bstewart

mspec,

I've thought about a situation like yours, but I couldn't think of a feasible way to make it work.

When it comes down to it, they're using your power, your lifts, your compressor, etc etc.

It might not add up to much, but what if a lift or the compressor breaks while they are using it on their time?

What if it was somehow due to their negligence? Would they pay to fix it?

Plus, I felt that a bigger issue was insurance. If they are doing side work and get injured or killed, would your insurance cover it?

If not, you could be personally liable for their injury/death. Especially if they are working alone after everyone leaves.

Another thing shop related where the risk outweigh the rewards (there's actually no rewards for this, except employee goodwill I suppose)

 

Sometimes it may just be easier to give your customer options and let them decide after you explain the differences in them.

I'm of the opinion that customers should almost always be given a choice. We don't know their personal/financial situation, nor their mentality or purchasing habits.

I've said before on here that at the minimum I feel a "good/better" choice should be given, if not a "good/better/best" choice.

Let them make the decision, it makes them feel like they have some control over a bad situation.

If they are selling the car within a year, do they really want or need OE parts? Probably not, unless that is their selling feature.

Are they giving the car to their kids? Maybe they would want the best -and safest- parts for their kids' car.

I don't know about anyone's policies, but that situation is 100% wrong. The shop owner should have dealt with that a long time ago.

The minute that tech's productivity started dropping OR he poached a single customer from the shop, he should have been written up for time theft, if not fired on the spot (depending on his attitude).

There's a segment of the population who never goes to a shop, always using their buddies who work out of garages, which will never be a shop customer.

These customers should not be viewed as poached, as they wouldn't come to the shop anyways.

But a paying customer who gets stolen? That's almost grounds for a conflict of interest lawsuit I'd say.

Looking from the tech's perspective, I think he's in for a rude awakening when he opens his own shop and realizes all the expenses he's got to cover.

Welcome to life in Canada! (and Alaska, in John Pearson's case)

It also depends on how "deep" the battery is frozen.

A battery with 12.2-12.3v that freezes overnight or for a couple days should have no problem being thawed out indoors and trickle charged back to a decent life.

That same battery that has been frozen for a couple weeks has probably lost a significant portion of its life, even if you thaw it and charge it back to full, it may have lost a few years of it's life.

Freezing a battery damages it internally as the ice expands in the small gaps and can damage plates and loosen connections.

If it won't hold a charge after being thawed you're probably looking at a dead cell from a broken internal connection.

The case can also be cracked from ice expansion, which can cause a slow leak of battery acid.

I'd look at doubling his production bonuses if he needs a raise.

Either go to $2 for 35 hours and $1 for each 5 hours after that OR

$1 for 35 hours, $1 for 37.5 hours and $.50 for each 2.5 hours after that.

I'd also do everything in my power to get his production above 100%, remove all obstacles that are preventing him from increasing his productivity.

Productivity = profits, and great techs at great shops will be well above 100%, but front counter processes can be a drag on his productivity as well.

If he's producing more, you're making more money so you can afford to give him more as well.

You don't want to lose a good master tech, so at least show him that you're willing to work with him to help him earn more money for the both of you.

While preached by many, I feel 20% net is a poor goal unless one likes paying a ton of tax. I try to keep net about 4-5% max. The shop can use a new truck, another employee, and new equipment more than it can use a 35% tax bracket.

I think the point is to have 20% net profit "in hand," then use it at your discretion for shop improvements in the places it will benefit you the most.

Shop tools, building improvements, training, computers, inventory are all good places to look at. How about profit sharing with your employees??

Ps. Canada only has a 15% corporate tax rate, much nicer then 35%!

I heard of someone else using this:

20% cost of goods sold

20% production labour cost

40% operating expense - includes non production labour

20% net profit

I don't know if it's accurate or attainable, but just another point of view.

Take a look at smotgo.com for a 100% free web-based shop management system.

The guy made it for his own shop, then released it for free for anyone to use, with no "catch" or anything.

A couple of quick tests to determine the viability of a business:

Current ratio = Current assets / current liabilities (this should be at least 2.0 in a healthy business)

Acid test ratio (quick ratio) = Quick assets / total liabilities (this should be at least 1.0)

Quick assets are cash + accounts receivable + notes receivable + other liquid securities (basically anything that can quickly be converted to cash in hand)

Equity to liabilities ratio = owners equity / total liabilities (higher is better)

Gross Turnover = Total cost of sales for 1 year / average monthly inventory for same period (jobbers should be 4.5-7.5, you should shoot for 6.0)

To find avg monthly inventory, add the inventory on the same day of each month together, then divide by 12

I'm curious to see what others say about this.

I'm a Parts Tech by trade (I'm from Canada, you guys don't recognize Parts being a trade in the US) and I have a federal certification.

Part of the in class training is learning how to run a parts store (it's basically a compressed business management course).

I could go on for hours about things like profit margins, inventory control and marketing (not the same as advertising).

