Saving Money on Everyday Business CostsPosted 3/12/2006
By Rachael J. Mercer
These days many shop owners - whether collision or mechanical - have developed business plans and methods of operating a business that allow them to maximize their profits. Keeping a careful balance of intake and expenditures, they work diligently to keep the bottom line in the black. As a shop owner, you probably evaluate spreadsheets and other record-keeping systems to make the most of the money your shop brings in. But perhaps there are some simple methods for saving money on everyday supplies or everyday expenditures that you've overlooked.
Practical Money-Saving Advice
Growing up, did your mother ever urge you to keep the door to the house closed? Did your father strongly encourage you to turn off the lights when you weren't using the room? This is practical advice that you may be forgetting in the day-to-day operation of your shop. For example, many shops leave some lights on at night to promote safety and deter thieves, but perhaps leaving half as many lights on would still promote safety while also reducing energy costs. Energy costs are one easy way in which some diligent actions can make a big difference in money-saving efforts.
Dan Torbeck, owner of Torbeck's Auto Repair in Cincinnati, suggests a programmable thermostat. "We keep the shop temperature at a certain level during the day, and each night the thermostat will drop to a much cooler temperature so that we're not heating the shop at night." The programmable thermostat allows for energy savings that don't rely on someone to remember to adjust the thermostat before heading home each night. Torbeck also suggests closing drafts, sealing cracks and using items designed to block the cracks under doors and on windowsills.
Credit Cards and Loyalty Cards
Many credit card companies lure individuals (and even some businesses) into doing business with them by promising bonus points, airline miles, cash-back bonuses and other incentives. Airline miles and frequent-flyer bonuses can be great for saving money when traveling for education purposes or even for leisure. "We have several cards we use that reward with flyer miles," said Rick Baker, owner of Rick Baker's Auto Service Inc. in Pleasant Hill, Ohio.
While for some businesses, the idea of using these "bonus cards" is tempting and even beneficial, there are circumstances in which using these cards for small savings sometimes dwarfs the other savings you might experience. For example, Torbeck says, "We looked at using credit cards to purchase parts, but decided against it." Because Torbeck negotiates for discounts with parts vendors, he pays with methods other than a credit card. "If a parts house has to pay a credit card company 2 percent to 3 percent on your purchase, they are less likely to give you the great rates you might otherwise receive," he says. In this case, it is most beneficial not to use a credit card for these types of purchases, since it's better to spend less on parts and make profit that way, rather than spending more on parts and hoping the credit card company will reward you for your purchase somewhere down the road.
Loyalty cards have become popular at grocery stores, drug stores and even office supply companies like Office Max, Office Depot and Staples. In addition to their loyalty cards, they have "perks" programs that reward frequent buyers with coupons, percent-off offers and even special rebates on office supply items.
"We do use Staples and their rewards card," said Baker. "It's convenient to order online, and you typically have the items delivered to the door the next day with no shipping costs." Programs and savings like these are twofold: first, you've saved the money on shipping that other companies might have charged; second, you've avoided spending money on gas and mileage while spending time away from the store. And ultimately, the needed office supplies arrive about as quickly as if you'd purchased them on the way home from work and brought them in the next day.
In addition to office supplies, cleaning supplies and bathroom supplies are necessary for proper function of an automotive shop. Scott Kallemeyn, of Kallemeyn Collision Center in Palos Heights, Ill., said, "Shopping at Sam's Club for some items (especially paper products) helps." Buying in bulk when purchasing toilet paper, paper towels, shop towels and such supplies can often be a money-saving tool. It's important to plan your trips to these mega-stores, however, as it can be tempting to spend more than you save while you're there! Ultimately, whether you are shopping at these "club stores" like Costco or Sam's, or whether you're using loyalty cards or credit cards that earn miles, you must evaluate their benefits versus their costs.
"We are always making sure we're being given the best prices and discounts that have been promised us," said Kallemeyn. "This applies to companies like Staples and Office Max, and to all other suppliers. Loyalty to a vendor is very important to us, but not if it's costing me [to be loyal]."
In the realm of office supplies, there are several new earth-friendly ways to save money while helping the environment. First, some of these companies reward people who recycle old toner cartridges by giving them a free ream of paper. From time-to-time, advertisements will inform consumers that by bringing in a used printer ink cartridge, they can receive anywhere from three to five dollars off their in-store purchase. Often these office supply companies advertise in the Sunday newspaper and on television specials they're running that week (or that month). You'll just need to spend a little time perusing these sales papers for the latest offer.
There are many companies on the Internet that offer a savings to companies that will use recycled toner cartridges or ink cartridges. Ultimately, you'd be on the receiving end of the recycling you did by saving money when you returned your items to that office supply store. "Many times," said Torbeck, "it's cheaper to use refilled or recycled ink cartridges rather than purchasing new ones over and over."
