Evaluation

[C Wolf]

Hello all.  I've been researching a lot recently and I i found this site last night.  After reading some of the other posts I still haven't found an answer to my most pressing question.  How do you forecast the first year of revenue for a new to me but "kind of" existing business?

I'll try to keep this short and to the point, if I miss something, I'll address the comment and edit the original post.  I apologize for all grammer, punctuation, etc, I'm on my phone typing this.

My background is in auto sales and management.  I have worked in Franchise stores for almost 20years, and opened my own Independent dealership in 2017 (6years as of October). Out of highschool I went to trade school and received my AAS as an auto tech, however I ended up in sales instead of wrenching.  I do a large amount of the diagnosis and repair for my dealership, subing out what I'm not comfortable with based on knowledge, tools, time, space etc.  I have a Bachelor's in Finance so I'm comfortable with numbers.  

I have reached my limit with my current facility and after a few discussions with my landlord, there is no realistic option to change that.  They won't sell the building nor sign a long term lease if I made improvements to the building.  (Property is owned by elderly parent, kids will likely sell.  My area is only 1/4 of the property, there are many issues that make the entire property very unappealing).  I am operating out of a small building with a single stall bay.  The bay does not have a floor drain, and is not high enough for a full size lift so I have a half lift, like what someone would have in their garage.

I have located a property that would suite my needs nicely, however with today's commercial lending market, this is a much tougher application process then I was expecting.  I had initial talks to the owner about CFD and those talks have stalled as he just wants to cash out. If I am able to purchase this facility I will be expanding into customer pay as well as servicing my inventory.  Sales and service will be at that location.  I will also be hiring a employee or two right off the bat.

The property is an existing automotive shop established in 1971.  The facility is quite large with ample parking and 6 bays, two with hoists.  The owner is selling it property only  for one price not the business as a whole.  He was roughly an additional 1/6 of the purchase price for the business.  There is basically no value to the business as he doesn't have a customer list (still working on paper and pencil, not a single computer in the building); the business structure is operating under an assumed name which he doesn't have registered with the state as trademarked, as the current business, nor as a DBA; there is no established credit for the business; and his books are not remotely accurate as he constantly brags about keeping cash off the books. The owner has worked their for 30 years, having bought out his boss 10 years ago.  This shop has been running with the owner and a young inexperienced tech (19 first auto job) for a while now.  They primarily do maintenance, belts, brakes, tires, hoses, etc.

Auto repair in this area is unbelievably busy, and I know it will not be difficult to get the customer pay side up and running.  I know most of the owners around and my average wait is anywhere from 1 to 3 weeks out.  My preferred service shop is part of a dealer group, and they haven't been allowed to do any customer pay work for almost 5 months.  My second favorite shop is so busy that I'm looking at 3 weeks out for a appointment.  The local Toyota dealership was a 3 week wait for a 4x4 diagnosis as well (needed for auction claim)

My plan is to start with two techs keeping the young tech he has currently (pending interviewing him) and poach a master tech I know.  If I dedicate 3 of the 6 bays to customer work with those two doing the work, how would you project the first year revenue?

 

 

[Transmission Repair]

Thanks for the detailed explanation.  The first problem I noticed was the long wait time.  That's not a "busy-ness" problem, that's a production problem.  My first suggestion is to hire more technicians.  That will be a self-fulfilling prophecy.  It will increase repair business sales.

Yes, buying your own building is best, but remember the majority of your profits come from fixed operations (parts, service) and not new car sales.  Focus on those 2 revenue streams.  Instead of making up numbers, I would forecast future sales based on previous sales and add what you feel is appropriate for the number/capabilities of your techs.

Most importantly, don't estimate or bill by the book unless it's warranty work.  "The book" is grossly underestimating work creating a situation to where you end up under-paying techs.  Make sure you get all the adds when it comes to labor.

As the saying goes, "Work ON your business, not IN your business" Tom Peters calls it MBWA or "management by wandering around."  I know you feel you want to be productive, but you will be less productive by being a hands-on owner.

Lastly, hire a new/used car sales manager.  You don't need the headache.  Delegate.  Focus on fixed operations.

Larry Bloodworth [email protected] (801) 885-2227

[C Wolf]

Larry, I think you misread my post, or skimmed it and missed details.  I do not have a shop currently, my business is sales.

 

The wait times are shops that I use for repairs to my inventory.  Again I do not have a service facility, I am asking how to forecast the first year of owning a service facility.

[Transmission Repair]

If that's the case, first-year revenue is going to be an educated guess, at best.  No fortune tellers that I know of.  Your guess will be as good as mine.

[bantar]

Make a very conservative forecast and cut that to 1/4.   You are going to burn thru cash heavily on the 1st year.  Your goal is pure survival.   Later, you will focus on profits that go in your pocket.  Your initial goal is enough profits to pay your techs and carry your fixed expenses and operating costs.  This is often a big hurdle.   It was about 3 years before I transferred from managing for survival to managing for success.  

When hiring techs, make sure that they are good and paid fairly.   Do not put the lack of car count on their backs (aka Flat Rate).  Why would I work for you if you cannot feed me?   I know you are new and I know you won't have cars for quite some time.   It is your job to get cars in the door and your pocket that suffers if you don't.  Not theirs!!! 

How will people know that you exist?   You'll likely grow faster with a marketing budget than without.   Remember, technicians are "free".  I learned this at a R&W class.  The 1st 15 hours pays for the technician, so anything beyond that becomes revenue.    As Larry mentioned, production tops waitlists.   Have enough techs for keep production up.   You want to sell every hour that you can.   However, too many techs will burn cash.   You need to get the car count up high enough to feed these techs to keep them "free".  It's your job to get cars in the door. 

There's no real way to forecast this, but I'd say your first goal is 1 or 2 cars / day consistently.  That should be 4-6 hours of work per day, assuming the cars are repair related vs oil change.  So, 20 hours / week pays for a tech, but not much else.   If you have high visibility and the place is clean / freshly painted, you may take off faster.   If the place you are buying has a TERRIBLE reputation, it may take you way longer to build traffic.    If your current business can send you work, it'll help you get moving faster.   So many unknowns.   

Using your favorite podcast player, find the "Changing the Industry Podcast" and start listening from the beginning.   It starts a bit rough, but quickly gets better.   Also, locate Hunt Demarest's "Business by the Numbers" podcast (accounting) and start listening.   Trust me, he's more interesting than the subject!   The next big training event is Vision in KC.   Make sure that you sign up for this, close the shop if you have to and attend every Service Advisor and Management training course you can.  I cant stress this enough!   There are industry coaches out there that can help you, but you may not be ready to afford them.  They will all be at Vision and give you big tastes of their offerings and allow you to meet them in person.