Auto Service World
Feature   October 1, 2004   by Bob Greenwood

Sink or Swim

The Canadian independent sector feels the rate of change


The first six months of 2004 shocked the independent sector into disbelief. So many shops could not believe how “dead” a total period could be and were asking “what the hell is going on?”

Change is hard to accept when you are not prepared for it, yet, the independent sector has been warned for five years now to get its house in order. The processes of how to conduct business in our sector of the industry has changed and too many shops across the country refused to believe it. Now they are feeling the consequences of their indecision and Management’s refusal to act.

The most progressive shops in Canada, however, saw some downturn periods but also joyfully experienced some record months during the first six months of this year.

The “cream is rising to the top” and the separation between the best shops and the poor shops are becoming as clearly defined as black and white.

Congratulations must be extended to the better Jobbers in our country as they have made a concerted effort to enhance their business relationships with their chosen shop owners. Our survey results show that Jobber/Shop relationships improved substantially over previous surveys moving from a rating on average of 5.1 out of ten to an average of 8.3 out of 10. This is outstanding and has had a dramatic change on the shop’s total aftermarket parts gross profit as the average shop went from 41.9% to 43.5%. Relationships work when the effort is put in by both parties.

The unfortunate fact for our sector of the industry is that the aftermarket sector is NOT educating the independent shop owner enough on fit, form and function of its parts. Dealer parts continue to soar in the average shop’s sales mix climbing 11.1% over previous surveys to an average shop’s parts sale mix of 75.9% aftermarket parts and 24.1% dealer parts of all parts sold through the business. This issue becomes interesting as many Manufacturers, WD’s and Jobbers still think the independent sector is only focussed on price where as our survey participants state the opposite. 87.8% of the survey participants in Ontario and 94.4% from Western Canada regularly take the time to counsel their customer/client to use premium parts over standard parts. It appears that a huge communication breakdown has taken place between Jobber owners and the WD and Manufacturer. This must be fixed! The best shops are now focussed on “Quality” and “Service”. The weakest shops are focussed on “price, toys and trinkets”. The industry had better learn to listen to the best shops out there because they will be the shops that are here five years from now.

In addition to that, shop survey participants continue to be prepared to pay more for their parts to their supplier who brings full business value-added services to the shop. The average shop is prepared to pay 5.6% more over current price “IF” the Jobber is on board with a complete value-added package. The shop owner did the math and realized that 5.6% is a minor investment that produces an outstanding return to the over-all business. Math does not lie. Mister weaker Jobber and WD … what part of this picture do you not understand?

All the good news in our survey applies to the hard goods component of the shop. The bad news appeared in the “productivity” section of the shop. Average shop productivity dropped a whopping 10.4% and as many informed people know in this industry, it is shop productivity that produces the ultimate bottom line and ROI, while the hard goods only contribute to the process of covering overhead.

Discussing productivity and how to achieve it is one issue but also discussing covering your costs when one does bill out the productivity is another. Based on what the average technician is being paid in Ontario, the minimum maintenance door rate in Ontario should now be $87.00 and the minimum diagnostic rate should be $118.00. In Western Canada, the minimum maintenance door rate should be $90.00 and the minimum diagnostic rate should be $125.00. Remember that the door rate of the shop reflects the competence of the shop. No shop owner has a right to charge top rates to the consumer for incompetence as it contributes to the “rip off” image some consumers perceive.

The “slowness” of business forced many weaker shop owners back into the bays as they perceived this was the only way to survive this period. The survey clearly shows that this was not the answer. The math in the survey shows that the average Canadian shop went from a productivity percentage of 70% with the owner spending 22% of his time in the bays down to a productivity percentage of 63% with the owner spending 25% of his time in the bays. Manitoba and British Columbia were the worst in the country for this. Time and time again, the math proves working “hard” in the shop doesn’t even come close to learning how to work “smart” in the shop. Working hard can lead to bankruptcy in this business today. Learning to work smart and manage the business properly sustains and grows prosperity for the shop owner and their Jobber.

Finally, an interesting fact that is consistently appearing in the results of our survey questionnaire is the answer to “What is the shop owner’s biggest business challenge?”. The number one issue for the fourth survey in a row is “Self discipline to manage the business”. This is why the shop owner and Jobber must work together as two business “partners” because the Jobber can be an excellent source of support. When the relationship is in place, the support mechanism works, helping the business owner to stay on track as to what the shop’s mission and processes are all about. When the relationship is not in place, the survey clearly shows us that the shop owner panics, will not take the time to learn his/her business all over again, stumbles back into the bays and price shops 3 or 4 suppliers to try to make a buck. There is no way they can make the math work for their business long-term survival with that business formula. They go broke or buy themselves a job for life. Today, self-discipline is the number one critical factor to the shop’s financial success. The second and third challenges were “finding competent technicians” and “building customer/client trust” respectfully.

Our surveys inform us that there is so much opportunity within our sector of the industry, and the better shops continue to prove this fact to be so true. Unfortunately it is the weakest shops and the weakest Jobbers that make the most “noise” in our industry. Everyone, at every level, must develop the discipline to cut through that noise to reach the next level, or plateau, which focuses on the right business practices that sustain business prosperity. Business prosperity is not a measurement that is derived from one season of business; instead it is a measurement that survives a two to three year trend format. A “blip” of financial success will not last in a storm, whereas a proven trend of invoking a “process” of developing sustainable financial stability can make it to the eye of a hurricane and back safely because the “knowledge” of what to expect and what to measure to stay healthy is intact. The best shops know exactly what this statement means whereas the weaker shops don’t understand this picture at all.

We certainly encourage all independent shops across Canada to participate in our E. K. Williams Management Institute survey. Log on to www.ekw.ca and click on the survey icon. You only have to register once. Once you are registered you are good for all future surveys as long as your e-mail address is active. Every shop owner needs a push to register and participate. Talk to your peers and get on board. Every survey participant who completes our survey will receive a free copy of the complete results which is currently a 15 page report. Remember the more participants we have, the more in-depth the measurement can be. Every survey is done in a secure environment so no one will see your numbers. The complex survey mathematical formulas and measurement criteria have been developed and entered into our server to derive an accurate average for a given area. We are the independent sector so let’s stick together, measure ourselves and move the business into the future.


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