I'm Confused... And need help.

[CarER]

Hey all! So I've been too embarrassed to ask this question before hand but I'm so tired I don't even care anymore.

 

I've been keeping records as best as I can lately, as far as quickbooks and Mitchell and everything. On paper, everything looks good.

 

By that I mean:

- ARO is growing: - up from about $180 earlier in the year to about $230 last month and growing steadily.

- My GP% is hovering at 57-62%

- Car Count is slowly climbing - at 55 last month (we're a smaller shop)

 

But the problem is, there is hardly any money left from week to week. I can't seem to figure out what I'm doing wrong. I try my best not to spend money unnecessarily, mortgage is not very high, expenses are a bit more than they should be, but is that all that's sucking the money? And I know this question most likely cannot be answered like this, but maybe you guys can point me in the right direction.

 

Feel free to ask any questions. Thank you in advance!

 

[lmcca]

well, how many techs? how many other employees etc?

 

this is pretty broad but car count is low, aro is kinda low but without seeing everything then hard to gauge it

[CarER]

Besides me and I don't work as a tech more of the service advisor, there are 2 techs. One oil change tech (paid hourly) and one regular tech. (also paid hourly)

 

I understand it's hard to gauge from a forum, but maybe I can get some ideas of what to change or implement.

[HarrytheCarGeek]

For a smaller shop ARO and car count is very low, $230 x 55 =$12,650 if GP at 60% = $7,590 Costs of $5,060. $7,590 /4.2 = $1,807 projected cash flow per week.

 

55 cars month / 4.2 = 13.09 cars week. if 6 works days = 2.18 cars day! Not good.

Edited December 3, 2015 by HarrytheCarGeek

[ncautoshop]

For a smaller shop ARO and car count is very low, $230 x 55 =$12,650 if GP at 60% = $7,590 Costs of $5,060. $7,590 /4.2 = $1,807 projected cash flow per week.

 

55 cars month / 4.2 = 13.09 cars week. if 6 works days = 2.18 cars day! Not good.

Let's put that in perspective though. My car count is probably 2 or less a day some months...but my ARO is roughly $700 in months like that. As I said in my other post. It's easy to get caught up in kpi's, and they are important but as Elon told me in a conversation a while back. Apples to apples and Oranges to oranges. In this case I think I'd be looking at efficiency, work mix and inspections. Are you selling work thats found?

 

Sent from my SM-N910V using Tapatalk

Edited December 3, 2015 by ncautoshop

[ScottyP]

That's not enough work for 2 techs, I'm not surprised there's no money left. I'm a small shop too, in fact I work completey by myself except for the summer months when I have a helper. My ARO is around $350 and I average 3 cars per day.

[stowintegrity]

Besides me and I don't work as a tech more of the service advisor, there are 2 techs. One oil change tech (paid hourly) and one regular tech. (also paid hourly)

 

I understand it's hard to gauge from a forum, but maybe I can get some ideas of what to change or implement.

 

CarER,

Like everyone else has been mentioning already, it's difficult to pinpoint a singular "golden" nugget of advice to offer in this setting, but I think everyone here truly empathizes with your post....we've all been in that spot, so you couldn't have posted in a better place. I think everyone's response so far has been correct.

 

I can only offer my own personal opinion, and I surely don't want to sound as though there's just one correct answer. This is simply what's worked for us in the last five years, and in our community. We carefully track what we refer to as our "10 Key Economic Indicators", and you've hit on some really important ones in your post. For the sake of trying to give you a picture of why this works for us, here are the ten metrics we record & compare on a weekly basis, and kept in a binder for our service advisors to refer to:

 

1. Total Sales (Revenue Dollars)

2. Last Year's Sales (Trending/Charted Sales History)

3. Established Sales Goal (Currently 40% over Last Year Same Week)

4. Gross Profit Margin (Our goal is 60%)

5. Average Repair Order (Our goal is $400)

6. Shop Efficiency (# of man hours spent compared to hours sold)

7. Average Hours/Repair Order (Currently averaging 2.25)

8. New Customers (30% of our repair orders)

9. Referrals (20-30% of our repair orders)

10. Comebacks (Anything above 1 out of 200 cars triggers an investigation into possible ways to improve our process)

 

There are exciting benefits to having a smaller shop (where your costs & overhead are hopefully easier to manage), but some of these key numbers are still likely, CarER. For instance, set your goals at a level where they're quite challenging, but still attainable, such as ARO, GPM, and New Customers & Referrals, and DON'T SETTLE!

 

These are the goals that work for us, but hopefully you can get a simple snapshot of our approach.

[HarrytheCarGeek]

Let's put that in perspective though. My car count is probably 2 or less a day some months...but my ARO is roughly $700 in months like that. As I said in my other post. It's easy to get caught up in kpi's, and they are important but as Elon told me in a conversation a while back. Apples to apples and Oranges to oranges. In this case I think I'd be looking at efficiency, work mix and inspections. Are you selling work thats found?

 

Sent from my SM-N910V using Tapatalk

You can sell four tires and an alignment and bring up you ARO, but not your GP, while also selling some brakes and do much better with your GP. Choose the most beneficial /profitable work first, and any profitable work is a better choice than no work at all.

[ncautoshop]

You can sell four tires and an alignment and bring up you ARO, but not your GP, while also selling some brakes and do much better with your GP. Choose the most beneficial /profitable work first, and any profitable work is a better choice than no work at all.

exactly! And the least profitable work always is the most frustrating and tedious work!!!

