Focusing on getting control, growing your business

Business management tools should do two things: they should simplify running a business and provide ways of generating new business. The mistake some independent service providers make is choosing a software package that does neither, or choosing software that is complicated and difficult to integrate into a shop’s operations. If a shop owner or a shop’s technicians spend more time trying to learn the software that software has become a liability to the shop.

Simplifying inventory control

Inventory control is the key to running a successful independent service shop. Too often, tracking of parts can become a haphazard affair, resulting in lower profits as parts remain unaccounted for and unsold.

Peter Steele, president of the Toronto-based Protractor Software Inc., a supplier of software products and computer services for independent service providers and Internet-enabled management tools, said proper inventory control must help a shop owner properly track and estimate the costs of parts to the business so as to improve gross profits.

“A good inventory control system must be able to properly track a part from that part’s first ordering, through to accounts payable and the return of the item, and its impact on the bottom-line,” Steele added. “For example, take a $100 item that has been purchased. If your average gross profit is five per cent, you take that $100 and divide that by five per cent and that will tell you how much money you will have to make in order to make that money back.”

Not being able to successfully track the parts ordered or what parts are in the shop means a loss of profit as the shop will not know how much was spent and how much should be charged in order to make a profitable return on those parts.

“It does not take too much leakage to do a lot of damage,” Steel said.

Danny Lankar, president of the Concord, Ont.-based Autogence Inc., maker of the Lankar Shop Management System, said Autogence’s Lankar tools simplify the ordering and processing of parts in the business, so costs can be better managed, along with better tracking of the parts ordered and returned.

The Lankar system is made to provide shops with online ordering of parts from such suppliers as NAPA, CarQuest, and WorldPac’s operations in the U.S. and Canada. Autogence is also working to build more online ordering functionality with a wider range Canadian jobbers and distributors and to be rolled out to Lankar users.

Protractor also offers online ordering of parts as well as Poway, Calif.-based Mitchell1’s management software.

Online ordering can also improve inventory management by letting a shop automatically enter part information and price directly into the management and accounting systems. The systems will take that online part information and use the information to manage the costs, margins and other bottom-line accounting processes so the shop can get a handle on its overall costs and to better control what is coming in and going out of the shop.

Steele said Protractor comes with a ‘parts pricing matrix,’ that uses the online ordering functions of the software so that the shop can quickly calculate the sell price of that part, in order for the shop to make a return on its investment.

The Lankar software uses the online ordering information to calculate margins based not only on the cost of the items, but also on the class of the items being purchased and the buying habits of the shop. A shop ordering large numbers of the same parts online can take the discount the jobber or distributor has for that shop and the shop can automatically calculates what kind of margin the shop is looking to make on that part and calculate the price the shop needs to sell that part to make a profit.

Online ordering can provide a small shop an added benefit, in that the shop does not have to stock on-premise a large number of parts. Management systems using online ordering means a small shop can only order the parts it needs for a particular job and not incur the costs of ordering parts that sit on a shelf not making money.

“The trend in today’s aftermarket repair is to minimize the amount of inventory a shop has to carry,” said Bill Colman, president with Costar Computer Systems in Sherwood Park, Alta. “Online ordering lets the user determine whether the stock they need is available locally, what the price is and whether the supplier can deliver it just-in-time. This translates into a better gross margin at the end of the day.”

Costar has developed strategic alliances with select jobbers and distributors, so shops can order directly online from those suppliers using Costar’s business management system.

Mining customer information for future business

What separates business management software from ordinary accounting software and most small business software is the ability to mine customer data for potential future business and to build and maintain customer loyalty. Successful independent service providers know success comes from developing customer loyalty and getting a customer to come back into the shop regularly, not just when something severe happens to the vehicle.

“Our shop management system is designed around customer retention and management, and soliciting business from existing customers,” said Lankar. “We’ve put systems in place that help bring people (back) through the door.”

These features include Vehicle History and Vehicle Reminder notices, reminding customers of regularly scheduled maintenance work, and Customer Mailer and Email notices that can be used to ask for feedback on the shop’s work and service, to scheduling profitable maintenance work such as replacing timing belts or water pumps based on the vehicle’s maintenance schedule or the pervious work the shop has done on that vehicle.

These kinds of tools are not available in standard accounting packages or most small business software, and using them can mean a loss of potential long-term business and profit.

“Our thought process is that while the customer is in the location, one should be booking the next appointment,” said Steele. “And if I am able to book that next appointment then I can remind him as to the future appointment in order to ensure that commitment. We have the Protractor 360 that will send a customer an email thanking them for their service and linking to a customer satisfaction survey. And we have developed relationships with CRM companies that will extract the shop’s (customer) data and will handle the email follow-ups and future customer contacts.”

Effective use of business management software can also streamline how a shop operates, gathers customer information and presents that information to the technicians so they can be more efficient.

John Dwulet, senior product manager for Mitchell1, said good business management software standardizes the business processes that happen in shop so everyone has access to the same customer, vehicle and part information and that information is collected and presented in the same way at all times. This consistency helps in building customer relationships and gathering the necessary information needed to use those relationships to generate more business.

“In the aftermarket, we have to compete against the dealerships that are nipping at our heels,” Dwulet added. “One of the features of our product is that it can generate a new customer report and it can give me a snapshot of the RO, the dollars that customer spent, comments and recommendations from that customer which I can use to follow-up on. But we can take that RO and put a synopsis of it on a technician’s work sheet.”

Mitchell1 is also close to rolling out a VIN coding reader that the technician can use to scan the VIN code of a vehicle and use that information to better serve the customer and directly input that information into the Mitchell1 system so it can be used to generate new business.

Resource List

Autogence Inc. www.lankar.com

Costar Computer Systems www.costar.ca

Protractor Software Inc. www.protractor.com

Mitchell1 www.mitchell1.com