AndersonAuto

I just fired Unifirst after only a year into my lengthy contract.

I'm tired of the uniform game. I bought my guys Red Kap uniforms from an online supplier, and had a local embroidery shop put logos and names on them. Most of the guys were washing their own uniforms anyway, but for the few that weren't I bought a washer and dryer for the shop. It cost me a few grand, but I'll save that and more in the next 6 months. I also never have to worry about my guys complaining about their shirts never coming back from the uniform company. Time will tell how it all works out, but so far so good.

Anything custom like that Jeep is a "time and material" job. I have my guys punch the clock, and the customer gets charged for it. The tech gets paid straight time, so it's great fill in work for when they're not busy doing more profitable things.

I'll be there. We're shutting down the shop for a day so my guys can all attend. 

Great video and great biz advice. Most small biz owners start out just like he did. I know I did. I spent the first 12 years as the lowest paid employee at my shop. Bad location, even worse marketing, and a horrible expense structure. I finally got my act together but damn it was hard. The best way I know to make sure you're not discounting your way to the poor house, at least in my case, is to hire an advisor and remove the owner from the front counter. Then tell the advisor that he's not allowed to discount, and make his pay plan discourage discounting.

I did get a couple of great pieces of advise in the early years. First was from a Vietnamese guy who ran a computer shop. He said if you're busy, hire someone. Don't worry about having enough business to keep him busy all the time. The work will come.

The second was from my sister-in-law, the hair stylist. She told me every time she gets too busy and is scheduling people out too far, she raises her prices. Some customers go away so she's less busy, but makes the same amount of money.

You have to learn to strike a balance between hiring another employee to keep up with demand and raising your prices to reduce demand. Of the two, hiring another employee is the more profitable, but both have their place, and sometimes it's appropriate to do both at the same time. 

This is why recorded phone calls are fantastic. In KS I don't have to get their permission or notify them that they're being recorded. Then if this situation comes up, I simply offer to attach a recording of their phone call to my response to the bad review. Or they can take it down. I would never actually attach the phone call, but it's a pretty good bluff.

I've also used it to head off a bad review before it happened. When the wife comes unglued because "it's doing the exact same thing" (mercedes that wouldn't come out of park, now dies going down the road apparently is exactly the same thing) I simply emailed her the recorded phone calls where her husband never mentioned anything about a dying problem, and apologized for our confusion. 

15 hours ago, Wheelingauto said:

I have read about the type of schedule you run Anderson and other than you, I dont know of anyone who made it work. You have to dramatically increase car count when going from standard 5 day work week to 6 day rotating schedule and as you described, there are other challenges.

It definitely takes time for your employees to adjust to it. Not only with regards to how to make sure they don't get in a bind with a customer's car and their impending time off, but also with life at home. My longest tenured advisor took a very long time to adjust. He came from the dealership world where you work dusk to dawn 6 days a week. Once we started the rotating schedule he said he didn't know how to act with 5 days off. He felt like he'd been fired and didn't know what to do with himself. But after a few months they fall into a rhythm and would have a very hard time giving up those long weekends.

You only have to pick up another 20% car count. 😉 Some of it will come naturally from people needing Saturday service, the rest you have to market for.

15 hours ago, Wheelingauto said:

I am becoming fat and happy.....

Working on succession planning before I become even more complacent than I am. I've worked pretty hard to make myself irrelevant to the business. I'm down to shuttle driver, coach to my manager, occasional firefighter, and technician of last resort when no one else can diagnose the problem. The last item will be the hardest to get rid of.

1 hour ago, gandgautorepair said:

Thanks very much for the comments. I come from 29 yrs in dealership management so I'm very familiar with rotating schedules. Anderson, you have a very good plan, thanks for taking the time to explain what you do. I'm torn with the idea of extended hours. So far, I tell people the truth that I chose opening a repair shop over opening a used car lot because the repair shop would not be open evenings and weekends. However, with all of the challenges that we will face in the future I want to do my best to position the shop to be successful long term. We already go out of our way to accommodate our customers, does this also mean extending our hours? So far, I have a good staff, with very little turn over, and I want to keep that. Good to hear that some of you have made being open on Sat profitable.

I think long term growth and business health comes down to making it easy to do business with you. It seems that it's no longer enough to be good. People will choose easy over good almost every time, so if you're easy and good, you've got it made.