 

Sent from my SM-N910V using Tapatalk

[HarrytheCarGeek]

CarER:

 

I would tell you to do a marketing blast, but much of the demand would be wasted if you are not ready to take advantage of it.

 

So, get your numbers in order, know your metrics.

 

Remember this: EVERYTHING IS ABOUT MAKING A PROFIT, YOU MUST MAKE A PROFIT. As long a you make even a 1 cent profit over all your costs and expenses you will stay in business indefinitely. You won't grow much, but you will stay in business. The larger the profit, the faster you are enabled to grow your business.

 

Add up all your overhead cost and expenses and divide them into month, week, and day, and business hour cost. This will give you the idea of what is the revenue number that you need. For example, rent, ins., utilities, taxes and labor is $10,000 per month, that works out to about $2,500 week, $500 day / 8 hour day = $62.5 Per hour to keep the door open.

 

Markup your parts at least 100% this is called Keystone markup. So, if the part cost you $10 sell it at least for $20. Adjust as necessary for competition and local market.

 

So, from this example at a minimum you need to sell at least $10,000 in parts and $5,000 in labor per month to break even. For a minimum revenue of $15,000 per month, $3,750 per week, $750 Per day, $93.75 Hour.

 

As you can tell this is way over simplified, and does not account for your expected return on capital, but will do for now.

 

So with these numbers, you need at least 2 cars per day with an ARO of $375 in revenue for $750 in revenue per day. Or in other words, each car is costing $250 to be service at your place not including cost of parts. Let's say you service 10 cars a day without additional expense, this cost goes down to $25 per car on average.

 

Ok.

 

With this in mind, get your marketing stuff ready, make a list of prospects, and start calling, don't let the phone weight 500lbs, call prospects, pass out business cards, print some simple flyers and pass them out, run car clinics, anything to bring up your car count and your revenue.

Edited December 4, 2015 by HarrytheCarGeek

[mspecperformance]

I dont think you are calculating correctly. at $230 ARO x 55 Cars/month = $12650. Your calculation of GP is way off unless your parts GP alone is like 80%. You have to factor your tech salary into your Overall GP to get a real number. If $12650 is a real number of the Gross sale of your shop for 1 month I think you would be hardpressed to survive even if you were a 1 man operation. Are the numbers you posted accurate?

[andresauto]

 

 

Hey all! So I've been too embarrassed to ask this question before hand but I'm so tired I don't even care anymore.

 

I've been keeping records as best as I can lately, as far as quickbooks and Mitchell and everything. On paper, everything looks good.

 

By that I mean:

- ARO is growing: - up from about $180 earlier in the year to about $230 last month and growing steadily.

- My GP% is hovering at 57-62%

- Car Count is slowly climbing - at 55 last month (we're a smaller shop)

 

But the problem is, there is hardly any money left from week to week. I can't seem to figure out what I'm doing wrong. I try my best not to spend money unnecessarily, mortgage is not very high, expenses are a bit more than they should be, but is that all that's sucking the money? And I know this question most likely cannot be answered like this, but maybe you guys can point me in the right direction.

 

Feel free to ask any questions. Thank you in advance!

 

Take a sheet of paper and write across the top:

 

THINGS I'M DOING WRONG.

 

Create a list of at least 20. No less than 20! And if it's more than that, you'll be better for it!

 

For example:

 

1. I drink too much Dr. Pepper

 

2. I show up too late or close too early.

 

3. I don't brush my teeth in the morning.

 

4. I avoid customer interaction.

 

5. I fart and burp in front of too many customers.

 

It does not matter what you write. What matters is that it is TRUE FOR YOU. It is things that you innately know are wrong with and for your business.

 

It is not what anyone else says is wrong with your business. IT IS WHAT YOU KNOW FOR YOURSELF!

 

If your customer says your price is to high and you feel your prices are to low, than we know that for your customer, prices are to high for him/her. We don't care about others opinions. We care about YOU here and YOUR business.

 

It could be: I attract the wrong types of customers or I laugh to much and people do not take me seriously or my technicians are not professional in dress and manner and don't inspire confidence or I steal from my business by not separating my personal income from my business income or I don't handle my tax liabilities in an honest and ethical manner or I waste time watching the ducks mate outside instead of ordering parts efficiently or none of the above. It must be REAL for YOU.

 

It's your subjective point of view of what is wrong.

 

After you are done with your list, pick out the top five most destructive acts toward your business and confront those only. Forget the other 10 million for now, we'll get to those later. Out of the top five, you can put them in respective order of importance or most easy to handle.

 

The key is to individuate and acknowledge all points of contention and destruction against the prosperity and growth of the business.

 

Get that together, post them or pm them and we'll take it from there. Nothing is too difficult to solve but confusions are often too difficult to confront leading to failure. Let's confront this.

 

-Andre

[mmotley]

Personally, an excel spreadsheet and some calculations combined with your bank statement would be the easiest way to find out where your money is going.

 

Make sure your hitting your GP% on parts and labor. If your not, you either need to raise prices (parts or labor rate) or lower costs (seek cheaper parts or cut payroll somehow).

 

Once your making your necessary GP%, start looking at operating expenses. Figure you want to keep 20% net. Subtract that and COGS and what you have left is your operating expense budget. If your operating expenses are over budget, start making the tough choices on what has to go.

 

Based on the numbers you provided, I would say you're most likely over-staffed. I am currently a 2 man shop and work on more cars than you with time left to sweep the floors and clean up. That's good news though, since payroll is likely to be your biggest cost.

