Business Talk - How's your shop doing?
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Latest Posts
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By Transmission Repair · Posted
Most shops have unrealistic expectations of a newly hired tech. That problem, combined with the new tech wanting to make a good impression during the hiring/interviewing process opens up the possibility of misunderstanding and miscues. We were a transmission shop specialist. Transmission, transfer cases, clutches, and differentials only. No General Repair. Before I became a shop owner, I had more than one shop wanting me to be a "Mr. Know-It-All". This was in the early & mid-1970s when all technical information was only printed in huge service manuals with tiny illustrations and fonts that few shops had current issues. I remember an older gentleman coming around once or twice a year with a trunk full of manuals for sale. I quickly learned that if I wanted a transmission manual, I would have to buy it because the shop owner wouldn't. The excuse he used was, "Manuals have a way of growing legs." because that's been his experience. Technical information was hard to come by in those days. Fast forward to today, everything is online, mostly by subscription. However, there are a lot of industry groups that cost little or nothing where you can both learn & share information & experiences. Our AutoShopOwner group is but one example. Today's technician should have an ample list of their online friends in the business. I can remember meeting several of my online friends for the first time in a face-to-face meeting at the Transmission Expo. It blew my mind because I had made up an image of what they would look and talk like in my mind. In reality, I wasn't even close. What worked the best for me was taking the time to write a Technician's Job Description that I heard about in a seminar I attended. It sounds a lot easier than it is. I don't expect to hire a Walking Oracle, but I do expect the tech to find the information he needs online. I edited the Technician's Job Description numerous times as things came up. It took me at least 6 months to settle on the final contents. We had a 90-day orientation period where both the shop and the new hire learned what to do, what was expected, and how to find information when you needed it. Within 90 days, both our shop and the new hire had a good feeling (or not) about things working out. Sadly, I finally settled on this winning formula later in my career, about 1995-2015. I hope this helps others in hiring a qualified Master Tech. As we all know, they are in very short supply. -
By Joe Marconi · Posted
Five Proven Tips to Improve Your Bottom Line By Joe Marconi, an Elite Blog - A recent Small Business Administration (SBA) report revealed that one of the main reasons for small business failure is due to a lack of financial knowledge. Another survey, also conducted by the SBA, found that 83% of failed business owners stated that their failure was due to cash flow problems. While there are many facets to operating a successful auto repair business, one thing that is common to all is that it needs to be profitable. The fact is that too many auto repair shops struggle financially. The sad news is that most of them actually have a booming business that is clouded by their financial woes. The typical auto repair shop has consistent car counts, a calendar booked out for at least a few days, and in many cases, booked a week or more. Where so many auto shop owners fall short is understanding their financials, more specifically, not focusing enough on generating consistent profit and improving cash flow. In this blog, I will outline five proven tips to help you increase your bottom-line profit and improve cash flow. Becoming financially stable also improves your personal life and the lives of those you employ. Understand Your Financial Reports. Establish Your Financial Goals There are three main accounting reports that you should have a basic knowledge of: The profit and loss statement, the cash flow statement, and the balance sheet. Most auto repair shops either have an in-house bookkeeper or an accountant to generate these reports. It doesn’t matter who updates and runs these reports, as long as they are reviewed by you, the shop owner, periodically. Have regular meetings with either your bookkeeper or accountant and become familiar with your financial reports. You do not have to understand these reports as well as your bookkeeper or your accountant does. However, the more knowledgeable you are about your financial reports, the better financial decisions you will make, which will make a difference to your bottom line. Performing an in-depth analysis of your financial reports will give you valuable information on the financial strengths and weaknesses of your company. This information is crucial when establishing your financial goals. Having financial goals is essential to your company’s future. Share your goals with your entire team and brainstorm collectively to find ways to achieve them. Focus on Gross Profit, Not Total Sales When shop owners get together they typically share their year-over-year sales increases. While total sales revenue is important, it doesn’t tell the entire story. And it may not reflect the