Being easy to do business with doesn't necessarily mean long hours and Saturdays. Wheeling has a bigger loaner fleet than some rental car locations, and loans them out for almost any reason, which is certainly convenient for his customers. At the time I extended my hours I was still losing money from my move into the bigger building and buying a dozen loaner cars wasn't an option. Loaner cars and similar strategies are also a long term play, where being open longer hours costs very little and pays off immediately. Of course, if you did loaner cars and  Saturdays....

I changed my hours back in Sept. 2012 8-5:30 M-F to 7a -7p 6 days a week. Full crew and full hours every day. Best single thing I've ever done. It was also one of the hardest transitions I've had to make. While I didn't lose any employees for it, I have lost the opportunity to hire a few great people because Saturdays are not possible for them. My techs work 7:30-6:30 and advisors go from bell to bell. 

The switch was good for an almost instant 20% increase in sales. 3 weeks after changing hours, Saturday revenue was indistinguishable from any other day. The ARO on Saturday is slightly lower, and the car count slightly higher. 2013 was our first full year of it, and we finished the year up 34% over 2012. The key seems to have been having full crew and regular hours. Half crew and half days gets you less than half results. Parts can be a challenge, but you quickly learn who you can count on for Saturday parts, which we then reward with more purchases from them during the week. The beauty of having a full crew and full hours is that we can identify problems during an oil change inspection, and actually get the work done without putting the customer out of their car during the week. I've found that people who generally get their oil change done on a Saturday are the same people who have a hard time giving up their ride during the week. They appreciate being able to get things done on their day off and are very likely to leave the car for the day for other repairs as long as it can be done same day.

The way it works is that everyone is on a rotating schedule. The shop is closed on Sunday of course, but in addition to Sunday, everyone gets 2 days off during the week, and the 2 days off rotates every week. Week 1 has Monday & Tuesday off. Week 2 has Wednesday & Thursday off, and week 3 has Friday & Saturday off. I have 3 advisors and 6 techs. 1 advisor and 2 techs are paired up on each rotation, so I always have 2 advisors and 4 techs in the building. The schedule allows the guys some pretty good time off, and allows me to attract good talent while also working Saturday. Every 3 weeks when week 3 wraps around to meet week 1, the guys get Friday Saturday Sunday Monday and Tuesday off. I tell my people they could go on a cruise and I wouldn't miss them. Combining their 5 day weekend with vacation is not only allowed, it's encouraged. Lube dudes are hourly and work 5 days a week, and both of them work every Saturday.

The difficulty in implementing this program was that when I started it I had one advisor, one assistant advisor, and 3 techs. I had a lot of hours of operation I had to cover at the front desk and not enough people to do it. I also didn't have the sales or car count to justify 3 advisors. I made the assistant advisor an advisor even though I knew he wasn't the right guy and would have to replace him, and I filled in the other advisor spot. On the 2 days a week that I wasn't playing advisor, I was playing shop owner/manager. I worked 7-7 six days a week for a year. The new hours and lots of marketing got us in a position to add staff, and after 18 months of this program I was at 3 good advisors and 6 techs.

The other difficulty was learning how to handle/avoid having to pass a partially completed job from one tech to another and from one advisor to another without dropping the ball. We bought quite a few rental cars as we figured this out, but now problems with it rarely arise. I didn't really implement any specific strategy to fix it. After the advisors and techs got burned enough times they figured it out all on their own. Now if a big job walks in the door on a Thursday, the advisor who's getting ready for his 5 day break will instinctively pass it to the other advisor. Same for the techs. If they find a big job on an inspection, they'll tell the advisor to give it to another tech. In some instances if there's just too much gravy on the ticket to give away, the advisor or the tech might come in on their day off and sell/finish the job. It all works with almost no input from me.
 

17 hours ago, JustTheBest said:

With all due respect - I don't think it's a matter of right or wrong. I think it's a matter of which business model do you want to run. 

Using the math and numbers from what I quoted above, the difference is this:

160 cars/month x $600 ARO = $96,000
500 cars/month x $425 ARO = $212,500.

Of course if the 96K is returning a 10% profit, it's still better than 212K at 5%. Now, I'm not saying those profit numbers are correct-  I am just making a point that it's not all about gross sales - it's about "what sticks". I get it. But I'm thinking that with the tracking and work you've put into your business, the 212K is doing better than 5%. 

