Southeast Tire Co.

I really liked this one Joe. We are currently in the process of transferring from a small, "fix what's broke" shop to a complete car facility. This helps my perspective and I shared it with my manager and service writer at our weekly meeting. Your wisdom is much appreciated and useful.

I really liked this one Joe. We are currently in the process of transferring from a small, "fix what's broke" shop to a complete car facility. This helps my perspective and I shared it with my manager and service writer at our weekly meeting. Your wisdom is much appreciated and useful.

We upgraded from the same Visualiner you mentioned to the John Bean Prism. It is faster to setup than the Visualiner and very easy to use. We only do 20-25 alignments per week so it fits our needs nicely. If you are looking for something to handle higher volume, the Hunter setups that Joe mentioned are tough to beat.

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.

I see what you are saying but maintain my position that you cannot look at your overall spending in this way. What if your sales doubled this year? You would obviously have to spend more on parts and labor while your overhead expenses would remain largely static. Looking at it using your method you would have spent a much larger percentage on parts and labor. This would not be a bad thing though, it means you made more money.

You need to monitor what you are making on the sale of those parts versus what you spent on them. What you are spending on them as a percentage of total expenses is unimportant.

What is your Gross Profit percentage on parts sales?

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%

I don't see how you can have a set a percentage of overall spending using this method. Part and Labor are costs of sales and will increase according to sales volume. If you have a phenomenal year, you will have to spend much more on parts and pay more for the labor to do the work while your overhead will remain basically the same. The will skew these percentages as you have them laid out here.

I think you are looking at this in a overly simplistic manner. You need to at least divide your expenses into Cost of Goods Sold (COGS) and overhead. You need to know your break-even number. What do you have to make every year/month/week/day to keep the doors open. You then adjust your gross profit (money left from sales after deducting cost of parts and labor) to cover your overhead and provide the owner with a salary.

Rather than looking at what you are spending on parts and labor as a percentage of expenses, you need to be looking at what your gross profit is on your parts sales and labor. That is the important number.

I don't know if this clears anything up for you.

First, The Basics,

 

Let’s talk diagnostics. Do you follow any kind of diagnostic procedure, or do you just throw darts on a wall, or play “pick-a-part” and hope you fix it before you or the customer runs out of cash. I hope you don’t do that. That might work some of the time, but it’s not a good way to get to the source of problems quickly or accurately.

 

One of the tire shops that I do business with dropped off a 2003 F450 with a 7.3 diesel for me to look at. It’s one of their service trucks that died on the highway.

 

These guys are super, I’ve known them for years, and they’ve got a great reputation and excellent work force. In fact, I buy all my tires there, and they do all my alignments. They try to fix their own trucks “in-house” and sometimes, well……the repair/diagnostics are a little out of their comfort zone. This was one of those times.

 

Now, they don’t try to keep up with the scanning or diagnostics on most cars and trucks. It’s a tire shop that specializes in tires. They stick to what they do best, tires, wheels, and undercarriage stuff. The only “techy” stuff they get into is with the TPM systems. Most generally, when it comes to their vehicles they’ll go with the tried and true…”throw a dart and whatever it hits we’ll change.” Of course they’ll ask around first, but you know, second hand information hardly ever gets the job done these days.

 

They had it at one of their stores in another town for about 3 weeks trying to solve the problem. When that didn’t work they decided to tow it up to another one of their stores, and see if the guys there had a better dart. Another couple of weeks and several darts later, all they had were holes in the wall and no truck running. Then my phone rang.

 

“Can you program a PCM on a F450?” the shop asked.

 

“No, sorry I don’t do those, but I know who does. I’ll call him and see if he can come over and do that for you,” I told them.

 

A day or two went by and the phone rang again. “Hey, this thing still doesn’t start. The guy that programmed it said it sounded like an electrical problem”. Ok, somehow, I’m getting involved now.

 

“Sure, bring it over,” I told them.

 

Well, they towed it over with a strap pulled by an F250 diesel truck. The F250 looked like a toy truck compared to this behemoth. With a push and a shove from the F250 the guys got it lined up and into one of my service bays.

 

The big concern was the IDM relay, it kept chattering like a machine gun. Instead of checking codes I thought it best just to start with a complete wire to wire check to determine if there was some lost signal that was causing the problem, or a wire that was scraped and grounding out. Removing the inner fender on the driver side I could gain access to the Injector module (IDM) and the PCM (Power control module). Seemed easier to start here than any place else. It didn’t take long before I tracked down a problem. On pin #71 of the (new) PCM there should have been 12 volts from the ignition. No voltage at the terminal.

