We Worry About Too Much About High Ticket Dollars and Labor Rates!

[Joe Marconi]

Raising your labor rate and trying to increase your average ticket dollar amount in an effort to increase income may not be the way to financial stability. In fact, it might just make you fail! Before you send for the men in white coats and call me crazy, please have an open mind and read on.

 

Like many of you, I once shared the belief that a high labor rate, quality work, high-ticket averages, and superior customer service was the business strategy to create a successful repair shop. I also believed that the customers should never control the flow of work in my bays by dictating to me when they need service and that I should carefully plan out the day. There was also a time when I would refuse a walk-in for an oil change because I had too much work in the bays. Well, I’m here today to tell you that for me, this strategy is dead. It died along with the carburetor, points and condenser. The quality of your work and providing great customer service still holds true, but in today’s world, it’s not enough.

 

Look around at the world today. Has anything changed? You bet! We live in a fast pace world where people balance work, family, fun, Church, and other obligations. Both Mom and Dad have careers and are running from ballet to baseball. The media has been drumming into our head for the past thirty years that great service is getting what you want now and fast. Why do people today value their time so much? Because they have so little of it.

 

So, here’s the scenario. It’s midday, Tuesday, at 2:00pm and Mrs. Smith arrives at your shop unexpectedly with a check engine light on. You politely and professionally tell Mrs. Smith that you would be more than happy to take the car in on Thursday. Now, she’s starts processing in her mind what she needs to do on Thursday: She needs to leave work early to bring her daughter to the dentist at 1:00pm and needs to be back at the office by 4:00 for a meeting, then dinner at 5:30 and the P.T.A at 7:00. “No, Thursday won’t do”, she says. Respectfully, you answer, “how’s next week?”

 

At this point she gets frustrated and says she will let you know. You just may have lost a customer. You viewed her problem as a check engine light and how you would fit her car into YOUR calendar. She perceived her issue as another way to balance an already demanding schedule.

 

Now let’s talk about labor rates and average repair order dollar and I will hopefully tie all this together. Concentrating on bigger tickets and labor rates as a way to overcome inadequate car counts and low profit will simply not work. I’m not saying you shouldn’t charge what you are worth. I don’t give anything away in my shop and charge accordingly. But, what I’m more concerned about in today’s market is opportunity. I concentrate on increasing my car counts to give me the opportunity to sell more. Today’s cars are not like those built in the 80’s. You don’t have the highly profitable repair work anymore and cars are more reliable. Also, take a look at what the automakers have taken away from us: Timing belts, plugs wires, fuel filters, distributor caps, rotors, etc. Not to mention long life coolant, transmission fluid and extended oil change intervals.

 

This means you will need to increase car counts in order to give your shop the opportunity to sell profitable service work. This also means that you will need to be very proactive in managing your customer’s vehicle maintenance. You will need to be very innovative in your approach on maintenance and service and diversify your services to fit a broader range of consumers.

 

Successful Big-Box stores understand the law of compounding and moving product. Even in these disastrous economic times, Home Depot would rather sell 1,000 cans of paint a week and make $6.00 on a can, then make $10.00 per can and only sell 300. Plus, having that many people coming through their doors buying paint increases sales in other areas, such as paintbrushes, primer, rollers and drop clothes. Again, when you increase the number of customers, you increase the opportunity to sell more products. This is the law of compounding sales through opportunity.

 

Before you go lowering your prices, STOP. Most of us sell at a fair price already. What I’m suggesting is that when you increase car counts you give yourself more opportunity to move product: such as air filters, cabin filter, batteries, wipers and other items. Plus, you are working on building a customer base that will more likely return in the future because your willingness to work around their schedule.

 

You may have loyal customers, but if you’re not perceived as convenient and not willing to accommodate them when they need you, you may not be capitalizing on your potential to fully satisfy a customer.