No, not right or wrong, but like with everything, it depends. You could choose to run my business model in a two bay shop with one tech, one lube dude, and one advisor. Could it work? yes, depending on your expense structure. If you're in a high rent area, then I would guess probably not. I'm happy to be proven wrong of course. Choosing which business model you want to run is not to be taken lightly. You have to analyze where your bottlenecks are, and whether you can do anything about them.

Your math is right, but not all of the story. If a guy is running 160 cars/month at $600 ARO and getting a 20% net, I wouldn't want to move him to 200 cars/month at a $425 ARO and a 20% net. Not only less sales, and less net on those sales, but the advisor doesn't have time to do a good job consistently. And, if a guy is doing 20% net on $96K/mo, I'd bet anything he'll be at 10% net or less on $85K sales. Sales fixes a lot of evils, but it's hard to get around a bottleneck like limited shop space/advisors. 

I'm obviously a firm believer in oil change marketing, but I'm also realistic about the ARO it will generate. ScottSpec runs a good operation and gets a higher ARO than cheap oil change marketing will likely get him. Is it possible that his advisor is such a rock star that he could prove me wrong and maintain that ARO? Possible, but I don't like the odds.

If a shop is running 100 cars/month, and a $200 ARO, then very likely a discounted oil change and proper inspection/sales process would dramatically improve the business and the bottom line. Like I said, it depends. 

17 hours ago, JustTheBest said:

A loss of 1/2 of the customers a year is rather surprising... and this is what I talk about with my clients. When it costs between $75-$150 to get a new customer, would you spend $15/year to keep your old customers?? I have to think the answer is a "yes". 

Everyone is surprised when they find out what their customer attrition rate is. The absolute lowest customer attrition rate I've seen is 35%, from a shop in a small town with limited options for auto repair, and an owner that the entire community knows and loves.

17 hours ago, JustTheBest said:

But the issue I always struggled with is that when you're smaller - fewer people - and fewer customers - there just seems to be more room for the bottom to fall out. In other words, if half of the 160 customers left - it would a much bigger problem than if 1/2 of the 500 customers left. See what I'm talking about. Now, with that said, of course, nobody wants to (or likes to) lose customers. I'm just looking at extremes. 

There's absolutely more room for the bottom to fall out in a small shop. If my car count goes down 35 cars in a month I might notice, but I'm certainly not worried. The shop that's doing 160 cars a month and drops 35 RO's just went into a loss for the month. It's a big problem for any shop to lose 50% of it's customers a year. In fact, it might be a bigger problem for the bigger shop. I literally have to come up with 1000 new customers every year. Can you say that about a shop that runs 160 RO's per month? In either case, if you don't replace those customers who are lost, you will perish 100% of the time. Marketing is critical, I don't care who you are. It's just that I think the marketing needs to be well thought out to produce the car count/ARO/repeat business that you need to be profitable, not simply car count. Oil change marketing certainly does that for me, but I'm not about to say one size fits all.

 

2 hours ago, 3PuttFever said:

Exactly how do you obtain a $425 average with 500 cars? I'm into this business less than five years and would like to know how you know how to do  this? Aside from listening to the customers, selling the dirty filters, overdue or due maintenance, pipelining upcoming needs like soon to expire brakes/tires, what else should we be doing? We inspect nearly every car and admittedly, we do have some lapses on finding things, but we do a good job for the most part. 

What those guys said. Remember, 500 cars is a lot of cars. Concentrate on figuring out exactly how many vehicles your shop can handle, and do an exceptional job with those vehicles.

One metric that I used to measure, and I really should get back into, is the number of jobs found per RO. We all work on pretty much the same vehicles, 10 years old with 120-150k on the clock. Things are broken on most of those cars. Your job is to find what's broken, and tell the customer every single time. When we were measuring jobs found per RO, we were looking for about 5 to 5.5 jobs found per RO. Some cars need nothing, some cars need 13 things, but in the end we looked for the average. If a tech could only find 2.5 items per car, we knew he wasn't doing a good inspection. We also tracked the sales closing ratio by the SA, and broke it down by technician. If I have 3 advisors and 2 of them sell everything a particular tech gives them, and one advisor doesn't sell anything for him, we have a personality conflict that I need to get involved in. If I have 3 advisors and 6 techs, and all my techs are finding 5 items per car, but all the advisor closing ratios on one of those techs is complete crap, I know I have a tech who's pencil whipping his inspection and the advisors don't believe him. Lots of interesting things you can find out when you track that stuff.