[alfredauto]

If there's no money left and you don't know why, its time to track all expenditures. At first glance you might expect more than you have. Add up all the expenses, and I mean all of them. 3% for the credit card processor, 8% for the sales tax, 3% for unbilled shop supplies, 3% for shrink, 15% payroll tax, 3% for lunches, 1% for girl scout cookies, 2% for toilet paper and hand soap, it goes on and on.

 

So when your done you'll see at 50% gross profit (income minus parts billed) you are left with 50% to pay expenses. Take off the 40% of gross for the other expenses and you will fall in line with most businesses - 5-10% net. If you want to earn $50,000 for yourself you better be doing $500k a year gross sales with a tight grasp on the expenses.

 

Don't feel bad if you're in the dark, most business owners learn the hard way - just work and make money and feel good until you can't pay the bills. Get your spread sheet filled in, maybe 20 or 30 lines of expenses, and start trimming each line by 1% or half percent or whatever just trim the fat off.

 

Don't worry once you get in the habit of tracking all the money it becomes very easy to see what's left for you. I pay myself a salary and the rest stays in the business, but thats not the only way. I could just take a draw every week based on the weekly profit, but I'm not so good at budgeting with the feast/famine routine.

[HarrytheCarGeek]

I pay myself a salary and the rest stays in the business, but thats not the only way. I could just take a draw every week based on the weekly profit, but I'm not so good at budgeting with the feast/famine routine.

 

Alfred that's a great point. You have to include your salary into the equation, so if you were to step out of the business you can have someone step in and paid them to do the job. It would seem that most guys are not running a business but just buying themselves a job.

 

 

mmotley: excel spreadsheet and some calculations

 

Spreadsheets are a great tool! I remember when I first started to use them and was hooked on them, I actually went to take a couple of night classes at the community college just to learn to use them more efficiently.

[HarrytheCarGeek]

I wanted to add, lot's of guys don't really understand margin vs markup. Here is a great article that illustrates how to figure margin and use markup:

 

http://www.accountingtools.com/questions-and-answers/what-is-the-difference-between-margin-and-markup.html

 

 

What is the difference between margin and markup?

The difference between margin and markup is that margin is sales minus the cost of goods sold, while markup is the the amount by which the cost of a product is increased in order to derive the selling price. A mistake in the use of these terms can lead to price setting that is substantially too high or low, resulting in lost sales or lost profits, respectively.

There can also be an inadvertent impact on market share, since excessively high or low prices may be well outside of the prices charged by competitors.

More detailed explanations of the margin and markup concepts are as follows:

• Margin (also known as gross margin) is sales minus the cost of goods sold. For example, if a profit sells for $100 and costs $70 to manufacture, its margin is $30. Or, stated as a percentage, the margin percentage is 30% (calculated as the margin divided by sales).
• Markup is the amount by which the cost of a product is increased in order to derive the selling price. To use the preceding example, a markup of $30 from the $70 cost yields the $100 price. Or, stated as a percentage, the markup percentage is 42.9% (calculated as the markup amount divided by the product cost).

It is easy to see where a person could get into trouble deriving prices if there is confusion about the meaning of margins and markups. Essentially, if you want to derive a certain margin, you have to markup a product cost by a percentage greater than the amount of the margin, since the basis for the markup calculation is cost, rather than revenue; since the cost figure should be lower than the revenue figure, the markup percentage must be higher than the margin percentage.

The markup calculation is more likely to result in pricing changes over time than a margin-based price, because the cost upon which the markup figure is based may vary over time; or its calculation may vary, resulting in different costs which therefore lead to different prices.

The following bullet points note the differences between the margin and markup percentages at discrete intervals:

• To arrive at a 10% margin, the markup percentage is 11.1%
• To arrive at a 20% margin, the markup percentage is 25.0%
• To arrive at a 30% margin, the markup percentage is 42.9%
• To arrive at a 40% margin, the markup percentage is 80.0%
• To arrive at a 50% margin, the markup percentage is 100.0%

To derive other markup percentages, the calculation is:

Desired margin / Cost of goods

For example, if you know that the cost of a product is $7 and you want to earn a margin of $5 on it, the calculation of the markup percentage is:

$5 Margin / $7 Cost = 71.4%

If we multiply the $7 cost by 1.714, we arrive at a price of $12. The difference between the $12 price and the $7 cost is the desired margin of $5.

Consider having the internal audit staff review prices for a sample of sale transactions, to see if the margin and markup concepts were confused. If so, determine the amount of profit lost (if any) as a result of this issue, and report it to management if the amount is significant.

If the difference between the two concepts continues to cause trouble for the sales staff, consider printing cards that show the markup percentages to use at various price points, and distributing the cards to the staff. The cards should also define the difference between the margin and markup terms, and show examples of how margin and markup calculations are derived.

Edited December 5, 2015 by HarrytheCarGeek

[CarER]

First of all, thank you everyone so much for all of the replies. I read carefully through each one and will now try my best to reply to each one.

 

@ncautoshop: I try my best to show each customer their inspection, but I will say that quite often I fail to show them or even do the inspection. That's mainly why I hired my oil change guy.

 

@stowintegrity: Thank you for those, I will say that I do track a couple of those but only like 3 or so from that list. I have goals set for the business but get too caught up with things that do matter to keep accurate track of them.

 

@Harrythecargeek: I did some calculations - and according to them, my monthly expenses are $9,722.42 including labor. Using your formula, that amounts to $56.52/hr to keep open.

