Transmission Repair

Q: Are you making the income you need, deserve, and expect from your auto repair shop business? A: (Long Answer/Story) Yes. After 17 years, we moved from a poor location/income level in Lindon, Utah to a great location/income level in Draper, Utah when I was 53. (2008) I knew retirement was just around the corner and with intent & planning we became the highest-priced transmission shop in Utah. (even higher than the dealer) We had such a long warranty and great service; we didn't have a problem getting our price in such a high-rent area as Draper. https://www.draperutah.gov/276/Demographics Lorraine (wife) and I paid ourselves paychecks collectively $100K/yr. She's an accountant and reported every penny we took in. She was still able to draw money into a savings account that averaged $125K/yr. In 2013, we bought the property for the appraised value of $860K. In 2015, we weren't doing as well and only broke even that year. We then decided to sell the shop (asset sale only) to http://www.tannertransmissions.com/ which had 5 locations and we would be the 6th location. We sold only the assets of the business for $330K and charged $11K/mo. for the building lease on a 10-year lease. In the summer of 2020, my wife went by the shop and noticed there was no sign on the building. Long story made short; the last 3 years we had the shop we were averaging $1.2M-$1.3M/yr. In the 5 years Tanner had the shop, the revenues continually dropped to only $400K in their last 12 months. That made rent 33% of revenue and no shop could withstand that. Of course, near the end, we were having a hard time collecting a lease payment. By the time we found out he had closed and taken all the assets with him. He still owed us a little on the assets but the big debt is he broke a 10-year lease after only 5 years. We took him to court and have an $85K judgement against him we can't collect because the business entity he did business as has no assets/money. I put the building up for sale in 2020 and we still owed $320K on the $860K mortgage. The building had not grown in appraisal value during the 7 years we owned it, but I felt it was worth A LOT more. The more I looked, the more I found out there was absolutely NO REAL ESTATE for sale on Interstate 15 at all. That's including Salt Lake City and Draper. I did find some undeveloped land way-off the freeway that had a $2M-$3M/acre asking price. I then listed our $860K piece of property for $3.2M. (THINK TRUMP) I listed it on LoopNet.com and BizBuySell.com for that amount. I also had a sign made/installed to put on the building that didn't list the asking price. It took only 2 weeks to get a bite from a plumber driving by who saw the For Sale sign on the building. He had a fleet of 40 trucks and some digging/trenching equipment. It didn't take him long to learn I was asking almost 4 times the appraised price. He negotiated the price down $900K to $2.3M. (2.7 times appraised value (again, THINK TRUMP) He put $500K down and signed a 30-year mortgage contract for $9,100/mo. I've previously posted what happened to that deal and I had learned NEVER to finance anything without having an early payoff penalty clause in the contract. NEVER run a TV ad like this in Utah... 0:30 http://www.tannertransmissions.com/media/tanner_30.mp4

In my experience, techs leave their jobs, they rarely leave the industry. The few that leave the industry just aren't cut out for this type of work. In the transmission industry we need to do all we can to attract and TRAIN quality employees.

Yeah, you're right Joe. We are a transmission shop and RARELY had a wait customer. Perhaps 2-3 waiters a week, rarely more. We wanted 10-year-old and newer vehicles for obvious reasons.

Joe, all of this is very true, especially about employers being underpaid. I could never pay top wages until the shop as a sole & separate entity made a decent profit. After that, I was able to pay $25-$50 per clock hour, not flagged hour. ($1,000-$2,000/wk.) All my guys (except the manager) punched a time clock.

I left out the part about training, manuals, & seminars in #2. Skills Gap

I agree with Joe that an oil change-only is a tough business model. Follow Joe's recommendations.

The shortage of workers in the trades is a complex issue with several contributing factors. Here are a few reasons why the trades may struggle to find workers: 1. Perception: Over the years, there has been a societal shift towards placing greater emphasis on obtaining a college degree rather than pursuing a trade. As a result, many young people may not consider the trades as a viable career option, leading to a smaller pool of potential workers. 2. Skills Gap: The trades often require specialized skills and technical knowledge. However, due to the lack of emphasis on vocational training in some educational systems, there is a gap between the skills required for these jobs and the skills possessed by potential workers. This disconnect can make it challenging for employers to find qualified candidates. 3. Aging Workforce: Many skilled tradespeople are nearing retirement age, and there may not be enough new workers entering the trades to replace them. This demographic shift exacerbates the shortage and further highlights the need for attracting and training new talent. 4. Perception of Job Stability: There may be a perception that jobs in the trades are less stable or have limited opportunities for career growth. This perception can deter individuals from pursuing careers in the trades, leading to a smaller labor pool. Addressing these challenges requires a multi-faceted approach. It involves raising awareness about the benefits and opportunities within the trades, promoting vocational training and apprenticeship programs, and bridging the gap between industry needs and educational curricula. Additionally, offering competitive salaries, benefits, and career advancement opportunities can help attract and retain workers in the trades.