When we do an inspection, I have the techs give the advisor the list in a specific order.

1. What the car came in for.
2. Safety items. Actual safety like metal to metal brakes and ball joints that are about to fail.
3. Things that will become a safety items in the near future.
4. Things that won't become safety items, but get more expensive if you wait.
5. Needs fixed but won't get more expensive.
6. Maintenance. 

On 9/17/2017 at 9:25 AM, JustTheBest said:

Hello everybody! I felt compelled to "chime" in on this topic again because of some interesting details. 

I read this topic from the start - wanted to get familiar with where it was going. And on top of that - I understand that it's somewhat of a touchy subject - I get it. 

But after reading everything, here's what I found:

In an earlier post, AndersonAuto said:

"One of my advisors who has been with me for almost 10 years used to complain non-stop about the coupon oil changes. He's on a 100% commission pay plan as are all my advisors and wanted to not include the coupon oil changes in his pay plan. He was absolutely sure they were killing his ARO and GP%. I just pulled out the tracking and offered to remove all the repair orders with mailer coupons for him. All $35,000 worth. He declined. "

Hmmm.... so if you're following, it's NOT about the cheap oil change - it's about what comes AFTER the cheap oil change.

Later in this thread, AndersonAuto advised:

"I looked up where we ended the month for June. $218,789 with a $447 ARO on 489 repair orders."

First of all, nice numbers. But can you see where the truth comes out?? 

With an ARO of $447, I'm pretty sure it's not 20 oil changes on each car, right?

I think (actually... have come to understand) is that most shop owners overlook the fact that from the time most people got their first car, the ONLY service they were told they need was that "oil change". In fact, it was probably "dad" that told them that - something like "be sure to keep your oil changed on a regular basis". 

Amy I right? 

So that's why the oil change works as an INTRODUCTION to your shop. 

Besides, I don't care how good you are - how many tools or scanners you've got - I don't care if you're the most honest shop in your market - Try to fix a car as it's rolling by your door. 

That's impossible.

Also, I wanted to mention to  "AndersonAuto" that it's nice to see that you're tracking your offers. I always say; "If you can't track it - don't do it." I'm not suggesting you've got to look at it every day - but it's nice to have something to reference... and that's why most shop owners don't "get it". If you follow this model - get the customer in the door with an attractive offer on the ONLY SERVICE THEY KNOW THEY NEED - you too can turn your shop into one that produces similar ARO's.

Nice work!

Hope this helps!

Matthew Lee
"The Car Count Fixer"

Get "The Official Guide to Auto Service Marketing"

Ooops... Almost forgot. Got an hour? Join me on this Training Webinar while I'm still doing them. You can register here!

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Matthew

 

Thanks Matthew. Whenever this thread pops up I always have a good laugh when I see the tags that Harry put on it. 

One thing I'd like to touch on is something that I knew, but it was even more evident to me a couple weeks ago. I happened to be in Maryland and I stopped by ScottSpec's shop to have a look at his operation, marketing, margins, etc. The thing that you have to consider when designing a marketing program is what you're doing now vs what you want to be doing. Scott currently runs very close to a $600 ARO with great margins, but his car count is up and down. He definitely needs to revamp his marketing, but he did have a good August. The reality of a cheap oil change marketing program is that a $425 to $450 ARO is what most shops can expect if you're doing good inspections and have a good advisor. Your demographics/zip code/vehicle mix obviously will have a big influence on this, but $425-450 is what I've seen. If you're a smaller shop like Scott, with a limited maximum car count due to a single advisor configuration and limited shop space, moving from a $600 ARO to a $425 ARO with higher car count might not make sense. 

The real issue that comes in is that the vast majority of shops need to replace half (HALF!!!) of your customers annually. Scott told me he was only losing about 10% annually. I showed him a pretty simple number which indicated that his losses were much higher, which he then back tested and showed just how scary it is. Scott is losing just over half of his customers annually (as am I) even with a great advisor taking care of his customers. My girlfriend sat in his waiting room and listened to/watched his customer interactions for a couple hours, and she concluded that Scott's customers LOVE his advisor, but he still has to replace half of them annually. That's the reality that most of us have to deal with. Customers are not as loyal as we all want to think they are, and the customers we see all the time give us the illusion that most customers are like them. Scott's numbers and mine have shown that over time customers are becoming less loyal every year.

