Transmission Repair

I wrote this over a decade ago and it answered 4 important concepts about virtually every problem that could happen in a shop or to a shop. It's titled "CLARITY".

Periodically, every shop needs maintenance in multiple forms. Ours included... Air Compressor Spray Cabinet Parts Washer Recirculating Solvent Sinks Water/Oil Traps Evaporative Shop Coolers (Swamp Coolers) Office HVAC Filter Changes Parking Lot Stripes I got really tired of training new employees on how to perform these maintenance duties. Training usually involved employees watching me doing all the maintenance duties. I had been using YouTube to sell transmission work since YouTube came out in 2005 and it finally dawned on me. Why couldn't I use YouTube for maintenance duties? So over the course of a year, I made about a dozen short videos on how to perform the various maintenance duties require around the shop. Suddenly, teaching new employees how to do maintenance became so easy. I'd assign them a chore to do and pull up the video for that task. Since I've retired, I deleted most of those videos but I did manage to find one on servicing our air compressor. I hope this gives other shop owners ideas to do the same. Here's the video... 1:44 Servicing The Shop Air Compressor 1:44 Cheers, Larry [email protected]

Here's multiple short videos on hiring techs from ActAutoStaffing.com Auto Jobs, Shop Jobs, Employment, Auto Jobs, Mechanic Jobs | ACTAUTOSTAFFING.COM Cheers, Larry [email protected]

Well put Joe. Some accounting software places the labor under expenses, including office payroll. I need to make it clear the office payroll and technicians' payroll are in two different categories. Technician's payroll is a Cost Of Goods Sold (COGS) account and any office payroll is under an expense account. Another is the owner's pay. If he/she works predominantly in the shop repairing vehicles, their payroll is a COGS account. If he/she works mostly in the office, then their payroll is an expense account. In either scenario, the shop owner's pay should be commensurate with what a normal employee would be paid for the same job. The owner's pay IS NOT the net shop profit. This was a hard concept for me to grasp early on. In the beginning, I thought my pay was what (if any) money was left over in the checkbook. Later, I began to think the net profit was my pay. Much later in my career did I finally learn the concept of my pay should be commensurate with what a normal employee would be paid for the same job. Throughout my career I was always learning more and more about accounting and that was a good thing. Cheers, Larry [email protected]

This article is 7 months old but nonetheless important. For those of you who use QuickBooks, now Mailchimp is part of QB. You can use the Mailchimp software and send Emails to groups of customers. Here's the article from the September 2021 issue of Fortune magazine. https://fortune.com/2021/09/13/intuit-to-acquire-mailchimp-in-12-billion-deal/ Cheers, Larry [email protected]

Like Joe said, that's not even relevant. We were (I'm retired since 60, 7 years ago) a transmission specialty repair shop in the greater Salt Lake Market area of Utah. 2015 was the last year I was in business. We based both parts markup and labor profit to obtain a 60% gross profit margin and a 20% net profit before taxes. We charged by the job, not by the hour, however, when calculating the job price for a routine repair we used $125/hr. and that was 7 years ago! Because of inflation, everybody expects things to cost more. Right now is an IDEAL TIME to recalculate your prices. If you've read any of my previous posts, you'll know that on the rare occasion somebody asks how much we charge per hour, I always say, "We charge by the job, not by the hour." That worked 100% of the time. Take your COST of parts and labor for any give period, the longer the period the more accurate your calculations will be. Divide that figure by .4 (inverse of 60% gross profit) to arrive at what you should be charging overall. You can break it down from there. Continue to monitor and adjust your prices until you reach a 60% gross profit. Let's say your parts and labor costs you $100K in a given period. (month) Divide that by .4 (40% costs) and that is what you should be SELLING parts and labor for. EXAMPLE: $100,000 costs divided by .40 (40%) = $250,000 revenue or $150,000 (60%) gross profit margin. That sounds like an awful lot, but isn't really. All your expenses including rent, taxes, insurance, tools, equipment, and etc. all come out of that $150K, so it's really not that much. Others may have an alternative method to calculate your prices, but that's the one I use in the transmission business. Many business accounting software packages like QuickBooks and others can help you monitor individual accounts for profitability. Separate accounts may be higher or lower than the 60% gross profit number but just remember what you really need to track is the OVERALL profitably of your shop target of 60% gross profit. Cheers, Larry [email protected]

