Tom’s Trends – Margin & Inflation [CC 104]

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• Price increases (inflation) are currently running about 7% year to year with no signs of letting up and plenty of reasons why it could go higher.
• So, what. What does that mean for shops? It will kill some shops and damage others, some seriously. 70s average 7%, peaked at 14% 1980
• Like the frog in the pot of boiling water, it can go unnoticed when not monitored carefully.
• Shop A is on top of it, making sure to stay ever or slightly ahead as there seems to be no let-up in sight.
• Total GP for 2022 61%
• Shop B is kinda sorta aware but not watching the numbers as they should.
• Total GP for 2022 56%
• Shop C is oblivious. Not into numbers - not watching the news.
• Total GP for 2022 51%
• These shops all do about $1M in sales
• At the end of the year, shop A has $50,000 more than shop B and $100,000 more than shop C. Trailing the inflation curve can be damaging or deadly to any business.
• Monitor GP daily on every RO. Your software should make that a quick and easy process. If not, it may be time to go software shopping.
• When an RO is below your goal line (typically in the 60% area), why? Find the answer. Does something need adjusting?
• In an inflationary environment, checking numbers weekly or monthly is not enough. Set time aside every day to check every RO.
• Then at the end of the month, look over your expenses thoroughly. Make sure they are separated into many lines so you can quickly see changes in individual items.

Put all your key numbers on a three-month rolling average – that is called TRENDING. It can save you a lot of money.  

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Tom Ham, with the help of his wife Deb, is the creator and owner of Automotive Management Network a 12,000 plus member website dedicated to the exchange of vehicle service management information. Tom got his start in the auto service industry pumping gas in the late ’60s. Tom and his wife operate Auto Centric, an import specialty shop in Grand Rapids, MI. Tom and Deb have five children including two sons and a daughter who served in the Iraq War as U.S. Marines.  He writes extensively on industry topics.  Discover Tom’s previous episodes HERE.

 

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