Charlie

All five of our shops are feeling the slowdown which came on at the start of October. Frankly, I welcome the drop in car count; it causes us to focus on the fundamentals in order to stay busy, think of it as a chance to sharpen the saw. When times are flush (April through September) we tend to get sloppy, we limit the number of waiters, and sometimes fail to follow through with our 'No Process.' I have always felt car count changes with the outside temperature, more so than Back to School, the Holidays, or Election cycles. When it's hot in Virginia, cars break and AC repairs become the priority. When it's cold, cars break and stressed electrical systems surface. 

My advice to anyone who may be worried about the drop in CC, is to return to the basics, listen to your recorded phone calls, engage with the community and soon we will have a cold blast that makes the phone ring. Take this time to get your team to be their best. 

Morning, Joe

Our shops are affiliated with Technet, there are two primary reasons behind the why. 1. is the ability to offer a Nationwide Warranty, and 2. is financial. We maximize our rebates using early pay, online ordering and threshold spending. While I know our prices may not be the lowest, the rebates amount to 8% of total purchases, that is a significant amount. We are also using their equipment buyback program, over a 5 year period (if our spending remains above the threshold) we will have recouped $88,000 in equipment expense. This was negotiated using our financing, which was a preferable interest rate. 

While we are affiliated with Technet, we choose not to promote our affiliation in any way. We do not allow any signage, and promotions or posters, and no handouts. My brand is just that, and I see no advantage to share our efforts with any third party. It may be a personal gripe, but I dislike the name - Technet. That name only confuses the consumer, and we certainly want to avoid that. I am grateful for the affiliation, however I manage the relationship by my terms. 

3 to 6 months of operating expenses, set aside in a stagnant account is hard to fathom to a small business owner who is trying to grow.

I speak from experience, for the first 24 years, I leveraged everything to grow. I work well in stressful situations, and can find my way through the tough times. It seemed for years, the numbers in my checkbook balance were red. I accepted every risk in order to grow to three locations, purchasing the Real Estate along the way. The trick was always having good revenue, strong revenue can conceal a multitude of sins. For the first 24 years I operated with no cash in the bank (to speak of) while making payments on the prior years taxes. I was bold and lucky, some would say stupid.... I was very fortunate.

Then, in 2019 I read Profit First, and it changed my world. The economic stresses of running this company have nearly vanished. We just purchased our fifth location, taxes are all paid with next years in the bank. The numbers in our Operating Account are now all black. When my bankers ask for the performance report, they almost can't believe it. Shifting how that revenue is handled, and changing my mindset has given our company strength and predictability. 

For anyone looking to sell their business, or to transfer operations to the next generation (that's all of us), having strong, predictable financials will change the multiplier, in many cases it doubles it. I suppose you could say, having strong, predictable financials is the best investment you will make. 

Was it necessary to operate the way I did for the first 24 years, in order to get where I am? I can't say for sure, but what I will say, is if I was to do it all over again, I would begin with the Profit First philosophy. Many of us start from nothing, with nothing, and we only know what we know. The lucky ones survive, and along the way, become enlightened, stimulating positive change. I only hope that for the next operator, it doesn't take 24 years to figure it out. 

1 hour ago, rpllib said:

I agree with the 7% rent factor. I know owners that have 13-15% rent factors and it is a lot of activity and generally not much return. I punched the ARCO location address into a demographic tool that I have been using for a couple decades. I then took that data and pasted it into the attached spreadsheet (column GV). When compared to many other locations shown in the sheet, I would call the mile high view of this location "average good". If you want to see exceptional, look for the Virginia Tire entries.

Again, "the mile high view" would suggest that this could be a successful location, but maybe not exceptional and maybe not a place I would risk a 15-20% rent factor. The "raw automotive retail market potential" is based on the idea that the 20k households surrounding your shop will likely be a good indicator of retail potential. It then assumes that household education followed by household income are the most important factors in determining the DIFM (do it for me) potential. The same formula has been applied to every location in the sheet. 

May be helpful. Definitely does not include other important factors like traffic patterns 

Caution would be advisable, Imo, if this is the area you are interested in.

misc2.xlsx 712.25 kB · 1 download

WOW, that's some powerful software. Nice!

Theta, I would caution you that you are entering into dangerous territory. You really want your rent at 7% in order to have strong net profits. If you own the property in a separate corporation, renting it at +/- 7% gross should deliver you a good cash flow to that property management corporation. If your shop was 8,000 sq ft at $40 per square you are looking at a monthly rent cost to the repair shop of $26,666. If that represents 15% of your gross then you need to consistently knock down $175,000 per month in gross revenue. In a down month, or God forbid a pandemic, that rent can become 35% of gross revenue and you are running in the red. 

