In the same way as the severity of a COVID-19 infection varies from person to person, the effect of this pandemic on the automotive industry varies from shop to shop. Just as there are immunocompromised individuals who are more susceptible to the virus, so there are shops that are immunocompromised from a business standpoint.
As soon as you look a little closer though, this analogy breaks down quickly. For most human beings, being immunocompromised is out of their control. They did not choose to have the underlying physical conditions that make it hard to fight a new disease. On the other hand, businesses have a lot of control over the things that might make them immunocompromised. It is only rare occurrences, like a flood or a fire, that a business does not have control over.
All businesses are struggling during this pandemic, and that includes automotive shops. But it is important to note that some shops are struggling less than others. This isn’t just dumb luck; it comes from learning how to control the things over which they have control, in order to be able to deal with the things over which they don’t have control. The shops that were living from brake job to brake job, from tow-in to tow-in, during the good times are not going to survive this economic pandemic. It’s also important to note that the shops that are struggling less than others are working twice as hard as they used to in order to struggle less. There is a difference between struggle and effort. Struggle is reactive; effort is proactive.
So what did these shops do in the good times that have helped them in these troubled times? Or what did they not do?
- They did not play the price game, offering low prices just to get people in the door. That includes discounts, coupons, and other car-count-getting gimmicks. Instead, they focused on value. They ensured that each of their clients had a great experience at the shop. They provided alternative transportation. They provided nationwide warranties, two years or 40,000 kilometres at a minimum.
- The maintained their margins on labour and parts. They ensured that each work order was profitable, while it was still an estimate and the customer had yet to authorize the work.
- They charged a reasonable amount for materials, consumables and hazardous waste disposal. (Depending on your yearly sales, that ranges from $20,000 to $45,000 a year to your bottom line.)
- They reviewed and managed their expenses every month. They knew where every dollar they spent had gone. And they were conscious of the expense-to-sale ratio and monitored that.
- Probably the most important point here: they understood cash flow. They did not manage their business from their bank balance. They knew which bills and remittances still had to be paid each month, and understood that none of the money in the business bank account was theirs until everything was paid for.
- They managed their debt load. They had healthy balance sheets.
- They managed accounts receivable. They did not allow retail customers to put invoices on account.
- They collected email addresses for their clients and had good client relationship management systems in place (thank-you emails, and email reminders, as an example).
- They performed some form of inspection on their clients’ vehicles at each visit. The shops that have changed to digital inspections have been doing the best of all shops during this time. They were already poised to provide contactless service even before the pandemic arrived.
- They charged properly for everything they did, including testing and diagnosis, brake inspections, leak inspections and more.
- They were part of a business coaching group where they learned from other shop owners and were held accountable by the group and the coach.
This is only a partial list, but this list proves that the concepts business coaches and trainers teach and coach actually work, because they are keeping the shops that use them in business. The same concepts and principles that work in good times help us survive in troubled times. The same aerodynamic principles that keep an airplane in the air on a calm day, keep it in the air in a turbulent storm.