Shop management skills are a development process

March 1, 2018
Many shop owners, as licensed technicians, are nervous about approaching the real issue of shop business management on their own.

Shop operators from coast to coast are experiencing challenges like no other era ever seen before in our industry.

Consider the level of development of vehicle technology over the past five years. Consider the change in vehicle service intervals. Consider the cost of diagnostic equipment to even begin the process of entering and sustaining this profession. Consider the technical skill level required today to be on the shop floor. Consider the uninformed consumer who doesn’t truly understand its complexity. Consider the change in vehicle sales mix with the dramatic increase of import vehicles and the decline of the North America brands. Consider the lack of supply of larger facilities which are required to provide the shop the space to hold more equipment then ever required before in the history of our industry to meet complexities of vehicle service. Consider the longer period of time required to properly diagnose and service the vehicle to manufacturer recommended standards. 

The shop business has changed drastically, yet it is not being acknowledged properly within the industry. Every level of the industry still talks about the desire to drive more “sales.” The commodity side of the industry has the loudest voice and spends the money on marketing that screams to shop owners “more activity” and “make more sales with our products and programs" and "be price competitive.” The commodity side of the aftermarket does not seem to understand at all how the shop business level has really changed and the need to address the real shop issues called “productivity” and “sustained individual client relationships.” They seemingly give this issue lip service only, without substance supporting or backing up their words.

Step back and consider the following: The manufacturer, warehouse distributor and part suppliers are in the commodity business, and they require volume sales of their products to survive with full payment. All their marketing displays their desired results. The service provider, however, is in the knowledge business and does not require the commodities to survive to the same extent, but rather requires proper billed hours at the right rate to survive and prosper. The service provider owner is not getting exposed to, or taught, the real issues of his/her shop that ensure proper net income is achieved and retained, allowing them to grow, prosper and enjoy a rewarding professional career. Instead, shop owners are approached by the commodity side and sold on the idea to attend and listen to a presentation that is 1, 2 or 3 hours, or a 1- or 2-day seminar that preaches more sales, more vehicles to service, more activity. These are “motivational” or pep talks only and do nothing to teach the shop owner proper business acumen and best business practices. The shop owner is never introduced to his/her own numbers and allowed to work with them and clearly understand what they mean. 

Can you separate the fact from fiction?

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This is an absolute tragedy within our industry.

Consider that high percentage of shop owners who have high school level education as their last year of formal education. From there, they worked very hard, paid the personal price and achieved the designation of holding a technician license. They are knowledgeable about the vehicle and the best shops have a concerted effort in place to stay on top of this issue. However, one must ask, “Where were they taught how to read the balance sheet of their own business? Where were they taught how to measure and manage their current business properly? Where were they taught the difference between mark-up and gross profit? Where were they taught the workings of shop site efficiency and its effect on the bottom line? Where were they taught how to manage gross profit and measure net profit? Where were they taught how to create a shop team through personnel development? Where were they taught the costs of accounts receivable and the 'cancer' it can give a business?”

The facts are that the average shop today is missing between $30,000 and $35,000 in net income per bay per year from their lack of management of their current business coming through the door. Independent shops don’t need more immediate vehicles to work on, they don’t need more “activity." They need to learn how to manage properly what they currently have. If their business was managed correctly through the process of learning to develop best business practices and measure and manage productivity instead of chasing activity, suppliers in this country would be getting paid in full each month and at better margins! The shop owner and staff would enjoy a professional personal income as well as have the cash to move his/her business forward.

Parts suppliers and warehouse distributors (WDs) tell me shop owners are not interested in business management. This is true based on the fact that part suppliers and WDs sold seminars in the past and called them business management seminars or courses. They, in fact, were not. They were sales courses. This industry does not need another sales course. Those part suppliers and WDs failed their customers! The trust was and has been broken. They sold the shop owners sales courses and seminars focusing on sales techniques making the shop busier through increased activity and selling more parts, forcing shop owners to work harder and not smarter. Sales of the shop went up, but net income did not. The credibility of these suppliers and WDs has to be rebuilt.

Many shop owners, as licensed technicians, are nervous about approaching the real issue of shop business management on their own. I’ve heard from them, “I will not understand as I wasn’t that good in school at math and English.” Or, “I’m a tech, not a pencil pusher;” “I would embarrass myself;” “That’s why I have a bookkeeper because business management is nothing but numbers and paperwork that bean counters have to understand.” These reasons are seldom spoken to their supplier, instead, they say to their supplier, “It is too expensive;” “I don’t have time;” “I don’t need another course;” “No one can show me something I don’t already know;” or “That stuff isn’t worth it anyway.” To all shop owners clinging to these excuses wake up and do the math — you bought yourself a job and you know it, and your debt is out of proportion to the business that has increased your stress to undesirable levels which is affecting your family relationship. Do you want to do something about it or not?   

Understanding real shop business management is easier than you think; however, you must work with it because it has not been part of your daily activity in your shop throughout your career. If you are a shop owner and a technician, you can grasp and understand proper business management! However, the real question is do you want to learn? If you don’t want to learn, then no one can help you. You should wind down your business and get out now while you can, as the next three to five years are going to be very challenging to say the least! 

If you do want to learn, then plan the time now and enrol in a proper business course that is independent-shop specific. I’m confident that if the course is the right one you truly will enjoy it. 

You did not create the current industry issues. This is just reality today. This business has changed, and if you are going to be in it you must clearly understand the business management side of it. 

About the Author

Bob Greenwood

Robert (Bob) Greenwood, AMAM (Accredited Master Automotive Manager) was the President and C.E.O. of Automotive Aftermarket E-Learning Centre Ltd. (AAEC). AAEC is a company focused on providing Business Management Resources and Development for the Independent Sector of the aftermarket industry utilizing the Internet environment. AAEC content and technology is recognized as part of the curriculum of the Fixed Operations Diploma and the Aftermarket Degree courses taken at the Automotive Business School of Canada in Georgian College located in Barrie, Ontario, Canada. This school is the leader and only college in Canada that offers an automotive business education. AAEC is also recognized by the Automotive Management Institute (AMI), located in Colleyville, Texas USA, allowing 80 credits for successful completion of the AAEC E-Learning portion of the site towards the 120 credits required to obtain the reputable Accredited Automotive Manager (AAM) designation. The Automotive Management Institute’s Accredited Automotive Manager designation is the first business management accreditation exclusively for the automotive service professional. To date, AMI various programs have attracted more than 212,000 enrolments throughout North America. 

Greenwood died on Sept. 9 in Surrey, British Columbia, Canada, from a heart attack. He was a regular contributor to Motor Age magazine and will be greatly missed. See some of his recent work here:

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