Is it Time To Change the Model of the Typical Auto Repair Shop?

[Joe Marconi]

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[Transmission Repair]

Great questions, Joe.  My answer on both questions would be "it depends."  There's a lot of variables involved before I give a definitive answer.  All I can say is what my experience has been in the past because at different stages of my career, I've asked myself the same questions.  I'll just tell you about one.

I came to the crossroads in my career when in deciding if I wanted to take in European vehicles, specifically, European transmissions.  Every job was like a new adventure in uncharted waters.  They took more time, more money for parts, and a higher percentage of those Euro jobs would turn into a "dead job" sitting in the back parking lot awaiting payment.   I considered myself lucky if we were paid as soon as the work was completed.  To add insult to injury, there was a higher rate of  no-goes (failed the final road test) and warranty claims.  Perplexing to say the lease because I didn't want to turn away work.

Unrelated to this topic, I bought a list of all the vehicles currently licensed in our county from our state's DMV to see where our bread & butter-type jobs were at.  I put the list into a database and would write queries.  Two years after I bought the list, a new question/query came up.  I wanted to see how many European makes are there in our county.  I couldn't believe my eyes at the answer... an infinitesimal 6%!  In my mind, I see way-more than that going down the freeway.  Moreover, I later discovered from AAA that the rate of European vehicles nationwide was only 10%.  Ever buy a particular model and color of a vehicle that you never see on the road?  Then, after you start owning that particular model and color of a vehicle, then they seem to be everywhere!  A similar phenomenon I call "a head-turner" was exactly what was going on with me.  Every time I saw a Euro on the road, it was a "head-turner".  Any other type of car was merely just traffic.

I soon reasoned if I ever chose to not work on European vehicles, I would still have 94% of the market!  After several months of thought, I finally would say "no" to European vehicle owners in a very special way.  My strategy was to price the work so high, the customer would be the person saying "no" and not me.  Anything can be had/done for a price.  Looking back, that was one of the best business decisions I've made in my career.  In the end, we still worked on Euros, just not near as many.  I guesstimate we still had 95-

96% of the market

The lesson I learned was to NEVER say "no" to any customer.  If the customer has the type of car or job you don't want to take on, don't be the person that says "no".   Let the customer say "no".

 

[Joe Marconi]

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[Transmission Repair]

4 hours ago, Joe Marconi said:

Larry, you bring up a few things I did not consider. And I guess if there is a strategy that works for one, who is to say it's wrong or right? As always, thank you for your perspective. 

I would be lying if I said nobody ever had something negative to say about my strategy.  I've been told my strategy is unethical.  Another said "You can't get that kind of money for that job."  Another said, "How can you let that customer walk?  Just because you're greedy?" and on, and on.  All complaints were some variation of those 3 objections.  That didn't deter me.

One thing for sure, all the shop owners I did consulting work for and practiced qualifying customers that way, went back to their old ways after I left.  Only one of them are still in business.  My opinion of why they are still in business is because they added full car repair to their formerly 'transmissions only' business.  The biggest problem I see with struggling transmission shops today is they don't cover their costs.  I train them in job costing and I hear objections like "I can't get that much." or "If I charged that much, I'd be the highest priced shop in my area." etc., etc., etc.    

My experience has been that they either follow my training (or any good training) or go out of business.  A great example is my former shop.  I sold my former shop to a multi-shop owner/competitor.  They had 4 shops in total, we were shop #5.  Before the sale, we were doing a consistent $1.2M/yr. in sales for the 3 years prior to the sale.  Their rent was $11K/mo. or 11% of sales.  Within 5 years, sales were down to $400K/yr.  Rent became a whopping 33% of sales.  No shop can survive like that.  They eventually folded, employees left, and they took all the shop equipment with them.  The $85K judgement we got against them wasn't worth the paper it was written on.  Sad, sad, sad state of affairs in the end.  Perhaps I'll write a book about it some day.

[Transmission Repair]

I've talked about this before, but it does bear repeating.  Does your shop work on European vehicles?  Here’s some validated facts.  Did you know if you added up all European vehicle makes and models they would add up to less than 10% of the U.S. vehicle population.  When I first saw this in the Automotive News Data Center (https://www.autonews.com/data-lists) I couldn’t believe it.  It seemed like I personally saw more European vehicles than 10%.  After seeing the same results year after year I finally determined why that was.  

It’s because European vehicles are head-turners.  You sit up and take notice.  However, over 90% of the vehicles on the road are mere traffic to me and most people.  These percentages are for the entire U.S.  Some parts of the country have a higher or lower percentage.  Where I live, in Utah, the number is 6%.  However in my suburb of SLC, Draper, the number is 8%.  I don’t have the numbers for other states.