Covering The Cost Of Marketing After quite a few years in business I learned the inverse of the rule that a business's price should cover all costs. Early on, whenever I considered something new, or something that would make my job easier, or improve business, I would often think "I can't afford that." After a number of years in business, I slowly learned I could afford any of those things as long as I raised my pricing structure to cover those new costs to doing business. I soon learned very few people were giving me price objections when closing sales at a newer, higher price. I felt good about my prices because I knew they were rightfully justified and not some willy-nilly price increase. This was especially true when considering any new technology for your shop. What once was considered as a luxury item is now very essential. Shop Management Systems, Digital Inspection, and Text Messaging soon became our industry's norm. Soon, I proved to myself that SEM (paid Search Engine Marketing) coupled with call tracking was just as essential. SEM is sometimes referred to as Pay-Per-Click (PPP). Here's a little history... Our annual sales at our transmission shop had plateaued at $700K before SEM and call tracking. Cautiously, we dipped our toe into SEM at first. Later, we tried call tracking with only 10 phone numbers. Combined, we were spending about $1K/mo. and we saw an $8K/mo. increase in business. To make a long story short, I came to learn the more I spent, the more our sales grew. Eventually, we were spending a combined $5K/mo. on SEM and call tracking with 100 phone numbers. I have to explain why so many phone numbers. Ninety-two of those numbers were in a "phone pool" with a 10-day cookie attached. Whenever somebody did a search for anything transmission-related, they would have one of those numbers attached and display on our website. Each different search would get a different number out of the phone pool shown on our website. It would take too long to explain the technology but let it suffice to say that the call tracking company handled it all with a couple of lines of JavaScript added to our home webpage. After 10 days, the cooking would expire and go back into the Phone Pool to be used for another search. The rest was all done behind the scenes on their servers. It seemed to me, the more I spent, the more sales went up. I leveled out at $5K/mo. only because of the limited size of our Salt Lake City area market. We appeared on every search and the very top listing on most searches, if we weren't at #2. I learned there were only about 1,300 transmission-related searches per week. I couldn't pay any more simply because there weren't any more clicks to be had. In the course of a year, our sales went up from $700K/yr. to $1.2M/yr. which is a $500K increase for less than a $60K/yr. investment. During this year of learning and growing, I slowly raised our prices to cover the new increased cost of doing business. In my mind, I wasn't paying for it out of my pocket, my customers were paying for it. It worked out to cost 12% of the $500K/yr. increase in business or 5% of the $1.2M/yr. in total sales. I ended up raising our overall parts & labor prices about 8%. Nobody even flinched, let alone complained. I think this sort of mindset when considering any new technology should be the norm. I don't know of a shop that doesn't try to cover its' cost of doing business. Just consider raising your prices to cover any new tool, equipment, or technology. In my next post, I'll talk more about SEM and call tracking.

My biggest piece of advice is to own your own shop and real estate, along with your home. That will come back to you in spades. That's the situation we were/are in. Like I've said before, we have no monthly payments to speak of. Property tax, insurance, groceries, utilities and a little gas is all we have monthly. We paid off and cancelled our credit cards because we don't need them. My wife calculated that if we made ZERO on our investments, we could still afford our lifestyle till our mid 80s. We're in some investments that will never lose the principle. That's good enough for me.

When I worked for Aamco, they had a similar lead sheet. However, one of the owner's complaints were how the store manager was judge and jury of what constituted a lost lead. The manager would often classify lost leads as a telemarketing call. Very few, if any, lost leads. I think every shop should use call tracking. I could enumerate all the benefits and features, but that would take too long to do it justice. Check out the call tracking company I used. They'll give you a 30-day free trial with 10 phone numbers. https://www.convirza.com/ Some of the things they can do are: Record and score caller and respondent. Tell you the lead source. Tell you both the raw search term and keyword source of the call. How many calls. Custom-tailor it to your needs. I had the scoring where the AI engine had to hear the word "appointment" at least 3 times on our end to have a decent score. At one time, I had over 100 phone numbers in a "phone pool" because we had so many calls. 300 to over 500 phone calls a month were not unusual. We kept a spreadsheet on it only for a couple of years until I had proven to myself our system was off the charts. We were using paid ads on Google, Bing, & Yahoo to the tune of $50K/yr. (4.2% of gross revenue.) You can check it out here and ask any question here, or Email me at [email protected] Phone Calls vs. Sales 2011 & 2012