true financial health of your company. If you had a choice, would you rather have a 1.5-million-dollar business that produces a net profit of $50,000, or a one-million-dollar business that nets a profit of $175,000? The answer is obvious. Why? Your bottom line net profit is what truly matters, not the total sales number. To have a healthy net profit requires that you have a healthy bottom line. Gross profit is the amount of money left over from your total sales after paying your technicians and paying all the costs of sales items for all work performed. The higher the gross profit, the higher the net profit. Gross profit is important because it pays for all other operating expenses and loans. After paying all your operating expenses, what’s left over is your net profit. Depending on your business model, typically, auto repair shops look to attain a net profit of 10% to 25%. Improving your bottom line requires that you properly establish your labor and part profit margins. While there are benchmarks for the average auto repair business, the margins you set for your company may be different. With that said, we usually want to see 40% to 55% part profit, and a 70%-plus labor margin. A good number to shoot for is a 60% overall gross profit for parts and labor. One more thing to consider when calculating your gross profit requirement: Your operating expenses need to be in line too. Keeping your expenses in line by cutting excess and waste will lower your operating expenses and increase your net profit. If you are not sure how to calculate your margins properly or need help with maintaining your expenses, speak to your accountant, or seek help from a qualified business coach. Improve Quality and Total Shop Production During the Great Depression of the 1930s, Chrysler gained market share and financial stability by improving production. While other car companies were looking for ways to cut costs, Chrysler made a bold decision to focus on building more affordable cars and improving overall efficiencies. Their strategy was to produce more cars with the same labor costs. This ultimately resulted in increased sales and profits. It also propelled Chrysler to become known as one of the “Big Three” automakers, along with General Motors and Ford. Improving workflow production in your auto repair shop by utilizing the same direct labor cost will result in increased sales and profits. Essentially, improving productivity by using your current workforce means more work is done in a given period. Shop owners, take a long hard look at your overall workflow processes. Track all the steps your technicians are taking throughout the day. Are there wasted steps that can be eliminated? Are there bottlenecks in the service advisor process? Are your service advisors properly trained in the art of sales, and in delivering exceptional customer service? Improving your total shop production and quality will result in increased profits. One last word on the topic of production; look at your shop layout. Are tools, equipment, and information systems easily accessed? And let’s not forget how continuous training for all employees is a key component in delivering consistently high levels of quality and productivity. Build More Profitable Estimates Years ago, we used to say that technicians have control over their efficiency. This may have been true to some extent, but today there are too many variables. Let me give you an example. Your service advisor wants to sell exhaust manifolds on a Chevy pickup truck. The published labor time in her business systems calls for 1.7 hours per side. However, all the studs are rusted away which will require drilling and installing new studs, which is probably a 6-hour job, or more. If the wrong labor time is sold, there will be no way the technician can complete this job in the labor time sold to the customer. Sometimes you need to close the book, and openly discuss with your technicians the true labor time based on experience and the individual scenario. There are too many published labor times that are not correct. Increasing billed labor hours is perhaps one of the best ways to improve your bottom line. Control Account Receivables and Inventory Controlling your account receivables will not affect your gross or net profit. However, it will impact cash flow. Essentially, high account receivables reduce the amount of cash on hand. Available cash and profit are not the same. Your shop can generate a net profit of $25,000 for the month, but if your account receivables are $35,000, you will have a $10,000 shortfall of cash for that month. Most auto repair shops these days do not have an extensive inventory. Exceptions are repair shops that stock tires and shops located in extremely rural areas. Even if your inventory is low, pay attention to it. Limit your inventory to only those items that move fast. Having old stock sitting on a shelf reduces your available cash. Another important task is to ensure that your inventory pricing is up to date. Charging out-of-date prices are losses that go under the financial radar and will hurt your bottom line. Conclusion Most shop owners have their vision of a successfully-run business. This vision includes providing a healthy work environment for their employees, providing training and equipment, and having a clean and customer-friendly facility. Additionally, shop owners want to provide a benefits and pay package that attracts and retains the best employees. And of course, the owner must be able to earn a respectable wage too. All this requires profit. At Elite, we understand what auto shop owners desire from their businesses. We not only provide the business tools, one-on-one coaching, service advisor training, and peer groups that we know will help take your company to the next level, but we accomplish this in the most honest and ethical way. View full article -