So the question for shops like ScottSpec is how do you ensure you're attracting enough new customers to replace the ones that don't come back, while maintaining a high ARO? I know exactly how to do it for a shop that can handle 500 cars a month and needs a $425 ARO, but a shop that can do 160 cars a month and needs to carry a $600 ARO is a different kettle of fish. I wish I had better answers. Scott is going to do some A/B testing with a few marketing pieces so maybe he can enlighten us all in a few months.

I do know for sure that the oil change is the only service everyone knows they need, and you can't fix it if it isn't in your shop. I've been wondering though, given the current climate of customer loyalty (or lack thereof), if the way forward is going to involve consolidation of the industry into fewer larger shops, or chains of smaller shops where the owner can count on making his living on smaller net profits from multiple locations.

17 hours ago, 3PuttFever said:

You had a $17k day and will do $220k for the month? That's fantastic! My biggest month is $100k and I'm shooting for $85k-$95k per month. By your numbers that's approaching 400 cars per month. Without knowing how many bays and/or Techs I have to imagine you're an 8 to 10 bay store with 5-6 Techs working. That's hammering it. 

Since this was mentioned, I looked up where we ended the month for June. $218,789 with a $447 ARO on 489 repair orders. The shop is very large, with 6 techs and a couple lube dudes. I actually have more bays than I need to produce those numbers, but I bought the building right, and I have room to grow.

Wheeling does do better numbers than I do, but he's been at his current size for about 10 years longer than me. I'll catch him.    We have different marketing philosophies, but both seem to be working. My marketing strategy was born out of the need to fill the bays of a very large shop as quickly as possible. We have the luxury of having great demographics in the surrounding area. The local population has enough money to fix their cars, but not so much money that they don't look for a little savings where they can get it. The cheap oil change works great as a way to bring customers in, then the inspection brings in the real work.

My sister lives in Alvin, south and west of Houston. Fortunately for her most of the rain fell to the east side of Houston. I know she's been taking in horses from people who no longer have pastures for them etc. I was down to see her a few weeks ago and a thunderstorm popped up. It's really unbelievable how much rain comes down after being fed by the warm gulf waters, and how fast things fill up since the ground is so flat there.

57 minutes ago, Framingham Auto Service said:

Thanks for all the previous replies.

When it comes to charging the customers, do you charge your regular labor rate or do you have a Lube rate? 

Do you try to compete on Oil Changes, what are your thoughts?

Thanks.

We've gone over my program in depth in other threads, but the readers digest version is that I pay .3, don't pay the techs for the inspection, do an oil change on 67.7% of all vehicles we see, carry a 425 ARO and don't exclude anything, and I don't just compete on oil changes I absolutely spank everyone on the oil change price.

The text messages use a unique phone number. You're then sent an email notifying you of the text message. All of your text interaction is then done through your web browser.

I think you can contact anyone there. The salesman who first contacted me is not the same person who handles my account, so I think you can just call them and get a demo from whoever. 

So the next question is, what are you going to do besides "visibility" to drive the extra traffic to your shop? Remember, your expenses are not just the rent. Utilities and insurance are going to go up, and not just a little. I'd figure on doubling your current utility bills. Maybe more since the new space will be air conditioned in the summer. Then if you're going to do the necessary marketing, it's expensive. On and on it goes. It won't be cheap. It could be made to be worth it, but it won't be cheap, quick, or easy.

I'm going to guess that you're still the lead tech in your shop, plus you do the bulk of the advising. When you move the service counter to the front, you'll be removing yourself from being a tech, or you'll be hiring an advisor. What's your plan for replacing yourself in the shop? How much will an advisor increase your expenses? If you don't increase your sales right away, can you afford adding 50-60K to the expense side of the ledger and still take a paycheck home?

Trust me, I'm not risk averse. I've been there and done that. The president of my old bank told I'm crazy for even thinking about it, so I'm not saying don't do it. I'm saying to go into it with your eyes wide open and know that it's going to kick your ass for a while.

 

I looked at Google maps for your location, and I'm skeptical. I'm assuming you're referring to the Key Credit Repair location. You're talking about doubling your square footage, and it doesn't look like you could add additional bays there. It doesn't appear to be deep enough to do much with aside from a waiting room and an office for you, plus a whole lot of JUNK that will inevitably accumulate. Your service desk would now be up front with the waiting room, and would be a real PITA to get to the shop. Although maybe not as bad as what you would have. It looks like you'd have to go out a back door from the office to get to the shop. You or your advisor will be less likely to make that trek as often as you should. It's an inefficient way to do things. Been there done that.

