Transmission Repair

A recent article in Ratchet & Wrench magazine said, "Flat rate puts the burden on the employee and hourly puts the burden on the shop."  In the transmission business, I agree.  I don't know of a shop whose main source of revenue is automatic transmission repair that pays their technicians by the flat rate system although many general repair shops and dealerships do.
To me, if the front and back office are doing their jobs properly, including, 

• marketing
• advertising 
• selling

And by treating their customers right by giving them a pleasing experience, there should be plenty of jobs to perform.  Sadly, shops like that are in the minority.  I only discovered this truth in the last 7 years I was in business because I came from a technical background, not business. In most shops, the technicians fully expect slow times.  It wasn't true in our shop once I harnessed the power of the internet.  Although we had our first website in 1997, we didn't start using it properly until ten years later when I started spending more of my time in the back office.

I came to learn that no matter what the pay plan was, it was the office's responsibility to keep the shop busy and full of work.  That bears repeating, it is the office's responsibility to keep the shop busy and full of work.  I think the best techs like to stay busy by nature.  At least that has been my experience.  Techs that were slackers didn't stay around long or if they did, they soon got with the program from peer pressure from the other techs.

I don't care what compensation plan a shop offers, if the techs can't pay their bills with some leftover, they won't be around long.  Whether what's left over after paying bills goes to savings, entertainment, or whatever, that's their choice.  The key phrase I would often use is "a comfortable living."  Some techs struggle to buy tools as reported in this article.

Conversely, I believe most shops have their techs suffer the burden of ineffective marketing, advertising, and sales that lead to slow times.  To me, from a tech's perspective, this isn't right.  It's management's equivalent of a recheck or comeback.  Why should the tech be penalized for it being slow?  This is why we always paid by the hour and it worked well for us.  It placed the burden of keeping everyone busy on me, and not penalizing the techs if I didn't keep them busy.  Any compensation package is perfect as long as the tech makes "a comfortable living."  If you want to know what most technicians think, read this WrenchWay industry survey.

My solution for others is to either learn how to use the internet effectively or hire someone who can.  That was my solution to the perfect pay plan.
 

I found this article in Ratchet & Wrench magazine and it made me think a little differently. 

1 minute ago, newport5 said:

that sounds like a "good" experience. I don't see it as amazing. Bad communication makes for a bad experience. I think good communication makes for a good experience, but not amazing.

My YouTube channel made most repairs amazing.  That's because we had over 2,200 customer videos of their transmission.  In each 3-4 minute video I would explain 3 important things, 1. What failed.  2. What we are going to do to fix it.  3. What we are going to do to keep the failure from happening again.  I would then follow up with either a text or Email of a .pdf of the final invoice, including tax.  If we found anything extra after that, we would just eat it.  Part of an amazing experience is not surprises.

I define an amazing experience by great communication.  The more I communicate with the customer, the better.  The mode of communication doesn't matter.  It can be through direct fact-to-face communication, a phone call, text, Email, or a video.  Keep the customer informed and make sure you understand his needs.  People are prone to go with what they know.  Make sure you read all of Joe's blog on customer retention.

2 hours ago, Joe Marconi said:

Yes, the transmission business, a lot like the collision business, it much different from the general repair model. However, I still believe that step # 3 can create song birds, if the overall customer experience was amazing.  It's all about how the customer "feels" when they leave. 

Once again, you're right.  We received about 20% of our business from referrals.  We received multiple comments on our website and YouTube channel because they were full of good information.  I had a customer that actually wanted to watch his transmission getting rebuilt.  He sent us multiple referrals.

Below is a local investigative reporter, Bill Gephart, who works for a one of the local TV stations.  (3:04)

https://youtu.be/Loo6V7Nln-o

I agree with points #1 & #2.  However, unlike #3 repeat transmission business is very difficult to predict, unless it's an annual service.  Repeat business in the transmission business is usually either a warranty job as in leaks, a malfunction, or a very unlucky person with multiple vehicles.  But that's just me.  It's very different from the general auto repair business.  In a nutshell, while I do try to make all customers feel good about the repair and communicate effectively, it's more of a transactional business model than a relationship business model because I rarely see the customer again.