By Joe Marconi · Posted
Isn’t It Time We Rethink What a Master Level Technician Is? By Joe Marconi, an Elite Worldwide Blog - My roots in the automotive industry go back to the 1970s working in a small 2-bay auto repair shop. As a young technician, my goal was to attain the status of master-level. That meant that I was expected to repair or service nearly anything that rolled into my work bay. However, “anything” really only meant vehicles made by General Motors, Ford, and Chrysler. The Big Three, as they were once known, dominated the roadways in those days. With a limited number of vehicle brands to learn, it didn’t take long to become proficient in all areas of automotive repair, from engine mechanical, drivetrain, electrical, steering, suspension, and all other systems. That was back then. Let’s fast forward to today. Unless you specialize in certain areas and/or on specific vehicle brands, it is becoming increasingly more difficult to be proficient in a wide range of vehicle models and vehicle systems. The training, technical information, and equipment that is required today to be an all-around master-level technician is too overwhelming. In this blog, I will explore a few ideas and push the envelope with a few controversial concepts. My goal is to help advance the automotive aftermarket and to improve the perception the typical consumer has of our industry. Everyone employed in the automotive industry should feel proud of the work they do. The Reality of Modern-Day Automotive Repairs and Service Is it reasonable these days to expect a technician to solve a complicated check engine light problem on Lexus, then jump to an electrical fault on a Volvo, and then analyze a transmission issue on a Dodge diesel pickup truck? Is it also reasonable to expect that technician to remain highly productive bouncing from problem to problem on different vehicle brands? The belief that the average technician can attain master-level status on a wide variety of vehicle brands and in all areas of auto repair has become unrealistic. We need to define different criteria. Should There Be a Change to ASE Certifications? We also need to consider the standards set by ASE (Automotive Service Excellence). Achieving ASE Master Level status requires passing a series of tests in a particular area of expertise. Most technicians consider ASE certifications to be a badge of honor, an achievement of accreditation. There is nothing wrong with this. However, in this modern world of sophisticated automotive technology among a vast array of vehicle brands and systems, does passing a series of tests accurately determine someone’s skill level and proficiency? There is no doubt that the ASE does a great job of creating standards for our industry, and their dedication to our industry cannot be ignored. However, I believe that the topic of what determines a Master Level Technician is something that the ASE needs to take a hard look at. A Shift in Our Mindset is Needed About eight years ago, I hired a technician that emigrated from Greece., we’ll call him Pete. When I reviewed his employment application, he noted that he was an Undercar Specialist. In his home country, Greece, he was trained in brakes, steering, suspension, wheel alignment, driveline issues, axles, tires, and wheel balance. I hired him, at first, as a B-level technician. What I found out in a short time was something I never considered before. Pete was so competent in his areas of expertise that I eventually promoted him to A-level technician and paid him accordingly. By focusing on certain vehicle systems, he was able to become highly proficient in those areas; to the point where he was the go-to tech in my shop for any undercar problem. Pete’s work was top-notch, with virtually no comebacks and the highest quality. The question is, why shouldn’t Pete be awarded the recognition of Master Level in his field of expertise? Here’s another thing to consider. We often complain about finding competent technicians. Techs that can handle everything we throw at them. Again, is this realistic? That may have been a reasonable expectation in 1985, but is it today? We need to shift our mindset and help young technicians choose their area of expertise, based on their strengths and preferences. This will build a larger pool of qualified technicians. This strategy would also open up more jobs for more people to enter our industry. With the proliferation of technology, diesel, hybrids, and electrical vehicles, doesn’t it make sense to have many areas of master-level status? Perhaps we need to take a page from the medical field. In the medical field, you have surgeons, cardiologists, gastroenterologists, pediatricians, obstetricians, gynecologists, dentists, and