KBenline

You guys need to think differently. When you come across stuff like this, take yourself out of your "automotive repair" world and you will see what is going on. It's a brilliant move by Home Depot. Who shops there? DIY home improvement people. People who like to do things themselves, mostly minor home improvement and small projects. What is changing oil? Adding fuel additives? Changing an air filter? To these people it is a "minor" improvement or "small" project. Home Depot gets to increase their average ticket, which could greatly offset the cost of added inventory. Will it affect us? Not really. Perhaps a tiny bit, but this stuff is out there already in most "grocery" markets. I would be more worried if I was a parts store because now, Mr. Husband may pick up what he needs when his wife drags him to Home Depot for another "room remodel." So, the local parts store may not get that 5 quarts of oil, air filter, fuel additive sell that they would normally get. That's my 2 cents. I will now go into hiding again because I know it irritates Joe Marconi. Just like my Angels do when his Yankees get beat or don't make the playoffs.....

That back premium thing can be horrible. I had it happen to me and Farmer's tried to say I owed $100,000 (which I didn't.) but after I went through everything I had it figured out at about $40,000 (although it was done slight of hand by the sales agent and should have been a lawsuit) but I got them to settle for $20,000. Hurt me bad. This was about three years after I took over ownership. You name it and I've been through it. I got everything I asked for and more buying this place. But, I wouldn't change it for the world. What hasn't killed me has made me sharper, better, meaner, leaner, wiser, and a better business person!

Joe - that is the best assessment I've seen of the situation. We can't afford to have that along with the fact that cars are better built and don't need as much these days. That is a double whammy. Then along with what the parts companies and internet is doing makes it a daily battle. I hope I'm wrong as well about the last man standing. These times call for aggressive management/ownership skills, that's for sure.

Been that way in California for a long time. We went through the ringer in California awhile back about this whole thing. It's a huge expense with very little control over it. It can kill a new business owner in no time. I went through a horrible issue with not paying enough premiums to Farmer's because of this. Service writers are in the office probably 70% of the day and only walking through the shop the other 30% but the insurance companies feel they should be written the same as a technician who is in the shop doing heavy work 100% of the time. Makes no sense.

This problem has become bigger for us in San Diego. We get it regularly. The only real way I see to solve this issue is Labor rates have to increase to compensate for the loss of profit. My parts profit has gone down 5% over the past two - three years because of this (and with the parts companies increasing their costs.) I really feel like the parts companies aren't thinking ahead with their philosophy and if many auto repair shops go out of business they are going to take a hit, although their have been many parts companies that have gone out of business already. I think the smart shop owners will do what they have to in order to survive and labor rates will increase naturally as a result, as our parts profits decrease. It's harder for a customer to justify labor rate than it is for them to justify why your part you sold them is $90 less online, same brand. etc. This is how plumbers, electricians, and others get away with charging more per hour than many of us do. I have been slowly ratcheting up my labor rate with very little squawking. However, raise your parts prices to your customers and watch the complaints start.

I saw this in 2008 and 2009, but then things started to improve. Now it seems it's back again. It feels eerily like it did in the last recession. I think I experience these things earlier and more often than most because of the cost of living in San Diego for most people. It's to the point where almost every customer battles us over price. I can't believe the amount of phone calls we get asking us for a price so they can compare to the price they got quoted elsewhere. I've also gotten more phone calls with customer's wanting to bring in their own parts then I ever have. I think our industry has begun the battle of attrition and is going to go through a "last man standing." Unfortunately, the last man standing may not be the best shop but the one that has the cheapest expenses/overhead and can survive. It may not be in the public's best interest but that seems to be what the public wants these days and where it is headed. I'm seeing less interest in warranty on repairs and quality and more focus on "cheap" than I ever have. People have a mentality that they are only going to hold onto their car for another year so why go with the better warranty and more costly part, etc. Keep in mind, we are in San Diego and we don't get the seasonal changes some of you get so there isn't a big winterizing or summerizing of vehicles for us, or rust repair, etc. Do I think this is the new normal? Hard to say. I can't tell if this attitude is being driven from a poor economy or the general change in the auto repair business with cars not needing as many repairs (timing belts, etc.), and the advent of the internet with parts pricing. I can tell you since about late 2007 I started noticing the change and it has slowly gotten worse. The last three months have been ridiculous. The good news is car counts are up but sales are flat. Yes, I have a few sales issues but that isn't the only answer. I thought this whole thing may have been just a locality issue but it seems like it has hit back in NY as well.

