The Magic Behind the Best Shops
Running a successful shop involves taking care of customers and their vehicles.
I have spent almost my whole adult life in the automotive service industry. For the past eight years I have helped shop owners get what they want and build software to measure and analyze business performance data.
I have had the opportunity to work closely with many shop owners over the years and to run an amazing shop that was a MotorAge Top 10 shop for three years in a row. I have reviewed numbers, marketing strategies, management techniques, personality types, location and anything else I can think of to better understand why some shops are extremely profitable and successful and some are not - all in an attempt to help my clients succeed.
I wish I could tell you there are three or four key secrets that some shop owners know that if you knew would make you profitable and make your business easy to run, but I can't. I do believe that I can point out some commonalities and a few cautions that will help you become more like the best and most profitable shops.
Some business owners would like to think that others are successful based on having the best location, the right name, being in the right community under the right circumstances, having the best technicians or the best service adviser or something else that is out of their control. I believe that all of these can help a shop succeed, but I don't believe that these things are what separate the best from the rest.
I believe it is simpler than that and I will try to define it for you.
The best shops believe in taking care of the customer and the vehicle
Many shops and employees think that they are only there to fix the vehicle. The best shops know that it is much more than that. They understand that it is their job to take great care of the vehicle and the customer, and do so at a profit. Profit is not a dirty word. Profit allows us to take great care of our customers, our staff, our families and ourselves. We are actually hurting our customers, our employees and our families when we undervalue what we do and undersell ourselves.
I am still surprised when I go into a shop and find they are not properly inspecting the customers' vehicle, completely estimating everything the vehicle needs and presenting the customer with everything. If they understood that they were helping the customer by giving him/her all the information they need so that they can make an intelligent decision, they would never hold back anything; they would do their job completely and professionally every time.
The best shops have great leadership
In his book, "Now Consider Your Strengths," Marcus Buckingham states that leadership creates the vision for the business and shares that vision with the staff. In my experience, a good leader is able to share his or her vision so that others can clearly see it. The vision is so clear and so well delivered that anyone who comes in contact with the leader buys into the vision and wants to be a part of the success.
A good leader also knows how to motivate others and appreciate them so that they know that he/she cares about them. A good leader points out where the wins are and lets the staff take credit for them and points out where the losses are and takes the blame, but always with a focus on what we can do better to succeed. A good leader hates to lose but when he/she does will not blame it on the staff, the weather, the community, the economic conditions, or any of a thousand possible reasons. A good leader will not lose for very long before he/she figures out what to do differently that will change the odds to their favor and takes action.
Good leaders don't make excuses for underperformance or not hitting goals. They will let nothing stand in their way. They are never beaten. They pick themselves up, wipe off the dirt and figure out what to do next. They evaluate, plan and change their strategies and tactics to become winners. Good leaders don't make excuses; they solve problems.
The best shops have goals and a plan
One of the things I find missing from most businesses is a business plan spelling out performance goals. The plan should clearly state what you want to achieve and how you plan to get there. A good business plan will help you know what to do and when to do it. Goals will help you stay focused on what you want and measure your progress.
When I go into a shop where the profits are barely measurable (and there are loads of those in this industry), I almost always find an owner who wants to increase car count but has no idea about what he really needs to do to be successful.
For these shops, the cure-all is to add more cars because that will increase the gross sales and "maybe" if we can sell more we can finally make a profit. Most owners don't understand that more cars will often cause decreased average repair order (ARO), decreased productivity and profits, and create more unhappy clients if you don't have the right processes in place.
Shops that are asking for more car count are usually missing 50 percent to 70 percent of the work that is needed on the cars they have. This creates low margins, low ARO, unhappy customers and high comebacks due to cars having problems after leaving the shop. And adding more cars is probably the most expensive thing to attempt and the least likely to work.
I have been working with a shop for the past 10 months. When we started they had pretty good profits, but there were a high number of customer complaints, and the employees and the owners were unhappy. The shop didn't run smoothly. The ARO was around $363. During the last 10 months we have increased the ARO to $467 using a good inspection process, a good tech reporting process, a good estimating process, and a better sales presentation. They have made more than $140,000 in additional net profit in 10 months and have a much smoother running shop with happier customers and employees. The business grew more than 12 percent while car count dropped and others around them are losing money and going out of business.
A good business plan will help you know what the right thing to do is and what will get you the most return for your efforts. It will also keep you focused when you want to give up and run and hide.
The best shops measure and manage results
Successful shops have goals and minimum performance standards that are created by those goals. They know exactly how much they need to sell at what margin to get what they want. They understand their business from a financial perspective and what it takes to be successful.
They use their business goals to set employee goals and measure success. Measuring gives them the chance to train when employees are not hitting goals and the chance to reward those who are hitting goals and let them know they are winners.
They have clear expectations around performance that they negotiate with the employee, and they have clear agreements with those employees. Measurements are visual so that the team and the individuals know when they are winning and when they are not. Knowing when you are not hitting goals gives management the chance to help the employee succeed and builds trust. Having clear expectations and goals builds trust. Helping employees win builds trust.
They have goals and they focus on results. Having goals and visual measurements and focusing on results creates accountability and builds trust. Having fuzzy expectations without clear measurement breaks down trust and makes employees unaccountable.
The best shops take action
Successful shops, owners and managers don't just talk about it. They do it. Once they have decided on a plan they do it. They don't sit back and complain; they take action.
Editor's Note: This article is one of several management articles that will be contributed to AutoInc. this year by Automotive Management Institute (AMI) instructors. Throughout this year, AMI's knowledgeable instructors will continue covering a variety of topics designed to educate and train today's service and repair professional in AutoInc. To learn more about AMI, its courses and instructors, visit www.AMIonline.org. AMI administers the distinguished Accredited Automotive Manager (AAM) program.
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