AndersonAuto

Hmmm. I have my cover photo selected and it stays put. I didn't know you could rotate them.

Here's what my plan would be going forward: Name change. Aggressive marketing campaign targeting everyone who's been in your shop in the last 3 years, but hit them with a "new customer" acquisition piece that touts repair instead of tires. Map where these customers come from, and hit all their neighbors too. Customer retention program like a loyalty rewards program. I disagree that your decline is a result of too many bays in the area. Those bays wouldn't have been built if there wasn't a market for them. You need to go get your piece of the market. Another thing I've learned through analyzing the numbers is that we lose a shocking number of customers every year. We see a lot of the same faces so mentally we think our customers are loyal, but then doing the data mining, we find out how many faces we forgot that we haven't seen. Especially one and done customers. We see them one time, how are we supposed to remember them a year later when they officially become a lost customer? Customers are not customers until we've seen them 4 times. My mistake in the past was to only send special offers to current customers who have spent more than $200 over the past 12 months, while the one time customers typically spent less than that. Now I include everyone.

Sitting behind Walmart is definitely better than my first location. I was also on a dead end, but in the back of an industrial park. If you're putting 50 new customers on the books each month, then maybe the best thing is to concentrate on customer retention. A rewards program maybe? With that many new customers a month, I suspect most of them are tires only customers. If true, what can you do to convert them to full service customers? If 70% of your biz is service work, what if your name became "Defer Tire & Auto Repair"? It's possible that a lot of the new customers you're putting on the books only think of you as a tire shop.

Do you have one line item in your books for salaries, or is it broken down into sub-accounts for each type employee? If you break each one out, then it's easier to manage by comparing labor cost to labor sales. This is of course assuming that you break out tire sales from your service work. If you're selling tires at an "installed" price, then expensing the tire guys is the best way because there's no direct correlation between the tire sale and the employee pay. Because service techs are billed to the customer per hour, there is a direct correlation between tech pay can the charge to the customer. In this case, COGS makes sense. This is not to say that you're doing it wrong. Either way you do it, the bottom line is exactly the same. It's just that I'm super lazy and would rather not have to do any digging to see whether my advisors are cutting labor charges to get the sale. Your management system will likely give you this info as well, but I've found that very often the management system doesn't agree 100% with my P&L. In the end, the P&L is the one that matters, so I want to make it as easy as I can.

I think it's going to boil down to a very aggressive marketing plan. I poked around on google earth in Streetsboro, and it's a tiny town with some pretty big businesses. Dealerships, Walmart, all those bigger buildings in the industrial park across from Walmart. They're all pulling employees and customers from somewhere. They can't all survive on 15,000 people. Plus, you're behind Walmart on a dead end road. Your traffic count past your building has to be non-existent. The dealerships etc. all have great frontage to high traffic count roads. The trick is going to be figuring out exactly where the dealerships and walmart customers come from, and hit them with very aggressive sustained marketing program. You'll need to give them a good reason to drive past the places that they see every day, and to your shop. Looking at your web site, you've got some pretty good offers that scroll through on your front page. The only thing I would suggest is that you pull the oil change and free rotate off the scrolling ads and put them as a permanent stand alone right in their face. I'd also change it from $10 off to whatever the price is, and make sure the price is very attractive. I love your mobile web site. Extremely simple. Easy to call you or get directions to you, which is the entire point of a mobile site. I might pull the "quote" button and make them call you. Unless you've been able to track this and see a very positive relationship to people actually coming in the door based on the online quote. I'd rather that my service advisor have a crack at getting the appointment than just letting the customer base the whole decision on a number. I'd replace the "quote" button with an "appointment" button. You've got a way to set an appointment on your main web site, but can't do it on the phone. I think I'd also put the oil change offer front and center on the mobile site as well. Also, if you move them to an appointment page on their phone, put a call button at the top of the appointment page in case they decide not to fill out the form. On your Google plus business page I'd change the main picture from the interior shop photo to the street view. Your customers don't care what the inside looks like, they want to know what building they're looking for. Now for the biggie. Your business hours suck. NTB down the street is open earlier than you, open much later than you, AND has great street visibility. If a customer needs tires, and doesn't have to take off work to get it done, they're going to NTB. I'm sure you can kick their ass on quality and service, but customers are increasingly driven by convenience. Changing my hours from 8-5:30 five days a week to 7-7 six days a week was good for a full 20% increase in revenue.