Yeah, Joe, we had different profit levels on different parts, labors, and whole jobs. What I learned to pay attention to was the overall gross profit of the business. It was very easy for me due to learning accounting through an early SMS I invested in named Digitree out of Colorado. They were eventually bought out by Mitchell and Mitchell quit supporting the repair shop version and only supported the body shop version. Later, I eventually went to a transmission shop-only software program called TransShop 1-2-3 by Larry Kuperman. (now retired) He stole the idea from Lotus 1-2-3. I learned a lot of easy management tricks through DigitTree. At the end of the week report, I would also print (remember dot-matrix printers?) out checks for that week's sales tax and 941 tax. At the end of the month, I would pay my 941 with 4 checks. We paid sales tax quarterly and I would pay that with 12-13 checks. That kept our bank balance from looking overly inflated giving me a false sense of security. Even worse, I wouldn't spend the money on something non-essential. It simply blows me away at the number of small business owners who don't know accounting. Reminds me of a young rebuilder I hired (early 30s) who had been building transmissions for about 10 years. Depending on the year model of a certain transmission, the steel plates and friction plates were of different thicknesses. I told him to measure the old ones to know which ones to use. I then learned he couldn't read a mic. I asked him how he could go so long not being able to read a mic. He said his old boss had a digital read-out mike, dial calipers, and a dial indicator. He had never learned to read a mic the old fashion, but standard, way. That young builder reminded me of small business owners who don't know accounting nor do any in-house accounting. Many have an accountant for all of that and the P&L and balance sheets they get from their accountant are basically an obituary as to their financial picture. They are often a month, a quarter, or heaven forbid, a year old. There are plenty of ways to learn accounting. Online, books, and even YouTube can all teach standard accounting principles and practices. It's not that hard and definitely not rocket science. Even the numbering of groups of accounts is standardized. For our members who don't, I would strongly suggest bringing all accounting in-house and only using an accountant, or CPA like we did, only annually.

We've never had anybody who answers the phone not have the proper telephone procedures and training. The sole purpose of the phone is to set an appointment. It's not to be used for pricing or diagnosing. No, we didn't track lost sales per se. The only way we tracked phone performance effectiveness was we used call tracking software that would score callers on the likelihood of being open to setting an appointment by the words used by the caller. It would also score how we did on our end as well. Those score reports were as close as we got to tracking lost sales (appointments). Due to the nature of our business (transmissions) when customers said "no" to a repair or rebuild in our shop, they would find another way to fix their problem. Usually some other shop, sometimes a used unit. "Saving" a lost job is virtually not possible. A few would abandon their vehicles. (dead jobs in the back parking lot)

I'm sorry... I just caught these questions 10 months later. 😞 Rent was 8.9% of my gross sales. Advertising was predominantly online PPC with Google and Microsoft advertising @ 4.2% of sales. The buyer was terrible at business. I sold him the shop with the previously doing $1.2M/yr. for the 3 previous years prior to the sale. Starting almost immediately after purchase, sales began to fall. The 5th year of his ownership, sales were down to $400K/yr. making his rent 33% of sales. It wasn't sustainable. I hope these answers help. J. Larry Bloodworth

I, myself, was much more sensitive to price objections when I was younger. As I grew older, I became less sensitive. I also noticed that the few people that would try to pick our price apart would only zero in on items they had a frame of reference for like ATF, gear lube, motor oil (for sticks that took it) and other such things. Early on, I started pricing those items competitively with the auto parts stores and hid the real markup in other items or labor. People simply didn't have a frame of reference for items like torque converters, rebuild kits, bushings, etc. What I REALLY WOULD LOOK AT is the P&L to see if we really had at least a 60% gross profit margin. I was lucky having QuickBooks where I could print out a current P&L with a couple of mouse clicks. If we were off target for any given month, I would adjust pricing. Having a wife as an accountant and using QB as our shop management and accounting software spoiled me. 🙂

I've never heard it quite that way, but I believe you are right. My dad used to tell me terrible depression-era stories. He was even into long-term food storage for fear of going hungry.

