MYOB: It’s About Today, and It’s About Your Future

Three-quarters of the automotive aftermarket is in a different business than the service provider.

While the service provider needs to focus on productivity rather than just activity, the jobber, WD and manufacturer are in the commodity business, and require volume as a major part of their successful business formula.

The professional service provider shop, however, is in the knowledge business today. It must evaluate and diagnose a given problem with a client’s vehicle, and then proceed to fix the problem, while at the same time maintain credibility with the client, and create net income for the shop with the service provided. To execute that successful formula takes time. The service provider must be very careful not to get caught up in the volume (activity) game that the rest of the industry dwells on, but focus on managing productivity to drive a good net profit to his shop’s operation.

This creates a complex set of issues for our industry.

Consider that many jobbers and WDs have made a concerted effort to sponsor business management courses to elevate the business knowledge of customers they want to turn into clients; that is, develop a professional business relationship, earn all their client’s business as absolute first call, and allow both parties to move forward together.

From a business standpoint this makes a lot of sense. The results, however, point out the real problems and issues that must be addressed by the rest of the industry. Consider the documented experience of one WD client of mine; it highlights a common problem that I have observed across Canada over the past five years.

My WD client listened, and we discussed extensively, the issue of the difference between the three-quarters of the industry and his jobber store’s professional service provider clients. He stated:

“It really hits home. If I am purely driven to look after the immediate sales goals of my side of this business, I should focus on finding shops that are screwing up, but are screwing up with flair, because these shops give me the volume, but I must confess, they are terrible at paying their bills. The responsible approach, long-term, is to help develop the progressive service provider, but he generally buys fewer parts as his focus changes to labor productivity from commodity sales. I continue to see sales drop from shops that progress. This makes it difficult for me (and in fact for my company) to justify spending time and money to create shops that buy less. The good news is that my company sees these shops, after they have embraced the right way to run their business, as big clients, with shiny and attractive shops with business-like approaches to many issues. To the average parts-selling executive, this is nice and clean–just the way they like it. But they are still unclear on how to deal with this phenomenon. I’m searching for the ‘silver bullet’ that ties these shops 100% to us.”

Here, Mr. WD, Mr. Jobber, are the facts as outlined in my response to my client. Don’t ignore this, or sluff it off as hogwash, because it’s your future.

“Your points are very accurate. The statement, however, that the progressive shops, once they have been trained to this new level of doing business and execute it, buy less, can be more of a perception problem than fact. I have followed these shops on a monthly basis for years now, and their productivity improves dramatically as they concentrate on the labor productivity component in their business. We have witnessed dramatic improvement in all sales categories year over year with each shop that has embraced and executed to this level. As the labor hours billed per invoice increases, the commodity portion of their business increases per vehicle as well. But we have discovered a major problem in that the jobber fill rate drops, and here is why: As the shop owner gets focussed on servicing clients’ total needs on the vehicle, based on how the client uses the vehicle, rather than focus on just the regular, fast-moving (seasonal commodity) needs that the industry focuses on and stocks, we are finding the jobber isn’t stocking the depth and quality required to look after that retail client.

“This is forcing the professional service provider into the position of jobber shopping, which he or she is uncomfortable with, to satisfy the retail clients’ immediate needs. A strong point that I make in every class is for the jobber and service provider to communicate more clearly, and decisively, with each other; to sit down and discuss fully the type of inventory the jobber should carry to meet the service provider shop’s needs. This is not taking place and both parties are to blame. The jobber is sitting back waiting for the service provider to come to him, and the service provider is thinking that the jobber doesn’t even show an interest in his business after the course as no time is scheduled for follow-up, to review the facts learned and discussed in the course.

“The relationship of the jobber and service provider that is enhanced during the course, falls back into the forest, and the two parties get lost on this important point about both of their businesses. The jobber must initiate the follow-up, schedule a sit down meeting, and draw out a plan that works for both parties.

“These shops that move to this business level are the best to deal with from the jobber’s point of view in terms of getting paid on time and, in general, to do business with. They are easily approachable and have a better attitude on things etc. To tie these shops to you 100%, you must look beyond your WD/shop programs. As they do play a vital role, however, I encourage you to also review your fill rate, parts quality (as viewed from the service provider’s point of view), and delivery response time.

“You may have the best shop program in the marketplace, but to improve any marketplace program the trick is for the commodity side of the industry to take off their hat, and put on the hat of a professional service provider. This is easier said than done when the majority of the commodity side does not understand the business side of a professional shop.

“There must be a real incentive to join a WD/shop program. In the professional service provider’s mind, his client comes first. Clearly understand that. And no matter how good your program may be in your eyes, if it doesn’t meet and exceed the professional service provider’s expectations in terms of assisting him in executing the highest service level for his clients’ needs, it’s just another industry program. That is why so many programs don’t really get off the ground, and then the WD is back to the drawing board trying to re-invent its program every two or three years.”

As you can appreciate in my response to my client, there are a lot of issues three-quarters of the industry must address in order to secure all the business of the best shops. The manufacturer must look at its fill rates, the WD must look at how its jobbers are really going to market in terms of securing the right relationship with the best service providers, and the jobbers must step outside the box and learn about the best shops’ true needs.

Business is a process today, not a seasonal fix. The business processes that the better shops in our industry have embraced require that the rest of the industry understand and adjust internal processes to meet the new professional shop’s needs. That is a challenge that too few jobbers, WDs and manufacturers are focussing on. They are still focussed on their immediate commodity needs this season, and missing the opportunities in front of them.

When the industry ignores this message, the entire industry suffers, but it is the individual jobber store that suffers the most through lost sales and lost profits, and ends up with the wrong perception about the best service provider business owners they are trying to serve.

Finally, consider that if you find out what the most successful service providers did in any area of their business, and then you did the same thing as it applied to your business, over and over, you would eventually achieve the
same result they do. Consider it.

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 sector 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.

E. K. Williams & Co. (Ontario) Ltd. offices specialize in the independent sector of the automotive industry, preparing analytical operating statements, personal and corporate tax return completion, business management consultation and employee development. Automotive Aftermarket E-Learning Centre Ltd. is devoted to developing automotive shop business management skills through the e-learning environment of the Internet at www.aaec.ca.

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