more designations. They are all specialists in their particular field, and they are all called Doctors. The Economic Reality I want to address the economic impact of running an auto repair shop these days. There isn’t a shop owner today who is not financially affected by the evolution of the modern automobile. The associated rising costs for tools, equipment, training, and information systems are heading into uncharted territories. Can the average repair shop afford to keep current on all makes and models? Buying expensive equipment, for example, has become a challenge. Shop owners often struggle, asking, “Why buy an expensive piece of equipment, only to be used once or twice a year? Where’s the return on investment?” With respect to being profitable, again I go back to what I stated earlier, can an auto repair shop be productive in all areas and on all makes and models? High levels of production are needed to generate profit. However high levels of production rely on creating processes on a predictable set of operations. What this means is that when a repair shop narrows its focus on what they do best, and on the vehicle brands they train on, those shops become more productive. They also become more profitable than those shops trying to be all things to all people. My Proposed Solution The automotive aftermarket industry must adopt a new way of thinking. Just like the medical field, technicians should be able to, and encouraged, to specialize. This would allow someone to achieve master-level status technician in a specific area of automotive repair. Just as in the example above with my technician, Pete, we would have highly skilled technicians proficient in different areas. We would have under-car specialists, transmission specialists, drivability specialists, EV/Hybrid specialists, engine specialists, and other designations. And they would all be considered Master Level Technicians in their field of expertise. Productivity and efficiency would improve, more jobs would be made available, and more people would have pride in what they do, and in the industry they work in. Conclusion At Elite Worldwide, we are committed to helping our clients stay on the cutting edge of business strategies. We are also firmly committed to elevating the auto industry, raising the bar for all auto repair shops, and for those working in the automotive aftermarket. From our Top Shop Coaching programs, Pro Service peer groups, and our service advisor Master’s Program, Elite has the business solutions to help you take your company right to the top! View full article -
By Joe Marconi · Posted
Money Isn’t The Motivator We Think It Is By Joe Marconi, an Elite Worldwide Blog - We often hear that most people are money-motivated. However, when it comes to employee motivation, there’s much more than just financial incentives. According to Gallup, a management consulting company, when people are looking for employment, money may be at the top of their list of considerations, but once hired, no amount of money can motivate someone if they are not happy in their workplace. Additionally, Gallup’s study revealed that money does not create employee motivation and that there is no direct link between salary and workplace happiness. Understanding employee motivation is crucial for any manager looking to improve productivity and maintain a happy, high-performing workforce. Without understanding what truly motivates employees, high levels of productivity and profits will not be achieved. People are motivated by different reasons. It’s the job of the manager or shop owner to build strong relationships with their employees to find out what truly motivates them. One of the best ways to find out is to simply ask them. You may be surprised by what they say. Now with that said, let’s address when money is important. Everyone needs to cover the basic needs of life. People need to pay the rent or mortgage, put food on the table, and take care of their families. If someone worries each week that their base pay will not cover their financial needs, they will work from a position of fear. This will eventually cause them to shut down, produce less, and start to look over the fence for greener grass. Another area when money becomes a factor is when an employee feels that they are not getting the respect they believe they deserve. For example, you hire a top-level, experienced service advisor and pay that person a higher wage than your current top-performing service advisor. No matter what arrangements you make with the new hire, your current service advisor will find out the pay wage for the new hire, and that will not go well. In some cases, this may cause your current service advisor to quit. Aside from a few exceptions, money is not a prime motivator. In this blog, I will outline five powerful ways to motivate the people in your company, which will also help you create the right culture, ensure long-term success, and help prevent your employees from looking over the fence for greener grass. Satisfy The Basic Needs of Life and Career As I mentioned earlier, when an employee worries each week about not earning enough to cover his basic financial needs, he works in a state of fear. In this state, people cannot function. The stress and worry consume them. When