Running a Shop Operations Finance

Keys to Staying Ahead of Inflation

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How many shop owners are looking for ways to stay in front of the ever-rising cost of energy and materials? JSE Consulting president John Shoemaker quickly considers his client list, and replies: “All of them.”

The U.S. inflation rate as of April was 3.2 percent, capping 10 straight months of growth, according to a Consumer Price Index (CPI) report published by the Bureau of Labor Statistics. The April figure is the highest since October 2008, largely because of high food and gas prices. The CPI for energy alone grew 19 percent during the past year.

Businesses, body shops included, have a couple of options in this climate. They can pass along the higher costs to customers, or they can keep prices the same and look for savings elsewhere. Because the country is still climbing out of a recession and many shops are trying to get customers back through the door, it’s hardly the time for a price hike. So, the savings hunt is on.

Shoemaker, who helps shop owners develop profit centers beyond energy and materials, says some owners and managers have been tempted to make rash decisions, especially when it comes to personnel. He recommends first examining what personnel changes—cuts, new arrangements—actually improve production, rather than hurt it. In many cases, a position can be eliminated or combined with another job and the employee can be moved to a new role.

Personnel changes are most helpful when they are strategic, Shoemaker advises. He’s surprised at how often shop owners’ first reaction to tight finances is to take a whack at staff—without really knowing which direction their business is headed. The savvy approach? “Redirect talent to a place that makes sense,” he says.

Consider the production manager. That’s one position that many shops can do without these days, Shoemaker says, because modern management systems can handle those duties. While the position goes, the employee stays—to the financial benefit of the company. That knowledgeable employee could become a blueprint tech and be partnered with an apprentice to do teardowns. A personnel change like that could improve efficiency, reduce overhead and produce billable hours, Shoemaker says.

The estimator is another potential personnel improvement. It’s critical to get the absolute maximum out of that job, Shoemaker says. And some shops have no idea what they’re missing during the estimating process, says James Moy, an I-CAR instructor and consultant at Precision Auto Group. “Anywhere that I go, I can easily write an addition of 15 to 20 percent, and for a DRP, 10 percent,” Moy says.

Some frequent misses are A-pillars being changed without reinforcements and rocker or quarter panels being added individually, when they should both be included, Moy says. Simply following manufacturer instructions for repairs betters business in two ways: it can boost estimates, while also mitigating tense and time-consuming negotiations with customers by transferring any “blame” away from the shop owner, he says.

While many shop owners are overly cautious about losing customers because of charging too much, Moy says, doing estimates by the book will not only boost revenue, but also improve the quality of repairs and ultimately enhance a shop’s reputation.

A final tip about maximizing money matters: Work with your accountant to break down, in detail, how much everything costs, Moy advises.

Gas prices may have fallen slightly in recent months, Shoemaker says, but he doesn’t expect the cost of doing business to fluctuate much.

“I think it’s become more obvious that this is the new normal,” he says. Determining which business adjustments to make not only ensures survival; ultimately, it can energize your business and position it to thrive.

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