Does this sound familiar at your shop: A customer needs a new bolt. The shop has a bucket of bolts in the corner. But this is no small bucket. There are hundreds, maybe thousands, of bolts. A technician spends 15 minutes digging through the bucket and finally finds the right bolt. They put it on the vehicle.
The technician feels good about finding it. It was a fun challenge. They also feel good about helping the customer. The shop owner is happy because the customer is happy they got the bolt they needed and helped them save a few bucks. The customer drives away with a smile on their face because they got the bolt and labour for free.
What’s not feeling good? Your bottom line.
Speaking at NAPA Expo 2022, Cecil Bullard, chief executive officer of the Institute for Automotive Business Excellence and RLO Training explained that the scenario — and its many variations that occur regularly in a shop — is bad business practice. The automotive aftermarket has a hard enough time making money and the above example is a money-losing endeavour.
If you charge $100 an hour for labour and that technician spent 15 minutes looking for a bolt and putting it on the customer’s vehicle, that’s $25 lost for the shop. All over a $3 bolt that could have been ordered and properly charged to the customer.
“And now you mark it up and they get a nice new bolt and your technicians aren’t wasting their time so they can be productive and make your money — which is what they’re supposed to do,” Bullard said.
This is one example of how a shop’s margin numbers at the end of the day don’t come out the way they should.
“So I want to charge the right price and hold my margin,” he said during his presentation, What are the Most Important Numbers for Financial Success? “Without margin, we have to work on a lot more cars.”