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Ep 34 - Coaching Call #6 | May Was a Tough Month
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Coaching call episodes of Confessions of a Shop Owner are when Matt Lofton, from Elite Worldwide, joins Mike to discuss one of his three repair shops. This is the sixth coaching call about this shop so far, and it was the toughest one yet, as the shop operated at a loss for May. There were several factors at play, and Matt helps Mike sort through how they can pick up where things left off in April. (The best month to date for that store)
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Transcript
Podcast Introduction & Automotive Anecdotes
00:00:00
Speaker
When he was backing up, he realized that he couldn't stop. So instead of backing up five feet to be able to get the door open, to vacuum it out, to clear the lift, he kept going and he went up the hill and panicked and put it in neutral and rode it back down the hill. Right back into the shop. Right back into the shop and demoed two toolboxes and the wall to the office.
00:00:24
Speaker
The following program features a bunch of doofuses talking about the automotive aftermarket. The stuff we, or our guests may say, do not necessarily reflect the beliefs of our peers, our sponsors, or any other associations we may have.
00:00:38
Speaker
There may be some spicy language in this show, so if you get your feelings hurt easily, you should probably just move along.
Event Highlights & Climate Challenges
00:00:45
Speaker
So without further ado, it's time for Confessions of a Shop Owner with your host, Mike Gallen.
00:00:55
Speaker
What's up, man? Hey, Mike. How you doing, sir? I'm doing okay. We just had ASTA Summer Social last night. It was hosted at Carfix in our big store in Garner.
00:01:07
Speaker
And so crazy, bonkers, busy day. The guy sold $26,000 of approvals during the day. And you know they're used to being there and just kind grinding out until they're done in the evening. I was like, it's a hard out at 530. Lights off, doors locked. You got to go because this thing starts at 630.
00:01:25
Speaker
parking lot was slammed. There was nowhere to park and we're expecting 60 to 70 people. Right. So, ands ah hundred and 140 degrees out there. Um, so shuffling cars and, kind of moving stuff around in the lobby to make space for all the chairs and everything and setting up cornhole and whatnot. it was a little bit of a, of a zoo, but, um, ultimately it was a huge success. Everybody had a good time. People were there until like 10 o'clock.
00:01:50
Speaker
Um, you know, we call that Mike. what we call that? We call that first world problems. Oh, how's that a first world problem, man? You know what I did get? i got a lot. I was too busy. I was too busy to have my friends over for an afternoon social. And it was, it was a pain in the butt to move cars around.
00:02:08
Speaker
Well, I wanted to make sure that I complained about how hot it was because, uh, a lot of folks gave me a rash of shit about the fact that that shop is not air conditioned. Um, Pretty much every technician turned shop owner that was there, ah you know, pretty called me an evil shop owner for, for not having air conditioning. So, and I told them all that air conditioning is for pussies. So, well, if you practice in the heat, then you're used to the heat, right?
00:02:36
Speaker
don't know. I actually have no foot to stand on with that because i it's 72 degrees right here. It's 90 outside. So, our our Our high school football coach, that's what he used to tell us all the time.
00:02:52
Speaker
said, if you practice in the heat, then the heat doesn't matter. If you're in it all day, it's just normal. Well, I think there is a degree of ah you get used to what you're surrounded by. like There are not a lot of shops in Houston that have air conditioning, right?
00:03:06
Speaker
Right. There are ton of shops in New York State that have air conditioning. The guys in Houston could never work in New York because it's so cold. We're driving crazy. The guys in New York could never work in Houston because it's so hot, right? This is what your body gets used to. Yeah, 100%.
00:03:19
Speaker
I do have a dude who just moved down from, I think he was in Iowa, and he moved down. He's been with us for a few months now, and he's, I mean, the heat is killing him. I'm like, bro, ice cold Gatorade, water, go sit in the break room, go sit in the parts room, whatever, like 10 minutes out of every hour, whatever you got to do until you acclimate, man. I can't have you falling out.
00:03:40
Speaker
It's okay. Don't let him fool you too much. And and if and and Mr. Employee from Iowa, if you're listening, don't take this the wrong way. But the hottest I've ever been in my entire life was in Newton, Iowa. In 2012, it was 112 degrees.
00:03:56
Speaker
How much was it in the truck? I was not in the truck. It was 100. 148 degrees inside of the car i was man You know, they should fit race cars with air conditioning. I mean, they should never have air under conditioning.
00:04:12
Speaker
Yeah, we got air conditioning in them. They call it air conditioning. It makes it about 10 degrees cooler than what the ambient air temperature is. So instead of 140, it was blowing 130 degree air.
TechMetric & Shop Efficiency
00:04:25
Speaker
So you just had a hairdryer in your face. Yeah. that was i assume that's when you were racing on the circuit still. That is correct. Yeah. Yeah. No thanks. Pass. How much weight do you lose on a race day like that? um I'm a little bigger than the average racer, so my my weight loss was a little bit more drastic.
00:04:44
Speaker
But I would lose between 15 and 20 pounds. 15 and 20 pounds? Mm-hmm. Holy shit. That's the new weight loss fad is just go race. Well, yeah it's it's water weight. It comes right back.
00:04:57
Speaker
Wow. It comes right back. But we did... Running a shop for 20 years teaches you a lot, like how outdated systems can make your job a lot harder than it needs to be. I used to deal with slow check-ins, clunky estimates, wasted time chasing down updates.
00:05:11
Speaker
Then I switched to TechMetric. It's all-in-one cloud-based SMS that lets me run my shop from anywhere. streamlines my estimating process, keeps customers in a loop with real-time updates.
00:05:22
Speaker
I'm not telling you that it was all TechMetric, but I'm telling you that TechMetric was a big part of it. Since I switched to TechMetric, my average repair order four years ago was 293, and right now it's 916. That's Not luck.
00:05:35
Speaker
It's better processes, faster workflow, speed of service that's facilitated by this technology helps me get higher and better authorizations for my customers.
00:05:46
Speaker
If you're ready for a shop management system that actually works for you, tap the link in the show notes and check out TechMetric. You're going to like what you see. Here's the deal. i I like to think that I'm pretty good at running an auto repair shop.
00:05:57
Speaker
It's what I've done for 20 plus years, but I'm not good at managing a marketing budget and all the different facets of a truly well-rounded marketing plan. There's mail, there's local advertising, there's website, there's Google AdWords, there's You know all the different things that go into that.
00:06:14
Speaker
And it's just not what I'm good at. So what I've chosen to do is to buy myself the time to focus on what I am good at while having someone else execute on all of those things at a way higher level than anything I could ever do.
00:06:29
Speaker
That's what turnkey auto marketing does for me. So if you feel like you could use some of that same magic, I'm going to recommend that you go to turnkeyautomarketing.com, get a free consultation. Tell them that I sent you, uh, tell them that Confessions of a Shop Owner sent you.
00:06:44
Speaker
You won't be disappointed. We did a, a study with one of the, one of the guys was, had a physician for a father and he was like you know, cardiologist and he actually came by and did a, a six month study on us where they came and took, um,
00:06:59
Speaker
carbon carbon monoxide readings on us but before each, uh, before each race. So they would get a ah baseline before like, as soon as we got to the racetrack before we ever got in the car. And then at the end of the race, they would come by afterwards. So after three days of being around it, um, and our carbon monoxide levels were about 40 times what the, the normal average was supposed to be.
00:07:24
Speaker
Seems healthy. So he convinced us all rightfully so to start doing oxygen therapy. So we had oxygen tanks and all that kind of stuff that we would like get out of the car and you go sit down and put a little cannules on and, you know, go through your debrief on the session and all that. But that was it it actually made a big difference, really.
