By Murray Voth
In preparation to write my first column of the year, I began to reflect on what topics I could cover. The list grew quickly: everything from the electrification of vehicles and the microchip shortage, to the fact that independent shop owners could do a lot more to collaborate, especially when compared to new car dealers, came to mind. These and many other topics affect a shop owner daily, so where should I start? Over and over again in my work, I see that much of my clients’ success still comes back to the basics.
Something I work at, personally and in business, is to control the things I can control so that I can face the things I can’t. I am going to write to automotive shop owners and encourage you to do the same. What can you control? This list is a lot longer than you might think.
Have the tools to measure your business accurately. Not only should you have monthly income statements generated in a timely fashion, but learn the industry key performance indicators and how you stack up against them. That means learning how to use your shop management system to its full potential. If your current system does not give you the reporting you need, change to a new system.
Some owners will say that they don’t understand accounting and bookkeeping. As the owner, you only need a very basic understanding of accounting; primarily, you need to be able to read the reports created for you. Once you know how to do that, you are in the driver’s seat. That means that someone else will do the bookkeeping for you, so you need a good accountant.
Another complaint that comes up is that the owners’s bookkeeper and/or accountant are always behind. If you think they are worth continuing to work with, have a meeting and hold them accountable. If they still don’t get it done, replace them with someone who will.
And when you do, make sure that they are not just there to keep you tax-compliant and filing on time. Ensure that they take the time to go over things with you, help with tax planning, capital expenditures, and other long-term planning.
The next excuse is that the shop owner can’t afford a good bookkeeper or an accountant, so what do they do? They take an already overworked service advisor and ask them to do the books, and then wonder why sales go down. Or they are not profitable enough to hire the staff or professionals that they need. Of course, that shines a light on the fact that this shop owner did not have a business plan in the first place that included all the necessary expenses built into it, but they also are not charging properly for what they do.
So that means that we need to evaluate our gross profit margins, and find out where there is an opportunity to improve. We need to look at what we charge for parts and tires. We need to evaluate if our service rate is high enough. We need to look at our menu pricing to see if it needs updating. And we need to look at if we are charging properly for materials and consumables.
Here’s a very common objection I hear again and again. “But my customers are already complaining about my prices; there is no way I could charge any more than I already am.”
Three things are always at play here:
- The shop owner is not confident in the value they bring to their customers;
- The shop owner is not showing good value to their customers; or
- They have the wrong customers. (The wrong customer is someone who is not willing to pay you what you are worth.)
But that means that the shop must get more customers, and they are already having trouble getting new ones! Which opens up the discussion on the shop’s marketing plan. Do they have an up-to-date website? Is the website responsive to different devices? Does the website have the phone number in the top right corner of the page? Do customers have the ability to book an appointment through the website? Are they managing their Google My Business profile? Do they have a social media presence on all the main social channels?
As you can see, every topic that we have touched on here is controllable. But any shop owner I work with, I will not let off the hook until we have chased every last piece of the business that they can control. It is when a shop is profitable, and the owner has more flexibility with their time, that they can face all of the other large issues that are on the horizon.
I look forward to discussing all of these controllable topics – and many more – in the coming year. Here’s to a prosperous and rewarding year for all independent aftermarket shop owners.