I can easily imagine how critical customer retention is in general auto repair, and I agree.  Our business is usually (as we call it) "won & done."

I agree with you, Joe.  I like the Warren Buffet quote, “The best investment you can make is in yourself.”  I think the quote not only covers shop owners, but it really covers anybody who believes in continual education.  During the first half of my career, I would attend technical training events.  The second half of my career, all my training was sales, management, and marketing training.

I feel I made the transition from a working boss to a real business person only when I started attending non-technical training.  I believe non-technical training is crucial for a business owner.  Think about this:  For every given market area, there are shops that stay packed with work and there's also shops starving to death.  Not coincidentally, there are shops that are the highest in town and shops that are the cheapest in town.  The dichotomy of these two extremes can be found in EVERY market area.  Based on my experience, the busiest shops also tend to be the highest in price, while the shops starving to death are normally the cheapest.  Which type of shop do you want to be like?

If you want to be the shop that's always loaded with work, you can't get there from here without investing in sales, management, and marketing training.  Great business people and leaders aren't born, they're made with training.  Proper training can help solve a multitude of challenges a shop may be going through.  Take staffing for example.  What top tech wants to go to work for a cheap shop that's starving itself to death?  By the same token, how can a shop afford a compensation package that attracts, hires, and retains top talent?  I firmly believe that a shop can attract, hire, and retain top talent only by being the very highest priced shop in their area.  I don't mean being equal to the highest-priced shop, I mean BEING the sole high-priced leader.

A lot of problems can be absorbed by having substantial revenue.  Like providing a free rental car during a warranty repair.  Or giving a customer all their money back if they are impossible to appease.  And the list goes on.  When it comes to running the shop, a shop owner can't afford to be a great leader with insufficient revenue.  Anybody can be a boss, but not everybody can be a great leader.

Every Tuesday at noon, we had our weekly shop meeting which included lunch on the company's dime.   Some weeks there were hour-long webcasts, while other weeks might have us all recapping a job that kicked our tail the week before.  Some weeks it was a pure gripe and bitch session.  But I always listened.

It's my belief that if a shop owner and/or the powers that be are truly engaged and approachable, it helps the shop run much smoother.  I would like to believe I was very approachable because I heard any and every voice of discontent or friction.  Sometimes, my crew would come up with some really cool ideas, too.  If a shop owner is disconnected from their crew, that sets up a situation of high turnover.  Really listening to my crew promoted higher quality of work and much less turnover.

Great words of wisdom.

Independent repair shops don't have the luxury of having multiple profit centers subsidize shop overhead that new car dealers do.  Here are just 4 other profit streams that have nothing to do with repair or maintenance:

• New car sales
• Used car sales
• Paint & Body shop
• Detailing

To me, it's simply bad business to be cheaper than the dealer.  We had 13 car dealerships about a mile away from our shop. Southtowne Auto Mall   We were either the same price, or higher for transmission repair, but we gave a longer warranty which added value.  If we were less than the dealer, we could never remain profitable.  I think about it this way: We weren't higher than the dealer; but instead, the dealer was cheaper than us for the reasons above.

We ended up towing a lot of vehicles out of the dealerships along with customers dropping the vehicle off for repair.  The numerous new car dealerships near us were the source of a lot of the work we did.  Don't be afraid of dealerships; embrace them because they are a great source of new jobs coming into the shop.

Lastly, here's the Southtowne Auto Mall's "claim to fame" they would advertise...

1 hour ago, Joe Marconi said:

Yes, bad apples don't remove themselves. And they infect others. 

A while back, I posted a letter I wrote to a bad apple we once had.  About 3 weeks after giving him the letter, I had to let him go because I saw no improvement.  One of the best things I ever did.

Here's a good example of a shop owner biting their tongue.  The most exasperated I ever got with an employee was when my tech forgot he was driving a stick shift into one of our bays.  "How can somebody forget that?" you may ask.  The really bad part was the customer was about to go to a family reunion and this was the only vehicle they had access to with a 5th wheel setup in the bed of the truck.

