Repair shop operators from coast to coast are experiencing challenges like no other previous era in our industry.

From automotive technology's level of development in the past five years, changing vehicle service intervals, costs of diagnostic equipment, updated on-board diagnostic (OBD) standards and increased levels of technical skill to the uninformed consumer, changing vehicle parc and lack of larger facilities for new equipment, the shop business has changed drastically — but that change is not being acknowledged properly within the 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 money on marketing that screams to shop owners "more activity," "make more sales with our products and programs" and "be price competitive." That side does not seem to understand how the shop business has changed or the need to address productivity and sustained individual client relationships.

The manufacturer, WD and jobber are in the commodity business and require the sale of products to survive. The service provider, however, is in the knowledge business, and to survive does not, to the same extent, require commodities, but rather properly billed hours at the right rate.

The service provider owner is not being taught the real issues of his or her shop to ensure proper net income is achieved and retained. Instead, they are approached by the commodity side and sold on the idea to attend and listen to presentations or seminars that preach more sales, more car count and more activity. These are motivational talks only and do nothing to teach the shop owner proper business acumen and best business practices.

An absolute tragedy

Consider that 75 percent of shop owners have a high school level education. From there, they worked very hard, paid the personal price of sacrifice and achieved the designation of holding an Automotive Service Technician license. They are knowledgeable about vehicles, and the best shops have a concerted effort in place to stay on top of this issue. But where were they taught to read a balance sheet, to manage gross profit and measure net profit, to create a shop team through personnel development, to recognize the difference between markup and gross profit or to estimate the costs of commercial accounts receivable?

The average shop is missing between $45,000 and $90,000 in net income from its inability to manage the business coming through the door. Independent shops need to learn how to properly manage what they currently have, which would lead to jobbers getting paid in full each month and at better margins.

Jobbers and WDs tell me shop owners are not interested in business management. This is true based on jobbers and WDs selling sales courses and seminars on sales techniques in the past and calling them business management seminars and courses. Sales went up, but their net income did not.

Many shop owners are nervous about approaching the real issue of shop business management on their own, but their real reasons seldom are revealed to their jobber or WD. Instead, they say the course is too expensive or they don't have time. But these shop owners bought themselves a job, are covered in debt and need to do something about it.

Understanding real shop business management is easier than people think. However, owners must work with it, because it has not been part of their daily activity. They should plan the time now and enroll in a proper business course that is independent shop specific.

Shop owners did not create the current industry issues; this is just today's reality. This business has changed, and to be in it owners must clearly understand the business management side of it. The automotive aftermarket's independent sector is at a critical stage in its development. Without a proper business focus now, the net income will not be produced to obtain the right equipment, to upgrade facilities, to find, keep and pay the best technicians and to provide management "with a life."

It is time to stop listening to the emotions that have misled us and to slow down and do the math for each individual business. Professional business development and business acumen will not let owners down. Consider where your shop customers will be three years and five years from now. Will their current business methods guarantee that they will be here in a healthy and prosperous manner? Prove the math right or wrong, but take the right look at the math.

Bob Greenwood is president and CEO of the Automotive Aftermarket E-Learning Centre Ltd. ( www.aaec.ca), a technology company based in Ottawa, Ontario. He has over 30 years of business management experience in the aftermarket. Bob can be reached at [email protected].