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By Bob Cooper If you speak with most shop owners they’ll tell you that they think their shop is worth x amount of money. Ask them how they came up with that number, and they’ll tell you it’s based on what they heard another shop sold for, or it’s predicated on their annual sales. But if you really want to know what your shop is worth, first of all, forget everything you’ve heard about “goodwill” and the fact that you have thousands of names in your database. That’s icing on the cake, but it’s not something a buyer can take to the bank. And although there is some value associated with some franchise names, there are two things that are most important to a buyer: the “tangible assets” and the “income history.”
Tangible assets are things like real estate, cash in the bank, secured receivables, inventory and equipment. To put it another way, these are the assets that buyers could turn into cash if they had to. When you’re establishing the value of your inventory and equipment, bear in mind that the actual appraised value may very well be far less than what you originally paid. So tangible assets are always number one.
In regard to “income history”, we all know that past performance is no guarantee of future performance, yet the substantiated income history of a company is what buyers can use to forecast earnings. And don’t forget: The amount of money the “company” made does not include any income you’ve drawn out of the company as a salary. The company’s income is the amount remaining after all expenses, including your salary, have been considered.
So imagine you’re looking to buy a shop, and let’s say the tangible assets are worth $400,000. In addition, let’s say the shop has a history of generating $100,000 in annual income after all expenses, and let’s say the owner has been drawing a salary of $80,000. So if you were to buy that shop, how much would you be willing to invest? Well, only you can answer that question, but I hope you take these 6 points into consideration:
1. If you were to liquidate after you purchased, how much could you sell the assets for? I call this the “street value” of assets.
2. How long has the company been in business, how long have the key employees been with the business, and what’s the probability that these key employees will stay on once you buy?
3. What is the probability of the company continuing to earn the same $100,000 in annual profits, and for how long?
4. In regard to the $80,000 salary the owner was taking, would you be willing to do what he or she does for the company for the same amount? Or will you be able to hire someone to do that job for the same or less?
5. If you were to invest the same amount of money in any other business or investment vehicle, would you receive a better return?
6. What are the terms of the purchase price? You may be better off to pay a higher price in return for a lower down payment, good financing rates and a non-compete.
So, how do you establish the value of your business? Not by the icing (goodwill and number of names in your database), but by looking at it through the eyes of both a banker and a buyer. Since 1990, Bob Cooper has been the president of Elite, a company that strives to help shop owners reach their goals and live happier lives, while elevating the industry at the same time. The company offers coaching and training from the industry’s top shop owners, service advisor training, peer groups, along with online and in-class sales, marketing and shop management courses. You can learn more about Elite by visiting www.EliteWorldwide.com, or calling 800-204-3548.
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Car and Driver The technical changes most everyone is familiar with have more to do with emissions or performance issues. But, let’s step back a bit and look at the whole thing from the occupant’s vantage point. You know, what changes has the driver had to endure? When the horse and buggy were still rulers of the open road, cars were just a tinkerers dream. Actually those open roads were more like uneven ditches with wagon wheel ruts, but a road none the less. The first cars had to adapt to those rutted roads and of course, the driver had to take his fair share of bumps and bruises just to prove his new horseless carriage was up to the task. It wasn’t long before a confrontation between the staunch horse and buggy drivers and the scarf wearing, goggle protected new-fangled automobile occupants came to a cross road. Laws were enacted that a man had to walk at least 50 paces in front of the car holding a raised red flag to warn fellow travelers (mainly the horses) to be aware of this metal contraption belching noxious fumes while sputtering along at the amazing speed of 7 mph. Later, it was the horse and buggies turn to have a red flag warning assistant in front of them as the roles of were reversed. Before long, a horn was mounted to the side of the car creating this obnoxious sound that not only scared the remaining horses but annoyed every passerby as well. The model T has always been considered the father of the new age of automobiles. But, there were a lot of improvements other than the assembly line that came along around the same time period. Later, enclosed cabs were added into the latest designs with retractable windows and a hard top. Heating systems were incorporated along with other creature comforts. All of these changes made the ride that much more enjoyable, and of course, sold a lot more cars. Eventually the pedals of the model T were replaced with the standard three pedal design, which made operating the car a bit more “driver-friendly”. Changing gears was made easier with a shift lever instead mashing down the pedal for low and up for high as in the model T. Cold starting a car was still an issue, but instead of getting out of the car and raising the hood, a lever on the dash could be pulled out for cold starts and in when the engine warmed up. The electric “automatic” choke followed years later which meant one less chore the driver had to accomplish. Hand starting your car was the norm. Even with careful instructions there was still the potential of a few wrench elbows and a couple of broken bones from simply trying to get the car started for that weekend jaunt around the country side. An electric starter was the answer. Now all the driver had to do was mash a pedal on the floor to accomplish the same task. When the automatic transmission made its debut a person’s strength or