The main things I'd be looking at are:

- The gross and net profits over the last few years (GPM for a part store should be ~30% or you'll go broke)

- Average turnover and how much dead or low turning inventory they have

- How much space you would be getting (whether there's too much or too little space, there's usually too little)

- How does the supplier upchain take care of their stores (Give you room to make good profits vs list while still being competitive, good return policies for obsolete/dead stock, having a good warehouse network to get parts to you quickly etc)

- How extensive is your trade customer base (your bread and butter, the guys who will call on you daily)

There's more but this is just off the top of my head. It's no small undertaking, but it could (and probably should) easily be more profitable then your 3 bay shop.

Wouldn't a production based pay structure reduce this to a negligible point?
If your techs know that they are getting paid based on efficiency vs a labour guide, they'd be far less likely to be on their phones wasting time?

I'd rather have a pay structure in place that penalizes someone for wasting time, rather then being "big brother" and criticizing everyone who pulls their phone out of their pocket.

Amen brother. This is a current issue with the snow, we clean the floor 10 minutes later its a sandy slushy mess. The workflow suffers when we are working in a mud puddle.

At the Kenworth dealership I currently work at, we have a bay cleaning fee built into every work order.

Every bay gets the floor swept, pressure washed and squeegied after every truck leaves, no matter the size of the job.

Granted, this is for heavy duty, not automotive.

Maybe a small fee ($5 or 10?) could be built into the job supplies on each work order to pay for a tech to clean the bay after each car is pulled out?

I just read this article today:

http://www.ratchetandwrench.com/RatchetWrench/January-2015/Making-Money-on-Service-Packages/

Alfred, do those prices include all synthetic fluids?

I would strongly recommend you read Mitch Schneider's entire series on auto shop management.

It's 8 books, about $30 each, but well worth the investment.

I'd be willing to bet that you don't need to be "more competitive" with your pricing.

I'm thinking you need to increase your customer service and have better inspection processes.

The main sites I read (besides this one) are:

motor.com

autoinc.org

ratchetandwrench.com

autoshopowner.com

I would also bring up the fact that the parts people buy online are inferior quality 90% of the time, unless they are getting the same brand/part number as you would sell.

Not to mention that there is lots of counterfeit parts circulating around, which are much easier to sell online then through a legitimate retailer.

And don't think that just because it's priced high, it's not a counterfeit. Counterfeiters have been increasing their prices to match real prices, taking out the "seems too good to be true" factor out of it.

Counterfeiters have also been improving the visual quality of their parts so much so that life long techs have been fooled (aka less white box, more real looking logos and better outer "shells" of parts, still putting the same crap inside where you can't see it)

I would say that the inferior part/risk of counterfeit parts angle would be an easy sell to a lot of safety conscious customers. The ones who don't understand this, should go to a shop that doesn't care.

http://www.rmi.org.za/wp-content/uploads/2011/09/CounterfeitAutoParts.pdf

Ok thanks. Add in 10-20% because Canada is more expensive and it's 18.5-20k new.

Guy is selling a couple year old used one for $5500, was gonna try and whittle him down to $3 or 4k.

How much does a new Road Force balancer go for?

I'm considering buying a used one at the moment.

I think SMMotors said it pretty much correct.

You do tires and car sales which will skew the numbers. Can the program separate out your tire only jobs and your car sales jobs?

2400 hours / 2100 car count = 1.14 hours per repair order, low for general repair but probably more normal for your shop. Average for general repair across the US is about 1.5 hours/RO and an ARO under $200.

Your ARO number looks pretty good compared to your hours/RO, but I'm wondering how much the car sales are bringing this up.

2100 car count / ~250 working days = 8.4 cars/day, not bad for 2 techs.

I'd definitely focus more on increasing your hours/RO and ARO before spending advertising dollars on increasing car count.

Perform courtesy inspections on EVERY vehicle, and notify EVERY customer about EVERYTHING that their vehicle needs. Make it a policy and stick to it!

It's a fact that the average vehicle in North America needs AT LEAST $500 in unperformed maintenance, it's your job to FIND and SELL this!

This will cause your hours/RO and ARO to go way up, without increasing car count.

Finally, I would break down your numbers by month, and then compare them to that same month for the previous year or two, to eliminate seasonal increases and decreases.

You obviously want to be improving over the previous year's numbers. A good goal to have is 10% over the same month last year.

http://www.crashforensics.com/wheelandhubfailures.cfm

Over and under torque are both a problem that can cause wheel issues. Using an impact, lubricant or copper coat can cause severe over torque of lug nuts.

Do you mark down what the wheels were torqued to on your work orders? This would be the easiest way to prove that you didn't over torque them.

You might have to take a long hard look around to find a single rim for the guy, I find it hard to believe that they are completely gone off the face of the earth.

It might also be time to update your procedures in your shop so this can't happen again.

Great post, Elon, but I'm going to have to disagree with you on a couple points.

1. Even if you don't like giving people too many options, I feel that you should at least offer them a Good/Better option being aftermarket (preferably high quality) vs dealer parts.

