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October was a very rough month in retail sales for us, across the board it came in down about -40%, yes, almost half of our average sales. Corporate accounts were down -16%.

 

What is going on, what are we supposedly doing wrong? November is on par with the past years but not by much.

 

We track our marketing meticulously, we ask our customers for feedback, what do we know? This is what we know, our customers are struggling financially, many are living in houses that their mortgages are not being serviced, they are in dire straights.

 

We have gone deeper into our research, but are not happy with what we are seeing. Bottom line, social and political economic policies are broken, we are in big trouble and we instinctively "feel it" but no one in political office will point it out because it is a thankless job.

 

I am an optimist, but even I have a hard time being positive about the present outlook.

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How's your YTD sales? How are your competitors doing? I have a system that has been proven to work, so I just keep with it. We market to upper scale individuals. If my competitors are thriving while I'm starving I need to change me. If we are all struggling so sad for us, I can't fix the economy.

 

My point is there isn't much any of us can do to sell services to people with no money. Market to people with income to spend, forget about the Walmart shoppers. You aren't getting their black Friday money.

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Exactly.

 

We are working twice as hard, for the same money. There is no pricing power, gas has gone down almost 33% in the past three months yet revenue into the stores has not increased.

Not to make matters worse, but... along with the lack of cash to fix their cars a lot of the "GP" out there have next to no understanding of the complexities of their cars. It used to be those folks that couldn't afford professional service on their car could go down to the cheapo parts store and swap parts until they got it or gave up on the car and put it up on blocks in the front yard. These days, well... we all know how swapping parts can get ya in trouble.

 

So, .... now all those that used to go to the salvage yard or to the parts store for a PCM, HVAC control head, etc... have to resort to going to the pro shop for service and are NOT happy to pay for said service. I guess you could say we are in a transitional state of time when there will be less parts swappers and more work at the shops. But, somebody will have to do something first.... like GET A JOB so they can pay for car repair.

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I guess you could say we are in a transitional state of time

 

Yes, also, the trouble being that "transitional time" can last years.

 

Take a look at this:

 

Epic oil glut sparks super tanker 'traffic jams' at sea http://money.cnn.com/2015/11/22/investing/oil-glut-tanker-traffic-jam/index.html

OIl price is collapsing, yet you don't see a positive response from the general economy, if you used to remember, when people had savings they could take advantage of this situations. Now people have no savings, so their optimism and taking advantage of opportunities are not happening.

 

Maybe that's why Turkey shoots down a Russian plane. A conflict that would aid the world economy big players... USA, EU, Russia, Saudis and China...

Edited by HarrytheCarGeek
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I agree with targeting people with more money. We are a German exclusive shop and there's cars we turn away because they are too old, too worn, ect. We have more work than we can handle and I'm struggling to find a full time master tech. Sales are up 19% over last year and approaching the 1m mark annually with a staff of just 2 and myself. The key is to trim out the customers that can't afford you, they suck the life and time out of you. This is a business, not a charity. Help people who are deserving. I'm sure all areas of the country are different but you still have to be one step ahead of everyone else around you.

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The key is to trim out the customers that can't afford you, they suck the life and time out of you

 

I agree with you. Here is the thing, depending how long you had your shop at your specific location, the demographics are changing faster than before for us. Real property taxes around our area are between $8K to $20K per year. Lot of people that are retiring cannot afford the tax burden on their retirement income and are moving away.

 

So finding that customer that you can put in your sweet spot profile it's getting much harder for now.

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How's your YTD sales? How are your competitors doing? I have a system that has been proven to work, so I just keep with it. We market to upper scale individuals. If my competitors are thriving while I'm starving I need to change me. If we are all struggling so sad for us, I can't fix the economy.

 

My point is there isn't much any of us can do to sell services to people with no money. Market to people with income to spend, forget about the Walmart shoppers. You aren't getting their black Friday money.

 

Alfredauto,

As usual, I appreciate your approach & thought process. I swear, one of these days, I'm going to make a personal introduction, and take you out for lunch!