ability to shift correctly wasn’t important in operating a vehicle. The car was becoming even more user friendly. The huge steering wheels could now be replaced with a much smaller version incorporated with power steering. Brakes, wipers, suspension, steering, lighting, heating, and air conditioning improvements meant less effort and far less exertion on the driver’s part to control the vehicle while being enclosed in their very own micro climate controlled environment. The car was becoming what some said in the 50’s as ‘futuristic’. True, yes… but Oh, if they only knew what was coming off those assembly lines just a few decades later. Thoughts changed to emission controls and safety issues during the 60’s and 70’s. Speed limits, bumper heights, seat belts, safety glass, were required from all the manufacturers. Those creature comforts were not forgotten about either. Smoother rides, better tires, and lush interiors were on the minds of every manufacturer. But, it was only the beginning of things to come. We’ve zoomed through the jet set age, moon landings, and the smog, to come face to face with the electronic age or what some would call the computer age. Cars aren’t wired together with bulky switches, relays, and mechanical linkages anymore, most everything is data signals, sensors and plastic. Not only is the modern car a rolling computer controlling all aspects of the emissions and passenger comfort it is also can be seen, controlled, and monitored by outside sources. Let’s face it, the days of you holding your hand out of the window to signal or move that seldom used device on the side of the steering column to tell other drivers of your intentions of a right turn may be entirely left up to a computer and not yourself. The car will soon talk to the other cars on the road and they’ll all know what your destination is, and the route you’re taking. All you need to do is tell the car to ‘Go’. In the near future, the only requirement to “drive” a car is to be able to push ‘enter’. Traffic lights, R&R crossings, and highway congestion can all be controlled by a system of checks and balances. You won’t need to know how to shift the transmission, how to use a road map, decide which wiper speed to use, signal for a turn, judge when the high beams need to be dimmed, or control your traveling speed. You won’t have to do a thing except to be patient and wait in the comfort of your car while you arrive at your destination safe and sound. When that day comes, you won’t need a steering wheel, pedals, or even a horn. Today’s standard safety features such as air bags, have saved countless lives, but it’s possible that a new and far more advanced crash avoidance system may even make the air bag system as obsolete as the guy with the red flag. Multiple position seating with heat, massage, and air conditioning, automatic tinted windows, premium sound systems, navigation, active cruise control, parking assist, touch screen commands, voice recognition, and an endless variety of other creature comforts are available. Honestly, some of these creature comforts are far better than what I have at home! But, it’s our car, our transportation, something we spend several hours in and of course, we want it to be just the way we like it. It’s no wonder you hear that today’s generation can’t drive a stick shift, or how they’ve never heard of “three on the tree”, let alone understand the three pedals on a model T. Those technologies are from a different time, a different era, and are not part of the modern world. In fact, most new cars don’t even have a shifter of any sort. Everything is done by the push of a button. Talk about occupant evolution! What do you think the next generation of drivers are ‘not’ going to need to know that you need to know today? It’s very possible that an ignition key will only be found in a museum, and I’ll bet they probably won’t understand what a door key was used for. Soon, those automatous cars won’t be something we’ve heard about, but will be the average-everyday car on the road. Now, the only reason to have a guy holding a red flag is to keep the crowd back from the cars on display at the weekend car show. But, through all the evolutionary changes for the car and driver, one thing has remained a constant. The seldom appreciated, hardly thanked, and least likely to be respected by the hustling-bustling-fast paced money-chasing drivers of these new-fangled contraptions… the person we couldn’t do without… the mechanic. As long as they make some form of transportation, and continually make it more complicated the more we need the educated and highly skilled technician to keep things in tip top shape. Today’s average driver knows far less about their cars than the previous generation. Although the mechanic needs to know quite a bit more than their predecessors. Before a driver was responsible for nearly every function of the car, but those functions have been passed onto computer signals. The responsibility of keeping those computer signals flowing has fallen onto the mechanic. So, if you like all of your cars bells and whistles, thank a design engineer. If you’d like to keep all those bells and whistles working…thank a mechanic. There may not be a ‘driver’ for every car in the future, unfortunately, they’ve been evolved out of the picture. But, you can be sure one thing… there will still be a need for a mechanic. View full article
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Hello all, Just wanted some general feed back from a few automotive repair shops regarding Yelp. We have been contacted by a sales rep from Yelp for quite sometime now regarding paid advertisement, though we have declined. We have noticed a few negative reviews, and many positive reviews though they are not being displayed. Is it worth it to "pay" Yelp and see what the outcome would be? Thanks in advance for your thoughts. Nick
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My wife and I went to Mall yesterday to buy a gift for my grandson. We passed the men's belts and noticed a sales offer; 30% off all Belts. I stopped to look, and my wife said, "Don't you need a new belt?" So, I picked a $40 belt that was marked down 30%, which brought the belt down to $28. My wife pulls out a $20 coupon, which brought the price down to 8 bucks! What is the real price on the belt?....what is the cost price to the store on the belt? Makes you think, right? I struggle with 10% discounts on AAA customers. Is price all smoke and mirrors, when it comes to retail?
