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Guy I need help. We just celebrated 1 year of being in business and I am not happy with the shop profit. I feel like we are busy. We pay the bills and salaries but nothing extra to go to bank.

Our spec:

$65 pre hour

average 35% on parts

15% on tires plus $2.00 dispsal per tire and $12.99 mount/ balance per tire

brake specials at $109.99

2 bay shop. 2 techs, 1 office manager

Any ideas that could help the bottom line or % on parts that may help?

Posted

Guy I need help. We just celebrated 1 year of being in business and I am not happy with the shop profit. I feel like we are busy. We pay the bills and salaries but nothing extra to go to bank.

Our spec:

$65 pre hour

average 35% on parts

15% on tires plus $2.00 dispsal per tire and $12.99 mount/ balance per tire

brake specials at $109.99

2 bay shop. 2 techs, 1 office manager

Any ideas that could help the bottom line or % on parts that may help?

 

First off, this is a VERY touchy topic due to anti-trust laws. But I will put in my $.02. Your labor rate and parts mark-up must be competitive to your market, not mine or other members, your market. With that said, I agree about maybe moving your labor up, but you will have to survey your competition.

 

I don't know about the mark up on tires since I do not sell tires.

 

You say you are busy, how busy? What is your efficiency rate? That means how many hours are you selling for the number of hours you are open? Here's where it gets tricky, if you are open 9 hours a day but only average 6 hours of available work, you will never reach 80-90% efficiency that most consider a highly efficient shop. But if you are scheduling only 6 hours because that is all you can finish in a day then you are losing money due to inefficiencies. These can be your parts ordering method, your technicians are simply too slow and need an incentive or replacement, or maybe your shop layout? Believe it or not I talked to one shop owner who, by simply putting up two additional identically stocked supply cabinets (you know brake clean, penetrating oil, silicone spray. etc.) and taking the doors off the cabinets he gained 2% efficiency. Doesn't seem like much, but some management gurus will tell you just a 5% shift in efficiency will yield thousands in additional profit. Think about it, you are paying the bills and making a living. Assuming you are running 100K (parts & labor, just an example) per tech, that 2% translates into an additional $4000.00 per year, just for two more cabinets and taking the doors off. Easy money. Now some shops are just not set up to meet maximum technician efficiency. Assuming yours is and you are busy every minute of every day, are you booked out a week or two in advance? If so your prices are too low. I suspect being a two tech, two bay shop that you are not highly efficient. You need at least one more bay for two techs. Think about, you've got a brake inspection done and waiting for the office manager to finish the quote and sell the job, what does that tech do? Put tires back on and move on only to rack it back up and pull the tires to do the job later, or wait for approval? Or how about the u-joint job where your tech has pulled the driveshaft only to find out there are four different u-joints available and you got the wrong one and have to wait 1/2 hour for the parts delivery of the right one? Wasted time and highly inefficient. He should be able to move on and utilize a second hoist for the next car, unless you always have flat bay work four seasons.

 

And how are you selling brake specials for $110.00? Again here, please be careful of anti-trust laws if you reply. But a decent set of pads will run you half of that. If you compete on price guess what you will get? Price shoppers and you will never make any money on them. All they want is cheap. I am currently trying to break that trend at my shop. I still offer specials and coupons, but I am trying to move them upscale to the point where I will make money and they have broad appeal, not just a cheap price. But back to the brakes, if you are just slapping in another set of pads and scratching the rotors sure 45 minutes may be enough. I checked book time on every brake job my first year and do you know what I found? Some really scalped you on pad replacement at .6-.7 but most were 1.0 plus .2-.3 each for machining the rotors. So that is an average of 1.5 hours, at your labor rate you are only charging 12.49 for pads and brake clean, no wonder you aren't making money. And what about the brake complaints from a poorly done job? Again, survey your competition, not from your shop phone, and get a feel for their pricing. You will never be able to compete on price because someone will always be advertising a cheaper deal to get them in the door only to upsell the devil out of them. Sure you will feel like you're losing a lot of work, but if you aren't making any money on it, what's the point? You will provide your customer clients much better value if you use a quality part and do a thorough job than if you do it cheap. Or maybe that's the reputation you want.

 

And the last item I can quickly think of is do you need all of this staff? If your efficiency is not there then maybe you need to reevaluate your staffing needs. For two bays you really need top efficiency to support that many paychecks. I suspect you are simply overstaffed for the shop you have. Moving a business sucks but unless there is additional space available to you, I'd be looking at a bigger shop, nearby. That extra bay probably won't cost you as much per year as the lost efficiency of your techs standing around. It won't take an extra 15 minutes a day of productivity per tech to make you able to afford $500 a month higher rent. If you have mortgage then maybe look into adding a bay. Of course you will have to evaluate your specific situation but I'll bet having that extra bay will increase your per tech productivity greatly.

 

And yes this was easier to write than it is to implement, but you asked for advice.

 

And if you want, I have a system for more efficient communications between the techs and the front office. Make it as non-verbal as possible. It really works and saves time. Contact me for more details.

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  • Have you checked out Joe's Latest Blog?