00:07:47
Speaker
I'm not sure that now is the appropriate time for it, but I want to hear stories about creative ways to cheat in racing. Uh, cause I've been hearing some, some of those stories on like Earnhardt's podcasts. It's pretty interesting to hear how creative they got with that stuff.
00:08:02
Speaker
So I have some really good stories on that. Um, I have, I have one personal story and then I have others that I've heard that have been passed down. Um, so.
00:08:13
Speaker
I was fortunate enough to be able to, to race at some of the super speedways like Daytona and Talladega. And before Daytona every year, there's a big test in January and it's a big three day event. And you just go down there and play around with a bunch of stuff. Right?
00:08:28
Speaker
So we had a two day test plan. And one of the test plans was for qualifying was to have a removable, uh, leg brace cushion. that was on Velcro and had a little handle and I could peel it off and then I would take my left arm and stick it up against the window and that would block the air off from the window and therefore give you a little bit more aerodynamic. A little bit more aerodynamic. So we are third or fourth practice, third or fourth on the board at this point in time at practice out of like a hundred cars.
00:09:00
Speaker
And we got to the point in the test plan where we're supposed to to do this practice. And the way they do it for that test is you have to run the apron until you get to the back. The apron is the flat part of the racetrack till you get to the back stretch and then you blend onto the back back stretch.
00:09:15
Speaker
So you're doing about 130, 135 miles an hour on the flat spot and in the apron. So I reached down to go grab this thing and I'm wide open in third gear and I'm trying to get it up with a thing.
00:09:29
Speaker
um i hit the steering wheel a little bit and it drops out of my hand. And I, I've lost my focus and I bent down to go, you know, look down to go get it. And I wound up hitting my right rear tire against the apron, uh, against the track. So, you know, the track is like this.
00:09:45
Speaker
So you wrecked in practice. That made it go. Car went directly to the wall like that. And I was still wide open in third gear. So it came about four and a half feet off the ground. Before we got on camera, I told you I'd broken my ribs twice in my life. That was one of the times that I broke my ribs.
00:10:01
Speaker
So that was my, while that was not cheating in a race, because we didn't get a chance to try that in there, we nixed that one.
00:10:09
Speaker
but That probably would have been my probably would have been my biggest cheat scenario if if we'd have done it. But that was a that was a big oopsie right there. Well, I mean, there wasn't a rule specifically against having a leg brace in the window, right?
00:10:25
Speaker
Let's just say if it would have been found out, it would have been the answer. You're not supposed to have that window sealed off. Yeah. It doesn't specifically mention anything about a leg brace, but how that was supposed to work is, is, you know, I would take it and stick it right back before I pulled, you know, pulled off. But we decided that's probably not a good idea to attempt that fate twice, but copy com I tried to tell him multitasking is not my thing.
Financial Analysis & Strategic Management
00:10:48
Speaker
And, uh, But as far as some of the other good ones at Daytona and Talladega, they used to take Visine bottles and fill it with um fill it with nitrous. And they would run a they would run a tube to the carburetor from inside the car.
00:11:03
Speaker
And so the guy would have the Visine bottle in his pocket. And then when he would get in, they would wait till comes off a turn four and goes, you know, get straight going down the back straight and he would squeeze that, squeeze that vizine bottle and get a little nitrous shot coming to the start finish line.
00:11:21
Speaker
Um, that's awesome. There, when they used to have the roof hatches at the top, there were guys that would keep a, like a cut broomstick beside the the seat and when they would get out on the racetrack, they would take, they would push up against that roof flap because it would take air off the spoiler.
00:11:42
Speaker
And, ah there's all sorts of, all sorts of nifty little things like that. i mean, but how does that not get caught? Why is there a broomstick and on during tech inspection, why is there a broomstick in the truck?
00:11:55
Speaker
Ah, cause tech inspection is going through ah series of, that's like saying in our quality control check, why doesn't the QC guy find out that the spark plug wasn't torqued to spec?
00:12:05
Speaker
Yeah. They just, they have a specific like checklist of things that they're looking for and looking underneath the driver's seat is not, ah it's not on that checklist. But it's like everything else, you know, somebody gets caught doing it now it gets added to the book and it is one more thing that gets added to the checklist. And that's why, ah that's why tech takes a whole entire day now because somebody created a rule for You're so good at cheating so much.
00:12:33
Speaker
Yeah. Awesome. So um we should talk about Carfix, I imagine. Sure. So one of the questions that we got ah online was I should talk less about ah silly, stupid stuff and more about numbers and the financials and actually the kind of the benchmarks that we want to have. And I think the appropriate time.
00:12:56
Speaker
to respond in a snarky way as with Brian on another episode where we will be childish. But ah the appropriate time to talk about numbers and benchmarks and targets, I think, is absolutely right here because that's your sweet spot and that's you know what you exist to to help shop owners out with. So yeah um one of the things we're going to do today is go over the P&L from May. ah and talk about kind of some of the things that happened in May and how those things affect and reflect in the P&L and the ultimate effect that it had on the bottom line. so
00:13:33
Speaker
And also, I think you're probably going to beat me up a little bit um today. because Yeah, we had it we had a good session the last time. you know We had a pet-to-dog session because you had you had gotten some stuff knocked off your list and you guys were heading in the right direction. And you were then now here we are.
00:13:50
Speaker
A month later, we'll have have to do a ah bad doggy treat. yeah Yeah, it's time for the shot caller, I think. So, yeah. but ah So we were prepping for the meeting today, and and performance report's not filled out, so we don't have any any numbers to really go over from May. So we'll have to – I'll just kind of have to ask you there, how was May? Yeah.
00:14:14
Speaker
If you haven't listened to coaching call number five, you should go back and listen to it so you have a frame of reference. This is coaching call number six. But um April was the best month we'd ever had. um First month with three technicians and a long, long time. We had two advisors on the front counter, and it was just kind of humming along.
00:14:32
Speaker
um Expenses were abnormally high due to some outside factors, but we still made really good money. um May was ah different. We... Because of some staffing changes and moves, the second advisor that was at that store got moved back to one of the other stores.
00:14:52
Speaker
And the advisor that was still there, you know it's a lot to do for him by himself there to do everything. Um, and that suffered and author ah authorization rates suffered significantly. Uh, and we ended up, we went from, i think we were one 40, give or take a thousand dollars in April.
00:15:15
Speaker
We were one Oh two in may in top line revenue. um And expenses came down a little bit, right? Because there are some expenses that are tied to revenue, but most expenses are relatively fixed.
00:15:28
Speaker
And the net effect was we didn't make any money to speak of. I think the bottom line was ah three points net. so Okay. Yeah. Well, well the but the true bottom line, actually, after I look at ah owner expense was zero.
00:15:49
Speaker
We lost $300 in May. So I should have taken $505 less out of the company. I said you sucked all the profit out of it, Mike. Yeah. All $3,000 of it. So...
00:16:07
Speaker
so We're going to kind of, what I'd like to do is I'd like to go through, i know we can't share the P and L for them. Um, as far as. might see if I can get Braxton to splice in the P and l at certain parts of the conversation, just give a frame of reference. Uh, you can do that. Great. Okay. can't, sorry.
00:16:26
Speaker
Yep. So we're going to, we're going kind of run through this. Um, I, I want to run through this as an exercise with you. You, you've got a lot of these numbers baked into your P and L as well. If you're like me, you know there's always hidden revenue and missed maintenance sales or overlooked customer concerns.
