By Murray Voth
Each automotive shop owner has his own reasons for opening his own business, and many shop owners build profitable and successful businesses. However, there are some common patterns that repeat themselves over and over again.
Let’s imagine one enterprising young automotive technician who is working for a shop. He’s been noticing the following, and it’s got him thinking.
- The shop is charging an hourly labour rate that is much higher than what he is paid by the hour. There must be tons of money to be made in automotive repair. Maybe his boss is actually overcharging the customers!
- The boss comes and goes as he pleases, and he does not seem to have to fulfill any particular role. Obviously, there is a lot of time flexibility in owning a shop.
- It appears like the boss is always pushing the technicians to work faster and to cut corners. It seems like the boss only cares about money, and quality work gets thrown out the window.
- There always seem to be upset customers. The boss and the advisor are always making promises they can’t keep. Cars are not done on time, and customers are always haggling over the bill.
As the technician mulls this over, he begins to think that he could do a much better job at this than his boss. He begins to dream about opening his own shop.
- He would always and only do quality work; word would get around about how good his shop’s work was, and it would always be busy. He would never push his employees to rush or cut corners.
- He would give much better customer service and have much lower prices, which would stop the customers from complaining about their bill. He’d answer the phones himself, because who could do it better than the actual owner? And besides, who needs the expense of that dead weight of a service advisor?
- His shop would charge a much lower labour rate. His current boss is just being greedy. With the lowest labour rate in town, the shop will be busy and make money, but not off the customers’ backs.
- He would hire enough technicians so that he wouldn’t have to work on the floor. He could come to work late, leave early, and go golfing with his buddies whenever he felt like it.
The technician begins to run the idea of opening his own shop by his spouse and friends. All of the people that care about him say he should do it.
They have heard him complain about how bad it is at his shop, and he knows he’s a really good technician. The technician is already doing work on the cars owned by his friends and family on the weekends, and he knows he could probably steal most of his boss’s customers with a lower labour rate and cheaper parts prices.
So he begins to look around for a space to rent, and finds an old, abandoned gas station that he gets really cheap on a month-to-month rental. He leases a bunch of hoists and equipment from the parts company, who is more than happy to sell him the equipment and pass the risk onto the leasing company.
He borrows $50,000 from his uncle for the rest of the start-up costs. He promises to pay it back in a year because of how fast he’s going to make the money back. He talks to all of his friends who are technicians and offers them a job. In fact, he talks about how as the shop gets to be successful in a year or two, he might offer them a partnership.
Most of his first customers are friends, family, and neighbours. It seems busy at first, but the new shop owner can’t seem to figure out why he isn’t making any money.
People keep asking for deals, and some of them keep bringing in their own parts. The expenses always seem to be greater than the money the shop is bringing in. The other technicians seem to be working flat out, but they only seem to be able to bill out a little more than half of their day. Everyone is busy answering the phones, making estimates, ordering parts, and trying to fit in time to actually work on the cars. Everyone is working long days, but they don’t seem to be getting any customers with good cars to work on, or that actually have money to pay for the repairs.
One year into the new business, the owner is asking his uncle for another loan because he is unable to make payroll. Revenue Canada is beginning to phone for its payroll and sales tax remittances. His best friend/technician quits in a huff, leaving him shorthanded.
The new owner just can’t figure out where all the money goes, or why there isn’t more money in the first place. The shop seems busy, he’s working long hours, but they keep getting behind. Oh, did I mention, they are now at 90 days with their main supplier and have been put on COD?
The new shop owner keeps beating his suppliers up for better parts pricing, and begins to buy the lower line of quality. He begins to push the technicians to rush and to cut corners; they are now working 16-hour days, late into the night, fixing all of the comebacks that were created during the day. Customers all seem to be upset and there are always fights on the phone or at the front counter, and they always want to haggle over their bill.
One morning, the new shop owner looks at himself in the mirror, and sees his old boss looking back at him. Obviously, there was a little more to running a shop than he realized.
Another great article as always Murray!