No inflation easing here in Salt Lake City suburb of Draper. It's just as expensive as always.

I would require 5 full days a year for training. They were the same organization putting on all the training. Of course, On The Job (OJT) Training was also required. The shop paid all expenses.

The days of quick lube places doing just oil changes have passed a long time ago. For example, here's a clip from Jiffy Lube's website. So, my question would be which one (or all) of the services do you plan on doing? How will you go about hiring techs to perform the more difficult services? Then--I looked on your website and you are already offering A LOT OF SERVICES. Auto Save Tire and Service Center

I looked but couldn't find a copyright date on this handbook. While the framework of the apprentice program is really good, the length/compensation of the program could use some serious updating. The AutoCare Apprentice Program is supposed to last 24 months and I think that's too long. Secondly, the pay scale is really outdated. I suggest plugging in your own numbers.

Article date: Sept. 25, 2023 5:30 am ET This is a Wall Street Journal article that you can either read, or click on the "Listen to Article" near the top of the article. It takes 6 minutes. The authors of the article are suggesting the labor shortage is not a short-term issue; it's long-term. Reading/listening to the article will give you the "big picture" view of the problem. It's easy to think that the automotive aftermarket is one of the few industries that have a labor shortage, but it's not. It's all over. Read on... WSJ - Why America Has a Long-Term Labor Crisis, in Six Charts

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.

Natalie, early in my career I worked at an auto parts store. I would hang out with an older guy, Tom Sitka, of Sitka Transmissions to just watch and learn about transmissions. I wasn't concerned about learning anything other than the technical end of the business. As it turned out, he had some unpaid 941 taxes and the IRS got involved. The unpaid 941 taxes were a mere drop in the bucket when compared to all the 1099s he had the majority of his employees on. In the end, the IRS said he had "misclassified" the majority of his employees. Long story made short, the IRS padlocked his building and later confiscated all the tools and equipment in the building. From that point on, he was doing transmissions by himself at his house. I would help him just to learn but that didn't last as I found a job in a transmission shop.

Listen to this 17:39 conversation between Michael Moore (UAW supporter) and Kaitlan Collins of CNN about the United Auto Workers strike. Compare this conversation to our current tech shortage. I can draw many parallels. Michael Moore On The Importance of the UAW Strike

Young techs have it rough. Their earning power is less -PLUS- they need to make a major investment in tools and diagnostic equipment. Think about it; they need to spend the most when their earning power is the least. Many forget that most young techs are also saddled with the added expense of a growing young family with kids. In our market area of SLC, UT, a fair starting compensation package would be $25/hr. or $1K/wk. And that's just to start. This is 2023 and we have a tech shortage that's not going away on its' own. Providing a healthy work environment is relatively cheap to provide while company benefits are not. The first thing a shop needs to do is get top marketing and sales training. This will give a shop the tools and knowledge necessary to charge top dollar. We aren't going to solve the technician shortage and retention problems paying what we used to. Payroll needs to be no more than 20% of sales, not including benefits. Instead of working the problem from the front end, we need to work the problem from the back end by asking yourself this question: "What do we need to charge to make labor no less than 20% of sales?" Here's a partial view of our 2012 P&L statement showing our cost of labor was running 17.3%, so IT IS possible: 2012 P&L Redacted We need to start thinking like a tech thinks, not so much as a shop owner.