 

How do you increase traffic to your bays? Say yes as much as possible. Be more accommodating. Try to work around your customer’s schedule, not yours. Be more flexible. Your daily planner is not written in stone. Promote while-you-wait service. I don’t understand why so many shops distain the idea of people waiting for service. We now welcome walk-ins and promote while-you-wait service. It’s a goal mine of opportunity. Remember; opportunity equals profit.

[EASAUTO]

Raising your labor rate and trying to increase your average ticket dollar amount in an effort to increase income may not be the way to financial stability. In fact, it might just make you fail! Before you send for the men in white coats and call me crazy, please have an open mind and read on.

 

Like many of you, I once shared the belief that a high labor rate, quality work, high-ticket averages, and superior customer service was the business strategy to create a successful repair shop. I also believed that the customers should never control the flow of work in my bays by dictating to me when they need service and that I should carefully plan out the day. There was also a time when I would refuse a walk-in for an oil change because I had too much work in the bays. Well, I’m here today to tell you that for me, this strategy is dead. It died along with the carburetor, points and condenser. The quality of your work and providing great customer service still holds true, but in today’s world, it’s not enough.

 

Look around at the world today. Has anything changed? You bet! We live in a fast pace world where people balance work, family, fun, Church, and other obligations. Both Mom and Dad have careers and are running from ballet to baseball. The media has been drumming into our head for the past thirty years that great service is getting what you want now and fast. Why do people today value their time so much? Because they have so little of it.

 

So, here’s the scenario. It’s midday, Tuesday, at 2:00pm and Mrs. Smith arrives at your shop unexpectedly with a check engine light on. You politely and professionally tell Mrs. Smith that you would be more than happy to take the car in on Thursday. Now, she’s starts processing in her mind what she needs to do on Thursday: She needs to leave work early to bring her daughter to the dentist at 1:00pm and needs to be back at the office by 4:00 for a meeting, then dinner at 5:30 and the P.T.A at 7:00. “No, Thursday won’t do”, she says. Respectfully, you answer, “how’s next week?”

 

At this point she gets frustrated and says she will let you know. You just may have lost a customer. You viewed her problem as a check engine light and how you would fit her car into YOUR calendar. She perceived her issue as another way to balance an already demanding schedule.

 

Now let’s talk about labor rates and average repair order dollar and I will hopefully tie all this together. Concentrating on bigger tickets and labor rates as a way to overcome inadequate car counts and low profit will simply not work. I’m not saying you shouldn’t charge what you are worth. I don’t give anything away in my shop and charge accordingly. But, what I’m more concerned about in today’s market is opportunity. I concentrate on increasing my car counts to give me the opportunity to sell more. Today’s cars are not like those built in the 80’s. You don’t have the highly profitable repair work anymore and cars are more reliable. Also, take a look at what the automakers have taken away from us: Timing belts, plugs wires, fuel filters, distributor caps, rotors, etc. Not to mention long life coolant, transmission fluid and extended oil change intervals.

 

This means you will need to increase car counts in order to give your shop the opportunity to sell profitable service work. This also means that you will need to be very proactive in managing your customer’s vehicle maintenance. You will need to be very innovative in your approach on maintenance and service and diversify your services to fit a broader range of consumers.

 

Successful Big-Box stores understand the law of compounding and moving product. Even in these disastrous economic times, Home Depot would rather sell 1,000 cans of paint a week and make $6.00 on a can, then make $10.00 per can and only sell 300. Plus, having that many people coming through their doors buying paint increases sales in other areas, such as paintbrushes, primer, rollers and drop clothes. Again, when you increase the number of customers, you increase the opportunity to sell more products. This is the law of compounding sales through opportunity.

 

Before you go lowering your prices, STOP. Most of us sell at a fair price already. What I’m suggesting is that when you increase car counts you give yourself more opportunity to move product: such as air filters, cabin filter, batteries, wipers and other items. Plus, you are working on building a customer base that will more likely return in the future because your willingness to work around their schedule.