 

We've "had the softest year so far in average growth, but are still very much holding our own in the market we're in. My wife tries to convince me that our much more aggressive sales history "has to plateau" sometime, and has assumed that this year has been the year. As chief marketing/promotional guy at our company, I couldn't disagree with her more, and in spite of softer-than anticipated numbers, our 2016 marketing plan is reflecting higher than least year's growth expectancy.

 

I can't tolerate the "running in quicksand" feel of working harder and getting same/less results, so I've pushed myself to a point of obsessing, at times to avoid it. Despite our positive finish on 2015, we're surely not immune to the downtrends I've been reading about here, as well as other places in the news.

 

You have a good product - Your people are the best in the business, and your process is ever-improving. that's all.

 

If I find myself in your neck of the woods, Alfredauto, how about lunch?

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Here's something else to consider. AAA recently published a recent report
that indicates the average customer spends $766.50 per year to service and
maintain their vehicle.

When you do that math, if your goal is to have a million dollar a year
business, you only need 1305 loyal customers spending all of their repair
and maintenance dollars with you.

Our experience is that number is very achievable.

However, here's what's standing in the way of that for many shops.

The Auto Care Association published a startling report, which revealed that
1 out of every 3 customers are doing research and/or getting a second
opinion after receiving a diagnostic about their vehicle.

That number goes up to 1 out of every 2 customers, when the vehicle
owner is between the ages of 18-44 years.

This tells us that these customers view auto repair shops as commodities.
We have done our own interviews and discovered this is true. The
typical driver believes everyone does oil changes. Anyone can do a
brake job. Anyone can mount a tire.

That means: the goal is to separate yourself from the pack when presenting
your diagnosis and estimate. Otherwise, the chances are very high, that
customer is going to look for a second opionion.

Here is a simple but powerful exercise that can really help clarify exactly
what's going on, in your business.

Pull out all of your tickets from the previous 6-8 weeks where you provided
a diagnosis or estimate. You're looking for services or repairs that were
safety-related and/or leaks.

This works best when you phone the customer and basically say to them,
"Mrs. Jones, I see you were in about a month ago. During that visit,
we discovered your water pump was leaking. Did you have this repaired?"

If they say yes and they had it done elsewhere, tell them you are looking to
improve your business and you want to do a better job of servicing your
customers. Then, ask them, "Would you mind sharing with me what was the
reason you chose the other company to do the work?"

Listen to what they say. What you are looking for is a pattern to the
feedback. For example, if they're choosing someone else because the
other shop was cheaper, it's an indication they see your business, as a
commodity, which means there's not enough value being communicated in
the sales process.

It's been our experience that most customers would rather pay for value,
but it's up to the business to communicate what sets them apart from
very other repair shop in the area. Otherwise, customers will choose the
lowest price, every time.

Here are the reports I referenced:
http://newsroom.aaa.com/2015/04/annual-cost-operate-vehicle-falls-8698-finds-aaa/
http://www.nxtbook.com/mercury/autocare/StateOfTheIndustry_Report/#/0

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I should match my numbers from last year, and thats including a little 3 month sabatical where I took a day job at a dealership because I thought I was done. I just had my best November that I can remember recently. My area has a lot of price shoppers, and a lot of unproffesional shops that will undercut everything to get the job. I refuse to do that, as Elon said your selling value. I've become staunch on the no customer supplied parts this year, that has helped weed out some bad customers.

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You know, the news tell us one thing yet we see another in everyday business life.

 

About 16 years back in my frustration in growing the business, I went back to school to take some economic classes. The stuff the professors were teaching me didn't make much business sense to me, now I thought, maybe I am not too smart like these people, so I gave them the benefit of the doubt. Well, guess what, those professors were full of crap.

 

We are pretty smart people in this business, don't let the media and politicians make you doubt yourself, like the cliche says, "Don't Pee on My Leg and Tell Me It's Raining."