XRAC, Absolutely. Many of us shop owners get stuck in small details and miss the big picture sometimes. We feel proud of ourselves (and rightly so to a degree) and feel that we should charge for diagnosis and the customer should pay. That's fine, I don't have a problem with that. When economic/marketing changes occur your business plan should be strategic enough to adapt, change, and still give you the profit you need. In other words, what you want is profitable sales and happy customers. Period. If the economy/market environment changes to keep you from charging upfront then think bigger picture. We were charging 1 hour labor for check engine light or driveability diagnostics $95 and 1/2 hour for everything else. If you had a check engine light on and wanted your brakes checked you would be signing an estimate with me for $142.50. This was fine until about 2007/2008 when the economy hit. Charging to check out a vehicle became a huge hurdle for people suddenly. I started to get tons of resistance, and then, people wanted to know if we would waive the diagnostic charges if they authorized the repairs. We did this with brakes but not check engine lights. Car counts started to dip. It seemed all my competition was telling people they would waive the diagnostic charges if the customer authorized the repairs. I have a service manager who worked for a Toyota dealership for a couple of years before he came to me and he said they would waive the diagnostic charges at the dealership if a customer authorized repairs. My General Manager and technicians were adamantly against this but car counts were tankin and the vendors were a knockin! I noticed when customers did come in during the 2008/2009 slow down it would only be for big repairs. I heard them tell me how they didn't want to bother me with "small" things (which they perceived were brakes, services, etc. ) because they knew we were expensive but honest, ethical and a great shop. What this told me is people knew we were the shop to go when calamity occured but not for the day to day typical stuff where everybody else ran competitive pricing. People were going to AAMCO and other "free diagnostic" places then coming to us to ask us to do the repairs saying they had them diagnosed elsewhere, all because of the cost up front. So, you can imagine how those conversations went. This wasn't just a handful of people either, it was becoming the majority of customers. By the way, my General Manager took some time off to help me because he could afford to during the economy times. After six months, he and I had a conversation where we shared this information. He told me a story about how he bumped into one of our good customers in a shopping store and they told George how they knew we were good, honest, but they had a $250 estimate just to check all the different things they wanted checked on their vehicle before they could get any answers. We agreed we needed to tweak our business plan. I started offering a "check engine light" or 'diagnostic" special of $59. I found out that all the "selling diagnostic" stuff being taught by auto managment consults had many customer's choking on things. Like anything it would be easier if all competing dealerships and other auto repair shops were doing this but they weren't. In my area there were check engine light diagnostic specials everywhere, many telling people no charge. (If you think your good customers aren't interested in free don't kid yourself.) They will go there to "check it out" since its free. Once I started the check engine light special of $59 approx. 70% of the hesitation went away. Car counts started to increase and sales were rolling again. I discovered you need to make it very easy for people to get the process started. The easier and more comfortable it is for people the more likely they will say yes to what you are going to recommend when you check the car over. I only had a handful after that ask if I would waive the diagnostic charge if they authorize repair. I play that one by ear..is it a first time customer? Do they seem legit? Etc. I also, discounted my minor service, intermediate service, and major service pricing. The dealerships in my area are very agressive here so I needed to be in the same ballpark as them. I continue to run my $59 diagnostic special. Here is an overview of what happened, how we teaked the business plan and still make great profit and have happier customers. 1. Economy hits us in July of 2007. We were up 6% in sales through the end of June that year and we ended up down 8% when the year was done. We had an ARO of $475 but we took a hit in car counts. 2. 2008 continued the slump and we maintained our ARO of $475 but ended up down 5% in sales for the year. The very end of 2008 saw the big hit on the economy. Of course I downsized and made the appropriate changes but any smart business person will tell you to be careful of the downward spiral and get the ship turned around. 3. in 2009 I asked my General Manager to take some time off and I implemented by diagnostic special, service specials, and flush specials. I printed them out from the website and put them on my service counter and told people that during these tough economic times we are here to help. You don't have to worry about printing out a coupon, we'll make sure you get the special. Sales ended up down 5% again but guess what, car counts increase 6%. The ARO went down to $375 but we built something very positive making it easy for people to come in. 4. 2010 I took down the service counter signs but left the specials on the website. We are kind of splitting the difference from where we were before to where we had to go in 2009. Our business plan has changed to making it easier to get people to come in and guess what? We are up 5% this year and the ARO is back to $475. You can see all my specials on my website and then beat the dealer guarantee. I have dealt with enough good customers in my area to know you can't be more than the dealer. You can try all you want and believe that all you want but no customer will understand it. They look at the huge dealership facililty then look at your facility and the customer's common sense buzzer goes off like mad when you try to do that. Customer's want Value and thanks to the internet and how it has empowered customers these days price has become more of a value to them. I'm not saying its all about price because it isn't. But the way the customer's feel they are getting a good value is to be one step ahead of the auto repair shop and our ugly reputation through the years. The internet has made this worse for us. So, I changed my business plan to make customer's feel more comfortable and at ease up front and then ease into the repairs required and other services. I found this helps customers come back to us for the "easy stuff" like brakes, etc. and at the end of the day we have profits, sales and happy customers. Isn't this what you want? So get out of the battles and win the war. Have your policies but also your strategies. Business is more like a chess game than a strict set of guidelines and policies. That's what I am doing and what I have done.