 

You may have loyal customers, but if you’re not perceived as convenient and not willing to accommodate them when they need you, you may not be capitalizing on your potential to fully satisfy a customer.

 

How do you increase traffic to your bays? Say yes as much as possible. Be more accommodating. Try to work around your customer’s schedule, not yours. Be more flexible. Your daily planner is not written in stone. Promote while-you-wait service. I don’t understand why so many shops distain the idea of people waiting for service. We now welcome walk-ins and promote while-you-wait service. It’s a goal mine of opportunity. Remember; opportunity equals profit.

[EASAUTO]

That is a lot of great idea's and I have already been implementing some of them like taking in all customers and working them into the schedule, be as accomadating as you can. Also give customers some value pricing in today's economy thats important. Keep up the good work!!

[Joe Marconi]

Thanks, it's a different strategy, but one I think will pull us through this economic mess.

 

Spread the word about AutoShopOwner and I promise to keep giving you more ideas to help your business.

 

Joe Marconi

[Tom Ham AutoMN.info]

You certainly have some valid points, however low average RO and low labor rates are still a massive problem in many shops that I see. We should certainly adjust to the market, but I believe that increasing average RO should remain as a primary goal in almost every shop.

[Joe Marconi]

I agree, I just think that in this economy, the little ad-on sales can go a long way at improving one's bottom line. I know many shops that spend countless hours diagnosing a check engine light, and never speak to the customer about service work. Some shop owners never even check the car out for service items.

 

I know you can't sell everything, but if you never tell, you'll never sell.

[KBenline]

Hello Joe,

 

This is Keith, former long time employee of a certain auto repair business consultant/teacher/guru. After working for this man for seven years and now owning my own auto repair business for almost six years, I can tell you your post is right on target. Any auto repair business that doesn't understand that soon will. The OE's have become their own worst enemy by making cars better and requiring less maintenance. You are right on target with that post.

 

By the way, I obviously know most of the auto repair managment trainers and what they offer and I have to say that this "Auto shop owner" website is by far the most practical, hands on, best information I can apply, most up to date, and best auto repair training/improvement information available out there in my opinion. Keep up the great work!

 

Keith - Robert's Auto Service

[Joe Marconi]

Keith,

 

Great to hear from you, old friend. It's an honor to have you onboard and thanks for the compliment. Coming from you, it means a lot. I try to bring real-life information based on my 30+ years in the business.

 

Let's keep in touch, Joe

[KBenline]

Keith,

 

Great to hear from you, old friend. It's an honor to have you onboard and thanks for the compliment. Coming from you, it means a lot. I try to bring real-life information based on my 30+ years in the business.

 

Let's keep in touch, Joe

 

Joe,

 

I have much to say about what I have learned after working for you know who and now owning my own shop. I can tell you first hand what has worked and what hasn't as I applied those things I taught in the seminars. I could keep the forums busy for several years hitting on the hot topics. I should do a seminar entilted "What I leared going backwards", which is a pun based on working with an auto repair management company as the Vice President to buying and operating my own shop and applying the information. I say "backwards" because it seems most shop owners graduate to become auto repair management guru's, whereas I went the other way.

I can tell you that you have to be very careful with some of the things taught and most things have to be tweaked. Most of us need to remember that the auto repair managment guru's are trying to "wow" us with concepts and ideas as these sell their own products and services, however, it may not be as tried and true as one might think.

 

Keith

 

Keith

[Joe Marconi]

You are so right!! And I am happy to hear you say that. I have attended many seminars, from a variety of companies, nothing replacing “real-life experience” as your primary teacher. However, many shop owners get stuck in the day-to-day operations and never grow their businesses. Many are unhappy and unfulfilled.

 

As you say, shop owners have a wealth of knowledge, but still may lack the ability or know-how to go to the next level.

 

I encourage you to post your ideas, comments or questions. With your background, it will be very valuable to all! I like your theme: "What I learned going backwards".

 

By the way, did you get a chance to see my blog? It’s all about my expanding the business.

 

Joe