00:16:42
Speaker
Detect Auto helps auto shops unlock that revenue by analyzing vehicle service histories, pinpointing maintenance recommendations, and equipping advisors to confidently address customer questions.
00:16:54
Speaker
It's easy, it integrates with your existing software, and your team will love it. ah Check out DetectAuto.com and see how your shop can stop guessing and start selling better service recommendations today.
00:17:06
Speaker
and but i think this is a ah great example for the listeners that are out there it's a really see what they should be doing month-end review on the P&L, good month, bad month, and then kind of where where the performance really affects things and then how to react when we see that.
00:17:24
Speaker
Because a lot of times, I know ah know in the early stages of of my professional career, you just scroll straight down to the bottom and see what you you know see what it looks like. And then you might go back up and take a look at expenses and then you see, oh gosh, I got all these expenses. My expenses were the same as my gross profit. I've got an expense problem.
00:17:43
Speaker
So I'd i like to spend a little bit of time today kind of going over how to evaluate that and how to figure out whether we have a top line revenue problem, a gross profit problem, or do we have a an expenses problem in the body of the p and l And then from there, we're going to spend some time talking about some of the staffing changes that you discussed and how that interrupted your process and then see what we have in place for June this month and working into July.
00:18:10
Speaker
so Sounds good. Yeah, absolutely. absolutely um Before we get into that. ah between now and next week, if you could please go through and backdate the performance report.
00:18:23
Speaker
That way we have some numbers to look at when we meet again in July.
00:18:29
Speaker
think what I'll end up doing is I'll just do it as soon as we get off the call because I got to stay on top of this stuff. I apologize. Yeah, absolutely.
00:18:37
Speaker
All righty. So let's jump into the P&L here. um like Like you just kind of described to them, you've got $102,000, 101, 807 in revenue income for the month. and So we're down about grand.
00:18:57
Speaker
and from there have a cost of labor of twenty seven thousand three hundred dollars which feels astronomically high.
00:19:11
Speaker
Uh, but we talked about a little little bit of that. That's shifting the risk from the technician to the owner when you have, uh, non-flat rate pay, right?
00:19:22
Speaker
Yep. So everybody over there has a, has a guaranteed minimum that's pretty significant. Uh, and so when revenue comes down, cost of labor goes through the roof as a percentage of revenue.
00:19:33
Speaker
Yes. That's what we're seeing. That's, and that's 100% correct. So again, not, Not saying that there's anything wrong with that. I commend you for for paying your guys regardless, but that is one of those numbers that we need to kind of stay on top of.
00:19:47
Speaker
And as top line revenue comes down, that cost of labor percentage winds up eating into the the gross profit of the store pretty strong. So you have a target set here on your P&L at 18% for the cost of labor.
00:20:04
Speaker
And just to give a a brief description of that for anybody out there that's listening, ah cost labor is going to be the technician pay, total pay of the technician team. And that 18% is 18% of the total sales.
00:20:19
Speaker
So oh what we have in this scenario is we have right at 27%. we're about, close to high there.
00:20:31
Speaker
on our on our cost of labor there And one other thing that I like to do in this scenario, Mike, can you look up in May and tell me what your total sold hours were for that month?
00:20:44
Speaker
Yep. In May, we sold 401 hours on 173 And in April, we sold 504 hours on 175 cars. car count was exactly same. were little over hundred Okay.
00:20:58
Speaker
okay
00:21:00
Speaker
and effective labor rate was also down 10 bucks.
00:21:07
Speaker
You know, gross profit per hour was down $17. seventeen dollars You know, it was kind of down across the board.
00:21:20
Speaker
So we take those anytime we have that type of an imbalance there with the cost of labor at the top versus a percentage of income. um I like to use that as an opportunity to go back and check what our effective labor cost per billable hour was not for the month, just to see kind of where we're at in target there.
00:21:41
Speaker
If we our 27,000, we divide by 401, we're at $69 per billable hour what effective labor cost
00:21:48
Speaker
was what our effective labor cost was
00:21:55
Speaker
And just just to put that in perspective for everybody, if we're shooting for a 70% GP on labor and we divide that number by 30%, that would mean our effective labor rate would have to be $230. $227. Don't unrealistic. Yeah, to be able to to overcome that sixty nine dollars of effective labor cost So my cost of labor is unsustainable at that level of revenue.
00:22:25
Speaker
At that level of revenue, 100%. So um again, i know you know a lot of this and and you're already in practice and rhythm on some of this stuff. But for those of you out there that are listening, I want you to take your P&L each month, do it by percentage of income. um So you're going to run it for the the the end of the month, add in the percentage of income for your report.
00:22:47
Speaker
And then take a look at that number. We want it to be under 20% for technicians is typically what we want. That 17% number is the target. But anywhere between 17 to 20 is acceptable.
00:22:58
Speaker
If it's high, and I want to make sure that I clarify this, it does not mean you're paying your technicians too much.
00:23:05
Speaker
That's not what it means. What it means is we didn't have enough production for the level of technician pay that we had. And that, it pick It could be a productivity issue at the technician level, but it also could be a function of what we've discussed here already, which is this is really more of a counter problem, right? You had the same level of car count.
00:23:26
Speaker
We had pretty much the same level of everything else. We just, we had a reduction in performance at the counter because we had a, we had a reduction of counter staff.
00:23:36
Speaker
So we took the same amount of volume, pushed it through one guy and in the experience got watered down. Well, and to give a frame of reference in the previous month in April, when things were good, when revenue was up, right? ah Cost of labor was actually a little bit less even because of some other factors that were there, but not significantly less. ah My cost of labor per hour $46 as opposed what did we say?
00:24:00
Speaker
It was $68. Yeah, $69. Yeah, and so 0.3, yeah sixty sixty nine yeah and so about point three my effective labor rate would need to be $153 to be in the right margin there.
00:24:13
Speaker
So that's how much, you know, falling short on revenue when you have fixed expenses for labor can negatively impact, uh, bottom line.
00:24:25
Speaker
Yeah. A hundred percent. And so we're going to talk about shop owners all like flat rate. And it's, you know, it's the lazy way to do that. Um, but,
00:24:38
Speaker
it it does It does solve that problem. Yeah, it absolutely does. So we're going to come down. The next one that I want to take a look at is our cost of parts sold.
00:24:49
Speaker
um Our cost of parts sold here, we have 17,386. So we're at So the reason we want that number to be under twenty five percent what we're looking at there So you're well underneath of that 25% of your cost materials.
00:25:05
Speaker
So where we're getting that there is you're holding a strong part margin. So our biggest issue here, when we drop down to our gross profit, we're at 53.8% gross profit overall. So we're about six to 7% off of our target of 60 to 62. That's almost all labor.
00:25:23
Speaker
We've identified that that's going to be all in labor. So we're estimating appropriately at the front. You know, we're not discounting heavily. ah We don't have an issue there with estimating. We just have an issue with conversion is it's kind of kind of what it seems like at the moment.
00:25:39
Speaker
I think you're not wrong. But what I want to highlight for for everybody, the next the next big one as far as the line of expenses to go down, when we get below our gross profit and our cost of goods, I want to jump down to where you have your payroll.
00:25:58
Speaker
So 60-50. okay And we're going to see that our total payroll expenses for the month of April or the month of May were 40% of our revenue.
00:26:12
Speaker
So again, we're trying to keep that number and that's that's total expenses minus technicians. yeah Obviously, when we add technicians- Non-labor payroll. Non-labor payroll. So that's your service advisors, your managers, reporters, everybody that everybody else that's not lumped into the cost of labor.