Another huge money-saving idea is that of using a waste oil furnace to provide heat for the shop during the winter. Particularly this winter, as the price of heating oil is at an all-time high and increases keep occurring, purchasing a waste oil furnace may be an option that not only saves you money, it works to help preserve the environment. Baker says, "Probably one of the biggest savings is with using a waste oil furnace to provide heat for the shop," said Baker. "This is a cost savings for us of about $700 a month during the heating season."
Torbeck also suggested a waste oil furnace as a method for saving money. He said he sees a "huge savings during the winter, particularly this year because of the increase in heating oil prices." Not only can shop owners be proud of the money they save when using a waste oil furnace but also for the help they give the environment as they recycle used oils and other fluids in their shop.
Sharing less frequently used tools in a co-op is another innovative way to save money. "Buy tools like a gasoline caddy, a scan tool or some other specialty tool with another shop," Torbeck suggested. "If you own more than one shop, share the tool between the shops, until your finances are such that you can afford each specialty tool at each shop."
Evaluating the Fine Print
While shop owners typically sign contracts for services with parts houses, cell phone providers, Internet providers, uniform distributors and insurance companies, evaluating the fine print in these contracts is important.
Aaron Clements, owner of C&C Automotive in August, Ga., said shop owners need to be discerning when evaluating these contracts. "It's very important that you evaluate your expenses that always seem to be the same. Just because the price you agree to in your contract each year hasn't gone up doesn't mean you're getting the best price possible."
Clements encourages shop owners to check their contracts with companies such as uniform providers.
"Sometimes they might add an item here and there, and all those little items and small charges can add up to lots of money over the course of a year. It's important to review your invoices carefully," said Clements.
In the area of insurance, particularly automotive insurance, Clements advised shop owners to evaluate the automobiles covered by their policies. "Make sure all the vehicles you don't own anymore are off the policy, and lower some of the coverage on the older vehicles," he said. Unless you're paying attention to that fine print, agreeing to the same coverage and policy information from year to year can be a costly item to overlook.
Another way to save money in your shop is to avoid write-offs. Doing the work properly each time you service a vehicle or perform body work on a vehicle is essential to avoiding write-offs. Because write-offs are inevitable, limit the number of people who can sign off on those. One shop owner said that any write-off of more than $100 had to be approved by him. This is one way to avoid losing profits before they've even been realized.
One of the most popular tools that many shop owners use to save money is negotiation. Clements encouraged negotiating with parts houses. "Make phone calls to parts department managers and ask, 'Are you giving me the best price?'" He urged shops to buy in volume and to use their negotiating power to decrease their overall price paid.
Torbeck encourages shop owners to negotiate with rental car dealerships.
"Sometimes you can negotiate a better rate when you use them exclusively and repetitively," Kallemeyn said. "I've negotiated a discount at the local hardware store, giving us a great rate and also allowing our money to buy locally." Kallemeyn is benefiting not only his shop but other businesses in the community through this negotiation. There are many benefits to negotiating fair and reasonable rates for your business, and most vendors and companies are willing to negotiate for your business as well.
Spending Money to Save Money
There are times in which it is necessary to spend money in the short-term to save money in the long run. Torbeck recommends flat-panel computer screens as a way to save money. They use less energy (not to mention the difference in counter-space) than the older computer screen models. This is an expenditure that will continue to save money for years to come. The waste oil furnace is another expenditure that, while a large one, will reap significant money-saving benefits for years to come. While there are many companies out there that manufacture waste-oil furnaces, many of these furnaces can be purchased for between $3,000-$5,000. In just a couple of winters, a shop can actually save enough to pay off the unit.
As you're working to maintain a bottom line that's more black than red, it's important to remain positive about your business even when things are tough. Look critically at the efficiency of your workers - are they standing around or are they busy bees all day? Don't be afraid to spend money to make it and save it - many new devices are great money-saving ways to boost your bottom line. You don't always have to refuse to let money go out of your hands - sometimes letting some out means bringing more in. Remember this when purchasing new technology, new advances (such as the waste oil furnace), and even when spending advertising dollars. It's important to remain reasonable about gains and losses, and remain committed to saving in simple, everyday ways.
ASA's Member Benefits Offer Many Opportunities to Save
As a member of the Automotive Service Association (ASA), you can experience many cost savings as a result of your membership on a daily, weekly, monthly and annual basis. In fact, many ASA members have found that their membership dues are easily paid for by the savings they experience through various member services.
Those savings can make all the difference as you compete with other independent shops, dealerships and service providers in a tough market.
One of ASA's goals is to provide the tools that today's business owner needs to be successful. ASA has teamed up with more than 30 benefit providers whose area of specialty is providing products and services for automotive service businesses and professionals.
To find out more about how you can save on a vast array of products and services, visit the Members Only section of ASA's Web site at www.asashop.org. Note: You must type in your six-digit member number to enter this password-protected site. Your member number can be found on the mailing label of AutoInc. magazine, and is located directly above your name.
Once inside the section, start exploring all of the great membership benefits available to you as an ASA member and start saving!
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