people realize that their basic needs will be fulfilled, they become more engaged with their work, will produce more, and are more inclined to grow and advance in your company. As a shop owner or manager, you need to sit down with your employees. Find out about their goals, both in their career and in their personal life. Another obligation for shop owners is to create pay plans that offer competitive wages, great benefits, and a career path where they feel secure with their future with you. Financial and emotional security is important, not only for the employee but for the employee’s family too. Create a Culture of Mutual Respect Everyone craves respect. This is an area that is lacking in so many workplaces. While employees may be at different experience levels and in different positions, everyone wants to know that what they do gets the attention and respect of leadership. As a shop owner, create an environment of shared and mutual respect. Look to those in your company who have leadership qualities and mentor them so that they can mentor others. When your employees share in their talents and efforts as a team, combined with mutual respect for one another, you have created one powerful motivator. Have Your Employees Compete Against Themselves In the workplace, employees are at many different skill levels. For example, a typical repair shop may have two technicians with over 20 years of experience and one tech with under 5 years of experience. It makes no sense to have the younger tech compete against the more experienced techs. When you do this, you create winners and losers. What you want are all winners. Encouraging self-competition is a powerful way to enhance employee motivation by allowing them to see personal progress and achievement. If you do that, each of them can win. Measure each employee’s production, whether it’s billable hours, sales, gross profit, or other metric. Find a baseline for each employee. Establish a minimum level of acceptable performance, the goals for their position, and the individual goals for each person. Provide the training, support, and a pathway for them to improve and succeed. When people see themselves improving, by measuring their metrics against themselves, they also see themselves winning. They become more engaged, which motivates them to work harder and want to continue to improve. Remember, create a shop filled with winners. MBWA – Management By Walking Around MBWA is a strategy that was written about in a book published in the early 1980s, by Tom Peters, called In Search of Excellence. The strategy is simple but powerful. It requires that managers get out of their offices each day and spend time walking the shop floor. Engage in conversation with your employees. But here’s the key component that makes this strategy so powerful; engage in conversation that helps you to find out more about them, their hobbies, their family, and what they like to do in their time off. In other words, don’t just make the conversation about business, make it personal, about them. When you find out what’s important to your employees, you will also find how to increase employee motivation. Imagine this scenario: Through your MBWA you find that your superstar service advisor enjoys taking her kids to dinner and a movie, and you surprise her with tickets and a gift card for the entire family for a night out. Tell me that’s not a powerful motivator! Praise and Recognition Praise and recognition are perhaps the greatest motivators of all. There’s not a person on this planet who does not want to be recognized and praised for a job well done. Look for reasons to praise your employees. Let the little mistakes slide. If you want your employees to grow and improve, then praise and recognize the behavior you want to see repeated. For example, you speak to an employee about coming in late. If that employee comes in on time for the next three days, praise and recognize that! After all, it’s the behavior you are looking for, right? What happens all too often is nothing is said when the employee comes in on time for a few days but is handed a heavy reprimand when the employee once again arrives late two weeks later. If you only point out when people don’t perform the way they should, that is what you will get; an endless occurrence of people not performing up to expectations. There’s a phrase from the book The One Minute Manager, but Ken Blanchard, “Find people doing things right!” Conclusion At Elite, one of our core values is to never put money ahead of people. We believe true employee motivation comes from fostering a culture where individuals feel valued and respected, rather than relying solely on monetary rewards. When a company focuses on building the right culture and prioritizing employee well-being, great things happen, and success becomes inevitable. This concept is woven into the fabric of what we preach, teach, and coach. Whether it’s our service advisor Master’s Program, our Top Shop Coaching Programs, or our Pro Service peer groups, we will never abandon what has made Elite the company it will always be… a company that will never put money ahead of people. View full article -
By Joe Marconi · Posted
Wow, I applaud you for taking ownership of the problem. If want a change in our life and business, WE must be ready to accept responsibility! Great job! -