Assuming it was an automatic transmission vehicle, my tech merely depressed the brake to stop forward movement.  This was a 3/4-ton Dodge Ram diesel...not a chance.  The clutch tore right through the brake holding power and kept going forward.  It was only after the vehicle almost knocked another car off the lift did the tech think, "Oh, shit, this isn't an automatic" and depressed the clutch pedal.  Heck of a time to suddenly realize you have a clutch pedal.  They say a picture is worth a thousand words... here's a video worth a million words.

The customer missed the family reunion and goes, "I don't like hanging around those people anyway."

https://youtu.be/uavCR9f5QME

23 hours ago, TheTrustedMechanic said:

I agree with you, in too many markets it is very hard for a shop to specialize.  In fact, in my town there are no strictly transmission shops anymore.  The only one that even advertises "transmissions" is a general repair shop that started off as a transmission only shop and then had to expand their services.  We have 3 "import specialty" shops and only one is truly import only with another having a very high percentage being "European" imports and the 3rd is now pretty much a G/R shop.  In Northern Michigan Subarus are a big deal and there is a Subaru only shop but as for single make or "sister" makes like Honda/Acura, Toyota/Lexus, etc. there are none.  All others are G/R shops because that is all the local market will support.

 

Even when the customer goes to the dealer sometimes that level of specialization isn't enough to solve their problem.  Sometimes "Most Car Makes, Most Car Models" comes in handy too.  I had a Lexus RX come in for a "lack of power" complaint.  They had taken it to two different independent repair shops and "the dealer" (I think it was actually a Toyota dealer) and no one could figure it out.  It would sometimes bog down and have no power taking off and when you were coming to a stop it would sometimes act like the brakes went out.  Those were the customer's explanations.  I think most experienced techs will have a very good idea of the root problem. I am a one man shop and I shuttled the customer and her attendant to a nearby coffee shop in the customer vehicle.  I pretty much knew the cause before we got to the coffee shop.  This was a Lexus but most of the "Most Car Makes, Most Car Models" shops have encountered the GM trucks and their false ABS activation issues.  A review of the WSS signals just like with the GM trucks proved that one of the front WSSs was slow to start a signal and early to drop to zero thus confirming the lack of power was traction control and the "brakes go out" feeling was the ABS activating.  Why the dealer didn't figure it out is beyond me,  but I had the entire diagnosis completed with two test drives and a brief inspection on the hoist.  The customer thought I was a genius because I figured out what 3 other shops could not.  All because I am a "Most Car Makes, Most Car Models" shop.

But you are 100% correct that as a "Most Car Makes, Most Car Models" shop, I am often not as productive as I could be if I dealt with just a few highly repetitive jobs.  But that is the state of the local economy, too few opportunities to specialize and survive.

Specializing depends wholy on your market and business location.  We were a transmission-only shop.  Big Ticket City.  However, our location enabled that thinking.  We were down the road (1.5 miles) from a huge 12-new car dealership group Auto Mall.

No matter the brand, people would go into the dealership only to hear from a dipshit service writer a return call that they needed a transmission for $XXX,X.00.  The car still drives and all 4 wheels are on the ground. The service writer hears "let me think about it" or "let me talk to my husband" or some variation thereof... and the customer starts to call around.  We're the closest transmission shop around, so they call us next.  The rest is history.

We've paid thousands, over the years, to our towing company to tow vehicles out of new car dealerships near us.  Bottom line: service advisors can't sell big tickets.  End of report.

2 hours ago, Joe Marconi said:

Do you think the reason for high productivity and beating the labor time is due to becoming very proficient in a particular area and skill set? As in your business model?

In the "Most Car Makes, Most Car Models" world that I operated in, over the years it became more challenging to beat the time. For example:  A tech's first car for the day is a Check Engine light problem on a Buick, then an ABS issue on a Lexus, and then a climate control problem on a Volvo.  To be proficient in this environment is challenging, at best. 

Thoughts, comments? 