 

Tracing the wiring diagram thru its maze it led back to the in-car fuse box on fuse #22. I grabbed my test light and checked the fuse… (Rolling my eyes about now) the fuse,… oh man… the fuse is blown. Good grief… all this for a blown fuse.

 

Well, better change the fuse, and see if it starts. Sure enough; it fired right up… sounded great, good throttle response, and no service lights.

 

Now the big challenge, what blew the fuse in the first place? Following the wiring diagram again…. I traced out all the components on the fuse circuit. There was one that caught my eye as the likely culprit. The brake cut-off switch mounted on the master cylinder. (It’s the one that had the big recall a few years ago.)

 

The updated replacement piece was in place but somebody forgot to secure the wires. The replacement piece has a newer style connector and an adapter connector to allow you to attach it to the original style fastener. Which makes it a little longer than it originally was from the factory. It was hard to tell where the new wire and connector started, and the old one ended, because the whole thing was lying on the exhaust manifold, and had melted down to a glob of wire and plastic.

 

Looking around under the hood there were all kinds of new parts installed. The nicest part……they were all installed correctly. There were no other wires out of place, or any signs of scraps or melted wiring. The important thing is that it runs, and the truck can go back to doing what it needs to do. I think the biggest thing that threw everyone on this job was the chattering relay. It sounded bad, sounded expensive… but, all it turned out to be was a loss of proper voltage to the PCM, because a fuse blew from a lead that grounded out. This was due to the improper installation of one small component.

 

The PCM couldn’t spread enough voltage and ground signals to all the necessary systems when it was missing the voltage it needed. As the relay would engage, the voltage drop was too much to keep the relay engaged. The IDM would pull more signal voltage as the relay would come to life. Then the PCM would have to drop the ground signal to the IDM relay to compensate for the loss of voltage. All this was going on very rapidly … on and off, on and off… making the machine gun sound coming from the IDM relay.

 

The guys at the tire store were extremely grateful that I got the job done, so they could use the truck again. For me, it’s another day at the shop. I’ve got nothing but good things to say about the guys at the tire shop. Hey they tried, I’ll give them that.

 

But one thing I wish they would do next time --- CHECK THE BASICS—BEFORE BUYING PARTS! It’s cheaper that way…

 

 

 

I'd like to thank ASO for allowing me to post these stories. Everyone here gets to see them before I send them to the editors for final approval. Not all stories make it into print and a lot of times I use your comments and interests in the story as a gauge to whether send them on. (Ya haven't let me down yet...!)

 

Enjoy, any comments you have are appreciated. Gonzo

visit my website for additional stories and info www.gonzostoolbox.com

I have printed out the last few of your articles and gave them to my service writer and lead tech. You manage to make a tiny lesson into an interesting anecdote. Keep em coming.

I'm with Brian on this one. Mitchell1 does my CRM. Not sure that I want more people having access to my records and Mitchell1 already does and they do it seemlessly.

I use Mitchell1, I have looked into their CRM program. It seems to me that it is geared more toward customer retention than it is to attracting new customers. Mudlick just uses demographic lists to target potential new customers, they do not use your existing data. Does Mitchell1 offer something similar?

Where do you guys draw the ethical line on recruiting employees? Is it unethical to pursue a competitor's employee and make him an offer?

I had a lively debate recently with a friend about this and it got me thinking. It is my position that there is no problem with trying to hire a talented technician away from his current employer if it is done in an upfront manner. If I can offer him a better opportunity and I don't resort to dishonest means in offering it, then I feel that I acted ethically.

I recently heard that one of my competitor's top mechanics was a little discontent with his job. I heard this through one of my parts supplier reps. I did not solicit the information nor did I ask how he found out this intel. He knew that I was looking for an additional mechanic and he casually brought it up over a morning coffee bull session. I have a mutual acquaintance with said mechanic so I contacted that person and told them to let the mechanic know that I had a proposal for him if he had an interest. A few days later the mechanic called me and we set up a meeting. I was impressed with the guy and I made him an offer to come and work for me. He thought it over for a few days before calling me back and declining, stating that he had come to an understanding with his current boss. He thanked me for the offer and I told him to let me know if he ever changed his mind. The end.

Did I do anything wrong in this case? My friend seems to think that I did, that I was unfair to my competitor. Its not like I walked into the guy's shop handing out business cards. I feel like I went through the proper channels. Agree or disagree?

Anyone know anything about this direct mail company? Mudlick Mail. They are a direct mail service specifically for auto repair shops. I requested some information and they seem to have some good programs. Anyone have experience with them?

Disclaimer - I have no affiliation nor am I trying to promote this service. Just looking for opinions.

