Shop owners across the country are experiencing challenges like no other times they have ever seen before in our sector of the industry.
Consider the level of development of automotive technology over the past five years. Consider the dramatic changes 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 and where technicians today require 100 hours of training now per year to stay level in their knowledge. Consider the uninformed consumer who likes their “toy” but doesn’t truly understand its complexity. Consider the change in vehicle sales mix with the dramatic increase of diesel vehicles and electric on its way. Consider the lack of supply of larger repair 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. Consider the “blackballing” of proper shop financing by the major banks in this country.
The shop business has changed drastically, yet it is not being acknowledged properly within industry. Every level of the industry still talks about car count and 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,” “are you busy?”, “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 jobber are in the commodity business and they require sales of their products and full payment to survive. 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. Commodities go along with the billed hours. As the billed hours increase, so do commodity sales. The service provider owner is not getting exposed to, or taught, the real issues of his/her shop that will 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, one to three hours long, or a one- or two-day seminar that ends up preaching more sales, more car count, more activity. These are motivational or pep talks only and do nothing to teach the shop owner proper business acumen and best business practices that drive net income. The shop owner is never introduced to his/her own numbers and allowed to work with them and clearly understand what they mean during these seminars.
This is an absolute tragedy within our industry.
Consider that the vast majority of shop owners have grade 12 level education as their last year of formal education. From there, they worked very hard, paid the personal price of sacrifice and achieved the designation of holding a Master Automotive Service 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 and how the banks interpret their financial statements? 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 what drives net income in their particular shop? 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 when not managed professionally?”
The facts are that the average five-bay shop today is missing between $125,000 and $150,000 in net income from their lack of management abilities from their current business coming through the door. Independent shops don’t need higher “car count;” 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,” jobbers in this country would be getting paid in full each month and at better margins! The shop owner and their team would enjoy a professional income as well as have the cash to move his/her business forward.