We really don't want to forecast our businesses based on perfect situations, such as full parking lots and a full staff that shows up every day. Business is expected to be fluid and we must have the flexibility to ebb and flow. 

First, I would caution you that I do not believe your people qualify to be paid salary, to read the rules which were revised last year CLICK HERE. This rule change exists because of situations just like yours (no offense). Here is what you are risking by skirting the rules. let's say you have a disgruntled employee who goes to the labor board and they determine that you were paying your people on a salary yet they did not qualify AND they were working more than 40 hours per week. The DOL goes back three years, determines the employees average rate of pay per hour and charges you with a fine and you now have to pay all employees time and a half for all overtime they worked. 

All of our shops operate differently, and sometimes convenience is really important but it can be abused. Another thing to consider is that we are are always training our customers what to expect, by being too convenient it is possible that your customers are abusing your graciousness and expecting too much from you and your people, possibly jeopardizing your most valuable asset; your employees. 

Only you can determine what is best for you. Protect yourself from being sued or atleast research the risk so you aren't surprised if it happens. 

Have you ever searched various services or products from your PC, tablet and phone trying to figure out what happens when your customers do the same? I'm guessing we all have and came to the same conclusion: it's a moving target. As shop owners we are all thinking "How do people in need of my services find me online"? Once we know the answer to this question we know where to go to get found, but that answer doesn't seem to be clear.

Google search is still the #1 lead generator but the playing field has changed, here is the best article I have ever seen which clearly describes what Google is (and was) doing. If you struggle like me to understand, this will clear up a little confusion. To read it, CLICK HERE.

Scorpion Internet Marketing are the experts my company has recently teamed up with for web development and marketing.

We've been in business since 1995, steady growth year over year by doing what we know works. I also am aware it can be a mistake to do the same thing, over and over, just because it works without being open to change. Late last year my son joined the company as General Manager. He graduated from Virginia Military Institute with a degree in economics in 2014 then worked for the Target Corporation to develop his own style of leadership. When he joined American Pride Automotive he immediately looked for ways to implement meaningful change. After reading an article in Ratchet & Wrench he came to me toi discuss selling annual service packages to customers. 

Has anyone had any success selling such packages? If so, what is the incentive to the customer? I learned many years ago that two things motivate a sale, price or terms. We don't want to erode our margin but some say this idea has merit, hopefully we can learn a lesson or two from you other shop owners.

On 2/5/2018 at 7:00 PM, alfredauto said:

The retail car sales side is even worse. The companies selling leads for cars are the same ones promoting fear, doubt, and distrust. Everyone knows that all used cars are lemons and you will get scammed unless you pay XX to prove you are a smart shopper with the report. We as an industry would be better off without most of it. 

Funny you mention this. We sold used cars for the past 15 years but closed down that division (after much deliberation) in November 2017 for that very reason. Advertising these days is tied directly to several online companies: Autotrader, Cars.com, CarGurus, Craigslist and Ebay to name a few. Each of these companies earn revenue exclusively from the dealers yet to the public they pit the dealers against each other and make them compete on price. Then you have CarFax that again charges the dealer and is free to the consumer. They have trained the consumer to search for 1 owner, low mileage, accident free cars with extensive service records. What about the other 85% of inventory that costs the dealer daily. In a nutshell there are easily a dozen companies dipping into the flow of revenue and the poor dealer at the end is left with little to no profit. 

New car dealers today suffer the same consequence. Each new car dealer has 4 profit centers: New car sales, Used car sales, Warranty/recall work and service. What I have learned is that 70% of a new car dealers profit comes from general service and they can only hope to break even on new car sales. This is why you see dealer group consolidation and expansive service facilities. And ultimately this is why WE are not each others competition, our #1 competitor is the new car dealer. 

I'm pleased to see the passion behind how we all run our businesses, it's that individual passion that has gotten us to where we are. The reason for this post was to raise awareness on a possible shift in our industry that I believe we need to build a collective passion to fight. That impending change is these lead generators that will only erode our profits, and as a result, ability to grow. As we know, there is no quick fix.

I think we all agree that the most important visit to our shops is the customer's next visit, the customer who is there today. Word of Mouth is a terrific driving force creating first time customers and that WOM promotion happens through outstanding experiences with our existing customers. 

The Repair Pals, Openbays and Blockchains out there will disappear without us doing the heavy lifting - we do not need them. CarMax is being smart, they pitch their sales customers that CarMax has a national network of shops, at the ready, performing warranty work. They are paying these 'opportunity generators' to have access to this discounted network only to aid in closing the sale....giving their buyers a false sense of security. 

We are not each other's competition. The competition is the new car dealer, the Wolf in sheep's clothing are the companies aiming to profit off of our hard work and reputation - they are not our friend. 