The transmission repair industry has unique needs in that we are short on experienced transmission rebuilders. Hiring an apprentice is merely the starting point to a 10-year learning process. I consider it the equivalent of hiring an apprentice with the goal of ending up with a seasoned ASE Master Auto Technician. What do you do if you need a seasoned ASE Master Auto Technician NOW? That's what it's like trying to hire an experienced transmission rebuilder. Inflation causes everything to go up in price. Things cost more than ever before. Therefore, I believe we as shop owners need to pay more than ever before. A lot of problems can be cured by paying the top wage in any given market area. The last seasoned transmission builder I hired was back in 2015 and we were offering $104K/yr. just to start! I could only imagine what a similar offer would be in today's 2023 dollars. According to the Inflation Calculator, $104K would be $130,230.69 in today's dollars, or $2,504.43/wk. Add to that all the company benefits and the total cost of employment could easily be $200K/yr. or more. All of these numbers are for the SLC, Utah market. Other markets could be higher. There's a lot of advantages to paying more than anybody else. The first thing that comes to mind is if your employee makes a move to another job, they would be taking a substantial pay cut. On the other hand, we need to raise our prices to cover increased payroll costs. A shop simply can't afford to pay top wages without charging top prices. Charging top prices is not possible without going through top sales and marketing training. And so, the training cycle continues. Share your thoughts on paying and charging top dollar. How would you hire a highly experienced tech?

I just heard a Carm Capriotto webinar with Cecil Bullard as the guest. I thought he had a great plan to cure the technician shortage. Here are some of his talking points... Here's the link to the webinar: A Plan To Solve The Technician Shortage Recent surveys and articles in the industry point to the fact that 73% of shops need to hire one or more employees in the next 12 months and that for 85% of those, it would be a technician • As much as 29% of the technicians are over 55 years old, and they are aging out of the industry • Only 15% of our industry is under 35 while 29% is over 55 • Every Automotive Service and Repair Business in North America will move their labor rate up $20 per hour tomorrow. We use $10 of this to increase the pay of every technician and/or mechanic working in our shops immediately. We make it financially appealing to come into our industry by moving the wages up substantially. If every shop (or 90% of the shops) did this, it would change our industry for the better dramatically. We start new technicians that are learning at $25 to $35 an hour or $50K to $70K per year (a real living wage where they can support themselves and buy tools), and we pay veteran A-technicians $45 to $65 per hour or $90K to $130K. We take $5 of the increase and make sure we have a full benefits package. Medical, vacation, dental, a reasonable number of sick days, a good retirement plan, all national holidays off with pay, including Thanksgiving, Christmas and New Year’s, as well as anything that other professional jobs offer. • We take the other $5 of the increase and join a non-profit organization that will market to the mothers and fathers out there (and potential technicians) and let them know that being a technician in a modern shop is a cool job, is financially viable and every bit as professional as becoming a lawyer, doctor, dentist, programmer or professor. • Lastly, every shop owner books an appointment at a college, auto tech school, or high school and ‘volunteers’ their time to talk to the students, teachers, and administrators about our incredible industry.

I used YouTube videos in our shop to replace the boring tasks usually written in a Standard Operating Procedures (SOP) manual. Some of our examples: How to take care of the air compressor. How to service the spray cabinet parts washer. How to service the recirculating solvent parts washer. How to use our electric car pusher. How to use our flywheel grinder. and more… Actually, an entire SOP manual could be done in video instead of a written novel that’s rarely read.

Here's an article out of Ratchet & Wrench magazine on how to figure out what your shop is worth... How The Value Of Your Shop Is Determined

That's one of the big reasons why the Democrats wanted to hire 87,000 new IRS agents! Not reporting income goes on in this country a lot more than we know. It's rampant.

Also, don't forget about Social Security. People who get paid "under the table" are unknowingly clipping themselves out of a lot of S.S. pay later in life. Earlier in my career, I worked for a family who would pay us by check but insisted we cash the paychecks with them. They had a safe in their back office full of cash. They also had a construction company in Chicago that I now suspect took in a lot of cash, but who knows? Now that I'm collecting S.S., I've come to realize they weren't reporting my income on the 941. Thanks to those clowns, I'm now collecting much less S.S. than I should be because they weren't reporting my income. I came to learn that not reporting all income comes back to haunt a person much later in their life.

Here's a 9-month-old video of a Wisconsin shop owner who pays his techs a salary. Moreover, he's thinking about going on an 8-hour day and only 4 days a week. Yet he's going to pay for 40 hours regardless of them working only 32 hours. The video states by 2025, our industry is going to be short of 800K auto technicians by 2025. Take a look at this short 2:14 video below...

I just found this on my Facebook feed. The lady posting this applied for a sales person position that I decided against hiring. But we did become FB friends. Check out her FB post about a synthetic oil change. This is a good way to retain new customers. Take note how this might apply to your operation.