 

@mspecperformance: My gross sales for this year is going to be about $181,042.90. (We opened in March of 2013.) Last year, we did a total of 118,xxx. So there's definitely some growth. That being said, this year we're doing about $15,086/month. The numbers I posted were for the month of November, which was a little slower.

 

@andresauto: Thank you for your suggestion, I'll get that list posted here by the end of the day.

 

@mmotley: What do you mean by getting a spreadsheet combined with my bank statement? And I just hired my oil change guy to do small stuff and mainly for the digital inspections. My main tech is 62 and though he's decently quick, he doesn't get along too well with technology.

 

@alfredauto: Like I mentioned earlier, my expenses are $9,722.42/month including labor. That leaves me with about 9%. And that's a great idea with trimming the expenses, thank you!

 

@Harrythecargeek: I recently started to use a parts matrix. It starts from 70% margin and goes to 35%.

 

Again, thank you all for all of your responses. I really appreciate them all.

[mmotley]

Open a blank excel spreadsheet, start working down your bank statement, and start listing all the fixed operating expenses, i.e. Rent, Loan Payment, Website fees/online ads, Insurance, software subscriptions, phone, internent, etc. (employees really shouldn't be figured into this as they are considered a cost of labor and affect your overall GP%). If you have annual subscriptions, divide those numbers by 12 and put them on the spreadsheet. Anything on the bank statement that didn't get put onto your list of fixed operating expenses is where your money is going. Outside of the fixed operating expenses, you should really only have payroll for YOU and your employees (start taking a weekly check if you're not already, you might be taking too many owner draws and don't realize it) and parts purchases.

 

Odd things will come up... You buy a trans flush machine, you buy a new lift, you had to get a rental for a customer, etc, but for the most part you shouldn't have much else. If you do, that's where your money is going. If you don't, well then, your expenses, payroll, or parts are to expensive for the amount of business you are doing.

 

Hope that helps. I'd say, so far you have gotten great advice. I don't post much on here because the others that have responded provide enough solid feedback.

 

I also add, if you notice, almost everyone is asking for numbers (ARO, Car Count, GP%, YTD sales, etc). If you don't know your numbers or where your money is going, you can't fix it.

[CarER]

mmotley, Thank you for the explanation. That's definitely something I need to do. As far as the numbers go, I know most of them off hand, but not all. Thank you!

[CarER]

Andre, here is a top 20 of things that I'm doing wrong. The first 5 are what I think need to be worked on first, and then the rest are in no specific order, just in the order of how I thought of them. And there's definitely more, but here is at least that.

1. Not charging for diagnosis properly.

2. Do not do inspections on every vehicle.

3. Am inconsistent with the sales process.

4. Sometimes I do not follow the parts margins because I think "I wouldn't pay that much for that filter (or whatever)"

5. Work in the business and not on the business.

6. I like to avoid conflict - including when employees do not meet expectations.

7. Too afraid to network for customers, or call prospects.

8. Try to be all things to all people - take things very personally when it is business. (for example, a bad review)

9. I sometimes work on things that are not helping the business (like mopping floors) when I know I have other things I could be doing.

10. I am not consistent with follow up calls a few days after the repair is completed.

11. When we do the inspections, sometimes I do not present all of the information to the customer, especially if I don't THINK they will buy it.

12. I am inconsistent with my monthly marketing campaigns.

13. Keeping employees motivated to produce the proper amount of hours/employee efficiency. (both techs are paid hourly)

14. Do not track KPI's consistently.

15. Inconsistent with my processes.

16. Not being a good leader, meaning, allowing certain things that are not beneficial to the business.

17. Asking tool guys and parts vendors how other shops are doing when we're slow so that I can feel better if we are slow.

18. Listening to family on how to run the business.

19. Not keeping techs accountable for training.

20. Get too busy to focus on customer service.

Again, thank you all for all of your help.

[davine4real]

#17 is funny lol. But I think you have a good setup and the right number of employees to be on your way to owning a business not just a job like a one man show. Reviewing your shop process from the customer intake to the custome exit would help. Example: make sure techs using forms to document any upsell opportunities. Then you sell them or at least try EVERY TIME . And try different marketing ideas to increase car count . I don't. Think. You're doing as bad. As you think.

[HarrytheCarGeek]

@Harrythecargeek: I did some calculations - and according to them, my monthly expenses are $9,722.42 including labor. Using your formula, that amounts to $56.52/hr to keep open.

 

 

Great, now multiply that x 3 and make it your sales revenue target at a minimum. $9,800 x 3 = $29,400 per month. If you focus and run efficient, you can see that sales target is very comfortable to achieve and deal with. It will also help you build a cushion for to deal with the feast/famine situations of small business life.

 

Also, do some research on your demographics, look for your target profile customer, that is to say who is your ideal customer. If your town only has 1,200 people in it, you may have some trouble meeting your numbers, so you may have to change strategy to meet your revenue target numbers.

 

Btw.I like your list, great job. If you notice, if you focus on your first five much of your troubles would clear right up.

[CarER]

Harry,

 

I'm going to run that as my new goal sheet for my employees. Thank you!

 

As far as the demographics go, I have 2 that I focus on: 1. College students (our town has 56,000 population, then an additional 35,000students (roughly) come in every year to one of ou 2 universities.)

2. The local customers - single family homes, own the home, 55,000 median income, etc...

 

And thank you, I've been trying to focus on getting those things worked on.

 

That being said: I'm not sure why but every week is a roller coaster in terms of numbers for us. Meaning, for the week of 11/22 - 11/28: our average RO was $161.07 with a GP of 56%. Last week it was an ARO of $345.97 with a GP of 64%. This week our averago RO is about $280 so far.

