Managing by Tracking Numbers
When Jody Gatchell got his start in the collision repair industry in 1999, he had a personal sales goal to one day bring in $1 million a year. For years he toiled just beneath that mark, unable to propel his business to the $1 million-plus level he envisioned.
In 2005, Gatchell, who owns A & J Collision Repair in Conway, Ark., sought help from a company called Management Success. Based in Glendale, Calif., the management company teaches auto repair professionals how to make decisions based on a shop’s critical statistics. To Gatchell’s good fortune, managing by statistics worked. By 2008, he had doubled his shop’s revenue, far surpassing his old goal of $1 million.
“I wish I could’ve taken a picture of myself five years ago to compare it to myself today,” says Gatchell, whose office walls are papered with charts and graphs from the statistics he gathers on his business every week. “I’m more in control than I’ve ever been. And it’s not just me. It’s my employees. It’s my customers. It’s just been a huge transformation.”
—Mike Lee, founder, management success
GOOD MONEY IS POSSIBLE
Many years ago, Management Success founder Mike Lee noticed that people who did well in the collision repair industry were focused on one thing: “What are the numbers? They knew: We’ve got to know the numbers, compare those numbers to earlier numbers and to other shops in the area, and make decisions based on those statistics,” Lee says.
Most body shop operators make decisions based on unfounded assumptions about their businesses, says Lee, who founded Management Success in 1993. For example, a shop owner might have a slow July, assume that’s always his slowest month and make marketing decisions based on that assumption. But if he tracked a few key numbers closely over time, he’d realize July tended to be busier than he thought, and that October was actually the slow month. With that kind of information, marketing decisions can be based on facts, rather than on a wrong assumption.
Bob Spitz, head of operations for Management Success, spins this scenario of operating a shop without closely tracking some key numbers: Say you’re driving to Florida, he imagines. Take all the gauges off your dashboard and stick them in the trunk. “You might get there,” he says, “but it’s not a very smart way to go.”
This—operating blindly—was the case for Gatchell before he started using statistics to manage his business. “I had a personal goal to reach $1 million a year, but I was just hitting my head against the ceiling, thinking if I just had the right guys working for me, maybe I’d get there,” he says.
When Lee talks to shop owners like Gatchell about using numbers to improve their business, he puts it in realistic terms.
“How would you like to [increase productivity by] one car a week at $1,500? That’s $75,000 a year. They can see that there’s $75,000 sitting in that shop being wasted every year,” says Lee. Shop owners invariably agree that they want to increase their business by one car a week. Then, as they continue tracking their numbers, they see how much more stats can really do for them.
NUMBERS, NUMBERS, NUMBERS
By recording certain key numbers with statistics software, Gatchell gets graphs and charts that show the patterns and trends of his business. Those graphs help shop owners like Gatchell track their shop’s productivity over time, and compare it with other similar shops that work with Management Success. Shop owners can then make well-informed decisions about marketing, employees, equipment and other expenses.
“It’s given me the ability to really track my production and see what condition my business is in,” Gatchell says.
There are about a half-dozen key numbers Lee says shop owners should track weekly:
• gross sales
• gross income
• approved estimates
• average ticket
• total billable hours
• direct costs
• gross profit margin
Gatchell measures those numbers and more, everything from parts usage to the gender of customers. “There’s nothing I don’t track,” he says. “Anything you can think of, I know.”
When he started with Management Success, Gatchell saw that his efficiency was about 80 percent, and he had very slow cycle times. Now, his efficiency is 167 percent.
The way he’s been able to achieve that is by measuring the productivity of his workers through charting how much they bill. If he hires someone who claims he can bill 80 hours but only produces 45 as shown through Gatchell’s graphs, Gatchell can sit down with the employee and figure out what’s going on.
“Either he says, ‘Yeah, I understand, I probably need more training,’ or he blows up and says, ‘Your system sucks, I’m outta here.’ Either way, there’s no speculation, no rumor, no bias. Just facts.”
It’s easier to talk to employees about their productivity when you have numbers to show them, Gatchell says. “It gives you the tools to help them.”
Through tracking his numbers, Gatchell was also able to see an important pattern in his closing ratios. He found that his strongest closing day is Wednesday, which he attributes to people having accidents on the weekend, bringing in their cars on Monday, and being more willing to pay for repairs as the week goes on.
“People coming in later in the week are more apt to buy, so should I be selling differently on different days?” Gatchell says he now asks himself. “We work differently on those days. We try to find the hot buttons for our customers on those days.”
Another piece of his business Gatchell has improved through tracking numbers is his marketing and image. One example of this is his practice of tracking the gender of his customers. The first thing he found was that more than half of his customers were women, and that 80 percent of them come into the shop after noon each day.
He saw an opportunity to market his shop as one where women feel treated with respect rather than worrying they might get ripped off because shop employees assume they don’t know anything about cars. He hired a female estimator and a female parts person. He also makes sure that in the afternoons, his receptionist is a woman. That sets him apart from the competition, he says.
MAKING GOOD DECISIONS
What thrills Gatchell is that, since putting this management tool in place, he’s making twice the money in the same amount of space, with fewer employees. He expanded his shop to 8,900 square feet five years ago, before he started using the Management Success system. Now he plans to expand his business into additional space across the street.
Five years ago, Gatchell had nine people working in his shop. Last year he had seven. The only people he’s added have been administrative employees.
Five years ago, Gatchell says he was working in his shop, as the estimator. Now, he says, he’s working on it, staying focused on the big picture and really driving business.
When asked whether running his business by the numbers has been worth it, and if he’s planning to continue, Gatchell just laughs. The answer is obvious.