There are multiple reasons for the seemingly high productivity.  We would do the same repairs day in and day out.  A technician can't help to get more proficient over time.  Unlike G/R, we didn't do very many 1-off repairs.  I trained my counterperson or manager to spot difficult jobs and 1-off repairs.  It was a collective mindset of everybody in the front office.  The most 1-off repairs we would get were the HD/High-Performance jobs in a chipped vehicle.  Some novice would chip their truck/car and the first thing it affects is the transmission because it can't handle the extra power.  Those types of jobs took much more time and had a high probability of us seeing the vehicle again under our warranty.  I would increase billed hours by 2 or 3 times to cover the extra time and risk involved.

A "nearby competitor" on jobs like those was ATS in Colorado.  They sold a lot of units that would occasionally come into our shop.  Their prices didn't include installation or fluid.  Check out this unit for a Dodge Ram diesel:   ATS 68RFE Diesel 

Another, but less apparent reason was our production contest.  We had a shop meeting during the lunch hour every Tuesday where we supply lunch.  During that time, I would write hourly labor totals on the whiteboard for each employee.  Although they were paid by the clock hour, we kept a total of billed hours for each employee.  There was no "prize" for winning other than the prestige the winner would enjoy for the week.

Lastly, we had a very well-equipped shop.  The three high-performance pieces of shop equipment we had were 1. Nustar car pusher.  2. Ten FWD car dollies.  3. Ten FWD engine hangers.  Other small things increase productivity, but their impact was too small to mention.

I have to add about our labor times.  In a transmission shop environment, it was really unusual for somebody not to beat the billed hours time.  That goes for both the build time and the R&R time.

As an example, if a technician works 40 clock hours, the billed hours usually ran somewhere in the range of between 50 to 60 hours.  That's between 120% and 150% efficiency.  Technician efficiency was not something I worried about and rarely checked.  New recruits were the only technicians who couldn't do better than billed hours.

The biggest problem I encountered with technicians was attitude-related.  One bad apple can turn into a cancer.  That happened to me once with two new hires.  Perhaps I'll post the letter I wrote to one of them sometime.

You're right, 60% gross profit is what we're after, and 20% net profit.  We didn't have a problem paying taxes because we included it in our overhead expenses to keep from spending it on something else.  Nothing produces stress like unknowingly spending tax money on something else.  We were $125/hr. on labor (2015, highest in our market area of SLC, UT) and 100% markup on transmission-related parts.  Very few general repair parts could we do 100% markup.

Lucky for me, my wife is an accountant and business partner.  One year she "rat-holed" $125K unbeknownst to me.  Another year, the state of Utah put us on monthly (not quarterly) sales tax payments because we went over the $15K quarterly threshold limit.  We were experiencing explosive growth at the time.  We were a very small (3K sq.ft.) shop with only 4 lifts, but we produced the most work of any transmission shop around. ($1.2M/yr.)  This was mainly due to the fact we didn't do general repair like the other transmission shops did.  We stuck to the big ticket repairs like transmissions, transfer cases, and differentials.  Minor work to us was transmission service jobs and most leaks.  The other variable was the high traffic count of our location.  We were right on I-15 with a daily traffic count of 235K/day.  Our front property line was only 90 feet from I-15.

We didn't have a big problem with production and efficiency mainly because I was a tool and equipment junkie.  One year I bought a valve reaming station for valve bodies.  Everybody was concerned it would slow down shop production.  Some really griped and complained loudly because it was a lot of extra work and didn't understand why I wouldn't buy valve bodies.  Three months later, everybody had warmed up to the idea.  Yet nobody complained when we installed an overhead ATF reel with a 50-foot hose or started buying ATF by the 330-gallon plastic totes.

I paid everybody hourly so that they would have a steady income they could depend on.  Everybody liked it that way, especially the employee's wives.  (Happy wife, happy life.)  I've since retired but occasionally miss the shop.  I thought I'd never make enough to fully retire.  Speaking of retirement, I'm like Joe in that I never made enough to retire with the sale of just the business ($330K).  I only semi-retired.  It was only after the sale of the shop's real estate ($2.3M) did I make enough to fully retire on.  I first learned this from Joe and he's absolutely correct, at least that's my experience.

