This article is from my business partner, Terry Keller, who owns Keller Bros. Auto Repair in Littleton, CO. For more information about Terry, you can check out his free ebook on our website, "Is My Story Your Story?" Click here to get it!
Most of us shop owners understand the process of comparing our numbers to a set of benchmarks or standards. I remember way back over 35 years ago, I had monthly meetings with my accountant where he showed me my shop’s financials with the percentages and ratios, and then told me where they should be. It was always a frustrating experience – not just because my numbers were off, but because I didn’t know how to fix most of them and neither did he.
A decade later, as my experimentation nudged some of my numbers to higher levels, I ended up believing it was impossible to improve them above a certain point. Looking back now, that level of performance was mediocre at best…and by today’s standards wouldn’t allow me to stay in business for more than a couple of months! As uncontrollable overhead continues to go up, we shop owners must have our pencil very sharp and keep our production and profits at the right levels.
So What Are the Right Levels?
This is EXACTLY the age-old problem that every business owner has faced since products, services and money first started changing hands thousands of years ago. Who is to say where sales, profitability and production levels SHOULD BE? How much is enough? How much is too much? Can you try for too much?
If you set your prices high enough to make a good profit but don’t work hard to control your expenses, can you price yourself above the market and out of business? The answer is YES! What if you don’t charge enough to make a reasonable profit…how long can you do that? How long will your family put up with not getting regular paychecks? What if your employees can’t produce an adequate quality or quantity of work? How is that working for you?
Needless to say this stuff is way past important. With the lingering bad economy and higher inflation just around the corner, it is vital to know exactly where your numbers are and where they need to be.
But there’s something even more important than understanding some set of so-called benchmarks put forth by some so-called industry guru. It’s this: do you BELIEVE THEM? Do you believe they are real? Have you seen first-hand evidence that they are really being achieved AND SUSTAINED by other shops just like yours?
Stay tuned for next time, when Terry covers what your shop SHOULD be comparing numbers to and who you can TRUST! In the mean time, if you have any questions, leave a comment below or contact us at [email protected].