[mspecperformance]

 

Andre, here is a top 20 of things that I'm doing wrong. The first 5 are what I think need to be worked on first, and then the rest are in no specific order, just in the order of how I thought of them. And there's definitely more, but here is at least that.

1. Not charging for diagnosis properly.

2. Do not do inspections on every vehicle.

3. Am inconsistent with the sales process.

4. Sometimes I do not follow the parts margins because I think "I wouldn't pay that much for that filter (or whatever)"

5. Work in the business and not on the business.

6. I like to avoid conflict - including when employees do not meet expectations.

7. Too afraid to network for customers, or call prospects.

8. Try to be all things to all people - take things very personally when it is business. (for example, a bad review)

9. I sometimes work on things that are not helping the business (like mopping floors) when I know I have other things I could be doing.

10. I am not consistent with follow up calls a few days after the repair is completed.

11. When we do the inspections, sometimes I do not present all of the information to the customer, especially if I don't THINK they will buy it.

12. I am inconsistent with my monthly marketing campaigns.

13. Keeping employees motivated to produce the proper amount of hours/employee efficiency. (both techs are paid hourly)

14. Do not track KPI's consistently.

15. Inconsistent with my processes.

16. Not being a good leader, meaning, allowing certain things that are not beneficial to the business.

17. Asking tool guys and parts vendors how other shops are doing when we're slow so that I can feel better if we are slow.

18. Listening to family on how to run the business.

19. Not keeping techs accountable for training.

20. Get too busy to focus on customer service.

Again, thank you all for all of your help.

 

 

 

I love this list and I think a lot of us can relate to parts of it. To be honest I think all of your concerns are the exact same problems I've had!

 

You definitely need to work on 3 areas... Leadership / Management / Sales. I was in the exact same boat trust me. If I can make any suggestions is to read read read. Soak as much info as you can on how to be an effective leader and manager. Also if you are the only sales person which I think is what your situation is, you really need to work on becoming a decent service writer. It seems like you know exactly what needs to be done and what you should be doing but you are having a hard time with implementation. The better you get at sales the more money you will be making and in 6 months to a year I would highly suggest to look to hire a service adviser. I personally did a pretty good job as a service adviser however there were still things that were hard for me to do at times like charge appropriately for parts or charge for diag. After I hired my service adviser things got a lot easier. Margins were holding and even going up. Since I've hired my second adviser as a team they are able to hold to my parts matrix and will not discount unless you get the go ahead from me. I actually set parameters in which they can offer any types of discount which they follow to a T. It helps because I don't have to get emotionally invested with a client or the sale. After all you are the owner and you hold all the keys to give discounts. Both you and the client know that.

[CarER]

Mspec, Thank you, it's nice to hear that other people have been in this position. I'm extremely young, so I know I have a LOT to learn. I've been keeping up with the "Books" thread going on right now and it's been great! I've definitely grown a lot in sales but still have a long ways to go.

 

As far as a sales adviser goes, I would love that and think that he/she would help tremendously. I get way too emotionally tied up in the business and have a hard time keeping it away from my personal life.

[mspecperformance]

Mspec, Thank you, it's nice to hear that other people have been in this position. I'm extremely young, so I know I have a LOT to learn. I've been keeping up with the "Books" thread going on right now and it's been great! I've definitely grown a lot in sales but still have a long ways to go.

 

As far as a sales adviser goes, I would love that and think that he/she would help tremendously. I get way too emotionally tied up in the business and have a hard time keeping it away from my personal life.

 

 

you just have to turn it into a strength. Some people can be very analytical and not let much rattle them. For those of us who are more emotionally charged we have to figure out what works best for us. If you are like me, I am a dreamer so its tough to get into the more technical aspects of being a business person.

[CarER]

I don't really know how to turn it in to a strength but I'll definitely try my best, hah.

[mikerisich]

Hey all! So I've been too embarrassed to ask this question before hand but I'm so tired I don't even care anymore.

 

I've been keeping records as best as I can lately, as far as quickbooks and Mitchell and everything. On paper, everything looks good.

 

By that I mean:

- ARO is growing: - up from about $180 earlier in the year to about $230 last month and growing steadily.

- My GP% is hovering at 57-62%

- Car Count is slowly climbing - at 55 last month (we're a smaller shop)

 

But the problem is, there is hardly any money left from week to week. I can't seem to figure out what I'm doing wrong. I try my best not to spend money unnecessarily, mortgage is not very high, expenses are a bit more than they should be, but is that all that's sucking the money? And I know this question most likely cannot be answered like this, but maybe you guys can point me in the right direction.

 

Feel free to ask any questions. Thank you in advance!

 

 

Hey CarER,

 

I checked out your account to see if I could help, and noticed you’re not using your digital inspection tool to its fullest potential. I understand your situation with being a smaller shop, but honestly you’re leaving money on the table.

 

The main benefits of Mobile Manager are increased ARO, car count, and efficiency across your whole shop. If your usage is limited, your results will be too. Simply put, the more you use it, the more you’ll get out of it.

 

The blueprints for Mobile Manager were designed by shop owners. We consult with a round table of shops discussing their needs and struggles regularly. Point being is this tool was conceived by people in your situation, and has been tested and proven in the real-world.

 

We can help you, Reuben. Do you mind if we reach out to see if we can give you some tips on how to get the most out of Mobile Manager? Let me know.