I find it amazing that nobody specifically mentions a P&L statement.  For our shop, we would look at the Profit & Loss statement to not only know our profit margin but to also calculate labor charges and markup on parts.  We are a transmission shop that has only 4 numbers to tell us if our labor & parts are priced correctly.  For us, it works like this...              20% of sales should be parts, 20% of sales should be labor, and 40% of sales should be overhead, leaving 20% of sales as profit.  If any one of those 4 numbers is off, we either need to adjust our pricing, look at the number of warranty claims, or shop efficiency/productivity.

Those 4 numbers tell me everything I need to know about our prices and profit margin.  To me, it's not as complex as some shop owners make it out to be.  If anything is below target, we adjust our prices accordingly, start looking at shop efficiency, or look for underpriced estimates.  It's only as hard as 4 numbers and being able to rationally diagnose problems that affect our numbers.  Just look at your P&L statement.

On 1/25/2023 at 5:01 AM, Joe Marconi said:

Great points!  The key thing is to dig deeper when issues with production arise. Experienced techs are efficient; they have control over that. However, writing the job correctly and other factors play into low production. As we have all learned, productivity and efficiency are not the same. 

Great article, Joe.  The biggest problem I see in lack of productivity is improperly written estimates.  Transmission estimates are very difficult to write.  The main reason for that is a lot of transmission shop owners and managers try to quote a price with the transmission still in the car/truck.  That's a guessing game at best.  Before we give an estimate we do a Removal, Disassembly and Inspection (RDI) on every transmission we gave an estimate for.  The fee we charged for that was $477 which we would waive if the customer approved the estimate.  We prided our estimates as being written stone.  (see below)

With the rising prices do the inflation it's sometimes difficult for shop owners and/or managers to ask a PROFITABLE price.  It sometimes it just simply takes courage.  That's what it takes for sufficient productivity/profit.  Under-bidding a job is the fastest way to lose productivity, and eventually, profitability.

Most shops I know don't have a problem with tools, shop layout, or a productive workflow.  I know my shop didn't.  My crew started referring to me as "a tool junkie".  Most good shops are that way.  We did sometimes have one or 2 comebacks, but that tended to happen in waves.  A labor guide is just that, a guide, and many times just flat-out wrong.

On 1/11/2023 at 11:09 AM, Juli Southard said:

We own the business and the land outright, we also just paid off our home 12/30/22!!  I'm hoping to have one or both (business & land) fund our retirement hopefully in the next 3 to 5 years.  We are currently in the process working with an amazing insurance agent/planner organizing our mess of current numerous policies into two better plans for my husband and myself.
When the eventual sale/lease of the business and/or property comes to fruition, is there somewhere to sock away what's left in it's entirety (after CA takes the tax) to just let it grow and live off the dividends?

I think what you plan to do as being an excellent idea, Juli.  Take a lesson from my experience... First, make sure the people you sell your business to doesn't go out of business.  That happened to us.  Secondly, have an early pay off penalty clause for the real estate.  The guy we sold the shop real estate to (different from who we sold the business to) paid off the mortgage totally off only 9 months in.  We ended up paying $400K to the IRS.  And... our $9,100/mo. payments for 30 years simply evaporated.

Our retirement plans went out with the shitter.  However, overall we came out OK even with the challenges.  Like you, our home and new car are  paid for and we have no debt.  We'll make due with what we have to work with.  Don't let my mistakes happen to you!!!

All great tips I never had until I met my wife, an accountant, as I've said before.  Prior to that, my bookkeeping and accounting was lame at best.  I just sort of "winged it."  Not a good business practice.  I was also guilty of skimming cash and underreporting income.  I did everything worse than wrong, what I was doing was illegal to say the least.  I was lucky and never had my personal income tax or sales tax returns audited.  I was the type of tax payer the Biden administration IRS would be looking for today.

From 2006-on, I was above board and I was a legal eagle.  Women, by nature, are security-seeking and she is above-board in all her dealings.  My wife used another lesser-known Intuit product to do only tax returns called ProSeries.  Boy was it expensive.  It was $2K EVERY year.  She just spread the cost over her 70 or so clients each year.  You can check it out here: https://proconnect.intuit.com/proseries/pricing/  The software can intake most popular bookkeeping's P&Ls and Balance Sheets and populates all the necessary IRS forms while leaving very little for the user to fill out.  It's almost automatic.