Our state, NY, isn't considering the ban, it has enacted the ban. We will be unable to sell or install lead wheel weights as of April 1,2011. I am seriously looking at the 3M stick on roll wheel weights. That way I only have 2 numbers to stock and I have any weight I need at my fingertips. I'm curious to know if anyone else is using the 3M system. It is expensive from the start, but I think it would be cheeper than stocking all of the weights in different clips.

We sell a ton of tires and use a whole lot of wheel weights. I'm in Louisiana and, by reputation, I'm sure we will be one of the last to adopt the ban. I have priced the alternatives and I have not found anything on the market that is as cheap as lead. We will price accordingly and pass the cost on when the time comes.

I got a free demo of the 3M system a while back. I think it is excellent but more than double the price per ounce of lead stick-on weights, which are already more expensive than clip-ons. We are being forced to use more and more stick-on weights due to modern wheel design which is driving up costs.

We try to offset this cost by only making 2 bulk purchases a year for our wheel weights. I have found that there is quite a bit of flexibility in pricing when dealing with the major tire supply companies (Myers, McGee, American Tire Distributors). We have each supplier submit bids and pick the lowest. We are able to get a 35-40% price reduction off their list prices using this method. I would assume you could do the same in the future with alternative weight options to drive costs down.

As a lifelong Louisiana boy and bonefied Cajun, I can state without a doubt that this is not filmed in Louisiana. Sounds like the guy is speaking Spanish. Amazing nevertheless.

Do you guys also deal with those third-party warranty providers much? Being a growing shop, we tend to take whatever is out there. We seem to get quite a bit of business from these providers clients and, although I have not done much insurance work, I can't believe insurance adjusters could be worse than them.

My hat is off to Gil Meche:

 

http://www.nbcwashington.com/news/sports/Baseball-Player-Quits-Says-I-Dont-Deserve-12M-114712809.html?dr

I actually played baseball against this guy in high school. I don't think I even fouled one off in my two at bats against him. It takes a lot of integrity to walk away from guaranteed money like that. He has my respect for sure.

A clone.

Beat me to it.

You certainly have plenty of scientific data to back up the claim that nitrogen is superior to air. You also cite the fact that nitrogen use will be more widespread in the future. What you do not mention is the public's perception and acceptance of it. You are getting feedback from very successful shop owners who are telling you that they view it is an up-sell item and not a necessity, that customers are not requesting it and, in some cases, are moving away from it.

My primary business is tire sales and service. My business is in a large city (600k+). I can think of 2 instances where a customer called or walked in looking for nitrogen in the past year and I service a heck of a lot of vehicles. When I see the green caps, I explain to them that I do not offer nitrogen inflation. It is not something people want or care about and I have never lost a customer because of it. With TPMS technology, proper inflation had become less of an issue. It has made people more aware of their tire pressure and consequently reduces problems that we used to see more of (uneven tire wear, blow-outs, poor gas mileage).

I group this gimmick into what I call the "Jiffy Lube" method of up-selling. You go in for an oil change and, before you know it, you need an air filter, wiper blades, a coolant flush, and diff oil change. Sell them everything you can by telling them they have to have it and will suffer the consequences if they don't. I despise that type of sales mentality and so do most customers. I will not sell something that only offers an arguably minimal benefit at a premium price.

It is snake-oil sales at its finest and I won't bite on it and neither will the consumer in the long run.

*edit - spelling

Do you think that due to increased competition, many shops are using more and more services as lost leaders? Major companies put items "On Sale" as a way to bring people thru the door, but the truth is the "special sale price" is still sold at a profit. Some times the promotional sales price is the actual price of the particular item. When we "give away" lost leaders as a means to gain a customer base, are we losing much needed profit?

 

I bring this up only to stimulate conversation, I want to hear from other shop owners and how they market lost leaders and other forms of marketing to bring new customers in.

Competition is certainly the driving factor for me. My main competitors in the area are larger shops or corporate chains. They spend quite a bit on advertising in both mail and radio. I can't afford to do as much of this but I do have a great location on a high traffic street. So I run specials like this to get people in the door. I run oil change, alignment, and free rotation specials all of the time and it really increases traffic and leads to bigger jobs. Because this shop is a newer location for me (just passed 1 year), I am more concerned with growth than I am with profit. My other locations (which sell only tires) generate the profit I need to run my overall business. Therefor, my main goal after break-even with my service location is to build my repeat customer base and increase overall community "buzz". I have found that, by doing this, I am building a loyal customer base and gradually attracting the more profitable jobs.

