'Net ... ProfitsPosted 11/16/2005
By Denny Kahler, AAM
The Internet has made our lives easier, faster and greatly lessened the paper piles in our homes and offices. E-mail communication is faster and much more efficient than postal mail. Questions and responses can take just minutes that used to take days or weeks. We can e-mail attachments and pictures to friends and family, and business uses seem limitless. Using eBay and other online auctions, we can sell - or find - almost any item we desire. Online databases and catalogs have replaced shelves of information from the past. The paperless office is close to reality. Using Web search engines we can find a wide variety of information on most any subject, and using hot links to locate additional information takes little effort. Yes, life with the Net has made running a shop more efficient and created an environment with much less clutter.
One negative the Net has brought to my mechanical repair business is the growing challenge of customer-supplied parts. Years ago it was a minor issue, but "the elephant" has grown to a monster.
Prior to Internet shopping, a few customers occasionally supplied their favorite brand of oil or spark plugs and we gladly accommodated them. In the past few years, however, we have had customers phone or walk in with complete brake kits, clutches, radiator water pumps, tires and other major parts. I used to struggle with the situation and offered a variety of reasons why we could or would not install their products. My answers would sometimes generate a discussion - and sometimes generate a debate.
In addition to important safety and warranty issues, when I consulted my profit-and-loss statement and computed my average parts profit per billed hour (parts dollars sold, minus parts dollars purchased, divided by hours billed), it became obvious why customer-supplied parts are not good business. Parts profit is a major component of a successful enterprise.
I don't encourage policies that cause me to lose money! The parts profit generated is normally the net profit in a business. A typical shop cannot profit with labor sales alone. Labor income pays our expenses and parts profit falls to the bottom line. Today, when the subject of customer-supplied parts comes up, we "just say no!" Selling labor only is just exchanging income for expenses, and there is no profit (motivation) to do the job.
As business owners, we have the responsibility to ourselves, our families and employees to stay profitable. Just today I got a call from a fellow who wanted his mail-ordered tires installed. When I informed him of our policy he asked, "Who will? I have called everywhere." Seems other shops in my area may have come to the same conclusion.
I know collision shops have many of the same challenges as mechanical shops, and parts profitability is certainly one of them. Issues like this one - along with many other industry concerns - are examined on a regular basis by both the mechanical and collision divisions of ASA. If you have business or industry concerns, please share your thoughts with us. You can reach the Collision Division Operations Committee through Denise Caspersen, Collision Division manager, at firstname.lastname@example.org. You can reach the Mechanical Division Operations Committee through Robbie Addison, Mechanical Division manager, at email@example.com. (Well, what do you know? Yet another way to make e-mail communication work for you!)
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