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Sales Profits


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									  Sales & Profits Down?
Time to Revisit the Basics!
Most shops today report that car counts are down and repair order averages
for those vehicles that are coming in are plummeting. Shops that maintain or
increase their sales and profits in tough economic times all have one thing in
     common: They understand and monitor the basics of their business.

                               he general automotive repair industry has been
                               rapidly changing, due mainly to the advance-
                               ment of technology and a significant increase in
                               competition from other segments of the indus-
                    try, including franchises and dealerships. Combine the in-
                    crease in competition with the current economic down-
                    turn, and operating a profitable business becomes very
                    challenging for many and impossible for some.
                      What should a repair shop owner do?       should exhibit an upbeat attitude, which
                    Return to the basics. Implementing basic    often makes employees feel good about
                    business procedures usually pays off        their jobs, their place of employment and
                    handsomely for most shops. Let’s take a     their customers. If an owner speaks nega-
                    look at some areas that can help a shop’s   tively about the business or the industry,
                    bottom line.                                some employees may show a lack of en-
                                                                thusiasm when work does come in, and
                    Company Leadership                          even seek employment elsewhere.
BY BOB O’CONNOR     It’s imperative that shop owners involved      Don’t let your staff mill around with noth-
www.rloconnor.com   in the day-to-day operations clearly        ing to do. It makes the days seem longer and
                    demonstrate a positive outlook for both     often leads to depression that can very
800-755-0988        the industry and their business. They       quickly spread like a virus throughout a

                                                                           February 2003                   37
company. Instead, make sure your staff       skilled in sales and customer rela-       pair orders. These shops have the in-
is kept busy doing productive work,          tions, he should hire a service advisor   spection forms but fail to utilize them
even if it doesn’t generate income. Ser-     and continuously invest in that per-      on a consistent basis. Most repair
vicing equipment, reorganizing work-         son’s training. A service advisor must    shops have access to OE maintenance
flows, taking inventory, cleaning and        possess advanced selling skills (tele-    menus but are reluctant to use them
other such tasks can be fulfilling and       phone and face-to-face), people-han-      to sell services. So, if your shop does
help maintain a positive attitude.           dling skills and communications           sell maintenance, you’ll be providing
                                             skills. Without such a person, the        something your competitors don’t!
Staff Skills                                 business could suffer—in some cases,      Implement more basics by reviewing
Take the time to review your training        drastically. For more detailed infor-     your sales procedures and forms. Re-
program and budget. Competition                                                        quire your staff to consistently per-
dictates that shop owners employ                                                       form vehicle inspections and recom-
technicians who are at the top of                                                      mend OE required services.
their game. Therefore, you should as-          The service advisor                        In addition to following proper pro-
sess the skills of each of your staff to                                               cedures and using inspection forms, a
determine which skills need to be ei-           is one of the most                     review of credit policies and types of
ther acquired or honed.
   Before you perform an assessment
                                               important positions                     payment is appropriate. Make sure
                                                                                       you accept as many different types of
of your technicians’ skills, you first           in a shop, in that                    credit cards as you can, and that you
need to determine the makes and                                                        implement 90-day/12-month same-as-
types of vehicles your shop currently
                                                  he’s responsible                     cash programs. The more credit op-
services, as well as the types of main-           for every sales                      tions you make available to your cus-
tenance and repairs that are per-                                                      tomers, the more they’ll spend, thus
formed on them. Then match the                   dollar and every                      increasing your average repair order.
skills needed to perform the work                   gross profit                          For more detailed information re-
against the skills currently possessed                                                 garding sales procedures and tools,
by your technicians. This will tell you            dollar earned.                      refer to “Building a Profitable Repair
who needs what training.                                                               Order,” in the March 2001 issue of
   The position of service advisor is                                                  MOTOR.
one of the most important positions          mation regarding the service advisor
in the shop. This person is solely re-       position, refer to the article “When to   Your Facility
sponsible for every sales dollar and         Add a Service Advisor,” in the June       One of the most common assess-
every gross profit dollar earned by          2001 issue of MOTOR.                      ments of a repair shop made by cus-
the company. Depending on the                                                          tomers is the shop’s so-called curb ap-
technicians’ compensation plan, the          Sales Procedures & Tools                  peal, which encompasses how clean
service advisor may be responsible           Sales are the core of every business,     the lot and the vehicles parked there
for their earnings, as well.                 and to maximize sales, a business         are, what types of vehicles they are,
   In many smaller shops, the owner          needs to follow established proce-        how congested it is and how easy it is
often assumes the role of service ad-        dures and use the right tools to make     to get on and off the lot with minimal
visor. Unfortunately, in most in-            the process easy and efficient. The       risk. In addition, customers look at
stances, he doesn’t have the training        major sales-building tools in the auto    the colors, signage and maintenance
to maximize sales and gross profits.         repair business are vehicle inspection    of the building. Dented bay doors,
Frequently, the owner is hesitant to         forms, maintenance menus and diag-        partially disassembled vehicles, rub-
sell the work for its full value; that, of   nostic information resources.             bish on the lot, faded paint, dirty win-
course, will keep profits down.                 Our organization performs hun-         dows and older vehicles in many cas-
   To be a viable competitor in this         dreds of repair order audits each year,   es may turn off customers.
industry, unless an owner is very            and we frequently find low-dollar re-        The parking lot also serves as a