[CarER]

Mike,

 

I would be grateful if you were to reach out and give us some tips on how to use it properly. Thank you!

 

 

 

Hey CarER,

 

I checked out your account to see if I could help, and noticed you’re not using your digital inspection tool to its fullest potential. I understand your situation with being a smaller shop, but honestly you’re leaving money on the table.

 

The main benefits of Mobile Manager are increased ARO, car count, and efficiency across your whole shop. If your usage is limited, your results will be too. Simply put, the more you use it, the more you’ll get out of it.

 

The blue prints for Mobile Manager were designed by shop owners. We consult with a round table of shops discussing their needs and struggles. Point being is this tool was conceived by people in your situation. It has been tested and proven in the real-world.

 

We can help you, Reuben. Do you mind if we reach out to see if we can give you some tips on how to get the most out of Mobile Manager? Let me know.

[mikerisich]

Mike,

 

I would be grateful if you were to reach out and give us some tips on how to use it properly. Thank you!

 

 

 

Ok, sounds good. We'll be in touch shortly.

[mspecperformance]

CarER, if you are already using bolt on then you should definitely be performing inspections on EVERY car. Its a no brainer. Do you pay your tech salary, hourly or flat rate? I personally give .5 for my inspections to my technicians. This is on top of whatever service they are already performing. I have been told this rather generous for an inspection but this way I make the technician more invested in performing a proper inspection both due the fact they are getting paid for it and they will prosper from any additional sold work.

[CarER]

Mspec, both of my techs are paid hourly. We've been up and down as far as the inspections go. Some days we're on top of them and other days it's as if we forgot the program existed.

[mspecperformance]

Mspec, both of my techs are paid hourly. We've been up and down as far as the inspections go. Some days we're on top of them and other days it's as if we forgot the program existed.

 

 

Just remember that we can get very caught up and almost on a high when we have a lot of cars. Business is great, we are making money life is good. The problem is we then forget to do all the little things that will keep us consistent. Follow up calls, small customer service things we need to always be doing and INSPECTIONS. Inspections are what feeds tomorrow's good days and next week and next month and so on an so forth. They need be done all the time on every car. If you want to think of it this way... you are doing a real disservice to your clients because you are not performing proper inspections for everyone. If they have a problem their car and they were not notified prior they can be all kinds of upset and leave you a bad review, go to another shop, tell other people of their bad experience. If you have build an incentive program for your techs since you pay hourly then I would suggest you do it. High quality and usable inspections are the life blood of your sales operation. You already have Bolt On so you HAVE to get it done. Lets go!

[CarER]

Mspec, I've never really thought about it that way, and I'm sure my techs haven't either. I'll bring it up to them and see what they think!

[mspecperformance]

Mspec, I've never really thought about it that way, and I'm sure my techs haven't either. I'll bring it up to them and see what they think!

 

 

We have all been caught with our pants down. When business is slow we blame it on everything but ourselves. This is what we can do to smooth out those lows. Follow up calls. Call back customers for their declined work. Schedule ahead work with your customers. Repairs that we are recommended in 3 - 6 months have on a schedule so you can call them back and get them back into your shop. Increase your ARO by having high value inspections. Build systems around this and above all else be consistent.

[mmotley]

Not to highjack this thread, but M-Spec, are you doing these inspections for free or charging the customers for them?

[CarER]

 

 

We have all been caught with our pants down. When business is slow we blame it on everything but ourselves. This is what we can do to smooth out those lows. Follow up calls. Call back customers for their declined work. Schedule ahead work with your customers. Repairs that we are recommended in 3 - 6 months have on a schedule so you can call them back and get them back into your shop. Increase your ARO by having high value inspections. Build systems around this and above all else be consistent.

I think that consistency is one of my biggest issues. On some days someone will come in, get a full inspection, a hand written thank you card on their seat, and a follow up call in a few days. On other days they won't get an inspection, no thank you card and no call. If I were a customer and my friend and I went to the same shop and I saw that he got all of those things an I didn't, it would be upsetting.

 

I need to get myself together and make sure I'm consistent in every little thing that we do, I'm a firm believer that it's all of these little things that separates us from the competition.

[kars]

 

Andre, here is a top 20 of things that I'm doing wrong. The first 5 are what I think need to be worked on first, and then the rest are in no specific order, just in the order of how I thought of them. And there's definitely more, but here is at least that.

1. Not charging for diagnosis properly.

2. Do not do inspections on every vehicle.

3. Am inconsistent with the sales process.

4. Sometimes I do not follow the parts margins because I think "I wouldn't pay that much for that filter (or whatever)"

5. Work in the business and not on the business.

6. I like to avoid conflict - including when employees do not meet expectations.

7. Too afraid to network for customers, or call prospects.

8. Try to be all things to all people - take things very personally when it is business. (for example, a bad review)

9. I sometimes work on things that are not helping the business (like mopping floors) when I know I have other things I could be doing.

10. I am not consistent with follow up calls a few days after the repair is completed.

11. When we do the inspections, sometimes I do not present all of the information to the customer, especially if I don't THINK they will buy it.

12. I am inconsistent with my monthly marketing campaigns.

13. Keeping employees motivated to produce the proper amount of hours/employee efficiency. (both techs are paid hourly)

14. Do not track KPI's consistently.

15. Inconsistent with my processes.

16. Not being a good leader, meaning, allowing certain things that are not beneficial to the business.

17. Asking tool guys and parts vendors how other shops are doing when we're slow so that I can feel better if we are slow.