A little quick math based on my experience. I'm going to assume you're probably doing right around 45-50K per month in sales. I'll also assume that since you're in similar square footage to Key Credit, that you're paying essentially the same rent. Assuming 50K sales, adding this space puts your rent factor at about 6%. A little high, but doable.

Assuming you do 50K a month in sales, at a $450 ARO, that puts you right at 5 cars per day. If you increase your business due to the increased visibility and no other marketing effort, you can at best expect another 2 cars per day. That puts you at 7 cars per day in the parking lot, plus your carry over, so figure on 12 customer cars in the parking lot on any given day. Add to this your car and your employee cars. Figure 3-4 more parking spaces consumed. So that's 15 or so parking spaces needed, not including any abandoned junk. If you take your boat home, I count 13 places to put cars, assuming you're jamming cars into the empty space near the dumpster and double parking behind at least one of your 4 marked spaces in the back, and parking along the east side of the front building. Assuming that at least a couple of cars will be inside the building, again, doable. Not easy but possible.

The real question is, are you doing at least 50K per month in sales, and how are your profit margins? If you're not doing 50K or more in sales with good net profit, why not? I can assure you, lack of visibility is only a small part of the equation and if the rest of the operation is inefficient, adding the extra expense will make it worse, not better. I've been in your situation, only worse.

My old shop started out with 3 lifts plus 2 flat stalls. I did have a waiting room and office, but I was behind a construction company in the back of an industrial park one building away from the dead end. No street visibility, no drive by traffic, plus an inefficient operation. The one thing I had that you don't is parking. When the construction company went out of business I took over their space. The main driver was that I could add 2 bays where my old waiting room was. My marketing was complete crap back then, and it took YEARS to increase my car count to make proper use of the space. I was also now far removed from the shop, but not as far as you will be, and it made the operation even more inefficient. 

Unless you have the money to burn every month, plus cash laying around for the remodel, and have an efficient operation that doesn't require your constant input in the shop, I would advise extreme caution.

 

I bought a Launch tire balancer a few years ago. Absolute junk. The dealer that I met at the trade show quit being a dealer for them right after I bought it. Hell, maybe before and he was just trying to unload it.

Long story short, it broke 3 months later, and the dealer wouldn't come look at it even though he promised he would time and time again. Launch kept telling me it was the dealer's responsibility to service it. After a solid year of fighting with Launch (and buying a replacement balancer) I finally got them to send me a scanner of equal value to replace it.

Along with doing an inspection on every vehicle, the customer needs to be primed for it at drop off. I train my guys to use the line "while your car is in the shop, I'll have my guys look it over to make sure everything is ok for you." Without fail, the customer says "Great. Thanks!"

It's important to use that line pretty much verbatim. We don't talk about courtesy inspections etc. It's all about making sure the car is ok for them. In a round about way, we have permission from the customer to inspect the vehicle, and sell them the needed repairs, while not making them feel like you're simply going for the upsell. Considering the age and mileage of the average vehicle we see, every single customer knows there's something wrong with their vehicle, and isn't surprised when we tell them there are things that need to be fixed. If they're primed to hear about it, the odds of getting the job are much higher.

I used to struggle with this when I first started out. I found that technicians would generally ask for enough money to make sure they can pay all their bills as a "guarantee". The end result was lazy technicians. If I would guarantee a guy 30 hours plus whatever he produced above that, he would invariably produce 28-32 hours.

Years ago I decided that all my techs would be flat rate with no floor. I also put my advisor on a straight commission plan with no floor. The result has been technicians who are almost always flagging over 40, and advisors who sell. My job is to give them all an opportunity to succeed.

A side benefit to this is in the bookkeeping. My tech wages are calculated as a COGS as they have a direct correlation to billed labor. It makes life easy when you're looking at your labor profitability vs ELR etc. Having a disconnect between labor hours billed and technician wages muddies the waters a bit. And since I'm the laziest human being on the planet, I like easy.

No matter what you do with your pay plan, one adage I always go back to is "There's no better manager than a properly structured pay plan". If your pay plan by default has your employees doing what you want them to do, life gets easy for everyone.