38               February 2003
kind of display, and owners are en-        that companies that maintain or in-       from less aggressive competitors and
couraged to park the makes they            crease their advertising investments      position itself for future growth dur-
want to attract more of in the most        in these times increase their sales and   ing the recovery. Advertising should
highly visible areas. Tip: Don’t repair    share of market, both during and af-      be regarded not as an expense but as
vehicles on the lot; it looks very un-     ter the downturn. In addition, main-      an investment to contribute to prof-
professional and may have a devalu-        taining or increasing advertising bud-    its. When economic conditions are
ing effect on the vehicles being           gets may be absolutely necessary in       good, you should advertise; when
worked on inside the shop.                 terms of protecting your market posi-     they’re bad, you must advertise!
   Lastly, evaluate daily what you have    tion and facing savvy competitors.           In addition to routine advertising
on the lot and in your bays. Ask your-     Maintaining market share usually re-      (in both healthy and uncertain eco-
self the following questions: Of the ve-                                             nomic times), you may want to con-
hicles on my lot, what percentage is in                                              sider seeking fleet business. Under
for preventive maintenance? For rec-                                                 the right terms, fleet sales could add
ommended repairs and maintenance?             The inside of your                     substantially to your sales and profits.
For emergency repairs? And, how                                                      For more detailed information re-
many vehicles were towed in? Perform-           shop should be                       garding fleet business, refer to the ar-
ing this exercise will help you deter-
mine how well your team sells mainte-
                                                inviting to both                     ticle “Building Profitable Fleet Busi-
                                                                                     ness,” in MOTOR’s May 2002 issue.
nance and brings the customers back            male and female                          Other business that pays off hand-
for recommended repairs and service.                                                 somely is industry referrals from re-
   The inside of the shop should be
                                              customers, and to                      pair shops who don’t have the capa-
inviting to both male and female cus-         their children, too.                   bilities you do, as well as commercial
tomers, and to their children, too.                                                  referrals from businesses outside our
Many progressive shop owners sub-
                                               Coloring books or                     industry. Some such referrals may be
scribe to publications that appeal to          videos help keep                      obtained by participation in a busi-
both men and women and provide col-                                                  ness networking group in your mar-
oring books or some simple form of en-           kids occupied.                      ket area.
tertainment for children. Some shops                                                    Many auto repair shop owners
stock an assortment of DVDs or tapes                                                 have put together “slow day plans,”
of popular children’s entertainment.       quires much less investment than re-      where they predetermine their activi-
Some are now using continuous-loop         building it later.                        ty during slow periods. Included in
electronic presentations on large             Advertising through both economic      such a plan would be having your
screens or monitors as a method of         booms and downturns helps keep            sales staff contact any referrals you’ve
educating their waiting customers.         your name in your customers’ minds.       accumulated.
   Many of the shops our organization      If you maintain a strong advertising         Remember, customers want the
visits on an annual basis neglect to       presence while your competitor cuts       most value for their money, and busi-
maintain the windows in the facility,      his budget, you’ll automatically in-      ness owners must sell the value of
and to properly utilize the reception      crease your market share. Moreover,       their staff, services and products.
area walls and space for marketing         maintaining your advertising budget       Customers enjoy having choices and
purposes. The more progressive             and campaign will give the image of       options. Understand what they want
shops use custodial services regularly     your company’s stability in an unsta-     and deliver it. Most customers appre-
that also include window cleaning,         ble business environment. Economic        ciate a one-stop shop, where they can
                                           downturns reward the aggressive ad-       get all of their repair and mainte-
Advertising & Marketing                    vertiser and penalize the timid one.      nance work done at the same place.
Winning market share during an eco-           A strong advertising/marketing ef-        Lastly, customers want to feel ap-
nomic downturn takes some planning         fort enables a company to solidify its    preciated and connected. Take an in-
and investment. History has shown          customer base, take business away         terest in them and listen to what they