There is a segment of customers who only puts OEM parts on their vehicle (nothing but the best for my baby), because of the peace of mind it offers.

The video that you posted even mentions giving customers options tailored to their current situation to make them feel like you are trying to suit their needs.

2. A flat warranty on all your repairs sounds great, but I feel tiered warranty is a perfect way for your customers to find their own perception of value in your services.

Ever been to an electronics store and been offered an extended warranty? Half the people decline it thinking it's a ripoff, the other half buy it every time because it gives them peace of mind for years!

A customer might be selling the car soon and wants it fixed low cost, does this make them a bad customer? No! Their value comes from low pricing, not a warranty that will outlast them owning the vehicle.

The point I'm making is that not every customer is the same, so you can't offer them all the same thing and expect them all to be happy with it. You said it yourself, there is no one size fits all solution.

Great post otherwise! The video was great too.

Haha, classic example of another CONSUMER on the phone, not any CUSTOMER or CLIENT of yours!

They just CONSUME your time, energy and give you headaches.

Another BMW owner who's too cheap to pay for a tow to get their car running. Even if you gave him a price, he would think it's too high anyways, don't worry about it!

Plus he said he wants to bring his own belt and tensioner (probably from the cheapest aftermarket parts store that looked it up wrong anyways).

Agreed xrac, in my industry I deal with a lot of east indians as well, the classic "is that your best price bro?" types.

It's part of their culture to inflate the initial price, then move down so the customer feels like he's getting a deal - and that the vender is actually working to help the customer out.

When I went to school for my Parts apprenticeship, one of my teachers said his best way of dealing with bargain hunters (on the phone, mind you) is:

- Inflate the price of whatever you're selling by a bit, $10 or 20 works

- When they ask for a better deal, you say please hold, but you don't put them on hold, you put the phone down near your keyboard (or an adding machine is even better because it's loud)

- Hit a bunch of keys like you're doing math so they can hear it

- Then give them your original price but make sure it ends in a weird number, not 0 or 5! Like if your original price was 79.95 you tell them 89.95 the go down to 79.63 or something like that.

Nine times out of ten, they are super appreciative, because they feel they saved money, also because you make them feel a little more at home and you're going out of your way to try and help them out a little - regardless of whether you actually did or not.

It can work with estimates as well - it usually doesn't hurt to over estimate your prices a bit, then when they come to pay you tell them that we were able to do it under the estimated price and you're able to pass on the savings.

Customers love it when you come in under the estimate!

I think there are multiple ways to handle your situation.

A ) The way you did it is perfectly fine!!! Don't beat yourself up! "Management has the right to refuse service" is a phrase far underused in this industry IMO.

B ) If you were truly slow and had time to fit him in, mark up your labour a bit, give him a new estimate including your own diagnosis, and if it was an O2 sensor problem, install it with no warranty. (Only because it was a dealer part - I wouldn't do this with aftermarket parts)

Could option B cause you some headaches? Possibly, but most of these problems would come from you not doing your own diag, so you've eliminated that as an issue. (You were already going to install it without diag, which could have been a big problem anyways)

But what if you found a broken wire or a loose connection that the dealer missed? You could actually SAVE the customer some money and make him really happy in the process - and make yourself look really good compared to your local dealer. (I think O2 sensors are changed WAY too often as a catch-all fix for air, fuel, CEL and emissions issues, when it's not the problem at all)

If the O2 sensor was the problem, the money he saved by buying his own part goes into your increased labour and he probably ends up paying the same amount as your original estimate anyways.

As for the "profiling" issue, I think each one of us has to rely on our own personal experiences and make a decision in each situation.

Is it the same as someone else's decision? No. Does it work for us? Yes. Is it fair? No. But we all learn from a young age that life isn't fair.

If you were to refuse someone service based solely on their race, that would be plain wrong, but refuse them based on their bad attitude and actions? That is perfectly fine, and not "profiling" at all.

Anyone of any race, colour, creed, etc can be a jackass. It's how you deal (or not deal) with them that counts.

From the customer's standpoint...

The internet has made it very easy for anyone to do some simple

research and determine what the "Suggested Retail Price" is for your parts.

 

"Suggested Retail Price" is a phrase your customers are very familiar with

and a comparison method (we have all been taught to use) when shopping..

So, using a blanket GP can put you in a situation where the consumer is going

to feel ripped off if/when they do any research and see they were charged way more

than the easily available, published prices for that same part.

 

What that means is: Parts have become somewhat of a commodity. You can

still make a profit on parts - it's just not where the real money is

 

The REAL profit opportunity is in your labor because let's face it...

that's the true value you bring to your customer. All of your training, your experience,

your trustworthiness, your tools, including technology, your parts and labor

warranties, etc, etc. The list is endless.

 

This is exactly what I was talking about in this thread:

http://www.autoshopowner.com/topic/9381-labor-margin-vs-parts-margin/

I believe this is where the future of the industry should be headed.