OK Joe, I made a new post to start off. Go check it out. - Keith

I am going to post things I learned going, "BACKWARDS". For those of you who don't know, I spent 6 years working for an auto repair managment company that you all know fairly well. I then purchased my own shop in 2003 and purchased the land my business is on in 2005. I implemented all the things we "taught" in our management classes and found out the hard way what works, what doesn't, and what can really hurt you if you are not careful. There are many things to share but I will start with marketing since that seems to be a hot topic. I can't cover everything in one post so I will summarize a lot and then add more detail as you respond with your comments and thoughts. What I have learned the hard way is there are three things people will consider to choose your repair shop, I don't care how great you are at marketing it boils down to these three things. The first, is your reputation, the second is your pricing, and the third is how you communicate/treat them. You can advertise all you want but you will not get the results you are looking for until you really understand these three things. Here is what I have done for the three things: 1. I first had to think through how customers are going to discover my reputation. It happens through word of mouth referral, but that alone isn't enough. It happens through affiliations like the Better Business Bureau, the AAA, and other affiliations customer's are comfortable with. But, here is where you need to think differently than a typical shop owner. Most of my customers are clueless as to what ASE is, they only want to know if you are certified. They don't understand what a Bosch Service Center or a NAPA auto care center is from their perspective. They do understand the AAA, the BBB, and.....review sites, such as Yelp to name one. I found you don't need/want to advertise on these review sites because those people that are reviewing are not necessarily the customers you want coming in. I found most of these customer's don't have money and have too much time on their hands to post reviews. They are usually college age or younger or unemployed. However, you need to understand that customers will go there for some additional validation once they are comfortable enough with their other sources. I don't have time on this post to go into great detail but this is very important to understand and work it your advantage to keep your reputation in good standing. I had to really look at things differently and break my way of thinking on this one. 2. Pricing is an area I feel I really made a mistake on listening to too many auto repair management consultants who have been too far removed from the auto repair industry for too long to really understand the changes that have happened to our industry in the past five years. Can you charge more than dealer list price for parts, yes. Will it come back to bite you, good chance yes. The internet in all its search abilities have given customer's more education. This trend will continue and it will get tougher and tougher especially with the economy like it is. You need to be careful here. I used to charge more than dealer list price (I still do but not as aggressively and I pay attention to it more) and we started to get a reputation as an expensive shop, good, but expensive. This is okay but as soon as the economy hits get ready for the crickets to chirp with this philosophy. Even your good customers will decided to not bother you unless they feel it is like a really tough repair issue, because they don't want to "bother" you or to pay top dollar for what they think is "smaller" stuff. One key area to all of this is your diagnostic charge. This seems to set the whole process into motion. I completely changed my philosophy and procedures regarding what we were/are charging for diagnostics and it has solved a lot of problems. Diagnostics have almost become lost leaders like anything else but that philosophy has worked tremendously for me. It is easier now to get customers in the door and I get a lot less of "shopping" and "comparing" me when it is an easier process for the customer to say "yes". We have actually increased in sales and profits following this procedure. So, charge what you need to but be careful and understand that no matter what your reputation your pricing needs to be in line and reasonable. Oh, and one other thing that the auto repair management consultants taught that I found out the hard way can bite you is charging more than the dealer. Be careful here because most customer's will not understand how a smaller shop like you needs to charge more than the dealer when the customer looks at the massive dealership and common sense tells them the overhead is way higher. I went down this road with "longer warrantys" (which I still offer) but it is still a hard pill for the customer to swallow, no matter how good you are. Customer's don't want to feel like they have been taken advantage of. The dealers are offering many good deals these days so have a battle plan ready. My battle plan is on the front page of my website and on my "specials" page. You can read at www.robertsautoservice.com and you will see how I compete with the dealer, make a profit, and make a customer feel good about choosing us. 3. Once customer's are comfortable with your reputation and feel your pricing is reasonable, how you treat them will make all the difference in the world. We have had countless customers tell us we were either a little more or a little less than another shop but how we communicated with them was night and day difference so they were choosing us. Customers talk to their friends, family, and coworkers about their auto repair problem. You can imagine the horror stories they get told. When they finally do call, you need to slow down and talk to them like you would a friend at first, not like a doctor/patient, that will come later. I don't care how busy you are. Once the customer feels the difference in the communication they will then start to tie in your reputation with it feel good about you. Then when you ease into the pricing/diagnosis, call them with authorization, you can become more doctor/patient like. Then when they pick the car up it goes from doctor/patient back to friend again. This ties everything together and not only gets the customer to come to you and then authorize the repairs, it turns them into marketing horsepower for you where they will tell others and write great reviews. So, once you understand these three dynamics of reputation, pricing, and communication, and once you master them, then, and only then, will your loss leaders and marketing programs start to work and have great value. I will share these "loss leader" and "marketing" ideas with you all in a future post. I would love to hear your comments. Keith - Robert's Auto Service, San Diego, Ca.

