by E-mail.