Evan Smith

So far--the responses in this thread have touched on addressing several potential "profit soft spots" related to productivity:

1. 
    
   
2. appropriate pricing for diagnostic/ up-front work (i. e. making sure the shop can cover its costs) (diagnostic pricing recommendation, offered by Tony M, Baldwin Express Lube);
   
3. cutting down the transition time between performing the (small-revenue) diagnostic work, and performing the associated (larger-revenue) maintenance work (add a service writer recommendation, offered by Joe M, Osceola);
   
4. improving the clarity and precision with which "diagnostic findings" get translated into a job estimate that a customer wants to buy (service writer rec, Joe);
    
   

Beyond the suggestions above, and improving the "on the job" productivity of the technician individually - it is worthwhile for you as a shop owner/ business manager to look at what I'd call the "white space" around the direct work on the car. This "white space" is defined as "space where low/ no value is being created"--for you or the customer. Some examples of white space that you might want to think creatively about addressing include:

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• the car-movement/ parking issues around your shop (if your techs are moving cars, they're not contributing positively to productivity);
  
• the time you spend going back/ forth with customers on the phone, trying to communicate the details of an estimate, and discover if the customer wants to go forward with it;
  
• the ways that you structure your parts/ equipment inventory (if your techs need to search for tools, equipment, or parts, or walk too far to get them, they're not contributing positively to productivity);
  
• the precision/ detail with which your tech's diagnostic findings--or other observations about the "street-readiness" of the customer's vehicle) get translated into an estimate the customer wants to buy;
  
• ... and others.
  

These and other white-space examples can all be forms of "waste". Some of the highest value opportunities in your business can be removing these types of barriers to productivity, to help you create more satisfied customers, and earn more money.

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

 

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

 

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

Greetings--

I'd like to respectfully put a few ideas out on the table - for your consideration. I believe your assertions regarding how you manage your business would be familiar to many shop owners, and other small-business people – and many would strongly agree with you. HOWEVER... following through on some of your assertions in the long run can put your business at risk. Having done a lot of work in this area - I have a lot to say. I've held off here on a longer response--but the key ideas I'd challenge small business owners to answer for their business are:

1. 
    
   
2. How do you create profitable growth in your business (because growth “at any cost” will create a “race to the bottom” for you and your competitors)?
   
3. What differentiates your business in the eyes of your customers – what value do they get from your business that they’re willing to pay for? (HINT: The answer is not “lowest price”. Customers who seek the lowest price are loyal to … the lowest price. They’re not loyal to your business).
   
4. How do you find more customers like your MOST DESIRABLE customers (the ones who come back over and over again, the ones from whom you make the most money; and/ or the ones who refer others to you…)?
   
5. How do you change your business cost structure to operate effectively in line with “prices the market will bear” – AND to deliver the value that the MOST DESIRABLE customers find in your business?
   
6. What is the lifetime value of each of your customers – and how do you extend/ add to that lifetime value your business can capture from your MOST DESIRABLE customers?
   

If you'd like to hear/ read more: please see our pageson small business growth & development... or drop me an email offline: [email protected]