Living the Dream Versus Just Dreaming

You have heard me talk about maintenance shops versus breakdown shops. If we want to change our shop business reality — financial as well as industry reputation — we must first shift our beliefs as to what is the best way to serve our customers. We have both a moral and legal responsibility to make them say no.

When interviewed, most shops today will tell you they are a maintenance facility. However, when you look a little deeper and ask them to define what a maintenance facility is to them, they tell you it is a repair shop that provides manufacture’s maintenance recommended for their customer’s vehicles. The reality is over 96 per cent of independent repair shops would be classified as breakdown shops versus maintenance shops.

So what is the difference between a breakdown shop and a maintenance shop?

“A breakdown shop provides maintenance work for its good breakdown customers.”

“A maintenance shop provides breakdown work for its good maintenance customers.”

Do you see the difference? One shop acts totally different than the other. One shop has nearly all breakdown customers and the other mostly maintenance customers; but they both believe, by definition of the work they offer, that they are maintenance shops. The reality is only one of them is a maintenance shop. One ensures the maintenance is performed and booked in advance, and tells the customer up front about the benefits of maintenance, and allows them to say no to that work if they wish; while the other offers the same maintenance service, but relies on the customer to know enough about their vehicle’s needs to request that maintenance work.

Another difference is breakdown shop owners believe their customers choose to wait until their vehicles break before bringing them to the facility. Whereas a maintenance facility owner understands that it is their responsibility to encourage the customer to be a maintenance customer, by educating and informing them on the value and financial rewards of choosing maintenance over waiting until the vehicle breaks.

A maintenance shop has scheduled work days and months in advance, and when properly done, the shop has customers show up for the work 94 per cent of the time. The non-maintenance shop has no control and can only book work a few days in advance, hoping the customer will show up. One hopes a customer’s vehicle will breakdown and the other hopes there are very few breakdowns because they are booked solid. One can be perceived as immoral and unethical while the other is recognized as a caring shop owner who truly wants to save the customer money.

And which shop is the more profitable? Most customers never had an opportunity to be a maintenance customer because the facility has little or no systems, procedures or maintenance programs in place. What decision would you make, if it was your vehicle, about spending more money on work if you had little or no information about the proper maintenance and care for your vehicle? If your customer never had a chance to say no to proper maintenance then the burden of the eventual vehicle breakdown as a result of that lack of maintenance lies with the shop owner. We can be held liable for breakdown repairs if the customer did not have a chance to say no to maintenance for their vehicle. This has also been proven many times in a court of law.

So let’s look more closely at what defines a breakdown shop and see if any of the following statements have a ring of truth for your operations.

Breakdown facilities can be defined as those that:

* Are hope and pray facilities. They hope and pray enough work shows up every day to pay the bills.

* Are a very low gross profit generating facility, meaning they can have a gross profit of approximately 35 per cent. The percentage of money you have left over after paying for your cost of parts, technician labour, sublet, shop supplies and environmental fees.

* Are usually a very low net profit facility. They have a net profit of approximately seven per cent or even less. This is the money you have left over after you subtract all of your operating expenses from your gross profit. This includes management fees, rent, (even if you own the land and building you must charge yourself a fair market rent).

* Have a shop productivity of about 54 per cent. This is the amount of time our techs are physically generating revenue in an eight-hour day.

* Have too many techs and apprentices. Because our shop productivity is so low it is very common for activity-based breakdown shops to employ too many techs. They believe they must have them to get the work done, but this is not at all true.

* Have great difficulty in implementing systems and procedures with any degree of consistency.

* Have very little time to measure and manage their business, or utilize any value-added programs.

Maintenance facilities:

* Are appointment based facilities. They inform and book their customer’s next appointment each and every time before the customer leaves, and followed up with a one-week reminder prior to the scheduled appointment.

* Attain an average gross profit of 55 per cent or better.

* Attain an average net profit of 18 per cent or better.

* Have a shop productivity of approximately 90 per cent.

* Have a technician to service advisor of 2-1 ratio (Two techs for each service advisor).

* Experience very few slow periods or extreme activity-based periods which results in high productivity and excellent net profits.

* Has great success in consistently implementing the right systems and procedures.

* Has specific maintenance programs based on manufacture’s recommendations or better, and provided to all customers. Shows the customers the value of such maintenance books the next appointment and makes the customer say no to the valuable service if the customer wishes.

* Records all deferred repairs and customer decisions when they decline necessary future repairs or maintenance needs for their vehicle.

* Measures and manages their business daily and maximizes the facilities true profit making potential.

What is obvious is that our industry is afflicted with too many shops being breakdown shops. What needs to be done is to change into a profitable maintenance facility. Everyone wins, the customer, the staff, and of course, the shop owner.

Have fun and enjoy your business.

Questions for David Meunier can be sent to tom@ssgm.com.

David Meunier, president of TACT Inc. (Total Automotive Consulting and Training), offers consulting and training to the independent service provider industry with his PROShop Manager Program. TACT can be contacted at 1-866-489-8228 and www.proshopmanager.ca.