59 minutes ago, Ron Ipach said:

Does it matter?

Not to me. I'm going to work on my own little piece of the market, and make sure I do all I can to keep my bays full and profitable.

The biggest problem we have in this industry is that most shop owners started as technicians. Those technicians have a thought process in their head that revolves around how much they would pay for something, not how much a customer should pay. If you can buy a water pump for $30 and the technician/owner knows that he can bolt it on in an hour even though the book pays 3 hours, and as a tech he got paid $25 an hour, to them, that job was worth $55. Most guys have a hard time wrapping their head around charging a customer $400 for that job. If they sell it for $200 they made a killing - they think.

The second biggest problem that we have is that any one of our customers can buy parts just as cheaply as we can. Standard retail markup for many many years has been cost times 5. That's an 80% gross profit for those of you playing at home. When you think of a "discount" store like Walmart, that just means the items are being sold at cost times 2.5 or 3. The difference is that I can't go to the supplier for Dillards department store and buy a shirt for the same money Dillards pays. Most people have no clue how much stores mark up their products, and would be outraged if they found out. We are in the crappy position of having to explain to customers why we have to mark up parts at all, much less why we have to mark them up over 100%. A lot of the technicians turned shop owners are unable to explain it. The rest of us are compared to those shops who can't explain it.

Seems  like everything I read has a different number. Unfortunately all of them are damn short on actual data, mostly relying on market research reports. The good news is that most paint a rosy picture for us.

http://www.alldata.com/blog-entry-option-1/feeling-good-about-future

http://www.tirebusiness.com/article/20161222/NEWS/161229978

https://www.inc.com/sageworks/why-business-is-booming-for-auto-repair-entrepreneurs.html

I'm seeing a different story from D&B. They're saying industry revenue is up 30%. Unfortunately industry revenue data is a little hard to find without buying an investor research report. I'll keep looking though.

http://www.firstresearch.com/Industry-Research/Automotive-Repair-and-Maintenance-Services.html

21 hours ago, ScottSpec said:

I always appreciate the thoughtful post you make. While I cannot speak for him, I imagine tyrguy would be in agreement with your assessment as I am. That we each need to analyze or local market conditions and plan accordingly. I think the issue we both have with this post is the argument put forth that more reliable cars and reduced required maintenance are not lowering car counts, and making this business more challenging for most. Obviously there is always the exceptions and caveats. For me is was being able to buy the customer base of a shop that went out of business after 29 years for the exact reason we are debating. This has grown our revenue 25% over the last 3 months. While this has been a great return on my investment, I unfortunately cannot count the availability of customer bases as a long term strategy. 

Thanks Scott. I try.

I meet with a few other business owners I know every month or so just to kick around ideas to help with business. We met this morning and talked about marketing. There were only three of us today, a gym owner, a guy who has a company arranging international youth sports travel, and me. I said something about the fact that I use cheap oil change coupons as a draw. Almost in unison, they said "right, because it's a commodity". What do people in your area view as a commodity that can be bought anywhere anytime? I'm not saying that everyone needs to jump on the cheap oil change bandwagon, I think we've beat that horse to death elsewhere here. I'm saying that we all need to figure out what spurs the people in our area to move their business from their current shop to our shop. Bottom line is, the cars have to get into your shop by any legal and ethical means available. Do what you have to do to make it happen.
 

16 hours ago, ScottSpec said:

Anderson,

What are your thoughts on this https://fred.stlouisfed.org/series/REV8111TAXABL157QNSA The amount of information about the report is limited, but if I read it correctly, revenues from Automotive Repair & Service have been pretty much flat since 2010.

Thanks
Scott 

It's interesting, but I think there's more to the story. It could well be that auto repair revenue is flat for the last 7 years, hard to say without more info.

If that chart is showing the reality, then at some point the number of viable shops is going to go down. It may take a few years, but it will happen. Costs increase every year, and if revenue is flat, someone's going to lose. I intend to make sure it's not my shop on the losing end. I have 13 employees who depend on me to make sure their mortgage gets paid and their kids get fed. If that means Darryl and Tony a couple blocks away from me don't make it, then I'll feel bad for them, but that's about it.

I'll dig into the numbers more tomorrow to see if I can find more info, but if the chart is accurate, it's just more motivation for me to make sure my marketing is on point.
 

BTW, if it makes anyone feel better, I'm getting my ass handed to me this month.