00:26:30
Speaker
Um, obviously we'd like to see that number lower again. That's a, that's another direct effect of us missing our top line number. What's your benchmark on that number? So when I put total, I add the technicians back into that and I'm trying to keep mine under 35%. Okay.
00:26:49
Speaker
okay So if if we add technicians back into that, we're at 66%. And obviously that's, that's, unattainable for profitability. Yeah. We're not going to we're not going to overcome that.
00:27:03
Speaker
um And so if we're if we're looking at that, but the real questions that we have to ask ou ourselves is, are we under so are we overstaffed or did we just underperform? Again, I think um that's a question that you have to ask when you're analyzing your business. We we know that in this ah instance, it's ah underperformance because looking back into April, right. We're comparing the good and the bad in April that, that number was 24% as opposed to 40% in May. So that's just a reflection of not getting that top line where it needs to be.
00:27:39
Speaker
We have the same car count. So, yeah. And so the other thing that I wanted, so as an owner, if you're wondering whether I'm overstaffed, missing potential, um,
00:27:56
Speaker
One of the things that you go take a look at there is your, what is my car count? Am I at my car count goals? You guys know your car counts the same as it was previous month. So it's a performance issue. If car counts not at where it should be, I want you to take a look at that percentage of advertising, you know, to your total income, because that's your responsibility as the shop owners to drive, drive the opportunity for cars to come and.
00:28:21
Speaker
If we see that number significantly low, you're about 6.2% right now. So you've you've met your obligation there. want to see it somewhere between 3% and 8%. In most cases, there are some that's going to be less than that and some that it's going to be more than that, depending on what your current growth goals are. But that 3% to 8% seems to be a pretty decent little sweet spot.
00:28:42
Speaker
Anything below 3%, we tend to be fall you know beginning to lag behind, you know being able to overcome our churn. and continue to add new customers and new new business to the to the funnel.
00:28:56
Speaker
Anything above that 8%, we start getting diminishing return on investment to some degree or maybe outpacing current staff unless we're in a heavy growth mode. So that's where we get that 3% to 8% at.
00:29:09
Speaker
But you're you're well within there, so I would agree with you. I think that think we need to focus on you know kind of getting back to that customer experience that we had at the front counter when we had two advisors.
00:29:20
Speaker
But just to kind of sum up our conversation here on the P&L, if we go all the way down to the bottom and we look at our total expenses, we're going to see that our total expenses are 50% of the total revenue.
00:29:37
Speaker
And when we say we only had a 50% GP to begin with, that leads us down 50 minus 50 is zero. And if we get to the bottom of it, we have what, Mike? Uh, it's not zero, it's negative $323. So,
00:29:52
Speaker
so so really, you know, the, the easy high level math here is we want 60% gross profit at the top 40% total expenses leaves us 20% at net profit down there on the bottom side, 60, 40, 20 rules, what we always try to push for our clients.
Profitability Benchmarks & Industry Insights
00:30:07
Speaker
Um, that's just the easiest math, obviously 20% is the number that matters most. So you could have 50, 30, 20 is fine with me um But we have to get to 20. We have to slice it one way or the other.
00:30:21
Speaker
you know having ah Do you know why 20% is the benchmark that everybody throws out there? do. And this is, i've had I've had this conversation with a couple of people that are significantly smarter than me.
00:30:32
Speaker
And because I asked that same question, because it seems like a really arbitrary number. And the response that I got out of it was this, whether this is 100% correct or not, I don't know. I liked it and it made sense to me. So I share it with other people.
00:30:45
Speaker
the Do you know what the average percentage of return is for the S&P on the index? So it's you you've got to make enough money to make it worth the risk of having a shop versus just putting money in an investment account.
00:30:59
Speaker
yeah is it Is it average 8% a year or something? if Yeah, if you go, it's it's hovering right around 10% right now. Okay. um So between 8% and 12%, depending on how things are going. So we you know we flush that out over the long haul, we'll give it close to 10%.
00:31:15
Speaker
So the the response that I was given was, listen, you got twice as much crap to deal with, you know, and and to start your business, you had a capital investment on the front end. No, I don't want to say nobody, but very few of us had zero entry cost into being in the business. yeah So we had a hundred thousand dollar entry cost. We could have taken that hundred thousand dollars, invested it in the S and P went and been the Walmart greeter and had zero stress in our life. And that money would have made 10% year over year.
00:31:43
Speaker
and we would have gotten a return on our investment. Whereas now we have a shop and we have employees and we have customers and we have all these things and problems that come along with it. And risk and liability. The risk and the liability and and all of this.
00:31:56
Speaker
So the return on that investment should at least be double, but we could get out of the S&P with no risk. Right? I won't say no risk, but very little risk. Yeah. So that was the reason that 20% was given to me. And I bought into that as a pretty daggum good idea.
00:32:11
Speaker
reason for why it should be that. um Obviously, it can be higher. I think we both know operators that are, you know, in that 30 to 35% range. I think that's rare, but it's possible and it is doable in our industry.
00:32:24
Speaker
um But for the, you know, for the amount of for the amount of work that we do and the amount of effort, the amount of stress, the amount of liability, I think 20% is a fair number for us to shoot for.
00:32:37
Speaker
And That's one of those conversations that I have with really price sensitive customers from time to time is I'll ask them, I'll say, hey, you know, if somebody says, hey, you're you're too expensive. And I said, well, hey, let me ask you a question.
00:32:48
Speaker
If I if I told you on the front end that I was going to keep 20 cents on the dollar, would you be mad at me? Would you think I was trying to rip you off? They're all like, no.
00:33:00
Speaker
And I'm like, OK, well, I'm lucky if I do that. If I do everything perfect and we have a great month and everything is, and I'm going to keep 20 cents on the dollar.
00:33:12
Speaker
Wow. I do not have that level of transparency with my customers. So I also don't make 20 points. the So i I probably could because it's even less than 20 cents on the dollar. Yeah.
00:33:24
Speaker
Let me make this clear. I'm not having that conversation on a daily basis. I might've had it twice with somebody that I knew well enough to have that conversation with. Yeah. That's not a good strategy you for dealing with price shoppers. If you knew that for every thousand dollars of revenue, i was going to lose three dollars.
00:33:42
Speaker
my Would do you think that I was trying to to rip rip you off? um so there are some dudes in pro service that are regularly 24, 25, 26 percent.
00:33:55
Speaker
And that's one of the most valuable things for me being a part of pro service is being able to, you know, just have a line to those guys and gals and be able to talk to them about, you know, what they do and, Hey, I'm thinking about this, what are your thoughts? And that kind of thing, that kind of peer group is really valuable. So, um, what would you say?
00:34:19
Speaker
i think it's already people who are reaching out to a coaching company or to a 20 group company. are already above, well above average to even be thinking about that um and in many cases. But what what do you think the average is across the industry for net profit?
00:34:35
Speaker
Yeah, so the the best, obviously there's no way to 100% know this, but we've had, um you know, Parmelis puts out some data each year, they do their state of the industry report. um There are some other um some other companies that happen to put out like state of the industry reports and some some data.
00:34:54
Speaker
And kind of what it seems like is looking through that stuff is somewhere around 5%, you know, tends to be the the industry average.
00:35:03
Speaker
I would say there's 240,000 shops in America. the last time I looked at the census, my guesstimate, and this is a 100% guesstimate, I would say less than 10% of them are getting some type of formal coaching or or in a peer group.
00:35:22
Speaker
And I would say that 50% or more are either unprofitable or break even. Yeah.