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How Long is a Labor Hour? Did you ever stop and wonder how long a labor hour actually is? I’m not talking about time ticking away on a clock. I’m talking about the actual time spent on a repair vs. the labor guide’s suggested time. Personally, I’ve never had a job that started and finished exactly to the second of the given labor time. It’s not like the labor guide’s hourly chart is set in stone, or that they’re wrong, but when it comes to getting paid it sure seems like they are. Any mechanic will tell you that a labor hour can stretch to half a day if a lot of research is involved, or it can last 15 minutes. Most labor guides typically don’t take into account how much research, diagnosis, equipment setup, or the time it takes recover your 10mm socket that just fell down into the motor. Time, as they say, is money. If you don’t think so, take your car to any bodyshop and read off the labor charges. You’ll find the labor time is divided into a 1/10th of an hour. However, in the mechanical repair shop, seldom are the labor costs scrutinized as they are when dealing with insurance companies. Even still, I’ve never once been asked to break down the mechanical repair labor into diagnostic time and the actual physical labor when giving an estimate. Estimates are usually quoted by the R&R labor time for a particular repair. Generally, that doesn’t include diagnostic time. Even though the book time has been calculated out, it’s still not a complete guide and certainly not the Holy Grail of the repair industries time clock. Try sticking with an estimate for changing a starter that’s listed as one hour job. More than likely the estimate is only going to be quoted straight from book of a one-hour labor charge and not any diagnostic time included. Even with all the technically advanced diagnostic tools a professional mechanic has at their disposal there are still people who can’t understand why diagnostic time should be included in the labor estimate, even though it’s not part of the R&R for the component. In their mind, (as I’ve been told numerous times), the mechanic should already know what’s wrong when they pull their car into the shop. What’s worse is the price shopper who calls from shop to shop looking for the cheapest repair. I’d bet to say the cheapest quote is probably nothing more than the R&R labor time for whatever part they’re concerned about. However, nobody mentioned anything about the crusted connections at the battery, or the leaking valve cover that’s coated the starter in oil, or whether you’ve installed aftermarket headers. Not to mention any diagnostic time, because the real problem isn’t the starter at all. On the other hand there are the stop watch aficionados. You know, the people who literally count the seconds of every minute and are bound to argue over any labor time discrepancies on their invoice. The mechanic’s entire career, (in their way of thinking), is strictly turning bolts and slapping on parts. These tick-tock-time-keepers, watch their timepieces with precision and inevitably use “time” as the only determining factor for the cost of a repair. For instance, let’s say the book time said an hour, and everyone involved agreed upon the charges, but the mechanic got it done in 25 minutes. The argument has always been that the cost of the job should be no more than the time it took to do it. Should the mechanic be penalized for doing his job proficiently and having completed it early? Where does it say he should give the job to the customer at some discounted rate because he can beat the book time? Doesn’t seem right at all. But, what if the same job that was quoted for an hour has taken four hours to complete? Who pays for the time difference now? So in a sense, a labor hour isn’t an hour at all. It’s an arbitrary amount of time that may or may not be exactly 60 minutes. If it was as accurate as some people believe, then theoretically you should get an estimate for that hour’s labor, pull up to the repair shop, and walk out in exactly 60 minutes with the job completed. Not a second sooner or a second later. Yea, good luck with that one. Like most trades mechanics get paid by the hour, however it’s not like you punch a time clock in the morning, work all day, then collect a 40-hour paycheck at the end of the week. Most mechanics work on flag time. Realistically, let’s call it what it really is… piece work, (the piece being the car). Very few mechanics are offered an hourly pay and a guaranteed 40-hour work week, (although there are some places that use a combination of both flag time and hourly pay). More times than not, a mechanic ends up eating a whole lot of labor time for problem solving. Whether there are rusted bolts, bad connections, illusive intermittent problems or poor information from the get-go, something is going to use up time which eventually won’t go towards a paycheck. Any time money and people are involved in the same situation, and you’re dealing with something that’s not widely understood, such as the modern car, it’s up to the mechanics and the repair shops to make sure they do. Customers also need to understand that this is a business based on suggested labor hours and not a time clock. There needs to be a reasonable amount of trust in the labor guide estimates from both sides of the counter. Because, it’s hard to say how long an hour of labor really is.
