Vegas14

Yes, you are absolutely correct about knowing your breakeven and in looking at what your gross profit is on your parts sales and labor etc.

But what I am talking about and I appologize maybe I wasn't clear enough, is that I am looking at my profit and loss statement for 2010, the previous year and looking at what percentages have been spent in those specific catagories that I stated, parts, labor, admin, expenses etc.

I look at this as a tool to see where maybe we overspent in one area, so now I can take a look and say, "Wow! it cost me 28% on parts for the 2010 year when really it should be at 25%" or "I'm only spending 15% on labor rather than 17%." So now I know or maybe need to do some tweaking for the following year. That's the percentage breakdown that I was talking about. Looking back to make any needed adjustments for current year. I hope that I am making sense?

Wondering if anybody knew that percentage formula.

It is harder to make a profit nowadays so my question is if anyone knows what the breakdown of percentage spending should be on your shop? This is what we have been told in the past when taking management classes. We are finding hard to stick with the 20% on cost of parts, it's more like 25% to 28%. We are $92hr so we can't really raise our prices anymore.

Any input would be great!

Here is breakdown we have:

Cost of parts - 20%

Cost of labor - 20%

Office Admin - 10%

Expenses - 30%

Owner Salary - 20%

Who here sends post card reminders or any other time of mailings. Maybe oil change reminders, or inspection reminders...

 

Do you do it on your own, have an outside company do it? What's your process and how successful are you at it.

We have postcards made up where you can check off what service will be needed next time or "other" recommendation that you can write in. Then each time the customer comes in we write in their name and address and postcard is checked off with what service will be needed in the future and date is written on top of card when they should come in next, eg: 3 months from today's date. Then we file it in date order and mail them out on a weekly basis.

I'm sure there are more sophisticated, streamlined ways but it works for us.

This is one of the best ways to keep them coming back and we find that the customer really responds to and appreciates the reminder.

In prior conversation about dealer price slashing, it sounds like everyone is on board in keeping up with dealer specials in order to keep the customers from going there. We came up with what we hope is a good solution and we'll keep you posted as to how it goes.

We send out a newsletter to all of our existing customer base every month. In the newsletter there are always two coupons in it with two specials for that month. Rather than looking on the internet and trying to keep up with all the dealer specials going on, one of our coupons will simply be a "Dealership coupon meet or beat-athon" with a picture of a fish trying to lure in a shark (tried to add a little humor to it). This way any dealership coupon the customers gets in the mail or internet they now know that they can bring it in to us and we will honor it.

We figured this would be the easiest way to keep up with the dealerships trying to take away our business with all their price slashing deals.

We'll run it for a couple of month and again we'll keep you posted as to how it turns out.

I absolutely agree with you. People want convenience regardless of how good your shop is.

The problem I see is that if you do have a smaller shop like you said, is manpower. But I think in order to get over that hump you need to be inconvenienced for some time before you see the rewards of being open on Saturday and then after at some point you can increase your workload to hire another tech or writer in order to rotate so they don't get burned out.

Right now we are open every other Saturday, because or rotation issues. We are starting to see an increase of business on Saturdays so we are hoping that soon we can do some new additional hiring and at that point we can offer every Saturday.

4 Bays - average 210 cars monthly

Mon - Fri 7:30-5:30

Every other Sat 8:00 - 2:00

Dealers are cutting their prices to make money in service, for the lack of selling cars. I would honor the dealer price just to secure the customer. It's getting tough out there, but I feel that we cannot loose ANY customers.

That's exactly what I'm thinking. I would rather not make as much profit off of the services but at least have them walking through the door and keeping them as a customer. Just wanted to know someone else's opinion and see if they are on the same page as I am.

Thanks for the input.

I always look through ads to see what other shops are charging for their services. Here is something I've been running into. The dealer in our area is now charging $52.95 for a minor service, $119.95 for an intermediate service and $179.95 for a major service. Now, I know that normally we should be too concerned with dealer pricing, but what I've noticed lately is that we've been getting quite a bit of "but the dealer is charging so much less."

Under normal circumstances, I wouldn't worry too much about the price difference. But, the reality is under these financially difficult times our customers that wouldn't usually question our pricing are starting to look for better deals that the dealers are offering. If we were to offer these prices, quite frankly we would be making hardly if any profit.

What is your take on this?

I have my business set up in a way that all positions are taken care of. My role is to oversee the operation, work on growing the business and to coach the people around me.

 

There was a time when I did everything. From service writing to working on cars, all the office work, road testing, etc. But I was killing myself. We are much more profitable now that I concentrate on running the business, instead of working in it.

 

We have 4 techs, a service advisor, office manager, shop foreman and a clean up crew.

In my opionion, if you desire to become a tech and eventually run the business, that is what you should focus on. It sounds to me like you are passionate about this profession.

I agree that you are right on track about running the business more so that working in it. Keep getting as much information as you can about managing and marketing your dad's automotive shop. This website a great resource for answers to all your questions...THANK GUYS!