00:35:33
Speaker
They're cash flowing enough to keep the business open, but not not really generating income. Well, they're not even opening a monthly P&L and scrolling to the bottom to look at that number. What they're doing is they're managing by the checkbook, right? Sure.
00:35:46
Speaker
yeahp And um and and i think the way I think everybody that's been in business at some point in time, unless you started off with an MBA or you know and an economics degree, that's how we started running our business was you know emotionally off the checkbook. And as we look at the bank account, and as long as there was money in the bank account, we felt good about it.
00:36:02
Speaker
um I can tell you that when you get to the point where you can start looking at these numbers and understanding what our industry you know norms are and what those benchmarks should be like we just went over for the GP and then what should your cost of labor benchmark be, what should your cost of parts benchmark be, and we start running the business off of the P&L instead of off the shop management system and the bank account, then that net profit number always improves.
00:36:30
Speaker
Yeah, for sure. Always. Unless you're like me and you screw the business up and cause it to go from its ah best month ever to a mediocre month. Bad month.
Staffing Strategies & Performance Optimization
00:36:42
Speaker
So let's go back to the root cause of that now. Cause I say we were going to go over the P and L first. We're going to cover the numbers. I was going to slap your, slap your hand for not giving me updates on the performance reports. I don't have week to week data to really see here, but walk me through why how we pulled somebody off the front counter after our best month ever and did not put somebody else in that spot during that timeframe.
00:37:10
Speaker
Cause I know you did it to cross train. Yeah. There was some, there's some evolution happening within the, within the greater company. Uh, and there's been some promotions and leadership and,
00:37:24
Speaker
um They've been kind of tasked with helping to implement my vision. ah you know We've had such huge success at the big store with implementing Rack Attack and Speed of Service and multi-stage sales conversations, that kind of thing.
00:37:41
Speaker
And it's not happening. at all on the Raleigh stores. And pretty much of all of the changes that I've made, the only thing that's been implemented in the Raleigh stores is free Diag, right?
00:37:53
Speaker
um And, you know, it's been beneficial. It's a reason that car count is up the way that it is because it just removes a lot of the barriers there. But ah for that system to work, you need the other aspects also.
00:38:09
Speaker
And so we're up 40%, 39% year to date, year over year at the big store where we've implemented all these things. And it's much more moderate to flat in the Raleigh stores um comparatively. Hillsborough Street is up for sure, ah but um not where it could be. So...
00:38:33
Speaker
Yeah, they made the choice that we need to get the Rack Attack in place at Northwest Street, my other Raleigh location. And to do that, we need to move some shuffle some people around. And that shuffling really kind of took the wind out of the sails for Hillsborough Street. We moved one of the advisors out and left the other advisor there kind of trying to answer all the phones and greet all the customers and sign for all the parts and send all the returns and um and manage three technicians and their workload. And it just, it didn't work.
00:39:02
Speaker
So my question, looking back on it, if we had an opportunity to do that over again, because it essentially you had a, had about a $30,000 haircut, right? Yeah. So that's a pretty expensive training session.
00:39:16
Speaker
Yeah. So my question to you is is if we had the opportunity to cross train and then rotate is if we Monday morning quarterbacked it, could we have rotated somebody over to fill that slot while he was cross training in another location?
00:39:33
Speaker
Yeah. Hindsight being what it is probably. um but at the same time, when I think about where we were, we were onboarding and training new hires at, uh, the big store also.
00:39:45
Speaker
And, um, I'll be interested to see how June falls out. Uh, you know, we're already over halfway through the month, so I kind of know how it's going, but, um,
00:39:57
Speaker
we're picking up a fair amount of the slack that was created in May. And by the end of this month, I think we'll be back to full bore, full full steam. So it was probably a 45 day brain fart.
00:40:12
Speaker
So, and again, you have multiple locations. So this problem is gonna happen again. And I'm sure your implementation is going in phases. So you're you're you did a cross train for phase one of the implementation.
00:40:28
Speaker
do you foresee there being a and need for cross training at a future time?
00:40:35
Speaker
Well, the way that, um
00:40:38
Speaker
yes, is the short answer. Okay. So my recommendation to be you you get with get with Xander, get with stephen Stephen, and you guys come up with a plan of how to rotate.
00:40:53
Speaker
And it may not be able to happen every time, but
00:40:57
Speaker
If I can't, if I can't make it work in a vacuum and I can't make it work in real life at all. Right. So I would come up with a way that in a perfect world, we would have been able to done a one for one swap out and, and still had coverage at the Hillsborough location while we were cross training.
00:41:19
Speaker
the other gentleman at the other store. Cause that's, yeah it's going to happen again. i just don't want to see you lose a whole month of, of profit revenue from training. Well, and, and I just want to set the guys up for success too. I want them not to be hung out to dry.
00:41:34
Speaker
um well, and if we take a look at that, you're saying I should, right. Um, well, and it's a, it's a stressful environment, you know, that we put the rest of the team in, um you know, your, your advisor that was left alone there at the front counter, you know, it's a, it's a, you have production pay, even though they have a strong guarantee that all those guys do have a production pay as well. I'm sure that their production pay was down ah for that month. So we essentially, you know, everybody kind of absorbed in some of that, that as well. So from a planning standpoint, I, you know,
00:42:06
Speaker
like to see us get a, get an SOP together that at least gives us the opportunity to not make that a round two. I'd like that to be a one and done problem for you. Yeah. Yeah.
00:42:17
Speaker
Not stumble into the same landmine multiple times, I guess. Yeah. Cool. I think we can do that. And I, I know that Xander and Steven both listened to this. And so, you know, we'll be releasing this episode next Tuesday.
00:42:32
Speaker
um and so I, I'm sure there will be conversations that come from that, but we also are having conversations daily, you know? Sure.
00:42:43
Speaker
So let's talk about how we can, um I think, I mean, I think May's a great learning experience. Like I said, I think we got, you know, I think we got a good idea.
00:42:56
Speaker
Glad to hear that, you know, as we sit right here in June, that looks like that investment of time is at least paying dividends and and things are starting to rebound and get back to, get back to where they should be. um on the On the future side of things, can you walk me through, ah know the last time we talked, we talked about the effective labor rate and some of the pricing strategies that you have in place that affect that effective labor rate.
00:43:22
Speaker
We talked about maybe doing the the audit of how many, we call them push cars at that point in time. So how many many Diag only tickets do we have just so we can put some some proof in the pudding? and
00:43:37
Speaker
Absolutely. so know we if I. If I go to, in TechMetra, if I go, I'm trying to remember what report it was that I found that information. I'm looking for sales details ah where I had, know, the tickets where it's going to be, as you call it, a push car is going to be one hour of labor and no retail dollars.
00:43:58
Speaker
Yeah. That's where they got a free hour of Diag and they bought nothing. So I know that, where did I find that report? Yeah. So I take my sales category report, upload it in Excel,
00:44:11
Speaker
push it into GPT and tell it to give me how many $0 tickets I have. ah Well, yeah, that may that's probably way faster. um
00:44:21
Speaker
If I go into, let me look at the month of May and make sure I'm logged into the right store and the right day range.
00:44:36
Speaker
And,
00:44:39
Speaker
Had 75 Diag jobs in May and and was at that store and we sort by
00:44:54
Speaker
total ticket value, or I can sort my gross profit dollars too, because it'll be negative.
00:45:03
Speaker
one, two, three,
00:45:06
Speaker
It's more than 10 because that's how many it defaults to per page.
