Do You Know When You Are Making Money?

[Joe Marconi]

Do You Know When You Are Making Money?

 

Way back in the 1980s, shops enjoyed a steady flow of broken cars. GM, Ford and Chrysler dominated the roadways and there was a lot of repair work. But, like many shop owners, I was a much better mechanic than I was a business owner. I never really knew the true costs of running my business. I was busy, but not very profitable. I survived, but never really thrived. And, there was never any money left over for my future.

 

Even as I began to understand how to break down a job and look at labor and part margins, I still did not see the big picture. It wasn’t until I physically looked at all my expenses, what I needed to live on, understand money was needed to grow the business and calculate future needs, that I truly understood how much I needed to make to generate true profit.

 

Many shop owners calculate breakeven, but still are short on cash flow. This ends up with a lot of frustration and confusion. Calculating breakeven should be more that merely paying your bills. It should allow enough for company growth, adding money to your retirement account, putting away money for your kid’s education and setting up a cushion for unexpected expenses. You should also factor in your return on investment. That’s right, your R.O.I. Why else are you in business?

 

Unless you have multiple income streams, your business is your sole source of income, which means your life, now and into the future, is dependent upon what you earn, which means: Do you truly know how much profit dollars are needed from your business?

 

Many of us have been in survival mode the past few years. And thinking down the road is not at the top of the list. But, history has shown that economics are cyclical and we need to prepare now for our future.

 

Take the time to go through all your accounts and start building your breakeven and future planning analysis. Start by calculating all you fixed expenses, variable expenses and allow for unexpected one-time expenses. Add into that report all the future expenses you will need; retirement, R.O.I., kids’ education, that boat you want to buy, etc.

 

When you truly know what profit you need, you can begin to work on your business to achieve your goals. If you don’t know, you will always be wondering, “Why don’t I ever have enough money left over?”

[HarrytheCarGeek]

i had to face this question head on after my 3rd year as a mechanic. I thought at the time I was making a pretty decent salary, but after all the time I was spending in certification and training, I knew that I was not making enough for all my efforts.

 

Believe it or not, you do need to become an economist to be a successful merchant/business man/entrepreneur. I have more to share but have to close up the day.

[Jeff]

Related to a prior discussion on diag time...I tried to save my customers money in the beginning by cutting labor..parts profit...etc. Now I charge a fair rate and a reasonable parts mark-up. Lost a few to economics but I gotta survive also. The cars are more complex and with the internet everyone is a genius( got 2 here now that have 500 plus in internet repairs that still don't run). Time is money, and I cant get more time, so I gotta get more money. Sounds kinda harsh but that's as simple as it gets. Yes I do still help out folks on occasion but that's when I feel its prudent, not them.!