Joe, I don't have a quick answer on this one. I have a marketing program that ties everything in together. If you go to my website you will see my specials that I run. We don't have state safety inspections in california, only emissions testing. When I get a minute I will outline what I have been doing the past two years now that is working VERY well! Keith

Joe, Thanks for the kind words. I will "come out of hiding" and be more proactive with this website. I really like this website and feel it is the best thing I have seen out there in terms of education and training for our industry. I will respond to more posts using my background of training and my past seven years of business ownership. I hope all is well out there. Keith

Joe, That's great that you are doing so well. You don't seem to have been impacted by the economy too much. In San Diego (where its only cloudy and overcast when Joe Marconi visits) we all took a huge hit starting in 2008 but especially 2009. I went overboard with specials and advertising to get as many people in the door as I could during that time. Although we ended 2009 down 5% in sales, we were actually up 5% in car counts. This tells you that you average repair order went down, which often happens when car counts are too excessive to handle. There is a positive to high car count and a negative to high car count and it is important as a shop owner to identify this. I found when our car counts were high everyone was getting burned out and overworked. Profitability dropped and customer complaints can start to rise. You can go too fast too soon and destroy your business and reputation if you are not careful. I also know that the effort in 2009 has paid dividends for 2010 as we are up 5% in sales and the profitablity is back. I scaled back on the coupons and advertising and the car count is now a little lower but the average ticket is higher and we are more profitable. The important thing is as a business owner, you need to understand this dynamic and not just from a "feeling" point of view. You should be tracking your daily sales, average repair order, car counts, and use accurate statistical data to make the proper management decisions. So, here is what I've learned going "backwards", (I worked for an auto repair management company for over 5 years then left and bought my own shop. I call this going "backwards" because most auto repair management trainers no longer own shops. They sold them and now do training.) 1. Be careful about implementing all the programs, ideas, etc. that the management trainers teach. I implemented many ideas to increase car counts "oil change packages, lifetime oil changes, free oil changes, etc." While these can be good then can also be very destructive if not thought out. If you have a smaller facility you will turn it into a large volume low average repair/profitablity shop and burn everyone out. Many of those customers will not turn into anything because they after the freebie only. You have to kiss a lot of frogs with these programs to get a price and you can be "married" to the frogs if not careful. Again, do not make "emotional" decisions based on ideas from a seminar. Implement these things based on your statistics, management philosophy, business plan, and how they can fit with the ideas you recieved from a seminar. 2. Be even more careful about implementing employee management ideas from a seminar. Once you put an plan into place it is very difficult to undo it and will kill employee morale. I found through consulting with auto repair shops and dealing with their employees that the employees hated when the owner went away to a management seminar. This is mainly because the employees felt the owner took a "left turn" on them and became someone different and so the employees entire foundation of their employment is turned upside down. That could be a good thing in some cases but a disaster in most. Your employees choose to work with you in small business based on who you are more than anything. You wouldn't like it if your top employees took a "left turn" on you and the feeling is mutual. So, when before you implement employee management ideas, think through the process. I don't have enough time to tell you my ideas on how to implement these things successfully. I simply want to emphasize knowing your facts carefully before implementing. Keith - Robert's Auto Service