Here is a perfect example. How would you price a spark plug change on a 5.4 Ford? Keep in mind, you are providing this quote to a price shopping customer and the price you provide will be discounted by 13% (26% GPM) by the 'opportunity generator' OpenBay.

Is it just me? or does it seem that lately there are a lot of businesses being started that insert themselves into the flow of existing transactions only to harvest your profits and lesson the margins of those doing the work and accepting responsibility (us). I am referring to technology companies: Repair Pal, Openbay, CarFix and now Blockchain to mention a few. It is frustrating to me after having built a business (brick and mortar), purchased equipment, hired employees, provide training, accepted full responsibility and risk, supported my community only to have a startup backed by money hungry venture capitalists attempt to erode our profit margin. 

I find the statements from co-founder Vladimir Lupenko of Blockchain in this months Ratchet & Wrench extremely arrogant: "The repair industry is huge, and people always get cheated"    "We use reputable and undisputable technical data to set the market and price rate". Vladimir goes on to say "Based on our contractual agreement , the repair shop will have to provide the service at the price we have calculated".

As good shop owners, protective of our future, we best rally against this technology, this Wolf in sheep's clothing. My research of these companies leads me to believe that no good will come from their involvement in our businesses. We, as independent shop owners, are operating in an industry some see as ripe for consolidation and this technology is just one of the signs.

I ask that anyone reading this post refuse to participate. The involvement of these companies is not a 'quick fix' for a shop needing car count. Their intention is to drive down your prices, recruit price shopping customers only and mine your data base for their benefit. If our industry sees their existence as a threat and together, refuse to become a member of their organization, they will disappear. Without shops to refer to they lose all value to the consumer and will not be able to return a profit to their investors.

To read the complete article, follow this link:  https://www.ratchetandwrench.com/articles/5504-how-blockchain-technology-could-affect-your-shop

To support this research here is a seperate article from this months Ratchet & Wrench magazine discussing how to price your services for long term health and growth: https://www.ratchetandwrench.com/articles/4841-how-to-price-to-gain-customer-loyalty?utm_medium=email&utm_source=utm_code

Joe,

The culture of your shop as well as your giving nature made Osceola Garage the perfect Family Service Day partner. Suzanne and I have heard from many of the families in the community you serve and it is clear they see you not only as a supportive business but also as a friend. 

You hit the nail on the head when you said "As small business owners, our biggest advantage is our ability to impact our communities". As independent shop owners our direct competition is not each other, it is the new car dealerships who are seeing no profits from new car sales and are currently growing their service departments to work on all makes and models. As small independents we have the ability to connect with our communities and enter the hearts of our everyday customers on a level the dealers never will, it just takes a little creativity.

Hearing success stories from shops across the country has been very rewarding, we are excited by the future. Thanks for all your support!

Charlie

Joe, I will be sending you great vibes. Due to scheduling conflicts American Pride will have our day of service on May 13th to honor Mother's Day, our chosen Non-Profit partner is Child Development Resources - they're terrific. Family Service Day gives our shop an opportunity to alter our pace, adjust our attitude and re-evaluate who we are in the community. I find it to be a great 'reset'. 

Looking forward to hearing from you post event. 

Charlie

Joe, you are so right. I was reminded of this fact on Friday when I was logged into an industry specific BWG conference call which included independent shop owners as well as franchise dealers across the nation. The call was mainly about retention, profit margins, competitive advantages etc. We as independents have a distinct competitive advantage against our direct competition (Franchise Dealers) and that is an opportunity for intentional community involvement. For my shops as well as many others across the country Family Service Day has given our retail customers something meaningful to talk about and the conversation lasts for months. 

At FSD we have found many shop owners across the country to be very giving men and women. Holding a day of service, carefully paired with a strong local non-profit and supported by area businesses rewards these top shops for doing good. While the benefits are many it all begins with a willingness to truly serve the members of our communities who could simply use a hand up. As shop owners we have a unique opportunity to create positive change in the lives of many by simply sharing our talents. 

Our sponsors over the years have been tremendous and extremely supportive - Jasper Engines and Transmissions, Advance Auto Parts, Auto Vitals to name a few. 

As always I am available to share my FSD stories from here in Virginia as well as other shop experiences in more than 20 states. We are very excited to see the magic this Mother's day at Osceola Garage.

Charlie

Thanks Joe for sharing your excitement for Family Service Day, it has been an honor to be involved with this initiative and watch it become a national movement. In business, timing is critical, a good idea today may not have worked 5 years ago. As a shop owner I have seen our industry shrink due to consolidation as well as new car dealers realizing the profits in general repair are viable, thus becoming our competitors.