I sure wish I would have had Joe's advice when I was younger.  I only met with my bookkeeper (I didn't have an accountant or CPA) once a year, usually in April.  She would file an extension every time, but I still had to pay the taxes due by April 15th, which I usually didn't have.  I was a shop owner who could have been a poster child for HOW NOT TO DO YOUR BOOKS OR TAXES.  But that was back then.  Things are much better today especially since I've fully retired.  Neither one of us have a side job in retirement.  I feel very lucky to say that and I owe it in a huge part to Joe.  He said you'll never make enough on the sale of your business to retire; you'll only make enough to retire by selling the real estate your shop is in.  I tried to lease the building to the person I sold the business to, but it didn't work out.  Once I heard Joe's advice, I felt and did much better selling the real estate vs leasing it for $11K/mo.  Thanks Joe!

14 hours ago, Joe Marconi said:

Will the TV ads match up to your demographic profile? 

Are you using a call tracking phone number?  Call tracking is your measurement tool.

Here's the one we  used.

https://www.convirza.com/free-trial/

What a great topic, Joe.  I agreed with you when the first sentence in your topic-starter post said, “There are many things to consider when creating a marketing plan.”  My experience of creating a marketing plan didn’t come until later in my career, the last 8 years to be exact.  For the 32 years prior, my idea of marketing was having the nicest sign and the biggest Yellow Page ad I could afford.

I quickly learned I couldn’t afford to pay someone to build a website, let alone the SEO/SEM/keywords work.  During the last eight years of my career, I learned to build a website which included learning to write HTML and CSS3 code.  Marketing and the activities involved with it were a never-ending project.  Having a happy crew and great shop curb appeal was a given for me.  We already had that.  But to stick to the topic, what would be my advice for the first step in a marketing plan?

It would be to have a great website.  That’s key.  A shop’s digital presence is top of the list nowadays.  Everything digital should point to your website.  Oh, sure, I could add to that ad infinitum.  But I won’t.

Great tips, Joe!  I wish I had those tips when I was in business before I retired.  The one tip the I, as well as most shop owners struggle with is "Hire the best people and have enough staff."  Easier said than done.  I hooked up with 3 automotive technical colleges in our region with limited success.  They were 

I still had to train the students as if they were green off the street.  That part didn't bother me.  What bothered me was the unrealistic expectations the student had as far as production and salary expectations.  The students couldn't grasp what a major investment we were making in training them.  They weren't used to working alone and having production expectations put on them.  After many years, I went back to hiring out of the industry and paying above normal salaries/hourly pay to attract the best of the best.

Joe,

Great post, brother.  Here's what we think of even less.  That is before we retire, IF, the BIG IF, we are selling our shop to employees or anybody of the technical mindset, hook them up with a shop trainer.  If I had it to over, I would have paid a trainer's fees a couple of years in advance for my purchaser.  They had the money to buy the shop, but little more.  They were expecting an immediate return on investment because they didn't have any money to do otherwise.  Food for thought.

I did sales and management training shortly after retirement and in almost every shop, I got disappointment after disappointment.  The biggest disappointment was after the gig was over, the shop I was coaching went right back to doing the S.O.S. they were doing in the first place that got them in the jam to seek coaching.  All, but 1, is now out of business.  The one that's not out of business is only 3 miles from my house and stopping by to say HI! keeps them on track.  Thank goodness it doesn't cost me a hotel and airfare.  A profitable, well-run, and managed company rarely seeks consulting services.

I read somewhere that a shop owner thinking about retirement was going into coaching shops.  He's living in a dream world and his desire has no basis in reality.  If you think owning and running an automotive shop takes commitment, you don't know what commitment is until you coach other shops.  Personally, I couldn't do it.  I only lasted 6 months and I had enough.  I wasn't cut out for living out of a suitcase and dealing with hotels, airlines & airports on a weekly basis.  I'm too old for that. 🙂