I agree with that. We used YouTube videos of 2-3 minutes to show people what's up. After I Email or text them the final bid, over half would either text or Email me back the "When" question which opened up for the assumptive sale. I didn't sell that way on small-ticket repairs. I think most people feel the "how much" and "when" questions are all they need to know. In the '90s and early 2000s, we were in a different market area where there was a lot of nitpicking the final estimate/invoice. I can't help but think that a lot of that was attributed to there not being any YouTube around, but also because it was a low income area. Location selection is very important, which I didn't realize until I was in my 50s.

Being in the transmission business, virtually all of our business is a transactional business, rarely repeat business unless it's a warranty claim. I was rarely asked about our individual prices. People would only look at the bottom line, with tax. When we raised our labor prices, nobody knew or asked about it.

I did mental gymnastics for 7 months before I finally pulled the trigger to sell. The biggest part for me was the old adage, "Live rich, retire poor." Knowing I was going to retire on a fixed income was the scariest part for me. Luckily my wife, who is an accountant by trade, kept impeccable books. When you show your books (cash flow) to a prospective buyer, don't forget the "add backs". Those are expenses that would not be there if you weren't there. Those numbers flow directly down to the bottom line of cash flow. For example... Your income (including "hidden" but verifiable income) Any vehicle expenses Insurances and any other things you can think of. My add backs added slightly over $200K/yr. to the cash flow that my bottom line that I didn't previously show. A great thing to remember when selling your business. Another thing, to get an idea of what businesses like yours is going for, go to https://www.bizbuysell.com/ and take a look. Prices are all over the map because those are asking prices. In my case, the average Aamco franchise asking price was about $100K. I felt very lucky getting $330K for my business. Stay well, stay safe. Larry 🙂

I agree with you Joe. However some younger, less experienced shop owners think that way. I know I did. I used to be ignorant to job costing. What you speak of is really a mindset. Due to the way our transmission shop sold work, less than 5% would have a price objection. It's sort of a different business world when it comes to transmission repair. Before I learned about job costing and profitability, I sold all transmissions for the same price, $387.05, in the late 70s and early 80s because that's what my ex-boss did. When I started doing job costing, there were some transmissions that I was actually LOOSING MONEY on. Slowly, I started charging labor plus parts based on my costs, then a whole new world opened up to me. Imagine that; by simply doing what G/R shops have been doing forever, I finally started turning a profit. I was young and ignorant about business before that. Just today I read a news story about Amazon charging their sellers an additional inflation & fuel surcharge of 5% to the already high 15% commission on sales. That means Amazon charges sellers 20% of their gross revenue. Amazon's New 5% Surcharge I'm sure sellers' prices will soon reflect the price increase, it's inevitable. In my industry, late model transmission prices have gone through the roof. But when coupled with the 30% rise in used car prices, many are simply being forced into paying $4k-$5K and more for a transmission because that's the least costly of all alternatives. I think we should all revisit our pricing structure before inflation and fuel costs pushes us out of business.

This is a 2-part article out of GEARS Magazine, a transmission trade publication from June 2015. It's written by a retired multi-transmission shop owner by the name of Thom Tschetter. He still writes for the magazine. He used to own 10 transmission shops in the greater Seattle area before he retired. I think it's sound advice. The title for the article is When Enough Is Enough. The article revolves around 3 crucial questions regarding retirement... Have I had enough? Do I have enough? Will I have enough to do? Here are links to the article: When Enough Is Enough; part 1 When Enough Is Enough; part 2

Thank you. After 30 years of service, my dad retired as vice-president of the 3rd largest steel company in the U.S. back in the 1980s. He was wholly dependent of his company pension and S.S. for retirement. The pension fund ran out of money in the 1990s, went bankrupt, and a pension fund insurance policy took over. The sad part was when he got a letter from the insurance company stating they were now going to fund his monthly pension payment. Sounded good at first, till he received another letter telling him his pension payments were going to get cut by 50%. OUCH! That took place when the whole country was in the process of dumping pension plans because they simply aren't sustainable. It's a pyramid/Ponzi scheme that eventually fails. Nowadays, we have to make our own retirement. I'm retired, and the best advice I can give any shop owner is they need to buy the shop real estate. Shop owners won't make enough on the sale of their business to fully retire, but they will with the sale of the shop real estate. That's what I did.

