By Nevil Jay
I'm currently looking into a business acquisition. It's a wheel repair shop based in South California. I have questions in terms of profitability and also, the expenses involved within the business.
I have profit and loss statements of the business. They currently operate 24/7 and have 30-35 employees. I am looking for someone who has experience in this sector that may be able to give me some unbiased advice. I also wanted to somehow come up with a valuation of the business. It operates out of a leased building, but consistently profits the owner a large amount of money. Who should I look for to verify these numbers? Will any CPA be able to understand?
Thanks in advance,
This is an article I wrote several years ago for a trade magazine.... I think it's still true today... Love to hear your comments.
Diagnostics fee or not
This has been an issue since day one. Should we charge to diagnose the car or should the estimate be free. Let’s define an estimate first.
What is an estimate?
An estimate is a list of all the parts and labor involved in making a repair. With the possibilities of adding supplements to the original estimate if other work is deemed necessary after the initial work has started.
Ok that’s an estimate, or is it…? Let’s try this again.
What is an estimate?
It’s a guess……. With the chance that I might get it right but more than likely the final bill will be different than what was original “estimated” at.
Hmm, the two definitions are different but at the same time mean the same thing… What about the diagnostic side? Ok, how about that… that diagnostic thing.
What is a diagnostic?
It is the process in which a technician is able to determine the cause or failure of a piece of equipment, vehicle, or appliance.
Did ya get that? … One more time …
What is a diagnostic?
It is the process used to determine the root cause of a given mechanical or electrical problem that has become an issue with a vehicle, appliance or piece of equipment.
Sounds the same doesn’t it…. hmm, maybe we are getting to the real issue… MONEY
The diagnostics may take some time, may even require a few sophisticated scanners, wiring diagrams, and tools. Time is money as we all know, of course, knowledge, expertise and experience is a commodity that should always be respected no matter what field you are in. A service charge for such “diagnostics” is essential in the continuing financial stability of a shop or for that matter… any service oriented business.
Once the diagnostics has been completed an “estimate” can then be given to the customer for their approval. This should also be noted that if a “diagnostics” is preformed and the problem turns out to be “intermittent” or none exciting a fee still applies. The time has already been spent to figure out that there was nothing wrong. That brings up another touchy issue. For some reason the customer feels cheated if you charge for nothing found… now wait a minute, how was it determined that nothing was wrong… ah…the diagnostics lead to that result. Then the problem isn’t the problem anymore, it’s the time spent looking for the problem that is the problem. To ease the customer’s woes you could always give them a time table for future re-evaluations. (30 days is a good round number) Note; It wouldn’t be the first time I have diagnosed a car for a customer only to find out that their complaint is from lack of understanding of their vehicle or dare I say… their just another fruit basket behind the wheel.
Now I’m not in favor of a free diagnostics (if you couldn’t tell already) and I’m not too fond of the free estimate. If there is any “man hours” that are part of any job a “man” wants paid. If that “man” is working on a commission basis, I can assure you that he is going to rush through the “estimate” in order to get to the real money end of the job.
However a diagnostic is a totally different thing, I don’t think I could have made a living without charging for the time it takes to figure out some of the strange pr oblems I’ve encountered over the years. Some things were easy to diagnose, some took hours. But I believe it’s the standardization of a diagnostic charge that would make things a lot easier for the customers to understand the complexities of today’s problem evaluations.
If a tech couldn’t figure out a problem in a reasonable length of time … say an hour… then it’s quite possible the shop is going to be losing money if they kept him on that job. The next best thing would be to move him off that job. Put another tech on who might be able to figure out the problem in a reasonable amount of time. Of course, the shop is already behind the 8 ball, since the first tech didn’t get the job done, but in the long run… it will get done, there will be an estimate for the customer explaining the repairs needed.
I don’t know which is more of a problem, the shops out there not willing to charge for estimating… Oops I mean diagnostic time… or the customer who doesn’t feel that it’s a necessary part of the process. Then again, these are not yesterday’s cars.
It’s about time there were some standards that everyone in the industry had to go by, be it from the independent side or the dealer side. Regulation or self imposed limits as to how much can be charged across the board for various levels of diagnostics. Not to say diagnosing a bad ball joint is easier than a battery drain, no, not at all. Each field in the industry would have to come up with a balanced set of standards that those involved could agree was a fair price for that type of service. If all the independent shops charge the same fees in a demographic area it would lead to a more even playing field for the customer. Maybe, we should think about using a different term rather than “independent”… we can be independent in ownership, style, quality, etc… but put the customer’s concerns up front. If I wasn’t in the business and didn’t know where to take my car I would really would like to know that I’m getting quality work done at a fair price at any shop I went to. If there was a way to put an end to the “I can get it done cheaper down the street” escapades… my drive home would be a whole lot more pleasant than in the past. .
If that didn’t happen it then only comes down to a question of where to have the vehicle repaired at. Everyone has their favorite doctor, dentist, or restaurant. Which is probably based on location, atmosphere, or “ya just like that particular place”. Price is always an issue, and probably always will be. If you’re not getting the job done right at the shop of your choice… choose another one. How many times a day does your phone ring because you have some “price shopper” who is never coming to your shop because your price is higher than the last shop they called… even though they were referred by a friend to call you.
Maybe we should focus on better instructional classes, more information, and true manufacturer level scanners available to the independent side of the business. Sometimes too much effort is put on the “Be nice to the customer”, or the preverbal “Customer is always right” routine. The old saying; “If the customer knew what was wrong they would have fixed it themselves” still holds true today. But I’m talking about telling them what’s wrong with the vehicle, not how to fix it. With the advent of the computer age upon us the car has become a rolling updateable, flash reprogramming software jungle of information. The cost of these specialized scanners puts them out of the range of most consumers, and a lot of small shops, which, in some ways, also places the shade tree mechanic on the endangered species list.
I can’t tell you how many times I’ve heard the same line from a customer’s after I have diagnosed a problem. “Well, I could have done that myself, I would have looked there for the problem if I had the time, and I don’t know why you’re charging me for something so simple. You should give a break on the price because it was so simple. “Hey, I’m a regular customer I should be getting a discount.” My usual answer is… “So if you knew what was wrong, why did you bring it to me to figure it out?” And, I’m not sure that other professional people you deal with such as a doctor, dentist, or the grocer…etc… is going to give you a discount just because you shop with them on a regular basis.
Common sense, the largest lacking component in all of these situations… In my opinion, once common sense is removed from the conversation “stupid” takes its place. I wonder if I could estimate how many times this has happened… maybe so… but I better think about diagnosing it first…
I have an older coats wheel balancer. Works great and is accurate. The problem is that on modern car 19-22" wheels it becomes really hard to eyeball the correct place on the wheel for the weight. Extra spins become common because the last weight was a few degrees off the mark. Newer balancers have laser pointers that make it easy. Has anyone retrofitted a pointer to their older balancer? Did you buy a kit or did you build something? I've done some searching but I can't find anyone that's done this before. I feel like it would be really handy.
By HK Blackbird
Our shop is being refitted with all new equipment.
Up for discussion is the choice of wheel alignment lifts.
The local distribution here in Hong Kong, has two brands on offer:
Hunter, who are well known and reputable, and Ravaglioli, who are well-represented, but
relatively unknown to me.
Does anyone here have any information to share on the pro's and cons of these two?
I've had mixed results with Italian equipment in the past, some good, some tragic.
Hoping to avoid any unnecessary shedding of tears, blood and cash.