There are several automotive management and automotive marketing companies that will be helpful in running and marketing your business. I hope it's ok to name of few, I'm not trying to sell any of them but just listing the resources that I know of. There is ATI, Management Success, Cinron, Dan Cricks, Autoprofitspro. These are just a few that I have heard about, but again, this website is especially helpful because your questions are answered by people that are in the same field. And, it's great input and advice on what has/is working for them and what hasn't.

Good luck!

Before I pay anyone (Service advisor, tech, foreman, etc) I establish goals. I factor in my breakeven, previous sales, return on investment and then set a bonus for a percentage after that figure is reached. I have found that to pay a percentage of sales without a benchmark goal takes away their incentive to do better.

So do pay a base salary and then an additional bonus based on the above factors?

I have a question in regards to how your service advisor should be paid. Our Service Advisor currently is being paid a flat weekly salary. I'm thinking of changing it to performance based in order to put a little more motivation into his sales. Any advise out there on how other shops are paying their Advisors and how is it working for you.

Great response to your customer. When we are asked a price over the phone and the customer wants to know how much? we ususally respond with it will cost you about 15 minutes of your time to bring it in and have it diagnosed properly. But being that it's so hard to keep up with dealership coupons, on our website we state that we will honor any dealership coupon, that way we can have them come to us regardless of what the dealer is offering

Why Can’t You Give Me a Price?

By Joe Marconi

 

I got a call a few weeks ago from a customer (we’ll call him Dave). Dave asked me to give him a price on a 60k service for his daughter’s Honda Civic. She was coming home from college and he wanted to get her car up to date with needed maintenance. I asked Dave how many miles were on the car, and after looking up the vehicle’s records, I realized that she had put over 12,000 miles on the Honda, since we saw it last.

 

I explained to Dave that it would be in his daughter’s best interest if I give the car a general inspection first, from bumper to bumper; just to make sure everything was ok. After the inspection I would be happy to give him a price on the 60k service and any other items identified during the inspection. Dave responded back, “You really can’t give me a price on the 60,000 mile service?” I explained again that many miles have past since we serviced the car and I just want to be sure that we look at the car in its entirety and not just focus on the 60k. After a pause he agreed and booked the appointment.

 

The Honda arrived a week later and was dispatched to one of our techs for a complete general inspection. The inspection revealed only a few additional service items along with the scheduled 60,000 maintenance service. I was a little concerned about Dave’s insistence about the price when I first spoke to him and told my service advisor that I would be calling Dave about his daughter’s car.

 

I reached Dave at his office and informed him that we had completed the inspection on his daughter’s Honda and that the car was in great shape. In addition to the 60,000 mile service the Honda would need a rear brake adjustment, a brake light bulb and a set of wiper blades. I gave Dave the total price, for the complete job. Dave responded back, “How much is the 60,000 mile service?” A felt a little confused at this point and itemized all the prices for him. He proceeded to tell me that a local dealer sent him a coupon and their 60k service was $80.00 cheaper! He asked me, “Why should I spend the extra money with you for the same service?”

 

I could have explained to Dave that the coupon from the dealer was a special promotional price only. I could have also explained that dealers sometimes use these specials as lost leaders. I could have gone on to say that we employ only ASE certified technicians and that they receive on-going training and that we invest in the latest equipment and information systems. I also could have argued that this is how we justify our prices. But I didn’t say any of that. What I did say was this, “Dave, do you remember when you were leaving for vacation a few years ago, on a late Friday afternoon, and you noticed you had a flat tire on your camper? Do you remember I stayed open until you arrived to repair the flat tire? And do you remember the day your daughter was leaving for college in her sophomore year, and the check engine light came on an hour into her trip? Do you remember you called me and asked for my help? Do you remember how I arranged for a tow company to stand by in case your daughter broke down? And do you remember that I stayed opened until your daughter returned back so I can check the car out? Dave, is the service we have given you throughout the years worth a least $80.00?”

 

There was a long pause and I knew from the sound in his voice that he felt a little embarrassed. He apologized and said that that he was trying to save a little money with the high price of gas and food these days. He also admitted that, with his daughter in her last year in college, he is feeling a little lighter in the wallet. We completed the 60k and the other service items later that day.

 

What’s important is that I never tried to discredit the dealership. That would have gone nowhere. I also tried to direct the attention away from price and focus on the value of the relationship we have created throughout the years. In retrospect, I don’t know if I should have thrown it in his face, about what I did for him the past. I have mixed feelings about that.

 

I think in these shaky economic times we need to concentrate on service. We need to address the concerns of the customers and give them options. Your customers will be looking to you for help and guidance, that’s part of your job. The shop that continues to deliver outstanding service and charges a fair price will thrive. I have lived though many economic roller coasters in my 28 years in business and have no doubt that this ride will pass too.

If you’re wondering if Joe gave Dave a discount on the job, you can ask him that and any other questions, in this topic we have started for this story here. How do you feel he handled the situation?