00:45:19
Speaker
While it's loading, I'm going to make my guess that it was 20 of the 75 more walks. Okay. your own
00:45:31
Speaker
I'm taking the over. You think it was, you think more than a third of my free diags walked in and buy anything? Yes. There's no way that's the case. Or they just bought another hour of diag.
00:45:48
Speaker
Where is, where do i see the total ticket? Man, I should have had the shit ready for you. I'm sorry. Labor total.
00:45:59
Speaker
No, this is just diag lines. It's not the whole ticket. I know there's a way to do this because I did it for you after our last call and then I didn't send you the results. It's not, it's not pretty.
00:46:10
Speaker
It was, it was over 25%. Um, so my question there is,
00:46:27
Speaker
and I lost you. You still there, Mike? I am. I'm here. There you go. Sorry. I opened up another window there and covered you up. um I got it.
00:46:41
Speaker
Five, six, seven, eight, nine, 10, 11, 12, 13, 14, 15 of to make me that shit too. Okay. Hang on.
00:46:51
Speaker
man you gonna make me do that shit too okay hang on
00:47:01
Speaker
1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12. Add 12 to that. So that's 27. Okay. we 75. So that's 36%. the reason said less than 200, because you can't have repair that's going to be less than $200. not possible. So...
00:47:14
Speaker
that's thirty six percent and reason i said less than two hundred because you can't have a repair that's that's going to be lesston two hundred dollars if not ah possible so so the reason that i'm bringing that number up you got that's 36 percent um of those are diag only tickets that are not generating a repair um i don't know what the value of that is yet but what i would say is let's i would want to look into that 64 and see what the revenue is off the 64 you after we total of that up my my question and just food for thought is is there
00:48:00
Speaker
do you think that there is a less costly
00:48:06
Speaker
avenue to generate the same goal that you're trying to generate there?
Sales Processes & Customer Interaction
00:48:10
Speaker
Cause you're, you're looking at that as a customer acquisition tool as part of your marketing. um i don't care one bit that you give it away for free, nothing wrong with it because it's, it's built into your pricing strategy.
00:48:22
Speaker
understand exactly what you're doing. um My question is, is do you, Is the return off of that investment right now, what you anticipate, what you want it to be?
00:48:34
Speaker
Are you, so are you able to sell brakes off of it? Are you able to sell rear shocks off of it? Are we, or are we diagnosing lifters and quoting out a $13,000 engine and then watching it load up on a rollback and drive down the road?
00:48:49
Speaker
Yeah. Well, so there's absolutely some of both of those things, right? Yep. And any response to this point is anecdotal, right? We've got a really dig into the numbers to give you the truth. And one of the things that i want to do is I want to that exercise for May and for April.
00:49:04
Speaker
Yep. Because, and that's ah that's a great point because the sales process could have been diluted yeah in May as well. And you could have had better results in April. So I, I think that's a very fair point.
00:49:16
Speaker
go back and take a look at when you had your full process available and you're able to work your customer experience process at a hundred percent. I would be interested to see what that number was in your, in your up month.
00:49:29
Speaker
Just to compare can do it also at the Garner store so that we can compare it to a store where we have the Rack Attack in place and the sales process in place. Yeah. First is just the free Diag and, and kind of sell them everything at once process and,
00:49:44
Speaker
not really the speed of service and kind see bad month as it is good month as it is good month where we're trying to go you where we're trying to execute so um but i think that would be i think that would be a really good exercise for you to do and and kind of bring you full circle as to whether that strategy is you know is but um I'm not saying that it's hurting you necessarily, that it's killing you. It just, it may not be the most efficient strategy. don't, I'm not saying that it's not, I just don't know, but.
00:50:19
Speaker
Well, and you know, devil's advocate, obviously I'm, I'm invested in this ah true methodology and i I'm emotionally invested in defending it. Right. Because that's what I do. um But.
00:50:32
Speaker
If I don't have the front of house staff to execute on the plan and the and the concept the way that I should, then this is a waste. It's just like doing cheap oil changes are a waste if you don't know how to convert the customers into buying customers.
00:50:47
Speaker
yep um So if I'm going to use this process, I have to have the team support and tools in place so that they can execute on it because otherwise it's wasted marketing dollars.
00:51:01
Speaker
I agree. I agree with you there. But I want to go ahead and throw something out there because you're missing the boat here. You should have just sent a link. I could have just sent a link. Oh, man.
00:51:14
Speaker
That was an absolutely amazing rant. and And to be there in person, like the the video didn't really catch it, but like his whole head turned red and he had like this vein popping out on his forehead. Yeah.
00:51:27
Speaker
oh my yeah It looked like he had a brake line under his skin. it That vein was so big. And there was spittle flying across the desk at me. um Pollock thought he was going to have to like step between us to protect me from the rage of David.
00:51:41
Speaker
yeah i just You should have just had your other advisor send out twice the number of links and you would have made up for all of that all that lost business that you had with the... It's such an ignorant statement to believe that you can replace human relations with a fucking link. it tells me It tells me that we just have different goals for our business.
00:52:05
Speaker
There you go. How's that? So it was entertainment. I got ah ah got a lot of entertainment value, but I i do believe, and and I brought it up out of jest, but also kind of as a as a real life example, counterpoint here as to, cause I'm very confident that you guys send estimates via TechMetric.
00:52:28
Speaker
Um, well, we used to always send the estimate and get them to approve it. We would sell it over the phone yeah and send the link for them to click approval. Um, we send the DVI and sell it over the phone, but I don't send the approval link anymore. I mean, you don't have to in North Carolina.
00:52:42
Speaker
So I don't, I don't, I do not either, but my, I would almost bet if you go back and take a look at may, and you look at your advisor running the counter by himself, I bet if you go look through the text messages, you're gonna find a lot more of that happened.
00:52:57
Speaker
think that he was just sending the text message and moving on to the next one. Yeah, and not saying anything wrong with it. I'm saying that just by virtue of trying to get stuff done and handle the volume himself.
00:53:08
Speaker
um So not that he's doing anything, you know, There's no malicious intent. He's just, he's trying to deal with that same amount of car you know car, car count that you had when he had a countermate helping him. And in that, we're going to revert back to what's, what's easiest to be able to get through that in the process.
00:53:27
Speaker
And he's going to pick and choose which ones he sells in person and which ones he sells via text message. and well And, but I would be very interested to see how many of those you did and what the conversion rate was off a text message.
00:53:42
Speaker
I guarantee it ain't the same. It's not the same. There's no way. um that so John, the service advisor who's been at Hillsborough historically, is at Northwest Street right now, cross training on RAC attack and and and everything. And where everybody will end up is is still kind of up in the air. But he's back in an environment where he has support and it's ah and it's a manageable volume and he is crushing it.
00:54:10
Speaker
Yeah. Uh, and it's just like, we, we really muzzled him. Like we, we limited his, potential because, um the guy that was working with him is also dynamic in, in his skillset. Uh, and so, I just, I need to equip him with, like, the team's gotta be set up
Technician Compensation & Performance Balance
00:54:32
Speaker
for success. And that was what caused, I believe the, the struggles in May was, and there wasn't enough support for the volume that was there.
00:54:40
Speaker
Yeah.
00:54:42
Speaker
So with that, um yeah, I think what we identified there is is's it's 50% system, 50% people, right? if you go If you go to what the production of this store was before you implemented your system in place, it was okay, but not as good as what it was in April, you know, where you saw the system take in.
00:55:05
Speaker
And then you had a good team as well. So then you took part of the team away. And now you have you still had the same system, but we didn't have enough team support to be able to work the system. And the system fell apart and you you get what you get out of it. So, yeah um
00:55:23
Speaker
but that's, like said, I think just just just for you to have some data to support that argument that you guys had on on that on that last podcast, I'd go back through and just count how many, maybe count how many links were sent and in may and see, maybe track down what the approval rating was off of those. Because like said I said, I would almost guarantee you it's it's different.