 

Going further into my economic research, I came across this gentleman, he is a pretty smart guy, hard to read at times for me as his vocabulary is steeped in academia, but legible enough to make your business even more profitable if you apply his knowledge to your business:

 

My Education as an Economist: How I Learned to Reject the Market Dogma That Dominates the Profession
A personal journey through economic thought. by Michael Hudson

http://www.alternet.org/economy/my-education-economist-how-i-learned-reject-market-dogma-dominates-profession?akid=13538.1118797.ZtMffX&rd=1&src=newsletter1043348&t=14

 

read his article if you get a change, once you understand what he speaks of, you will never let another main stream media mouth piece tell you that is raining while he pees on your leg.

Edited by HarrytheCarGeek
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We became "official" in November 2007, open for business in December. Each November we look to the November that finished our first year of being open, November 2008. We did fairly well our first eleven months, not knowing what to expect. Then November came................. our gross for the month was $0. Yup, you read that correctly. We could have locked the doors and stayed home and would have been ahead. At the time we thought "what are we doing, did we do the right thing?" We opened a new business during a major recession, it has humbled us how far we have come.

 

Last month was better than the first November we were open. We set a monthly goal for last month and hit it. We have grown in size and redefined our business thru the years, but we know we will never have another month like November 2008. And for that we are thankful.

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I just finished my quarterly review, OUCH! Our shop was down between 8-15% per month Sept, Oct, and November. August was a fail. FOUR IN A ROW. Part of the problem is last year we had the best year ever. Unbelievable numbers last fall, as in 50% increase over 2013. Stupid growth. The good news is the shop is up 18% overall over last year and ARO profit is up without including December 2015 so unless something really bad happens this month we beat the yearly goal. I just get worried about trends, downward is the wrong way.

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I just finished my quarterly review, OUCH! Our shop was down between 8-15% per month Sept, Oct, and November. August was a fail. FOUR IN A ROW. Part of the problem is last year we had the best year ever. Unbelievable numbers last fall, as in 50% increase over 2013. Stupid growth. The good news is the shop is up 18% overall over last year and ARO profit is up without including December 2015 so unless something really bad happens this month we beat the yearly goal. I just get worried about trends, downward is the wrong way.

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I just finished my quarterly review, OUCH! Our shop was down between 8-15% per month Sept, Oct, and November. August was a fail. FOUR IN A ROW. Part of the problem is last year we had the best year ever. Unbelievable numbers last fall, as in 50% increase over 2013. Stupid growth. The good news is the shop is up 18% overall over last year and ARO profit is up without including December 2015 so unless something really bad happens this month we beat the yearly goal. I just get worried about trends, downward is the wrong way.

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November was slow here too, the first half was average but it really fell off from the 15th to the end(deer season). I haven't looked at the numbers yet but it was down from the last couple years. For the year though we are up over 27% and our net profit is up even more. Hope the winter holds.

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Auto Loan Madness Continues As US Car Buyers Take On Record Debt, Lunatic Financing Terms

 

Way back in June, we noted that auto sales had reached 10-year highs on record credit, record loan terms, and record ignorance. We based that assessment on the following set of Q1 data from Experian:

 

Average loan term for new cars is now 67 months — a record.

Average loan term for used cars is now 62 months — a record.

Loans with terms from 74 to 84 months made up 30% of all new vehicle financing — a record.

Loans with terms from 74 to 84 months made up 16% of all used vehicle financing — a record.

The average amount financed for a new vehicle was $28,711 — a record.

The average payment for new vehicles was $488 — a record.

The percentage of all new vehicles financed accounted for by leases was 31.46% — a record.

 

In short, the “renaissance” in US auto sales is being driven (no pun intended) by increasingly risky underwriting practices and this is leading directly to the securitization of shoddier and shoddier collateral pools in a return to the “originate to sell” model that drove the housing bubble over a cliff in 2008.

 

As Comptroller of the Currency Thomas Curry recently put it, “what's happening in the auto loan market reminds me of what happened in mortgage-backed securities in the run-up to the crisis.”

 

Of course you can count on Experian and its incomparable senior director of automotive finance Melinda Zabritski (who never saw a subprime loan with ridiculous terms she didn’t like) to let you know that as dangerous as this dynamic most certainly is, everything will be fine.