As Larry Kudlow says, "The cavalry is coming." talking about the November elections. I'm an open minded voter who votes for the best person for the job. However, somehow, I end up voting Republican 90% of the time. Here's the GOOD NEWS... There are currently 31 House Democrats who are not going to run for office come the mid-term elections in November. Most are retiring, but not all. I think that will be a lot better for our country. Give a 30-second listen to this: Biden’s sinking popularity points to GOP sweep in fall I find it odd how we can elect a new president (Trump's full of it, the vote wasn't "stolen") to office and everything go to hell in a handbasket so quickly and affect our industry so much. I still stay in close contact with a couple of local transmission shops and they both tell me business is down. The two shops and myself are in the Salt Lake City market area.

Joe, I fully agree with you. However, how a shop charges for those items is up to the discretion of the owner or manager. I, personally, never have line items that aren't either parts and labor because I don't like explaining "extra charges". I chose to charge for those things by factoring it into the labor we charge. As I've posted before, we charge by the job, not by the hour. 90%+ of our jobs are repetitive canned jobs. However, when calculating the labor on a new type of transmission or one we don't have canned yet, we use $125/hr. to calculate the price of the job. We went to $125/hr. "behind the scenes", so to speak. On the rare occasion somebody would ask our hourly shop labor rate, I would respond with "We don't charge by the hour, we charge by the job." You have to remember I sold our business in 2015 and I set that labor rate way back in 2013, 9 years ago at the time of this writing. At the time, I knew we were the highest in our market area for hourly labor charges, but virtually nobody knew it. Think about it, no consumer knows the price of any transmission work. You can't price transmission parts at Auto Zone, only complete units. Nobody walks in with their own parts or rebuild kit. I feel our situation was rather unique in comparison to the majority of the industry. We intentionally located in a very affluent area of the Salt Lake Valley where there were virtually no price objections. I doubt that most shops could do what we did.

Jim, Because we are a transmission-only repair shop 90% of our work is repetitive... very repetitive. There's even stuff that I can almost predict to break. Like Joe says, I factor stuff that breaks and shop supplies into every canned job; even Brakleen (we use hexane). Occasionally, we see a new transmission or one we don't have a lot of experience on and the standard factoring is automatically factored in. I pride myself on my estimates being dead-on accurate. That's mainly because we don't give written estimates until an RDI. (Remove, Disassemble, & Inspect) If we find something after the estimate, we eat it. Once we have the transmission out and apart, it's really hard to miss something. Actually, in our shop, the word "Estimate" is a misnomer.

How often have you been met with the sales objection of "I'll just buy another car?" when trying to close a big ticket repair? Being a transmission-only repair shop, we heard this sales objection quite often. It used to be anyone could buy a fairly decent used vehicle for $5K-$10K and never look back. Everything automotive-related costs a lot more now. Used vehicles, new vehicles, and yes... transmission repair. Today, it's not uncommon for a transmission to run $5K or more. 5, 6, 7, 8, 9, & 10 speed transmissions are what modern vehicles are equipped with. The average price for a good used vehicle today is $20K or more. According to JD Power, used vehicle prices have increased in price more than new vehicles, or more, as illustrated in the chart below. This chart shows the AVERAGE change in selling price of both new and used vehicles. My wife and I purchased a brand new fully loaded RAV4 Hybrid last year. We paid slightly over $50K. A few years ago, that same vehicle was only $40K. Whether new or used, people are faced with sticker shock when they go actively looking for another vehicle. When any shop is faced with the sales objection of "I'll just buy another car.", we need to bring our customer into the modern real world reality that the sales tax alone on another vehicle is often just as much or higher than the price of the big-ticket repair we're trying close on. 1:35 https://youtu.be/3vlFp-3wGzE

As I've posted before, it's my belief is that the sale of an automotive business isn't enough to fully retire long-term. However, I just watched a documentary put out by Detroit Public Television titled When I'm 65 that is a good retirement history lesson as well as good information for Millennials and Gen X'ers. Its content is a little too late for baby boomers. If I had to give one piece of advice to a younger shop owner (I'm currently 67) it would be to buy your shop's real estate. If it's a good location with ample traffic count, the later sale of your shop could fully fund your retirement as it did me. With that being said, here's the link to the retirement documentary, When I'm 65.