Greenwood On Management: Are You Up To Date With Your Business Management?

This is the July summer month issue, and I think it is safe to assume that you are catching up on some reading, relaxing under a beautiful tree in your hammock, or lying on your deck with a gentle cool breeze keeping you very comfortable, and your favourite summer beverage close to your side.

As “dormant” as you may feel, I would like to test your business savvy for the year 2002. Take the following business test and then check your answers on our web site at www.ekw.ca. Click on Ontario, then click on “Published Articles” and your answers will be there. Good Luck.

The independent sector of the automotive aftermarket industry has changed drastically in the past three years. The changes within the industry means your business must also change to stay on top.

The following questions are all very key factors in your business today in order to maximize shop profitability. Management must have the know-how on working with all of them

1. Understanding pricing strategy is critical today. What is the difference between Gross Profit and Mark-up?

2. What are the recommended gross profit percentage guidelines for the following revenue categories: Oil, Tires, Batteries, Aftermarket Parts, Dealer Parts, Maintenance Labour?

3. What are the six questions Management must constantly examine that affect the businesses ability to maximize its capability?

4. (a). What is the mathematical formula to establish the maintenance labour door rate this year?

(b). What is the mathematical formula to establish the diagnostic labour door rate this year?

(c). Having 2 labour rate structures within a shop is called tier pricing. How many tier rates will a typical shop require within 3 to 5 years?

5. (a) What do you examine on a work-order to measure productivity effectiveness in a shop?

(b) What should that productivity effectiveness guideline be on a work-order?

6. Larry Technician is a skilled employee. If I want my payroll percentage to remain at 30% of total shop gross profit, and my overall bay gross profit percentage earned in my bays is 65%, what TOTAL dollar sales would Larry have to produce to earn $1,150 per week?

7. (a) What do we mean by the expression “Employer Burden”?

(b) As at this year, what is the minimum employer burden percentage for a typical automotive maintenance and repair facility in Canada?

8. What should be the ratio of total labour dollars to total parts dollars in a successful shop today?

9. What should be the ratio of total labour dollars produced to total dollar wages paid including not only technician wages, but also management wages, service writer wages, administration wages and employer burden?

10. What percentage of total sales should a shop make as a minimum net profit before taxes?

11. A shop is earning 45% gross profit on shocks. Management is thinking of putting a sale on shocks by reducing the price by 25%. What unit volume percentage change would the shop have to realize in the sale, to maintain the same gross profit dollars the shop enjoyed before management reduced the price?

12. This is a gimme.

12. What has been a typical Independent shop owner’s answer to the question:

12. “Will you spend 2 to 5 days in an Industry specific Business Management Course this fall to learn what is required today, and how to implement a strategy to maximize shop profits to insure your very survival, and that you really enjoy your business for the next five years?

12. (a) No, I don’t have time; I’m going hunting for a week! Which week.?…Any week that a course is going on.

12. (b) No, I don’t have time; I’m too busy (I have the perfect business that is why I never complain about it or this fabulous industry).

12. (c) No, it’s impossible to get away from my business (I’m chained here 7 days a week for the rest of my life).

12. (d) No, nobody can teach me anything… this is the automotive business and I have been in it for over 5 years… I know how the game is played.

12. (e) No, I’m always short staffed. (I can’t ever schedule things so I can get away to improve my future, unless…you’re talking about a fishing trip).

12. (f) No, that stuff is hogwash, and besides that is why I have an accountant/bookkeeper.

12. (g) No, I’ll send my bookkeeper/wife…she looks after the numbers stuff.

12. (h) No, if my supplier would give me a better price, my business would be perfect.

12. (i) No, that stuff is a waste of time, those instructors don’t live in the real world.

12. (j) All of the above.

Well, have another sip of your favourite summer drink, and ponder the outcome.

I can assure you, you are not alone in not knowing 8 out of the 12. That’s the issue. Why do so many shop owners want to ignore it? The fact is that a typical shop in Canada today who has sales of $500,000 to $600,000 a year is missing out on $30,000 to 60,000 in NET PROFIT just in the way they run their current business with those sales. That is real money, and when your ready to discover your business all over again, get enrolled in a class this fall, and watch a smile come over your face. Math doesn’t lie…it is there right now, but are you ready to go after it? Opportunity knocks at the strangest times. Success is that old ABC…ability, breaks, and courage.

Robert (Bob) Greenwood is President and CEO of E. K. Williams & Co. (Ontario) Ltd. and Automotive Aftermarket E-Learning Centre Ltd. Bob has over 27 years of Business Management experience within the automotive industry, counseling individual shops in Ontario. 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 and Business Management and Employee Development Courses. 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. Automotive Aftermarket E-Learning Centre Ltd. is a company devoted to developing Automotive Shop Business Management skills through the E-Learning environment over the inter-net. Students learn at their own speed, and at a time, and place, that best suits their needs; available 7 days a week 24 hours a day. Visit Automotive Aftermarket E-Learning Centre Ltd. on the Internet at www.aaec.ca Bob can be reached at (613) 836-5130, 1-800-267-5497, FAX (613) 836-4637 or by E-mail; greenwood@ekw.ca or greenwood@aaec.ca