00:55:47
Speaker
Well, I think if you look at the average the size of the average quote that you're sending, and if you're having a conversation versus just sending a link and then compare that to the closing rate, I don't know that it's easy to but pull that data, but I don't know much about David's business.
00:56:04
Speaker
I do know that he doesn't really have a service advisor. They just send a link. Right. And, and I do know, i mean, there are, and there's people that we know, Mike, that follow that exact same process and, and they're, they're profitable and they're comfortable with what they're doing.
00:56:19
Speaker
Um, I can tell you what your goals are. Yeah. It depends on what your goals are. it depends on what your market is to a certain extent, but I think a lot of it also, you know, depends on what your customer experience standard is um,
00:56:34
Speaker
And like you said, again, what you're trying to achieve, but I don't think it's undeniable that a a quality skilled service advisor is a is a huge improvement in any business. Over a link.
00:56:49
Speaker
Over a link, any business. And from a customer experience standpoint, from ah a dollars and cents standpoint, from an internal team experience standpoint, if if you sit down and talk to any really good technician and ask them what the worst part of you know, the industry is most of them will tell you bad service advisors or bad managers.
00:57:09
Speaker
Bad managers first, bad service advisors second. yeah You know, but I mean, it's, it's almost neck and neck. um And just because if you think about how demoralizing it is as a good technician, you spend all this time doing a DVI and recommending all this stuff and you know, make these nice long tech stories and put your 12 tech finds on there. And a bad service advisor looks at and estimates 25% of what they saw on there and then finagles the tech time in there because they're too scared to estimate it at full price and sends it out. And then the technician's the one that eats that poo sandwich at the end of it.
00:57:47
Speaker
Yeah. um So something that's interesting is um were having a conversation the other day about implementation of the rack attack and some technicians have an issue because the shops that don't yet have rack attack pay two tents for a DVI. yeah But a good DVI takes probably 45 minutes with pictures and write up and videos and everything else.
00:58:12
Speaker
um And they're like, well I'm going to lose those two tents.
00:58:18
Speaker
I don't get it because every time you do a DVI, you're losing time. there's no way you can do a dvi in 12 minutes to the standard that we expect and so i'm taking away the thing that the time is the worst on and i'm giving it to someone who that's all they do and they're paid hourly right so they're not negatively impacted by it and they're you know trained on just do it consistently do it consistently are they perfect no they make mistakes they miss things or they're incorrect on things but so do the technicians none of us are perfect we all make mistakes sure
00:58:52
Speaker
Um, and I don't understand why there's a hesitancy to give away thing that you lose the most time on every day in favor of more of the things that you have a labor bump on, you because so we had this conversation a ah couple calls back actually, and,
00:59:12
Speaker
There is, as as much as technicians hate flat rate, and I think by and large, the majority of technicians in the industry have a negative connotation about flat rate. Yeah. um Or at least the loud small minority do at least.
00:59:28
Speaker
I think it's probably majority at this point. It's very well documented that flat rate's not an ideal pay scale for most technicians. and And I'm fine with that. But I would say that the the my request of technicians out there is If that's going to be your feeling, you have to let go of the flat rate mentality of observing work to to pay because essentially you have a hybrid pay ski system, right? Because you have a guarantee and then you allow them to earn past that guarantee if they produce.
00:59:59
Speaker
All right. So we can call it what it is, but that's not flat rate. It's a hybrid pay system. They're getting paid whether they're sitting on a five gallon bucket, watching cars drive by, and there's nothing going on in the shop as we've observed on your P and L from, ah from May.
01:00:15
Speaker
yeah um Now they're not earning that full potential obviously, but they're still getting, they're still getting a good guarantee pay. So if I look at it that way and I broke it in, and I had this cause we have a hybrid pay system in our, in our shop as well.
01:00:29
Speaker
So when I talk to technicians that are on a hybrid pay system, my question is, Let's break it down to how much you got paid for the job and not how much time you got paid on the ticket. So what did you actually make?
01:00:40
Speaker
Like it took you an hour to do it and I paid you the hour on the clock and then you got an X amount of production bonus on top of that. Whether it's the book time or not is immaterial.
01:00:55
Speaker
Right. So if you're, if you're on the clock amount was $30 an hour and you've got $5 production bonus for that, even though if you were on flat rate, it would have been more, but you were, you made $35 an hour to do that particular job.
01:01:11
Speaker
My question is, is that fair? They're like, well, yeah, that's fair. I'm like, well, then what are we sitting here? oh I could have made 75 if I was on flat rate. Yeah. But if you're on flat rate and there were no cars, you wouldn't make it. A flat rate wouldn't be a $75 an hour flat rate.
01:01:26
Speaker
Yeah. You know, you would have been a $35 an hour flat rate guy and you would have made $35 an hour. Right. So that's where, um, it's, ah it's just a, it's, it's a point of view. It's a perception. It's, it's the only way that they know to, to judge their worth is through the production time.
01:01:44
Speaker
well and And it's been manipulated against them for so long too, the other way, their point. They just assume they're being screwed. That they assume that they're being screwed. yeah And so they have a valid reason for that fear because they've been on a flat rate pay before at some point in time.
01:01:58
Speaker
And there was an advisor or a manager that was paid on a GP, you know, GP dollar, a GP percentage based deal. And they said, oh, that four hour job, that technician is going to do it in two. They kept the dollar amount the same to the customer and they whittled the time down to two to the technician.
01:02:12
Speaker
I've watched it happen in shops before. And so I understand why they feel that way. I think that the conversation that we had was, is is taking a look at doing the labor bump on the multiplier and and then bringing them in and having that conversation with them about, listen, you're going to see lower times on these commodity service tickets because I can't pay a bonus for that service.
01:02:39
Speaker
Because essentially at that point in time, once we have a hybrid pay scale, the production time is only there to to calculate the bonus. It's not there to calculate pay. And I can't bonus on those jobs.
01:02:52
Speaker
because Well, and that's what we've done and Garner is... um you know, we had ah but a 25 point labor bump on anything that wasn't a canned job that you had to, you know, look up labor time on. And um that was there because technicians were heavily involved in doing really thorough DVIs and helping with estimates and, you know, yeah all the reasons that you put a labor bump in.
01:03:17
Speaker
ah And we took away the DVIs and the estimating and the labor time lookups and all that kind of stuff. ah but we allowed them to maintain the labor bump that we had, that we had given them to make up for those things.
01:03:33
Speaker
But then we drew down the labor time on those commodity items that were always crushing our effective labor rate. right well And the net effect has been has been good. So ah sure yeah if it had been if it had been really bad or if it had been bad at all, you know someone would have come to me and said, hey, I'm um making less money because of this.
01:03:53
Speaker
Yeah. And that's, and I think you did the right means you have to sit down with them. That's what, that's what we did when we implemented that philosophy was we just brought everybody in and said, Hey, you're going to see some reduced times here. If at any point in time, you feel like this is impacting your, your pay, here's what your average hours are right now. Individually, we're going to be monitoring this. If you feel like it's a problem.
01:04:13
Speaker
and And then that gain is as long as we're selling more, as long as we're selling, like we're supposed to sell, then it's a net gain to the technician because, know, we're able to you know We're able to get a larger amount of higher effective labor rate repair work in the door. And that's that's where there they're not making money off DVIs anyways.