Consumer behavior has changed driven by Google, Yelp, Open Bay, True Car, Auto MD, AAA and Repair Pal to only name a few. These distractive resources interrupt customer loyalty and if we aren't careful, erode profits. The timing is right for us shop owners to be a force within our community, the best customers respond well and loyalty is deepened. There has also been a lot of talk lately about the younger generation (Millennials) questions of how to reach them as customers and what motivates them as employees. This generation searches for meaning in what they do and where they spend, a well organized cause marketing initiative such as Family Service Day moves that needle.

Shop Owners naturally do good deeds every day, as shop owners we come in contact with a lot of people and we know who need our help. At Family Service Day we see our members across the country 'Doing Well by Doing Good' and I would be happy to answer any questions directly where answers are not found on the FSD website. My direct email is [email protected]

It looks like you are doing a lot right. Your website looks good, it has multiple call to actions, you have claimed your place page and you are staying current with Yelp. These days it's not 'one thing' that works it all things working together and for that I would encourage you work with a group that can provide individualized attention. Are you seeing increased activity from your Google Analytics page? The dashboard there is invaluable and once you learn how to navigate within it you will find opportunities to increase it's effectiveness.

However, AS is correct, it takes time to build a presence that Google respects. After all, can you imagine an industry that promises 1st page results to everyone and delivers? Can you imagine how big that first page would need to be?

I'd be happy to refer you to those who have helped my company.

Family Service Day started with our company in 2009, in 2013 we formalized into a benefit corporation and gained sponsorship from TECHNET making their network of over 7,000 shops exclusive service providers for Family Service Day events across the country. We just had our national day of service last weekend where FSD events were held in 16 states across the country. We expect FSD to be a true asset within the tools available to TECHNET shops helping them sustain and grow.

I would be happy to explain it to you in greater detail by phone.

www.americanprideautomotive.com

We pay a Hybrid program that is based on 20 years of experience. Each of our shops has two service writers, gross revenue per shop is between 80 and 120 thousand. Each shop has a manager and a writer (basically they are both writers but one has more authority). We pay a base pay of 700 to 800 weekly with a 4 point monthly bonus. Both writers will get paid 1% of their gross for having 52% of total revenue in labor, 1% of their gross for having a 50% GPM, 1% of their gross for having an average ticket of $275 or above. The second in command also gets 1% of total company GP to ensure teamwork while the manager get's a healthy bump based on total gross revenue tiered by GPM.

It sounds more complicated than it really is, what it does very well is train the guys to focus on the metrics that matter while rewarding for success. A service writer should make between 47,500 and 55,000 while the manager should make about 70,000. This plan puts our expense above the much talked about 8% but my goal is to have quality people in place that allows the business to operate well in my absence.

I think where you are in the country can make all the difference and every shop is different. I'll be glad to spend extra time with whomever if you would like further descriptions.

Here is some good information for research: http://www.businessnewsdaily.com/6780-best-business-phone-systems.html

Unanswered calls because all lines are in use? Do you have voicemail in a central point?

My research showed VOIP phone systems are totally unreliable in service (lots of latency). The cell phone idea scares me, $250 per month for 3 lines sounds reasonable and definitely don't give up the old phone number.

The major trade publications for two years now have been warning us that our industry (independent repair) is ripe for consolidation, they just didn't say how. Think of the local hardware store from 30 years ago, the family doctor or the local pharmacy from 15 years, all gone due to consolidation. I'm afraid that our industry will be consolidated to the AAA, Goodyear, Firestone etc. driven by consumer demand made possible by the internet.

As many of you have already stated, the real question is how do we change with...

I to am a Tech net shop and a little worried about parts quality.

My independent CARQUEST is now stocking BWD electrical components such as ignition parts, sensors, switches, etc.

I have an Oreilly parts house up the street from us and have used BWD in the past that we got from them and have had nothing but trouble with them.

Also the Wearever brake pads CQ is now selling have me a little worried also.

We do ALOT of brakes because 70% of my customers commute 40 miles or so to Denver daily from my rural town and its all down hill

Quality of parts is very important to a shop like mine and always has been.

We are not the cheapest shop in town because we use quality parts ( or used to ) and hire the best techs to get the job right the first time.

If a parts fail because of quality that gives us a black eye, even if it isn't out fault or even if its covered under warranty.

Customers want convenience, bringing their vehicles back to have the same problem fixed again isn't convenient not to mention what it does to shop flow and profitability.

Time will tell whether this whole Advanced deal comes back to bite me in the rear diff.

There are some advantages, like their new Nationwide warranty is now 3yr/36,000 mile. You have to pay an extra $83 a year to get it.

There labor claim program is quicker but now its more of a fight than before to get it approved.

Updates to come about this Advance Auto Parts adventure.

Mike, Have you brought these concerns to your Advance account manager? Reliability is a huge concern for us and we must have confidence in the parts we install, a failed repair may mean a lost customer and that is a price we can not afford.