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[Podcast] Your Cash Position – Staff Reductions – Overall Outlook Coming out of COVID-19 [THA 178]


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https://youtu.be/axP6xZK3dgg

Mike Chung is director, market intelligence at Auto Care Association. With more than a dozen years of experience in market research, Chung and his team provide the industry with timely information on key factors and trends influencing the health of the automotive aftermarket and serving as a critical resource by helping businesses throughout the supply chain to make better business decisions. Chung has earned a Bachelor of Science in chemical engineering from Massachusetts Institute of Technology (MIT), a Master of Science in environmental health management from Harvard University and a Master of Business Administration with a concentration in marketing from Montclair State University.

Hunt Demerest, CPA at Paar-Melis. Hunt is Accredited in Business Valuation and a licensed Certified Public Accountant that has been with the firm since 2006. He specializes in business taxes, valuations, and does consult work with our clients all across the country. When he’s not in the office, Hunt enjoys spending time with his family, golfing, working on and racing his cars. Listen to Hunt's previous episodes HERE.

John Wafler has spent all of his working career in the automotive industry and has experienced almost every position in an automotive repair facility (yes, he started as a technician back in 1982) and also owned his own automotive repair business for several years. This background, in addition to the post-secondary education he received in Business Management, Marketing, and Computerized Management Systems gives him a unique perspective on what it takes to be a successful business owner in today’s challenging automotive aftermarket service industry.

John also worked as a Systems Integrator/Franchise Consultant/Management Trainer for Pace Automotive Systems in Canada for seven years and for Horizon Training and Management for the next five years, where he was introduced to RLO Training and the “Series One” Automotive Management Workshops developed by Bob O’Connor.

At RLO Training John started as a Bottom-Line Impact Groups Facilitator with Bob O’Connor back in 2001, and since then has helped hundreds of shop owners achieve high levels of success through his training, facilitation, and coaching. Listen to John's previous episodes HERE.

Key Talking Points:

  • AutoCare Association has been pulling data from it’s members regarding the impact of the pandemic to help them understand and cope. They’ve provided a few slides for this Town Hall Academy
  • Cash PositionIn early April 36% were highly concerned
  • In May and June, 16% were highly concerned
  • A very strong discipline for the service professional happened within the first two weeks or months when Covod-19 hit was to look at every expense.Called every vendor. They found items they were paying for and not enjoying
  • Many found a 20% reduction in costs
  • Too many shop owners were costing along as they become more profitableMargins, and getting fat with their fixed expenses
  • Budgets need to be reviewed
  • Every cent needs to be scrutinized, pandemic or not
  • Many shops that put cash aside did not worry about getting through this
  • The pandemic was the single most stress test on your business
  • Many shops got the PPP money and EILD has provided them a strong cash position   
  • The aftermarket is typically immune to certain downturns, the industry is cautiously optimistic.
  • Staff ReductionsSmaller companies were not going to reduce staff as much as the larger ones were
  • Service professionals do not have to go into board rooms to decide and they are closer to their people and their families to ride out their decision to reduce staffIf they did it was a short period of time
  • Reduced hours
  • Opportunities for the independent to hire technicians from dealership layoffsDealerships were always a smart and solid place to work. Covid-19 changed that
  • They were quick to shut down their service bays even though they were essential
  • A number of shops considered letting people go, were not great contributors to the business.
  • Many did whatever they had to do to keep their best people on the payroll
  • The tough problem is the extra amount of federal unemployment is making it tough to get people back to work. The extra $600 per week makes it hard to go back.
  • Many shop owners are rethinking wages
  • Labor rates need to go up
  • Charging for extra charges like concierge service is not the right moveIncrease your labor rate to cover any extra cost of doing business
  • The optics for the customer will feel they are nickel and dimed to death
  • Don’t be the cheapest in town
  • OverallMany shop owners are having the best June ever. Some are booked out a few weeks
  • We are not out of the woods and need to be cautious and be safe. Virus hot spots are growing
  • Very optimistic for the year at the service level
  • Road trips are being planed. May be safer than air travel
  • The RV industry is booming
  • Will the work from home and back to school have an impact on miles driven
  • Many shop owners have said that the pandemic is the best thing that happened to themWith PPP and EIDL monies smart operators have helped their cash position
  • They got caught up with debt
  • Opportunities to buy weaker shopsSome are using pandemic as an exit excuse

Resources:

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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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