If this were my only location, and I was dependent on it for my livelihood, this strategy would never work. But, since I am able to do this, I feel it gives me a key advantage over my competition and will eventually allow me to grow to the point that I can eliminate some of these lost leaders and realize more profit.

It looks promising, but the website is horrible. There is also the Redi-Sensor by VDO or the universal one by Schrader. The VDO sensor, from what I've seen doesn't need ANY specific hardware. All you do is install the sensor and use your standard TPMS tool to set it for the vehicle. To be honest, they all look promising. I have yet to be able to find out where to purchase them.

From what I've read on the Schrader and VDO, they are mainly covering domestics. They covers almost no imports with their universal systems as of now.

This system is the first I've seen that has such wide coverage. I agree that the website is terrible. If I hadn't put my hands on it at SEMA, I wouldn't even consider it based on internet info.

I love the wibiya bar at the bottom. That is very cool. I wonder if I can get that on my page.

Sure you can, it is free. www.wibiya.com. It has a nice statistics feature that tracks traffic as well. I like it.

I am not certain as to what I would do but I would dress it up someway. You needs something to make what you do stand out.

Your site looks good. Guess I'll just go ahead and copy your section and use that.

Kidding, of course. Thanks for the feedback.

I like your website. It loads fast. It has nice colors and is appealing to the eye. I think you have a great logo. On most of your pages I think the size of the small print may be a little small and too light colored. Maybe it could be darker. I think you could dress up the auto services pages some.

Thanks. I agree on the print. It is a work in progress. What, specifically, would you suggest on the auto service page?

We just recently added a new website. I am looking for an honest opinion from fellow shop owners. Our business is primarily tires. We do offer full service auto repair at one location. take a look and give me some feedback. All feedback, positive and negative is desired.

Southeast Tire Co.

Pretty ambitious plan for a 1st business. Especially for no management experience. The SBA does not lend money, they only guarantee the loan

thru a bank. So you should have started with a bank who does SBA loan. At time, they are difficult to get as the banks are not even lending to

on going businesses. Be careful with borrowing friends/family because it it a good way to loose friends and make for angry relatives.

 

I started a shop (hi-perf). I spent $350,000 the first year with 2 techs. I am not a mechanic, but have 40 years managing several businesses (concurrently.) My wife and I do not draw a salary. 2 years later, we are barely breaking even. Shop has 2-4 post bays, 2-2 post, chassis dyno, air compressor, 2 band saws, TIG welder, drill, sanders, and misc. shop hand tools. We now have 4 techs. My investment doesn't compare with what you are planning. I have learned a lot about this business in the process.

 

You are starting with a lot of overhead and you need to draw a salary. Go slow is best advice I can give you.

I would have to concur with this assessment. The current commercial lending situation is tight at best. I think it is awesome to have a grand dream but I think you should consider smaller steps in achieving it. You are talking about a multi-million dollar investment before a profit is realized. Dream with your heart but reason with your head.

Myers Tire Supply is pushing a new TPMS solution. I played around with it at SEMA this year and it seems like an excellent and affordable system. Here is the link: http://www.alligator-sensit.com/

Rather than having to purchase a new OEM sensor, they sell an aftermarket replacement that can clone the defective sensor. You program the new sensor using a simple little USB pad that works with any computer. They claim to have about 85% model coverage growing to 90% by the end of the year. They are saying software updates will be free. I guess they are planning to make their money on the sale of the aftermarket sensors and accessories (valve stems, cores, o-rings, etc). It looks like a great system with the total start-up cost around $750. The sensors are supposed to sell for around $25-35 i believe. Anyone have any experience with it yet? If all true, it seems to be an excellent solution with good profit potential.

We personally run a $55 alignment special for most vehicles. We also give a free alignment with the purchase of 4 new tires. It was said above, and I agree, that alignments generate a ton of front-end work. It is also, in my opinion, the easiest to sell. The customer is typically in the waiting room (rather than a drop-off) and I can bring them out there and physically show them the issue. It is a strong selling point and a great money-maker.

I view alignments the same way as I do oil changes: A way to get a customer in the door, get their information in the database, and start them on a regular maintenance program.

We don't sell a lot of tires. We sold $24,000 plus last year. Just wondering how everybody else is handling wheel weights and the tape ones. We charge a mount and balance additional.

We use an all-in pricing model. We market this as every tire sale gets a free mount, balance and valve stem(where applicable). We price in the cost of that when we determine mark-up. I have had better success with this method over an itemized breakdown, it is easier for the customer to understand and they seem to respond well to the upfront delivery of the pitch. There is no shock when it is check-out time. When I quote a tire, the price I give is total installation and tax included: "Out the door price". Works for us, about 90% of our business is tire sales