MYOB: Is Making Smarter Customers Making You More Prosperous?

Many jobbers have a tendency to look at every dollar leaving their business as a cost, rather than an investment. This can be a very scary attitude in today’s business environment.

Imagine talking with a jobber who believes his staff is a cost to the business. This person is clearly saying that the staff are profit takers, not profit makers. The obvious question to ask then is “Who hired them, and who pays them?” The fact is good staff are a clear investment in the business, as their knowledge, talent, and efforts produce a return on the investment made from their wages paid.

Consider that the most common topic under this expense mindset is the dollars spent on providing training courses for customers of the jobber’s store. Perhaps it is time to review this particular category a little deeper.

All automotive maintenance shops are under siege when it comes to ensuring they have the right knowledge available to them to enhance their shop’s efficiency and profitability.

One clear example of enhancing an automotive shop’s efficiency is the availability of competent technical training.

Without good technical training courses, the shop is forced to experiment with the problem–which in turn can create downtime within the shop, as they are out on a “safari hunt” trying to resolve a driveability problem. In these cases, the shop may turn around and order a number of parts they believe are required to resolve the problem, and send back the parts they later find out they didn’t need.

This really does incur jobber cost into the store’s business, as the parts have to be delivered, picked up, restocked, and credits must be issued to keep the paperwork in order. At the global Automotive Aftermarket Symposium earlier this year in Chicago, it was clearly stated that 18% of all parts ordered from a jobber are returned due to wrong diagnosis. If the shop had the right training, the problem would have been properly diagnosed and only the right parts would be ordered the first time to resolve the problem.

Clearly, taking the time and dollars to provide technical training has an excellent financial return to the jobber’s business.

Many jobbers look at providing ongoing technical training courses as a necessity to maintain goodwill between the jobber store and the shop. Mathematically, though, if a jobber had a shortfall of $2,000 in revenue for technical training and the store’s margin is 30%, then $2,000 divided by 30% equals $6,666.67 in total dollars that would have to be saved in time and costs in one year to realize a 100% replacement on the cash flow paid out.

Consider, in this day and age, a 35% return on an investment in one year is a pretty decent return. If there were only 10 shops involved, this breaks down to $666.67 per year per shop, or $55.56 per month in savings required to the jobber store to justify the investment. The $55.56 may actually be the savings earned by making three fewer deliveries per month to the shop because they diagnosed the problem right this time, as they had the right training and ordered the right parts the first time, eliminating delivery and office paper work costs. Investing in training to improve customers’ shop efficiency makes good business sense for a jobber.

On the profitability question, the shop would have to have proper and ongoing business management training. Many jobbers clearly see this as an expense and not an investment. If that is your mindset, consider the following:

1. If a shop learned to manage its business affairs better, which also in turn shows the owner how to become more profitable with current business, then the jobber’s monthly statement would be paid in full every time.

2. Good shop management courses teach the shop owner the business benefits of purchasing as much volume as possible from one supplier, and that is what a jobber is in business for: all the aftermarket business from the shop, not just some of it.

“Some” costs too much, whereas “All” increases profitability. Substantially increasing the volume of parts sales to each customer, and remaining the chosen supplier of first call, makes huge business bottom-line sense.

3. Considering that there are too many jobbers in the market for the number of good shops left, your business relationship becomes exceptionally critical today. Opening up personal communication levels between the shop and the jobber store is necessary to start the process of gaining shop trust and understanding for both parties. Attending a course with your chosen customers can tremendously enhance that important business relationship, which in turn, enhances shop loyalty to your store.

The benefits to the jobber store are large and they should be long term, if the jobber follows through with his commitments to the shop. Just attending a course with the shop customer does not create loyalty. It is how you follow up after the fact, and how you work with the shop after the course, that makes all the difference to your business.

From a mathematical point of view, let’s assume that the jobber had a $4,000 shortfall in cash over the revenue collected from customers to sponsor a business course. That would, in the jobber’s mind, be a pure expense, therefore lost net profit. If a jobber was netting 2.3% of his total sales, then $4,000 divided by 2.3% equals $173,913 in new sales that would be required to replace that net income investment.

If the business course had only 15 shops attending, then that would work out to $11,594.20 new business sales required in one year from each shop ($173,913 divided by 15). This represents only $966.18 in additional sales per month from each shop, or based on 20 working days, only $48.31 per day increase in purchases per shop attending the class.

If you can’t achieve that, then I would counsel you to get out of business because you certainly do not have any relationships left in your store. Also keep in mind, the increase that you do receive stays with you year after year, if you bring more value to the automotive shop compared to your competition. Ask yourself what value you bring to your customers that your competition does not? Define this in writing.

It certainly appears, mathematically, that offering a full line of training courses makes very good business sense for the jobber.

The question to be asked is why jobbers don’t get involved by offering annual courses to their customer base. From what I have seen and heard, most jobbers consider this an expense they can do without. These jobbers just do not understand how to do the math of their own business. Also, most jobbers have a tremendously weak business relationship with their customer shop owners; consequently the trust relationship is not in place, and the shop owner makes up an excuse as to why he cannot go to such a training course. He is really saying: “If I trusted you, I would really pay attention to your recommendations and act upon them.” I know jobber store owners who only see their customers once a year or even once every two years, if that, which they justify by saying that is why they have sales reps. How do you build relationships sitting in your office and not getting out to see and talk with the store’s customers? If you hate your customers and do not respect them, please get out of this industry now!

It really seems that jobbers have a lot of work to do in building, and rebuilding, their business and the relationships that go with it. Perform a mathematical review of your circumstances and then put into action the process of investing in all types of training. However, make sure it is the type of training that is needed for your customer base, and your store. When handled properly, the financial return to your jobber store is tremendous.

Robert (Bob) Greenwood is president and CEO of E. K. Williams & Co. (Ontario) Ltd. and Automotive Aftermarket E-Learning Centre Ltd. Bob has more than 27 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 service secto
r proven to enhance the shops’ profitability and grow the business. Bob has also worked with wholesale jobbers on how to do a better job for the service provider by providing valuable insight as to the real challenges faced by the retailer today.

Bob can be reached by e-mail at greenwood@ekw.ca or greenwood@aaec.ca.