         0 comments
      The Technician Shortage Is Our Fault, And It's Time We Own It
      Nearly every day, I hear shop owners complain: "There's a technician shortage. We can't find qualified people. There's no one out there." If that's true, then who's to blame?
      The industry? The schools? The government? I don't know how you feel, but who promised us an endless supply of qualified technicians?
      Another common complaint is that young people do not want to work in the trades. Well, if that were true, then why are other trades such as HVAC, electrical, and plumbing growing? What are they doing that the automotive industry is not? 
      Here's the reality we need to face: We do have a problem, but we shouldn't look for someone or any entity to rescue us. Not the government. Not the trade schools. Not the recruiting companies. No one owes us a workforce. If we want great people in our industry, it's up to us. At some point, we need to own up to the truth: Building a pipeline of qualified technicians is our responsibility.
      In this blog article, I will break down the key reasons we are in this situation today and what we, as an industry, can do to solve the technician shortage. Are you ready to look in the mirror?
      Have We Pushed Technicians Away?
      Let's take a look at flat-rate pay. True flat rate, which pays a technician only for the hours they produce, is a controversial pay plan that emphasizes high production levels and creates a competitive work environment that, if not properly controlled, can lead to increased mistakes and a decline in morale and team spirit. Additionally, the stress and physical demands placed on technicians as they age are not favorable to long-term employee retention. What do we do with technicians as they grow older into their fifties and begin to slow down? 
      I have heard all the arguments and pros and cons of flat-rate pay, and I am not going to judge any pay plan. Let the facts speak for themselves. True flat rate has changed in most areas around the country and has evolved into a pay plan that gives technicians some pay guarantee.
      Many shop owners have learned that team morale, along with the opportunity to earn income, is important to technicians and to the company's long-term success. But let me ask you: how many technicians have left or been pushed out over the years because of the old flat-rate pay system?
      Another issue is the workplace environment. I remember being grateful to be hired as a young technician at a local repair shop. While very thankful, the work environment was not ideal. The shop owner kept the bay doors open year-round (I am from New York) unless it rained or snowed. He felt that if the bay doors were closed, customers might think we were closed for business. We had no heat and no hot water. Many of the jobs were done outside, year-round,  in all types of weather. The starting pay was minimum wage, with no benefits, sick days, or vacation pay. 
      Now, again, I need to point out that I was truly grateful for the opportunity this shop owner gave me. I learned a lot working there, and the experience was pivotal in my career. But looking back, I wonder how many people were discouraged by these working conditions?
      While the physical demands of the repair workplace are daunting, perhaps even more critical is the culture. Too many of my generation shop owners preached the mindset of "my way or the highway." We were the business owners, after all. We started our companies, took all the risks, and provided jobs. Why shouldn't we be the ones to set the ground rules our way?   
      Many of us found over the years that the "my way or the highway" mentality was a sure way to isolate employees and make them more likely to look over the fence for greener grass. In other words, it led many technicians to seek employment elsewhere, where they felt they could be appreciated and recognized for their hard work. The issue, however, was that there wasn't much green grass around. Disappointment after disappointment, bouncing from repair to repair shop, eventually led to despair. So, I ask you: were workplace conditions a contributing factor in today's technician shortage?
      Another factor that we are all well aware of is the complexity of the modern automobile. When I started, the work was mostly physical, and you were required to master essentially three vehicle models: General Motors, Ford, and Chrysler. Let's fast-forward to today. The evolution of automotive technology, along with the extensive training and tools required, has outpaced the typical technician's pay compensation, with no clear career path. Again, leading to frustration and insecurity about the future.
      Here is the bottom line: people don't leave their job; they leave their experience. We must do a better job. 
      The News Isn't all Bad; Your Next Steps to Fix the Technician Shortage
      To fix the technician shortage, it will take a combined effort from everyone in the automotive industry, particularly automotive shop owners. Shop owners are in the perfect position to make the greatest impact, not only on their businesses but also on the future automotive workforce.
      First, shop owners must become better leaders and understand that their ultimate success is directly dependent on the people they assemble around them. Any shop owner who mistakenly believes they can build an empire solely on their abilities is destined for serious disappointment. Business owners who think like this will eventually plateau. Without the collective contributions from a team of qualified people, your business will stall; it will not continue to grow.
      Create a workplace that attracts top talent: a clean, professional, well-equipped facility designed to support productivity, teamwork, and a career, not just a job. Build a great reputation in your community by getting involved locally. Become the auto repair shop that people take notice of as "the" place to work.
      Next, shop owners must become more financially knowledgeable. Knowing your numbers and what you need to achieve for a strong bottom-line profit is essential to paying technicians the money they need and deserve. Profit will also allow you to compete with other trade industries by providing a benefits package that has real take-home value and security.
      When it comes to culture, this is where the rubber hits the road. People crave recognition, praise, and a sense of purpose. Despite what you hear, people are not just money-motivated. Once people feel secure in their financial situation, retaining and motivating technicians can only be achieved by connecting with them on an emotional level. You cannot show enough appreciation. Give out praise for a job well done as if your business depended on it, because it does.
      As technicians age, we need to have a place for them. Expecting a 58-year-old to perform like a 35-year-old is unrealistic. We need to be more focused on career pathing. Provide training, skill development, and coaching to develop leaders and mentors within our older workforce. While their bodies may have slowed, the knowledge they have gained is priceless. 
      Our future is dependent on young people entering our industry. We need to give more young people opportunities. Every shop owner across the country should consider hiring an apprentice, then build an apprentice training plan and career path for them. If every shop did this, we could solve the technician shortage within five years. Get involved with the trade schools and high schools in your area. Look into the NAPA Apprenticeship Program. Don't sit on your hands with this one. Do it today.
      Lastly, don't get left behind. Commit to ongoing training for all your employees. Keep up to date with tools and equipment tailored to your business model. Don't try to be all things to all people and all vehicles. Identify your core profile customer and the vehicles they drive, and become an expert on those vehicles and the services you offer.
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