By Joe Marconi · Posted
I have through many horror stories too. As an industry, we need to stick together on issues like this, but sadly, we often don't. -
By Transmission Repair · Posted
Have you ever tried to get an extended warranty to cover a major transmission issue? Every step of the way, they find a reason to delay and tie up a lift. I shoot a short video on every transmission we do, whether it's for an extended warranty company or not. In the video, I make these important points: 1. Why did the transmission fail? 2. What we're going to do to fix it. 3. And most importantly, what are we going to do to keep it from happening again? I call videos like that the "Show-N-Tell" video. We have at least 2,100 Show-N-Tell customer videos on our YouTube channel. BTW, all of our transmissions come with a 5 yr/100K mile warranty. Retail customers are very happy with me sending YouTube video link and a .pdf of what it's going to cost to fix it. They either call me, or Email me, (50/50 split) with the O.K. and that's it. Not so with extended warranty companies. Unless it's a relatively minor mechanical issue, extended warranty companies are hard to deal with, second guess our diagnosis, and want to supply a used transmission. We have more than enough major transmission work to where we can be selective on who we choose to do business with. It took me the first half of my career to finally send those jobs to my nearest competitor who likes to do the work; they have the time. Problem solved. Here's one Show-N-Tell video as a sample to let you know how thorough we are. 3:41 -
By TheTrustedMechanic · Posted
I don't get too many requests for extended warranty work but I agree with Bell Road Automotive. Further than that, when I call the customer with the warranty company's determination I encourage them to call the warranty company if the authorization doesn't seem right or fair. As for a horror story, my last experience with an extended warranty company was on a transmission and it was with American Auto Shield (just one of many names the company goes by) and I will NOT deal with them or CARS again. First they wanted to send an adjuster, no problem. Then the adjusted called to establish a time frame in which he could come look at the car, no problem. I am a one man shop and close for lunch between 1:00 and 2:00. The adjuster left a message saying he would be here no later than 1:00, possible problem. I left the shop at 1:16 and he had not arrived. When I called the warranty company to find out what had happened they told me that the adjuster's notes said he was here at 1:06 and the shop was closed after confirming that lunch was between 12:00-1:00. BIG PROBLEM!!!!! Remember, I have the voicemail message saying he'd be here BEFORE 1:00. The warranty company allowed me to submit the proof they were seeking but then couldn't accept/open/convert an iPhony video (really?). Anyway, we went through the whole ordeal and then they told me they would only approve what THEY could buy the transmission for. We all know how that goes, the cheapest garbage they can find regardless of miles. I refused and that's pretty much where the ordeal ended. The customer did not have the money to pay any additional over the cut rate that the warranty company approved but she needed it fixed so she could trade it in. Warranty companies have their agenda and it is NOT to pay out more than they take in. Can you as a shop owner blame them? They aren't fair often to the customer or to the shop demanding we use inferior quality parts, but they don't care. They expect us to provide the warranty after that so they are done with the liability or expect the extended warranty to expire before the USED UP part fails again. Again, how is this wrong for a company that is simply playing the numbers? Don't we do the same thing with our warranties and how we factor them into our hourly rates? Extended warranty companies appear to be evil and they certainly do work in evil, unscrupulous and unethical ways. But they offer a contract and the customer accepts that contract, Like Kind & Quality and all. I think the problem comes in by the repair shop not adequately informing their customers IN ADVANCE that the warranty company will NOT cover everything and likely will NOT perform in a way that the customer is expecting. We do not need to accept the risk and danger to our reputations, but these are often our existing customers who trust us, who like us, who want to do business with us. Education is the key, educate them up front that you will do everything you can to get as much covered as possible, but that there will most likely be things that the warranty company won't pay that they should pay. For example, my state of Michigan used to charge sales tax on core values but I had one extended warranty company tell me that they would not. And it was not an insignificant core amount either. I explained that to the customer, the customer called and complained and the warranty company finally relented and covered the sales tax because the customer induced them to investigate the law. Thankfully now we don't have to charge sales tax on the cores unless there is no core returned.
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