Southeast Tire Co.

We ended up just with just under 40% total sales increase for the year. This is with the addition of a new location. Same store sales were up around 20%.

We are starting a major advertising campaign in 2011. We have done little to no advertising in our first three years so this is uncharted territory. We started with a new website, setireco.com. We are also looking into some direct mail programs and also internet and social networking programs. We have had good response through Facebook in the past and are really looking to build on that.

In the balance between being competitive and profitable, I think it depends on the goals of the business. Profitability goals depend on the overall direction of the business as the owner sees it. While many owner's goal is to be as profitable as possible, it is not mine. My goal is growth. Growth at all costs. Being a fairly new business, I want to build a huge customer base first and make money later. As long as I am covering overhead, providing my employees with good pay and benefits, and am personally able to take a reasonable salary, I will cut prices to the bone to beat my competitors and gain their customers.

I can honestly say that I have never priced any service or product by a profitability projection. My prices are based on the market and I change my business to make sure it can operate under those margins. I feel that the most important thing in this economy is a strong customer base not maximizing the profit of each job/sale. While I think both can be done, I will never lose a reasonable customer to price. Never. I'll take a 15% overall profit on a tire sale if I know I gain a customer in the process.

I envision one day changing my business goals to maximize profit and when I do that, I will already have a strong and loyal customer base to support me. So again, I think that balance you are talking about depends on where you see your business in the future.

That's great. Thanks guys. I'll give it a try.

Most of them get a discount of 10-20% on everything. My franchisor negotiates that out so I have no say in what it is. I just have to live with it. The deepest discount I have seen is 20% and the lowest is 5%. Ofcourse, my situation is different. I turn all invoices into Car-x and they collect the money but my paper work has to be correct. We do GE, MAP, Wheels, LeasePlan, ARI, Donlen, PHH, and some others. If you want this type of work you need to see who has got the most cars locally.

Well I've had a few inquiries and they have all been GE so far. One was a pretty large company that I would love to have, I just want to make sure it is going to be worth the effort.

Which companies are you guy's using? Which ones should I avoid? I have applications for GE, Map Inc, and LeasePlan. What are they using as their basis in these negotiations?

Is anyone servicing fleets using one of the fleet management companies (GE Capital, Kelley, etc)? I would be interested to hear experiences. I am considering looking into it but have heard some negative feedback on the process.

You need to get your billable hours up and they only way to do that is to have more manpower. You cannot afford to turn away work. People are too busy these days and if you are not accommodating they won't come back.

 

Part time techs are an option. When I was expanding I hired “B” rated techs part time with the opportunity for full time as the business grew. I also paid them a wage that was lower than they would expect, but paid them commission based on productivity. I found that techs like this. In a busy week they can make money.

 

As our client base grew, I put them on full time.

 

In my opinion, the most important thing you need to do now is concentrate on getting your car counts up. And this requires not turning away work.

 

Another thing, your manager needs to manage. That's the way you make money. Keep him out of the bays.

 

I struggled with the same thing. Trust me, do this first.

This is pretty much along the lines of what I was considering. I like the idea of a lower paid, lower skilled tech that is paid on commission. I may explore that after the new year.

What do you guys consider a good productivity rate? Are your mechanics paid on a flag rate? If so, what is the split?

I use the Mitchell system to organize my service reminders: State inspections, recommended services and major services. I had the Mitchell Company doing it, but found that their CRM was overkill. I now have a company through CARQUEST Auto Parts called Auto Alert, manage my service reminders. I have more control and it costs less. I go back 14 months.

 

I also purchase a mailing each year list for a radius of 5 miles from my shop. For these people I send a quarterly newsletter. This helps prospects for new customers. The newsletter also goes to my regular customers.

 

Another thing I do is email blasts. I collect emails from my customers and all the local businesses in my area. Once a month I send an email newsletter which highlights seasonal tips, promotions and has links to my web site.

 

For the emails I use a company called Constant Contact. Check it out, you can create your own professional looking email and it's very inexpensive. The link is below:

 

http://www.constantcontact.com

I am going to check out these suggestions Joe, thanks. What would you estimate your response to the purchased lists is?

That is quite a bit of traffic. I need to build a Facebook page for our business also.

Yeah, I also use a google function called "Local Business Center" which is another free listing that Google offers. You can edit your existing listing on their site and "own" it. You can upload information about your business, hours, pictures, etc. It also tracks your hits to your listing. I get over 2500 impressions monthly with around 700-1000 clicks for more information. I have had tremendous success with it. When I created the Facebook page, Google automatically picked it up and attached a link to it under my listing. That is where the traffic is coming from mostly.

I would suggest everyone set up this Local Business Center, it is the single most successful advertising that I have done to date and it didn't cost me a dime. See one of my listings here: One location. Each individual shop has a listing with pictures and info. Google is amazing.

Mine is a little low budget, free in fact. We do get about 100 page views per day though.

Southeast Tire Facebook

I am considering implementing a direct mailing campaign next year. I recently accuired the business along with the previous owner's Mitchell system and database which goes back 8 years. How far should I go back into the database when deciding who to send mailers to? I am concerned about changed addresses, people who moved, etc.

Does anyone have a suggestion on a vendor that does this?

Of all the business I can think of, an illegal used tire business is not one of them.

It wouldn't surprise me one bit if this is more widespread than just this one guy. I know for a fact that some of guys on the collection trucks "lose" some here and there. That is one thing, but defrauding a state governing body? Not smart.

All tires are sent back to my supplier. I don't know what they do with them. My tire supplier is a major wholesaler tire distibutor for new tires in my area.