You're correct, this is the traditional method, and it's the reason I tell people not to allow their accountant to set up your chart of accounts. Most accountants don't know how an auto shop works, and their main goal is to make it easy to do your taxes, not make it easy to manage your business. Automotive shops charge for labor based on billable hours. If you're paying your technicians on flat rate, which I am, then they are a COGS. Even if they're hourly, you make assumptions about their average productivity and your expected margin per labor hour, so you can still make them COGS. For each billable hour you have a cost that represents a percentage of your charged labor. If you calculate your technician labor as a COGS, then it's very easy to see if your labor rate is correct. Just in the same way that you calculate what your part charge should be based on your desired parts margin, you can calculate what your labor rate should be based on your desired labor margin. If you have the tech labor lumped in with your SA and your lube dude under "Salaries" like an accountant would want, you can't manage properly from your P&L. I can pull a P&L and use my calculator for about 30 seconds to see if my labor being billed to the customer is consistent with my desired labor margin. I see that you're a tire dealer, so you probably don't bill out a lot of your tech wages on a billable hour basis, so expensing them would be appropriate.

You're calculating the GP correctly. GP = sales - direct cost (parts cost, labor cost, sublet cost). You never include tax in this equation because it's neither a profit center or an expense. It's a pass through. Your rent, insurance, utilities, SA cost, advertising, etc. etc. are all expenses. Your net profit is your GP dollars minus your expenses. When analyzing your business, you have two sides to look at. First, did you make enough money on the sale? Are the percentages that you're marking up your parts and your labor enough to cover your expenses plus give you a little in your pocket? Second, how much are your expenses as a percentage of your sales? Quickbooks will actually do this for you in your P&L report if you select "customize". Then you can look through your expenses as a percentage of sales, and see where you can trim and were you can't. For instance, most of us can't do anything about our rent expense. The only way to reduce your rent factor is to increase your sales. Other things like uniforms are usually up for negotiation. There are also two types of expenses. Fixed expenses and variable expenses. Fixed expenses never change, or change very little, based on sales. If you sell $10 or $10,000, your rent is your rent. Others are variable. For instance my advisors are on a commission pay plan. The more they sell the more they make, so my SA cost is a variable expense. There are ways to increase your GP without getting out of line on your sale price, like negotiating a better price structure with your parts suppliers. You can also get cheaper techs, but that usually comes with a significant quality cost. With this info in hand you can design a nice spreadsheet with your break even points and profitability in a nice graph to look at. One line on the graph will be expenses and the other will be GP. At zero sales your expense line will equal your fixed expenses, and your GP will be at zero. As sales increase, your expense line will increase by the variable expenses as a percentage of the sale, and the GP$ line will increase at a rate equal to your GP%. Where the lines cross, that's your break even sales. Any sales above that nets you the spread between expenses and GP.

Jay, you're a badass. Balls of steel and put your head down and get it done. Failure is never an option. Love it. Don't encourage the inspection process, require it. And require them to do the same level of inspection that your ace tech does. They'll be amazed that suddenly they're ALWAYS busy. And don't forget to have the advisor always prep the customer mentally for the inspection result. It starts when the customer hands him the keys. Say these exact words: "While your car is in the shop, I'll have my guys look it over and make sure everything is okay for you." You'll get a much higher closing ratio, and higher ARO for it.

I thought Mitchell did do a labor matrix. My daughter's shop uses Mitchell, I'll have to ask her. I know it doesn't do the linear labor matrix. If it does do it, it's a stepped affair where you can get an unusual looking jump in the labor charge for just a few ticks.

I'm using RO Writer. The glitch happened when we changed our labor rate. There's a table of various labor rates like most management systems have. Retail, wholesale, fleet, etc. If you change all of the rates at once, and we did, it sometimes has a problem keeping this setting. When adding labor to a job, the labor rate displayed matches the new rate that you put in, but then as you finalize the labor job the rate flips back to the old rate. Since we also use the linear labor matrix feature, the labor charge can be all over the board, so my guys didn't notice that it happened. If you've ever played with relational databases you know they can get extremely complex. I'm sure the rate has to be written in more than one table on the database, or possibly on multiple databases. We just got unlucky enough for the rate to be updated where we could see it, but not where it counted. It took ROW support about 37 seconds to fix it. It took us 8 months to figure out what was happening. I had been pounding my guys about ELR all year, and we just couldn't figure it out. We figured it had to do with canned jobs as they are usually done at a lower rate to be competitive, but it was software all along.