18. Listening to family on how to run the business.

19. Not keeping techs accountable for training.

20. Get too busy to focus on customer service.

Again, thank you all for all of your help.

 

That my friend, is a good honest list. I find myself guilty of about 1/2 those things. If you can trim that in half I would consider it a victory.

You might consider putting your techs on commision as well. It will help with the inspections and force you to do a better job of selling.

[Handson]

I think that consistency is one of my biggest issues. On some days someone will come in, get a full inspection, a hand written thank you card on their seat, and a follow up call in a few days. On other days they won't get an inspection, no thank you card and no call. If I were a customer and my friend and I went to the same shop and I saw that he got all of those things an I didn't, it would be upsetting.

 

I need to get myself together and make sure I'm consistent in every little thing that we do, I'm a firm believer that it's all of these little things that separates us from the competition.

 

You have listed all of your problems now you just have to work on them. I was in your exact shoes. The i fired my older tech and hired a faster one and started doing inspections on every car and attempting to sell everything. I have two techs also and these days i get upset when we do less then 45k in a month.

 

You will get there if you stay consistent.

[SprinklerMagician]

Old post but I'm going to reply.

 

Look at your objectives. Why are you doing what you are doing the way you are doing it? The answers can be deceiving.

 

Obviously we are all trying to make money. So lets break it down. Maybe we want a higher car count or a higher ARO.

 

I'd say forget all that has been said above (albeit very valuable in and of itself in the proper timeframe) and look at what you are doing for a minute. If you were all by yourself with no employees would you be making money? How much? Those activities which generate lots of profit can be delegated to employees, those that don't necessarily generate tons of profit (oil changes maybe) are killing you. It is amazing how one man or a two man shop can survive just fine and cover overhead, but if you go to three and things aren't organized for efficient scaling and things get out of hand real quick and to track the source of the issue seems impossible. The issue seems invisible. Then we start working on improving the wrong things.

 

My guess is that one or more of the following applies:

 

1. Your guys aren't busy and this is why you are paying them hourly.

2. There are some or a lot of things that take your or your employees' time that generate no revenue, and this seems okay because you aren't overworked.

3. Your guys aren't so good that they can run the shop without you, so you have to be there making things work. That making things work thing doesn't directly generate revenue in and of itself.

4. Warranty issues are getting out of hand.

 

Could you cover your overhead if you were the only tech? If not then could you do so with a two man show? If not then prune the overhead out. If so then I'd say try that and use the third guy part time as needed. If he is unwilling then you have to work as a two man show until you have nailed the model, have made money to prove you can be successful then you can grow. This is hard because you will have to say no to more work. I've learned that if you can't make money being small then getting bigger only makes the problem worse whereas most people thinks it gives them a competitive advantage.

 

I also believe that treating people right and eliminating advertising costs is a better way to acquire new business. Referrals are better anyway.

[JustTheBest]

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[TheTrustedMechanic]

I've read with interest all of the comments. There is a great deal of very good information in those posts.

But one thing I see is missing that is so often missing in a lot of the "ARO must be this much" discussions is this,

Your customer's car needs what it needs, not how much you need to sell.

 

What that means is this, do not let your need for an ARO of $350 (or whatever you conclude) cloud your judgment and destroy your reputation. If you need an ARO of $350 then that's exactly what it is, average and it is your need, not your customers. I am sick of hearing all of this "you are entitled to fulfill what you need on your customer's dime" stuff from these calculation explanations. If you have a dozen cars come in for an oil change or a tie rod end and that is all they need, then you can't ethically or honestly make $280, or $350 or $700 on those tickets. If that is all they need. But when you have the car on the hoist for the oil change, how are those CV boots or tie rod ends or an easy peek at the brakes through the wheels? Your need demands you look and identify legitimate work, but don't cheat your customers to meet your ARO. It's easy to lose sight of that when you're trying to make numbers on every ticket.

 

I am a horrible business owner. I tell my customers that they will need this work, down the road. I don't try to sell it to them today if they have reasonably 5000 miles before it's due. But if I ethically think it will fail in the next month or so I will certainly try to sell it today. You also have to consider your customer's tolerance for a breakdown or additional downtime. Don't let your bad numbers or desire for better numbers affect how you honestly deal with your customers. They need what they need, not what you need them to buy.

 

You have every ethical right to look for more work, but don't let your standards slip and try to sell unneeded work because you need an ARO of $350, their brakes are still at 50% and they came in for an oil change. It takes years to build a good reputation but only seconds to ruin a lifetime's work.

[Jeff]

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[TheTrustedMechanic]

@Jeff

I know what you're saying about the dealers and some indies being crooks. But they didn't get there overnight. They didn't open their doors with the intent to cheat their customers. It was a slow slide. That was my point with letting your standards slip because you need to make your numbers. I know, I saw it happen. I worked at a dealership with a great reputation. They changed owners, the new owner was known for running an honest place too. Then they replaced the service manager with a corporate "buy the numbers" guy who thought he was God's gift to service departments. He implemented a "spiff" program with the quick service guys, of which I was one at the time. Guess what, that marginal belt suddenly was critical and brakes worn to 30% were unsafe! I would like to say I didn't play that game too, but if it was within the standards we were given for failure, even if just barely or teetering on the edge it was recommended. I saw quickly how that "spiff" program took our focus of doing the job and redirected it toward finding more work, period. Forget the reason the car came in. That service manager lasted about a year before he was shown the door. The service department took about 5 years to bounce back I was told.