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By Joe Marconi
A few weeks back I had a problem with my refrigerator. I got a referral and called an appliance repair company. I called three times and each time I called this is what happened: "C and E appliance, please hold." I was put on hold three times for about 5 minutes. After being put on hold each time, a women would say, "What's the problem?" No engagement, no sign of interest for me the customer, no signs of caring. I gave the women a brief description of the problem and each time she told me someone would call me back. Well, no one did.
So, I called for the 4th time, and as the person answered the phone I said, "DO NOT PUT ME ON HOLD." There was silence, so I continued. I explained to her that she has spoken to me three times, I left messages three times and three times you told me that someone would call me back. She replied, "You are talking to the wrong person, if you have any complaints, write a letter to my boss, after all he won't listen to me anyway." I hung up the phone and called another company.
The lesson and takeaway here is simple: Who's answering your phone? The wrong people on the phone in your shop can kill your business. Have meetings with your people. Make sure you review your phone skills policy. If you don't have one, create one. Empower your people to people to handle issues. And make sure you log every phone call. If you feel you have a problem, start recording phone calls.
Your phone is your lifeline to future business. So, please ask yourself....Who's answering your phone?
By Joe Marconi
Shop production is a hot topic these days. High production results in higher sales and profits. But there seems to be so many obstacles to overcome to achieve high production levels.
I was discussing production with a few shop owners, and one shop owner mentioned that he recently hired a shop foreman; an “A” tech in his early 50’s. The foreman uses his knowledge and skills to organize the work flow. For younger techs, it’s even more important that they know how to work and keep productive.
What are your thoughts? Does anyone else have a foreman or similar position? And how does this role affect production?
By Joe Marconi
July 4th is this Wednesday. And as a shop owner, it means that sales may suffer. But, there is more to life than sales. Celebrate July 4th; commemorating the adoption of the Declaration of Independence! Speak with your employees about their plans for the holiday. This will send a message that you care about them as people, and that it’s not always about business.
With the right attitude, you will build morale and you will make up those sales. And let’s face it; we all need a little time off now and then.
By Joe Marconi
I recently made a call to my Internet provider to discuss and issue I was having. After multiple attempts at trying to explain my problem, the customer service rep on the other end of the phone had no clue how to solve my problem. She was nice, extremely polite, and had the voice of an angel. She was well-trained, but not in the art of problem solving.
Great customer service is not about being nice to people, it’s all about understanding the customer’s needs and coming up with solutions to their problems. Train your service personnel in the art of proper etiquette, but also in the art of problem solving. Empower your people to also make decisions. Set limits, but give them the authority to solve issues without every problem reaching your desk.
By Stevens Automotive Service
You are a entrepreneur and your business is Automotive Repair. Run your business like a business and become more profitable.
You have a tool box just like your techs in the shop do and the ones with the correct tools , good work ethics and knowledge are the best at what they do. So can you in the shop management area just use your TOOL BOX!
A few things to get cleared up. I have read a lot of post , forums etc, dealing with car count, advertising, us against the dealerships etc. WELL ! First you have to concentrate on your business not what someone else is doing, what works for you and makes you money should be what matters to you and your business.
1) Concentrate on what your doing right if it needs refined ..REFINE IT.. DIAL IT IN... GET THE PERCENTAGES CORRECT.
2) Do you have enough work flow and are you getting the max out of what you already have ?
3) IF you don't have a good even flow of car count, advertise, but do it in a way that it comes back to you to show what your business has to offer that the others don't.
4) REPUTATION, CUSTOMER SERVICE, FIXING THE CONCERN and BEING A SMART BUSINESS OWNER are the only steps to winning.
5) Last but not least .. PEOPLE BUY GOODS AND SERVICES FROM PEOPLE PERIOD !!
Look at it in this perspective for a moment. Your advisors are problem solvers, customer comes in with a problem or just for a service and they let them know what it will take to repair it or what the car may be in need of if not now then soon. They are solving problems if not right now then later, building trust and reputation for your business. I always say if you solve there problem the rest SELLS itself. And for those of you that think and have been programmed to think that getting new customers, keeping the good ones you have to spend crazy money to get them and keep them is just that "crazy".
I will be glad to speak with anyone that wants to have less stress and make there shop profitable. Send me a message, email, phone call and we will go over what you have and what you are wanting to achieve and the consultation is always free. IT COST NOTHING TO ASK BUT IT COULD COST A LOT IF YOU DON'T !!
"LOAD YOUR TOOL BOX WITH THE RIGHT TOOLS"