 

On Wednesday, Experian released data for Q3 and well, let’s just say that the trend we’ve observed and documented over the past two quarters is still intact.

 

First, the percentage of new and used vehicles with financing rose to 86.6% and 55.3%, respectively. The trend is readily apparent:

 

Next, the number of leased vehicles as a percentage of the total continues to rise:

 

The percentage of subprime and nonprime in the leasing category rose meaningfully.

 

And the average credit score on loans for new vehicles just hit its lowest level since before the crash:

 

While the average amount financed is up across the board:

 

As are average payments:

 

And loan terms:

 

“As the price for a new or used vehicle continues to rise, leasing has become a more viable financing option for consumers looking to maintain an affordable monthly payment,” the aforementioned Melinda Zabritski said on Wednesday.

 

Well yes Melinda, leasing has become a "more viable financing option" for people who otherwise couldn't afford a car as has acquiescing to the extension of loan terms. On the lender side of the equation, continuing to feed Wall Street's securitization machine means constantly expanding the finite pool of eligible borrowers and that means lower underwriting standards.

 

What's incredible here is that Experian should be shouting about this from the rooftops and instead they're making up excuses for why it isn't a disaster waiting to happen. Auto loan ABS supply is set to rise by a quarter this year to around $125 billion and keeping that party going means making more loans. For those who missed it, here's a look at the latest data from the NY Fed on originations by FICO:

 

See a problem there?

 

Of course the bigger question for the US economy is this: what happens when this bubble bursts just as auto inventories hit their highest levels relative to sales since 2009?

 

http://www.zerohedge.com/news/2015-12-03/auto-loan-madness-continues-us-car-buyers-take-record-debt-lunatic-financing-terms

 

 

Crazy.

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Those stats are frightening and exciting at the same time. Think of how many people will be upside down with their car loans in a few years. That's good news for us repair shops, but bad for the car dealers who no doubtedly will start pushing service to pay the bills. 84 month loan on a used car? Thats bonkers. Cars aren't that much better than they used to be.

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We actually had the best October and November ever (well in 5 years since opening) : ) ARO in those 2 month went up by $100 from average, the profit margin 2% up from goal and both months sales goals were reached with ease. It feels good to look at the numbers when they are good but you have to monitor them every day or at least every week to make sure you know the big picture and can adjust your strategies before it's too late...

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  • Have you checked out Joe's Latest Blog?

         5 comments
      I recently spoke with a friend of mine who owns a large general repair shop in the Midwest. His father founded the business in 1975. He was telling me that although he’s busy, he’s also very frustrated. When I probed him more about his frustrations, he said that it’s hard to find qualified technicians. My friend employs four technicians and is looking to hire two more. I then asked him, “How long does a technician last working for you.” He looked puzzled and replied, “I never really thought about that, but I can tell that except for one tech, most technicians don’t last working for me longer than a few years.”
      Judging from personal experience as a shop owner and from what I know about the auto repair industry, I can tell you that other than a few exceptions, the turnover rate for technicians in our industry is too high. This makes me think, do we have a technician shortage or a retention problem? Have we done the best we can over the decades to provide great pay plans, benefits packages, great work environments, and the right culture to ensure that the techs we have stay with us?
      Finding and hiring qualified automotive technicians is not a new phenomenon. This problem has been around for as long as I can remember. While we do need to attract people to our industry and provide the necessary training and mentorship, we also need to focus on retention. Having a revolving door and needing to hire techs every few years or so costs your company money. Big money! And that revolving door may be a sign of an even bigger issue: poor leadership, and poor employee management skills.
      Here’s one more thing to consider, for the most part, technicians don’t leave one job to start a new career, they leave one shop as a technician to become a technician at another shop. The reasons why they leave can be debated, but there is one fact that we cannot deny, people don’t quit the company they work for, they usually leave because of the boss or manager they work for.
      Put yourselves in the shoes of your employees. Do you have a workplace that communicates, “We appreciate you and want you to stay!”
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