Harry is mixing a bit of apples and oranges because he failed to note that I said I've been doing the cheap oil changes for almost 5 years, and the first year I did it I had 37% growth. Then I said that I currently have 13 employees. I increased my sales from 900K to 1.2M the first year doing the cheap LOF with 6 employees. I'm sure I added staff along the way that year, but the timing of exactly when is a little fuzzy and I don't feel like digging through employment records for this. Last years sales were right at 2 Million. Bottom line net was 251K. For those of you playing along at home, that's 12.5%. Pretty soft. We actually found a software glitch in January that literally cost me 100K at the bottom line last year. Since correcting it my ELR improved by over $10 per billed hour. Current year profitability, my net ran just short of 16% through the end of February. January was a little soft, and we had extra high training expenses in February due to sending everyone to training for a weekend. The Net Profit % will bounce up a couple percent through the summer. Not sure I'll hit 20% this year, but we're working on it. YTD this year (as of yesterday) we're at $440,479 in sales @ 61.56% GP. We're about 6% ahead of last years sales, with a 5% improvement on GP% (due to the software fix). Gross profit dollars are up 10%, car count is up 9%. We've got a little HPRO problem as it has slipped by 0.15 hours vs last year. It's always something. If cheap oil changes weren't good for business, you either didn't have the facility to service them, or you were doing it wrong. Listen to they guys at Aspen. Implement it. It will work, and you'll make a fortune.

One of the worst things you can do for your business is to drive people to the front door, only to turn them away. Not only did you waste your marketing dollars, but very few of those customers will come back even if referred by a friend. I'm very fortunate (or more likely, just stupid enough to buy a giant building) that when I see a sustained busy period, I don't throttle back the marketing, I just start pricing racks. The local BMW dealer has 25-ish bays, not really sure exactly how many. They run one bay per tech. 25 bays, 25 techs. I can't imagine how organized things have to be to do this, but talk about an efficient use of their building. If they can do it, you can do it. I have no idea how, but I know there are guys out there who can help you figure it out. Then you could potentially dedicate one bay to the lube dude, and run 6 techs. Then you'll have to get a bigger parking lot for all your car count.

I was thinking about this thread, and trying to figure out how it is that some guys could be so opposed to a method of growing their business that has worked so well for me. How could they not understand the value in it? Then it occurred to me. We have different problems to solve. Both Total Auto Care and Harry's service are two bay shops with as much office as shop space. Shop space is at an absolute premium and can't be wasted on cars that might be profitable a few visits from now. Every new customer must be the creme-de-la-creme, which we all know is the word of mouth referral customer. They buy the first time they're in, and buy more than non-referral customers. Since space is at a premium, discounting to attract customers is probably the dumbest thing they could do. I have a different set of problems. Different problems mean different solutions. Problems like how do you pull in enough customers to feed 13 employees? So far this year we've written almost 1100 repair orders, while carrying over a $420 ARO including the damn near free oil changes. Fortunately I've hired well, and my guys just knock it out of the park almost every day with very little input from me. I certainly wouldn't want to have the problems associated with a two bay shop. While many people say they'd like to have my problems, trust me, they're still problems.

A great one is Influence by Robert Cialdini. In it he discusses the perceived value influence to buying. Kohl's is probably the best example of using this very effectively. Every "original" price is a number none of us would ever consider paying for the item. But subconsciously, the perceived value is planted. Then they "mark down" the item to exactly what everyone else sells the item for. Every single customer knows this, but who sells more clothes? Kohl's does.

That's ok, you can hate it. I don't mind. Define "hurting myself" for me. If by hurting myself, you mean years of double digit growth, fine by me. The first year I started the cheap oil change coupons, my business went up by 37%. My net for the two businesses (the shop and the LLC that owns the building) was 317K last year, plus the 78K that's on my W2, plus the shop bought me a BMW 650 Gran Coupe for a company car. This year I'm on track to clear about another 50-60K on top of that. The painful part is writing the check to Uncle Sam in a few weeks. That's gonna hurt. Bragging? ok sure. But here's the thing. You can either see my marketing strategy as a gimmick and that I'm hurting myself and other shops by cheapening the perception of our value, or you can see it for what it is. It's a means for bringing customers into my building so they can spend money. Period. I feel sorry for shop owners who allow their prejudices about coupons to get in the way of making great money. It is after all the whole point of having a business, to make money. It's time to detach yourself from the emotions of what you think is the right way and just do things that make money. It doesn't matter what that method is, as long as it's ethical and honest. If it's "low life" coupon clippers that make you rich, then fine. You're still rich, right? Coupons work when done right. If you have any doubts, look at Kohl's. They used to advertise much like Macy's. Beautiful models wandering aimlessly through their commercials in the latest high fashion, and the Kohl's logo on a white background at the end. You know, lifting the image of the department store, promoting their value over price. 🙄 Then in the late 90's they switched gears and started doing coupons, % off scratchers, and Kohl's cash.Their ads feature the discounts as much as the clothes. They're now the second largest department store in the US. They're not the cheapest on everything, and everyone knows it, but the coupons bring their target market in the door to spend money. Isn't that the goal? BTW Harry, I scanned through the article you linked to, and at the bottom it includes an "About the author". In it, you'll find this line: "He provides an inexpensive, easy to use, website based marketing system that is designed from the ground up for automotive repair shops." It seems the author knows how to attract his target audience, but then advocates a different approach for everyone else.