                                                                                           February 2003                  39
say. Customers will return to places                                                 other staff or make leasehold im-
that make them feel appreciated and                                                  provements, etc. If borrowed for cash
will take care of their needs. For
more detailed information regarding
                                          Advertising should be                      flow purposes, you’d have to have a
                                                                                     business plan demonstrating how the
marketing and advertising, refer to        regarded not as an                        influx of cash would improve your
the articles “Marketing Strategies,” in                                              shop’s profitability, and demonstrat-
the March 2000 issue of MOTOR, and
                                            expense but as an                        ing your ability to service the debt.
“What’s Your Competition Doing?” in         investment. When                            Assess your company’s financial po-
the September 2000 issue.                                                            sition. If an influx of capital to use for
                                          economic conditions                        marketing, staffing, equipment, etc.,
Finances                                  are good, you should                       would make the company more prof-
Many shop owners feel a certain                                                      itable, then perhaps it’s time to visit
sense of pride when they can make            advertise; when                         your local banker.
the statement, “Everything is paid           they’re bad, you                           Regardless of which of the basics
for.” During today’s economic down-                                                  described here you plan to imple-
turn, this may be perceived to be a          must advertise!                         ment or revisit, pay particular atten-
desirable position to be in. However,                                                tion to creating a formal business
it’s also very acceptable to owe mon-                                                plan. It’s your roadmap to successful
ey, so long as the revenue it generates   have to make sure the advisor per-         future development. For more de-
provides a rate of return greater than    forms better than you are. You feel        tailed information on business plan-
its cost.                                 that the advisor could easily add a        ning, refer to the article “Creating a
    For example, let’s say you want       quarter of an hour of labor to each        Successful Business Plan,” in the
your shop to grow and you’re the ser-     ticket, which, at a $60 labor rate com-    September 2001 issue of MOTOR.
vice advisor. Because you’re over-        bined with the related parts, is a total      Get started on improving your
loaded with other management re-          dollar increase of each repair order of    sales and profits by revisiting the ba-
sponsibilities, you want to hire a ser-   $15 gross sales. Add to that the parts,    sics of your business today!
vice advisor. Let’s assume in your ge-    and the total increase is $27. If the
ographical area, the investment for a     overall gross profit percentage were a
service advisor is around $40,000 an-     meager 50%, the added gross profit         Robert “Bob” O’Connor is President of
nually, including benefits and the em-    dollars of each invoice would be           R.L. O’Connor & Associates, Inc., a
ployer’s contributions to employee        $13.50. The store writes 175 repair        Seattle-based automotive operations
taxes. In addition, the person hired      orders per month, so the increase          and management training and consult-
will probably require another $10,000     would amount to $2362.50 in addi-          ing firm. He is best known in the U.S.
in training to be on top of his or her    tional gross profit, or almost $1349       and Canada for his highly effective au-
game. The total cash needed is            more than the monthly loan payment.        tomotive management training work-
$50,000. That $50,000 could be bor-          To cover the advisor’s salary of        shops and his continuous improve-
rowed at an interest rate of around       $40,000 for the year, pay for the          ment Bottom-Line Impact Groups.
8%, and for a probable term of five       $10,000 in training and service the        Bob is an Automotive Management In-
years. Using those figures, the calcu-    first year of debt in the amount just      stitute (AMI) approved instructor and
lated monthly payment would               shy of $12,166 (12 payments of             AMI EXCEL “Guarantor.”
amount to almost $1014.                   $1014), the average repair order
    Continuing with the example, let’s    would have to increase by $59.20 to                Visit www.motor.com to
also say you currently write approxi-     $273.20, which in today’s marketplace           download a free copy of this
mately 175 repair orders per month,       is still considered to be a very low re-      article. Copies are also available
with an average sale of $214. To re-      pair order average.                            by sending $3 for each copy to:
                                                                                       Fulfillment Dept., MOTOR Magazine,
lieve yourself of the responsibility of      This example could have been
                                                                                        5600 Crooks Rd., Troy, MI 48098.
the service advisor position, you’d       used to purchase equipment, hire

40              February 2003

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