The Chickens Have Come Home to Roost

Do any of you remember what SSGM stands for: Service Station and Garage Management. Many of you remember the day when the main focus of the magazine was service stations, or garages as some people called them. Places of business that pumped gas and fixed cars. When did the independent shops without gas pumps start opening? My research indicates the very late seventies and the early eighties. Prior to that time, there were only new car dealers and service stations. How many service stations are you aware of now that still service vehicles? In urban settings they are getting as rare as hens teeth. You are probably wondering where I am going with all these chicken analogies. “The chickens have come home to roost” is an expression that means, we are paying now for our behavior of the past.

Our industry has changed so much in the last 20 years, yet most people in it are not behaving like it has changed. In fact, many of the current generation of independent shop owners are not even aware of the history that is causing this behavior. They are bearing the brunt of actions and decisions taken in the past, usually with the best of intentions. We need to be students of the past to see how our present was created.

Let’s take an overall look at the current state of the independent automotive service provider.

• We still see that most shops are activity based. What I mean by activity based is the following: we focus on activity and volume, the number of cars, how much the phone rings, how much broken stuff we can fix, and how “busy” the technicians are. We are not focusing on productivity, efficiency, gross and net profit.

• Giving discounts or discounting services to get business in the door is still prevalent in some parts of the country.

• Although technicians in the industry are working hard most of the time, most days, they are still unproductive. The average shop in the independent automotive sector is 54 per cent productive. That means management is only collecting 54 per cent of the revenue for the time the technicians are available in the shop. There are two reasons for this: either the technicians are not working on vehicles all day and instead are answering phones, ordering parts, driving customers etc.; or they are working on vehicles all day, but it is not all being billed out.

• As an industry we have trained some of our customers over the years that it is fine for them to bring their own parts. We have taught them to ask for a discount. We have allowed them to try to control the repair process.

• This industry still has an adversarial relationship with its suppliers. Rather than take responsibility to manage its own gross profit and productivity, it blames the supplier.

Now let’s take a walk through history. There are enough of you that will remember the good old days.

• In the gasoline business it was and still is volume. How many gallons or litres did you sell? We were selling a commodity. Sound familiar?

• We gave things away to get sales: dishes, cups, coupons, story books, you name it. We discounted goods and services to get business.

• Some of us still hear the ding hose in our sleep. Remember that? The mechanic was just a glorified gas attendant. He had to stop working on cars to pump gas. His time was mismanaged; he was viewed only as a cost to the business and not a revenue generator.

• We were trained by the oil companies that the customer was always right, fast service was the best.

• We were always fighting with the oil companies over margins, price, rents, and image among other things.

My hope is that you see the connection between the last list of five items and the first list. We need to shed our history and view our businesses from a new vantage point. Here is my last list of five new items:

• Over 90 per cent of independent shops are started by or owned by current or former technicians. We need to learn to become managers. We need to manage productivity and gross profit before sales volume.

• We need to differentiate ourselves to the consumer, rather than be a commodity. One key area is to build relationships with our clients. We need to inform and educate our customers in order to show and provide the value we have to offer.

• We need to recognize that the technicians are our most valuable asset. They are the revenue generators, they are the professional information and service specialists.

• We need to understand that the customer is not always right. They are special, they need to be treated well and they are the ones who pay the bills; but they don’t always have enough information to make the right decision about their vehicle. The reason many customers try to control the repair process is that we as an industry have not respected their time and money.

• We need to build relationships with our suppliers and them with us, based on mutual and shared interests, the priority being profitability. We need to work together on both the value and price equation.

As you can see, how we did business in the past has a distinct effect on our practices today. My hope is that through understanding the why, we can change the how. Both the independent automotive service providers and the parts jobbers and suppliers need to rethink their practices. The challenge for all of us is to make that shift as soon as possible, because the tsunami of rapid changing technology and high fuel prices has started to form and we need to be ready for that.

Do you agree? Disagree? Let us know!

cmurray@ proshopmanager. ca Do you agree? Disagree? Let