As I've said in another thread, I've been advertising the absolute cheapest Full Synthetic oil change in town. $29.95 for a domestic/asian 5 quart synthetic LOF. No one in town can touch it. In fact, that's a pretty good price for a non synthetic oil change. As a marketing piece, it's working great. I used to do $19.95 coupon oil changes with great success, but there was always a few people who were in it for the cheap oil and that's all. Way more upside to the program than downside, so I put up with them. We made the change to full synthetic and $29.95 at the first of the year. We had a guy in today who informed us that we had lost his business for good due to us raising the price on the coupon oil change. $29.95 was clearly out of line. He's been a customer here for 4 years, and brings us 2 cars. The ONLY work he's ever done with us is the oil change, in four friggin' years! I was heartbroken to say the least. 😀

One of the bigger differences between an auto shop and many other businesses is how labor is accounted for. Technicians go under Labor COGS vs expenses. An accountant will want to make labor and expense line because they don't know how an auto shop works. When you calculate what you're charging the customer based on billable hours, you want to be able to track your labor as part of the cost of goods, that's what makes labor a COGS item. Anything that you have a sales line for, like sublet or towing, need to have a corresponding COGS account. Other than that, you just want to create broad categories (AKA accounts) for your expenses, then create subcategories within those main categories. For example, you might have an "insurance" account, and "liability" as a sub-account and "work comp" as another sub-account. This is not to say that all insurance belongs under the insurance account. Health insurance for instance would go under "employee benefits". These are the sort of things that you have to consider as you're building your chart of accounts. I have a rule with my bookkeeper. We don't create any new sub-accounts without discussing it first, and creating a new main account is to be avoided if at all possible. The goal is to have a very simple and easy to read P&L.

After we dive with the sharks, we feed them any fish carcass that's left over after we filet them, or any undesirable fish we catch like Barracuda. Last year we learned the lesson that we need to make sure the swim ladder and all extra lines are out of the water first.

Here's a little video from a few years ago. Sorry about the lousy camera work.

What does everyone do for fun? I like to sail and scuba dive. Preferably, I like to sail to a great dive location, burn a tank or two, then sail to a little island and drop the hook for the night.

Yes.

I don't have bays set up as quick lube only. I have so many racks available that finding the space is not usually a problem. My lube dude uses the 4 post drive on most of the time, but if I have a truck that needs it, the truck gets it. Technician efficiency can be fixed. There's no better manager than a proper pay plan. Plus if you can start tracking their time they'll magically become more efficient. Finding good people is another matter. I don't know anyone who's having much luck lately. We've been hearing about the coming technician shortage for years. I think it's here.

Still liquid, but pretty heavy. I've made coffee for my friends a few times, and the response is always the same. FANTASTIC!! They can't believe how tasty it is, and they're full until lunch.

I can't begin to tell you how much better my life is than it was 6 years ago. 6 years ago I had been in business almost 15 years. I was very much in the same school of thought as you are regarding oil changes and discounts. The shop was working for me well enough to be able to buy my new building (I did own my old building too). With the new building came a lot of expenses, and I had a lot of bays I needed to fill FAST. I tried a few things that were not too successful. I was growing, but not nearly fast enough. Money got tight really fast. A year after moving into my new building, I bit the bullet and actually went into a little debt to launch my mailer campaign. I joined my 20 group 3 months later, and my facilitator tried to get me to lease a portion of my building to reduce my rent factor, and told me to cut down on the marketing expense. I said no, and no. He also said I should consider removing current customers from my mailer list. Again, no. I got bitched at constantly because my expenses were too high. I don't think my facilitator or other members could see how I was going to become profitable. I told them I was going to sell my way out of it. Impossible they said. Challenge accepted. My biggest regret in business is not marketing my old location as much as I'm marketing now. It was something I thought I couldn't afford. Now I see that I can't afford not to. For every dollar I spend on my mailers, which is my lowest ROI piece, my customers give me $6.80. I'll take that all day long, and I'm not going to judge the people handing me money as being "cheap" for using a coupon.