Tom Ham AutoMN.info

It depends. If the economic slump is mild, the reduction in the number of shops may be good for those remaining. But, we could be headed for a world not seen since the 1930's in the US or even the 1990's in Russia. In such a case, all bets are off for almost any business. Such a scenario is almost unimaginable. Worthless currency. Most business done in barter. Civil unrest. With three of the hottest selling items in the last couple of weeks being safes, guns, and ammunition one gets the impression that it is no longer just the far fringe groups making preparations. I hope it doesn't go that way, but I also do not believe that it could not happen. Can't hurt to be prepared. What will you do if your bank tells you that your funds are not available at this time (this has been occurring to some extent already with some money market funds...just not making the news)? Tomorrow morning would be an excellent time to review the location or all of your assets and investments.

Joe: I believe you are absolutely correct. Many will never know what hit them as this is a very fast moving situation. I would not be surprised to see the majority of legit shops gone a year from now. On the other hand this is the type of industry where countless backyard shops will open and find themselves in high demand as consumers are also rapidly wiped out. I have developed multiple plans for our shop to remain open...all shops should do the same.

The financial mess appears to be headed to an area that none of us can comprehend. The management of both personal and business finance should be first on everyone's to do list as the US economy one year from now may be unrecognizeable. The wheels may be about to come off...yet few are open to accept that possibility.

Alex: I very much appreciate you mentioning one of my classes here. Of all the classes that I present, this is the money class where we really concentrate on getting rid of a lot of wasted spending. Not just a few hundred, but thousands of dollars a year. The next one will be held in Grand Rapids, MI on Thursday, Nov 13th 9am-4pm. Thanks again,

Considering the massive number of miles driven which could be defined as optional, the potential for this number to see a huge drop would seem quite high. Another shop owner told me recently how one of his regulars came in for some service in August. He normally drives 1,000 miles or so a month. He decided to make some major changes in his driving habits in a number of ways. The result was that the car had clocked 300 miles since April! That may be extreme, but I believe that many drivers could reduce their driving by thousands of miles each year.

For the time being it seems to me that demand is dropping faster than the number of shop which are closing. From what I am hearing from around the country the number of shop closings could accelerate rapidly due to vast numbers of empty bays...shops are learning a definition of "slow".

Actually, the media has been and still is under reporting this to the extreme. The math of the economy is far worse than most people realize.

Yes to both....and there are other reasons, also. Every day that goes by more people are awakening to the increasingly likely possibility that the US economy may collapse. Loss of jobs, homes, investments, and all of their other stuff is becoming more real. The end of the era of economic fun and the beginning of a massive change in how the average person in the US lives.

We are making more adjustments and getting more creative in many areas constantly. Overall, it is getting tougher, but so far the changes we are making are working both to retain and increase over 07, although the success is not as great as it was when the stimulus checks were being sent out earlier in the year.

Well, of course you are correct. But, the issue has more to do with competition and economic pressures than anything else. We do retain testing charges in almost all cases, but they are lower than what they should be...less than we charged in the 90's. The typical shop around here runs at 50% to 75% capacity. Many advertise that testing is free if they do the repair. We adjust to the demands of the market. We are seeing the complexity of the vehicles driving more cars our way, although this was supposed to be our huge advantage 20 years ago. The market in the future many demand that most testing is very inexpensive, if not free. We concentrate on the bottom line...the overall GP...to get where we need to go. I suggest that all shop owners do the same and not spend too much time worrying about individual segments, whether that is testing, parts, labor, or anything else.

Joe: There are exceptions to almost anything. In general, we will quote almost anyone a price on almost anything. Works great for us!

Probably daily. We quote what was requested, inform them of the inspections which are part of the service, then call them with what we found. Normal daily operations. I can't recall the last time someone complained about this process.

Joe: On the other hand, we gladly quote anyone the prices on cut and dried services like a 60K and have excellent success in doing so. We attract many dealer customers this way.

Almost all types of businesses almost always have price wars. It's the intensity that varies. The intensity in our industry is picking up and will likely grow significantly soon. A few shops will be able to stay out of it. Most will not if they want to be a player. Many who ignore it may get run over. The trick is, if you need to get into the battle, is to maintain decent GP. There are many ways to be price competitive without simply lowering the price. One just needs to be creative in what they offer. Different levels of parts, service, what is included, and warranty are some examples. Adjust to what the customer wants while remaining profitable instead of focusing on what you think they should want.

The biggest thing anyone can do is trend tracking/graphing of all key numbers to see which direction they are headed to prevent getting behind. Also, constant monitoring of GP and expense figures.

Common service prices should be set according to a competition survey. Other prices should be set according to overall GP. Price marketing should be used effectively as needed (yes, I will beat you on that timing belt job if I have stuck techs). Many shops will get behind the curve during the rapid inflation which is not underway....and it will kill many of them.

The key is to adjust to the customer no matter how unconventional a method may seem...and do it in such a way as to maintain decent numbers. I agree with most of the management theories to a point, however if the economy really tanks, all bets are off and many of the management theories will be junk.

Where the industry is headed at this time looks like it will be primarily driven by the economy. What are the indicators in your area? What do you believe will happen to the U.S. economy over the next year or so? If it worsens significantly, shops will be on ground that has not been seen in this country in many years. Maintenance services will decrease, repairs will increase...and many of the repairs will be things that today we consider unacceptable. Fixing parts instead of replacing them. Used parts could become huge. Net income is primarily driven by the difference between sales and costs, not primarily by sales. There are many shops today who could lose 25% to as much as 75% of their sales while fixing their key numbers and end up with the same or more net and a lot less stress. One needs to first fix the key numbers, then go after sales, but conventional wisdom typically has that backwards.

It will likely require more innovation that many are anticipating. The train is coming your way. Key numbers are what shops should currently be looking at, placing costs at the top of the list.

Joe: It's just one more tool in the advisor's tool box to be used when appropriate not unlike so many other industries. Things are a bit different here in Michigan as it has been established numerically that we have been in a one state recession....we started sinking back in 2000 and have never recovered, instead it has progressively become worse each year. 68% of all residential moves here are out of state. We have led the nation in unemployment for years. Many of our counties lead the country in foreclosures....30-40% of them being negative equity forelosures due to collapsing real estate prices. So, we got creative. Lately, GP is up, car count is up, net is up...a lot of this due to new "tactics". Plus, the business is indeed changing. Competition is getting far more sophisticated and will continue to increase. As these things spread beyond the borders of Michigan (already happening from the numbers that I have seen around the country) there will be many sleepless nights for shop owners who think we are nuts to do the things that we do here. They will either see the light or get out...probably the latter for many who just won't accept the changes. If you really want to learn a lot about shop management, come on over to Michigan and give it a try...it could be quite enlightening.

Great question. The answer in our case is: "As needed to make the sale." The days of fixed pricing for all services are gone for us. A shop with a stuck tech is no different than a hotel with an empty room. Once the day is gone, that time/room is gone forever. We do what we need to do to fill the room for the night. Today in Michigan if you want to survive you will learn to play hardball...or you will not be in the show for very long. Undercutting competitors has become part of normal day to day operations. We expect this in the hotel industry, but conventional wisdom scoffs at it in our industry...for no logical reason. Adjust the warranty, adjust the price, adjust what is included, adjust the part, etc. If you walk in my front door wanting a deal on a timing belt when I have 2 stuck techs odds are you are going to get a heck of a deal compared to when we are backed up with good jobs. Dynamic pricing can be a great addition to your service advisor's tool box.

The most common warranties we offer are either 12/12 or 2/24. We are using them more and more as a way to offer different price options to the customers.