Do you realize if you thought servicing European vehicles was too much of a hassle worth pursuing, and eliminated Euros from your job mix, you would still have over 90% of the market?  Food for thought.

Rethink your business model.  If you are in or near a big city on the coast, you may not want to eliminate Euros.  They seem to be over 10% in those locations.  However, we did not turn Euros completely away.  We are a transmission repair facility and many specialized tools we buy are for a 1 or 2-time use only.  We have to pass those costs on and is why we price European units so high when compared to domestic transmissions.  Because of that, we did few European vehicles.  And without exception, they were always a hassle.

Think about it and determine if European vehicles can fit into your business model.

Edited February 9, 2023 by Transmission Repair
Correct spelling and add link.

[newport5]

Regarding “My strategy was to price the (European) work so high, the customer would be the person saying "no" and not me.”

While that strategy makes sense to a shop owner, let me add this.  I want to encourage a panel discussion at an upcoming auto conference on improving the perception of our industry. I started a list of talking points and overcharging is one of them. And that strategy looks exactly like overcharging. When the customer checks a European repair shop, they obviously decide you are overcharging. And our industry looks bad. I believe we need to fix that. For the benefit of all of us.

Thoughts?

Side note: we're a German car repair shop in Orange County , California and German cars are EVERYWHERE !!!

[Joe Marconi]

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[Transmission Repair]

3 hours ago, newport5 said:

Regarding “My strategy was to price the (European) work so high, the customer would be the person saying "no" and not me.”

While that strategy makes sense to a shop owner, let me add this.  I want to encourage a panel discussion at an upcoming auto conference on improving the perception of our industry. I started a list of talking points and overcharging is one of them. And that strategy looks exactly like overcharging. When the customer checks a European repair shop, they obviously decide you are overcharging. And our industry looks bad. I believe we need to fix that. For the benefit of all of us.

Thoughts?

Side note: we're a German car repair shop in Orange County , California and German cars are EVERYWHERE !!!

You need to go back through this conversation and read ALL of what I said.  Just as an example, I said:

"Rethink your business model.  If you are in or near a big city on the coast, you may not want to eliminate Euros.  They seem to be over 10% in those locations.  However, we did not turn Euros completely away.  We are a transmission repair facility and many specialized tools we buy are for a 1 or 2-time use only.  We have to pass those costs on and is why we price European units so high when compared to domestic transmissions.  Because of that, we did few European vehicles.  And without exception, they were always a hassle."

I agree we need to improve the image of our industry.  However, I don't believe pricing needs to be in the discussion.  In my opinion, the vast majority of automotive shops UNDERCHARGE, not overcharge.  Nobody is holding a customer hostage when giving pricing information.  It's always a negotiation.  Watch a few episodes of TV's Pawn Stars and you'll start to get where I'm coming from.

[newport5]

I apologize for the confusion. I had read it all. I wasn't blaming. We've all done it and I NEVER thought anything about that until I started brainstorming reasons for our bad rap. And polls have shown overcharging is an issue, even though they don't say HOW those customers decided that!!!

As if it FELT high to them???

My point was, when that customer calls a shop that specializes in European cars and they quote a regular price, the customer jumps to the conclusion that you were overcharging. Human nature.

Again, I apologize for the confusion.

Victor

[Transmission Repair]

No apology needed, Victor.  I have an "overcharging" story for you that might smooth things over.  I had a customer with some bad luck.  His wife's transmission went out and 2 months later, the transmission in his Dodge truck took a dump.  In less than 90 days, he had over $6K in unexpected transmission repairs.  His truck also had a pinion seal leaking in the rear diff.  I called the customer to get the additional authorization for $300 and he declined.  His brother-in-law said he could fix the pinion seal leak for $50 bucks.  So, we did just the transmission and noted on the repair order that the pinion seal was leaking and we wouldn't be responsible for low fluid damage to the rear diff.  He paid the bill and left.

Two weeks later he calls to get his truck towed in.  Our manager took the call and had no idea we had worked on the truck before.  As it turns out, his pinion nut had come loose and slung the rear driveline out of the vehicle.  The damage was extensive.  So much for the "brother-in-law pinion seal job."  Take a peek...

 

[newport5]

Wow!  Ya, I hate the "My brother-in-law can do it for ..."  Hard lesson for the customer.

[Transmission Repair]

I bet he and his brother-in-law aren't on the best of terms anymore.  His brother-in-law thought we were overcharging.  (If they want too much for a pinion seal, I wonder if they didn't do the same on the transmission?)  So much for the do-it-yourself pinion seal job.