 

Regarding the UNDER performed maintenance, yeah, I've seen those bogus numbers too. I say they are bogus because I firmly do not believe that they are accurate. At least not practical. Just because your customer's car hits 105,000 miles and is due for a timing belt, spark plugs, cabin air filter and a valve adjustment does NOT mean that the customer is going to buy it. Does that mean there's potential work there that you left on the table? NO! But that's not how the articles are written. And the authors can explain it anyway they want to but the simple fact of the matter is, that $69 BILLION in unperformed maintenance is NOT going unperformed because we aren't finding it or trying to sell it. Some of that unperformed maintenance is also calculated including stuff that is NOT recommended/required by the manufacturers, ie wallet flushes. Some of that under-performed maintenance calculation also includes the missed oil changes because the customer came in at 5500 miles instead of 5000 so by 60,000 miles you have one unperformed oil change.

 

I do agree that we all miss some opportunities and if we get better so can our numbers. But this "unperformed maintenance and repairs" is really a fallacy. If we are doing our jobs, the work is being found, the work is being recommended and the ONLY reason it is not being performed is because the customer wont' buy it, for whatever reason. They may never buy it or they may need to save up to pay for it. My point I still think is valid, the car will need what the car needs, not what we need (or want) to sell. But to listen to some of these article authors EVERY car needs more than we find, every car needs more than the customer will buy, EVERY car could meet our ARO needs IF we look hard enough. So I guess I'm just a little sensitive to the implicit dishonesty of some of the so called "professional advice" we are given sometimes about inspections, finding/selling needed work and under-performed maintenance.

 

In my mind the bottom line on the un-/under-performed maintenance is this, if it can be sold, it is sold/bought. It is our jobs to look for and find any legitimate repairs and maintenance that needs to be performed. But just because we find it and offer it to the customer does not mean it will be bought. And if we are trying to sell, sell, sell everything possible to every customer we will lose their trust. As I explain to my customers sometimes, "It won't affect the safety or reliability of yoru car and I know this is nit-picky I know but I feel it is my job to let you know what I found is not quite right with your car." I can't give you an example of this scenario but some people will be concerned that the jack is missing, others will say, well I'd just call roadside assistance and they use their own jack.

[xrac]

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[alfredauto]

I am willing to bet that any shop can honestly increase their ARO without any high pressure selling or questionable recommendations by simply checking over each vehicle that enters the shop and asking the customer for the work. EXAMPLE: An oil change comes in at 60k miles, the tech gets it in and out in 20 minutes, you made $5 profit, that's it. Customer needs to call the dealer to get the mileage service done. You lose. That same car if you ask the customer "would you like to schedule your 60k mile service with us?" can mean a much better outcome for both parties. It's really all about asking for the sale, and paying attention to things that are broken on the cars you are already working on. That's why a good service manager (or consultant) can take a shop from zero to hero, he's looking after the guys to not let bald tires and grinding brakes go down the road, then making sure someone is relaying the info to the customer. It's so basic, but so many shops are not doing it. It's magic when everybody pays attention.

[mspecperformance]

I've read with interest all of the comments. There is a great deal of very good information in those posts.

But one thing I see is missing that is so often missing in a lot of the "ARO must be this much" discussions is this,

Your customer's car needs what it needs, not how much you need to sell.

 

What that means is this, do not let your need for an ARO of $350 (or whatever you conclude) cloud your judgment and destroy your reputation. If you need an ARO of $350 then that's exactly what it is, average and it is your need, not your customers. I am sick of hearing all of this "you are entitled to fulfill what you need on your customer's dime" stuff from these calculation explanations. If you have a dozen cars come in for an oil change or a tie rod end and that is all they need, then you can't ethically or honestly make $280, or $350 or $700 on those tickets. If that is all they need. But when you have the car on the hoist for the oil change, how are those CV boots or tie rod ends or an easy peek at the brakes through the wheels? Your need demands you look and identify legitimate work, but don't cheat your customers to meet your ARO. It's easy to lose sight of that when you're trying to make numbers on every ticket.

 

I am a horrible business owner. I tell my customers that they will need this work, down the road. I don't try to sell it to them today if they have reasonably 5000 miles before it's due. But if I ethically think it will fail in the next month or so I will certainly try to sell it today. You also have to consider your customer's tolerance for a breakdown or additional downtime. Don't let your bad numbers or desire for better numbers affect how you honestly deal with your customers. They need what they need, not what you need them to buy.

 

You have every ethical right to look for more work, but don't let your standards slip and try to sell unneeded work because you need an ARO of $350, their brakes are still at 50% and they came in for an oil change. It takes years to build a good reputation but only seconds to ruin a lifetime's work.

 

 

All valid points except that the reason why anyone's ARO can be increased dramatically is virtually every car older than 4 years need a lot more work than what is their immediate concern.

[TheTrustedMechanic]

It's magic when everybody pays attention.

I don't disagree with anything you wrote, but I wanted to highlight that part.

[TheTrustedMechanic]

 

 

All valid points except that the reason why anyone's ARO can be increased dramatically is virtually every car older than 4 years need a lot more work than what is their immediate concern.

Case in point, I have a 2005 Chevy Express that came in for an LOF and a tail light out. Parts are on order for a $2500 RO. That nicely offsets the 2011 Escape with 38,000 that needed nothing but an LOF.

 

With that said, if I am doing my job and my customer is allowing me to do my job then their car won't need more than their immediate concern. After 2-3 visits the car/truck/van should be up to snuff and only in need of maintenance or unforeseeable repairs such as the alternator that tested fine last visit.

[Jeff]

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