 

Year ago in the 70's, (when I started in this business) I worked in a gas station in the Bronx, NY. We did save used tires that were later sold. But, since I opened my business in 1980, I have always sold new.

So your new tire supplier actually picks up every tire junk tire that you have? I've never heard of that. Is that common practice?

Here in Louisiana, every tire sale must have a $2 disposal fee attached to it. We pay the state monthly and we must use a state designated tire recycling company to haul off the junk tires. We get audited yearly and you darn well better have proof showing that you paid for the number that you disposed of or more. In my case, I pay for about 20% more in disposal fees than than actual tires that I dispose of. This is mostly because many of the tires that I remove on new tire sales are able to be resold so they don't get disposed.

I never considered the use tire market. Do you have major tire stores in the area? Firestone? Goodyear? PepBoys? Etc?

Both of my tire-only stores have 3-4 major chain stores with 5 miles of them. In fact, they are a major source of new customer leads. Many of them give out our cards to customers who can't afford or aren't willing to pay new tire prices.

It is really a different business and their is some liability risk. In fact, the last issue of Tire Business had an short section from the SEMA show discussing dealerships selling used tires. Many of the dealership owners agree that if it is done right, there is a tremendous upside. As long as you have a good quality control system to screen tires, the risk is relatively low in my opinion.

What do you do with your take-offs that are potentially reusable Joe?

My shop currently has one full-time tech and one manager/alignment tech. This is a business I recently acquired and am still dialing in my rates and pricing matrix. Both of my employees are on salary now. We are working a 40 hour week and I am currently billing out around 30-35 hours per week. The low productivity is due mostly to the previous owner only working part-time and not really pushing to grow the business. He was near retirement and content. Based upon this setup, what are my most important metrics to monitor and when do I make the leap to add a second tech?

As is, I am losing a few jobs every week due to the fact that I really only have one tech that can do anything beyond basic alignments and brakes. So I miss jobs that customers want done that day or others that my top tech doesn't have time to diagnose during the day because of other jobs. I feel that I do not have enough business yet to keep two techs working steady but I have too much traffic for one. How should I attack this? My manager currently fills in on the simpler jobs and alignments but he is really a "front of the house" guy and an excellent salesman and I want to get him fully into that role as soon as possible. Advice??

Joe it is a totally different market in the deep south. I have only been to northern LA but I once did contracting work in Jackson, MS. It was totally different. A lot of vehicles there would probably not be allowed on the road in NY. Because the weather is warm snow and ice is not an issue and people tend to get by with tires that would get you in toruble in the north.

It is true. In fact, we buy our used tires from the Northeast. You wouldn't believe what people come in on all the time. It is a very good market for used tires.

Your # 1 location is a different business model?

Well, it is currently being run a dual business model. I took the former owner's service model and put in my tire sales model and haven't really done too much to combine the two yet. To be honest, I am not a mechanic and have taken the cautious route with the management of the service side. I am learning every day with the help of a great manager that I hired but I am still a little weak on the overall model plan.

I am currently viewing the operation as a generic business, looking at overall gross profit margin rather than productivity, parts margin, etc. I do intend to use more traditional metrics as soon as I find out what the hell they are and what they mean!!!! That is why I am here. I will have questions to this effect shortly.

Thanks guys! I am looking forward to it.

With the recession and chinese embargo are you having a hard time coming up with enough used tires? The guys around here just about kill to get a hold of 14" and 15".

Well, we operate a little differently than most used tires shops. Most of them will get their tires from salvage yards or they pay new tire dealers for their usable take-offs. The larger shops sometimes buy their tires in bulk wholesale loads.

We go the wholesale load route but we do it a little differently than most. I am partnered with 7 shops throughout South Louisiana and we pool our resources to purchase bulk loads. We have a processing facility where we sort, clean, test, repair, and distribute according to each shop's inventory. The advantage of this is we are able to have a steady supply of limited quantity, fast-moving sizes (14", 15", some 16" cars). A single shop would have to sell roughly 55% of a bulk load to break even on it and, once they do, all of the good selling sizes are already gone leaving only slower moving tires. We avoid that by spreading that slow moving stuff out amongst the partners so we are able to keep those highly desired sizes (195/70/14. 235/75/15, 215/70/15, 225/60/16, etc.) on hand much more than our competitors.

With the implementation of the Chinese tire embargo, we have actually seen an increase in business as more people are bargain hunting. Supply has not been an issue and we don't expect it to be.

looks like I posted this in the wrong place. Sorry guys.

3 locations-----

#1 - Service and Tire sales (new location so I only have October's numbers)

Monthly count: 75 (Oct. 09)

How many bays: 4

Hours of operation: M-F 7:30-5:30

1 A Tech

1 Tire tech

#2 - Tires Only

Monthly Count: 750 (give or take)

2 Bays

8-7M-F, 8-5 Sa

3 Tire Techs

#3 - Tires Only

Monthly Count: 450 (give or take)

4 Bays

8-7M-F, 8-2 Sa

3 tire Techs

Keep in mind that 75% of our tire sales are used tires and we are doing only tires at #2 and #3. Hence the fast turnaround and the high counts.

Hi guys, I read one of Mr. Marconi's articles in Tire Business which I found interesting and I figured I would check out the site. I have been browsing the archives and I must say that I am really excited to find this resource!!

I own 3 shops in Baton Rouge, LA. Until recently we have only sold tires, no service. Last month we bought out an existing mechanic shop for our third location. Since it was already a solvent business, the transition has been easy for me into mechanic service but there are many factors that I have not had to deal with with my previous operation and I think this site will really provide me with some of the help I am looking for. I hope you guys don't mind answering questions because I am going to start firing away as situations arise.

Glad to be here.