01:04:32
Speaker
yeah It's the least efficient thing that they do in the shop is a DVI. Absolutely.
Shop Mishaps & Safety Reflections
01:04:38
Speaker
um We're pushing up on an hour here. And before we go, there is something that would like to request that you share if you could.
01:04:46
Speaker
Sure. you know, part of my shtick is it's confessions of a shop owner. I want to hear what went wrong at the shop. And we don't typically do that on these coaching calls because we're kind of focused on the numbers and everything.
01:04:57
Speaker
um But you had some shenanigans at your shop that were too good not to share if you'd be so kind as to to just kind of let the world know. That would be wonderful, please. Yeah, absolutely. So, um you know, you know this about Elite. All of our coaches at Elite are either current shop owners or very recently very successful shop owners that have exited out.
01:05:18
Speaker
So I try to make sure that I tell all of my clients, cause I'm still an active shop owner as well. You know, we have all the same, just because I'm a coach doesn't make anything perfect about my my organization either, but we did have a little bit of excitement last week that was outside of the norm.
01:05:34
Speaker
And so I was, I was getting ready to pack up and go on vacation last week for a little mini three day getaway. And I got a a text message from my store manager and the text message said, hey, boss, how's your day going?
01:05:52
Speaker
Which is never it's never that's never the way that you want the conversation to start. If you're talking to an employee ah or a child, you know.
01:06:05
Speaker
a child that you have or anything like that's not the, not where you want to go. So I'm like, I like, look, Hey, I don't have a whole lot of time on a scale of one to 10. How bad is it? And so she texts back and she's like, so that her first response was, well, everybody's okay.
01:06:22
Speaker
which is But it's probably a nine. And I was like, Oh,
01:06:30
Speaker
So I make an emergency run. i'm I'm fortunate I'm seven miles away from the store. So I hop in my car, drive, drive down to the store and I get there and everybody's kind of hovered around, you know, and I see a, I see a minivan nosed into a ah toolbox and I get to my office and there's a, the office wall is impregnated.
01:06:58
Speaker
It's got a big- With the other side of the toolbox. Yeah, with the other side of the toolbox. So to tell the story of what happened, we have a QC process ah that every single time a ah vehicle is completed, we vacuum out the driver's side floorboard, we spray some smell goods, we wipe down the area and make sure there's no fingerprints, all that good stuff, document out mileage.
01:07:22
Speaker
check tire pressures, normal QC process, right? And so we have a support staff there and one of three of the support staff members will perform that operation. And this time it was our Porter who does a fantastic job, but he he got overly ambitious.
01:07:42
Speaker
this particular day and he had been performing a QC behind the vehicle in question and had that vehicle locked in. The technician had just finished a ah brake job all the way around. So he did pads and rotors front and rear and couldn't pull the vehicle out to go do the test drive on it burnish the rotors and reset the the brake pedal.
01:08:02
Speaker
And so he went and grabbed another ticket. While he was gone, the porter decided he was going to move that vehicle out of the way, saw that the vehicle that was in front was done and was going to jump on getting the QC on that one done.
01:08:16
Speaker
And Mike, you've been to my shop, but on i have three bays on the backside of the shop. And on the backside, there's a bit of a hill that they have to go up to get to the access road. And so he backed up and it's a pretty steep hill.
01:08:28
Speaker
Well, when he was backing up, he realized that he couldn't stop. So he went all the Instead of backing up five feet to be able to get the door open, to vacuum it out, to clear the lift, he kept going.
01:08:39
Speaker
And he went up the hill and panicked and put it in neutral and rode it back down the hill. Right back into the shop. Right back into the shop. And, uh, and demoed two toolboxes and the wall to the office and the front bumper of the customer vehicle.
01:08:58
Speaker
So. The airbag deploy? Was it that hard to hit? The airbag did not deploy. So we were as far as damage goes, I mean, we were fortunate, like I said, man main thing was, like she said, everybody was safe.
01:09:11
Speaker
Nobody happened to be in the office when it happened. we missed We missed that by about two minutes um and about six inches of penetration more, and it would have got into some of the office equipment. So it really just damaged the wall itself.
01:09:24
Speaker
um And so, but yeah, so I mean, it's, I think Elon Musk has the quote that, you know, entrepreneurship is like staring into the abyss while eating glass. yeah And at some point in time, you get used to staring into the abyss.
01:09:40
Speaker
but you're never, you, but you never stopped chewing the glass. yeah And so so it's always something, man. There's always something. And if, if anybody thinks that they got into this and this was going to be at some level, I'm going to get to 1 million and this is going to be a gravy train and it's going to be easy.
01:09:57
Speaker
Or once they get to 1 million, they're like, oh man, once I get to 2 million, it's just going to be a ah gravy train and it'll be easy. I try to tell all my clients it's, it's just like your kids, right? There's different stages of the business. And every time you move through one stage to another, you leave one set of problems behind and you take on a whole new, a whole new section of problems.
01:10:17
Speaker
And, uh, you know, that's, uh, when you get bigger and you add more staff and you add more processes and you do more stuff, you, you wind up with a few more little mistakes like that, that happened throughout the course of time. But, um, that was, that was my confession. That's what went wrong last week for me. So,
01:10:36
Speaker
Well, keep that juju up in Roxborough. I don't want it down here in Raleigh. He's, he is a, he is a good Porter and Again, we talked I think we talked about this, but we started pushing the pace on him on you know trying to get these QCs done faster and get some things turned around. And I think, like I said, he got a little ambitious there and and got ahead of it. But it allowed us to go back and and rework our process of, hey, what should we do? i think just a really quick point, because we had this conversation internally, I think we forget.
01:11:12
Speaker
how dangerous what we do really is. And the fact that every car that comes to us is broken in some way, shape or form. And we take for granted just getting in and moving a car from point A to point B could be dangerous. So there are some things that from a technician standpoint, we probably know what to do, but how many times does your advisor get in a car and move it?
01:11:31
Speaker
um and doesn't really know what's wrong with the car just because this is where it was parked at was the wrong spot. So we were able to create some little quick, little checklist. Hey, when you get in the car, you need to, you know, check the brake pedal, do this, do that.
01:11:44
Speaker
Um, so it was, a it was, it's not how you want to have the refresher, but it was a good reminder. now Yeah. Um, to the expensive learning lesson, a very expensive one.
01:11:55
Speaker
All right, man. Well, thanks for the, uh, Thanks for the conversation. Thanks for the, uh, little bit of, uh, corrective, uh, action accountability. And i'm going to get performance report updated soon as soon we stop recording.
01:12:09
Speaker
I'm going dig into that. Um, some of that analysis that you had asked about and probably also going to review this episode with, Steven and Xander,
01:12:20
Speaker
ah because we were reviewing P&Ls yesterday. So this is a good exercise for them as well. So I appreciate you, man. Absolutely. Thank you, Mike. Talk to you soon. See you. Thanks for listening to Confessions of a Shop Owner, where we lay it all out.
01:12:33
Speaker
The good, and the bad, and sometimes the super messed up. I'm your host, Mike Allen, here to remind you that even the pros screw it up sometimes, so why not laugh a little bit, learn a little bit, and maybe have another drink?
01:12:44
Speaker
You got a confession of your own or a topic you'd like me to cover, or do you just want to let me know what an idiot I am? Email mike at confessionsofashopowner.com or call and leave a message. The number is 704-CONFESS. That's
01:12:59
Speaker
three three seven seven If you enjoyed this episode, be sure to like, subscribe, or follow. Join us on this crazy journey that is shop ownership. I'll see you on the next episode.
01:13:38
Speaker
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