She’s the boss

Hannah Gordon tells us what is has been like becoming the boss in 2018 as she starts her own garage business

Published:  05 July, 2018

After learning the ropes and being on the tools for 14 years I decided 2018 was the year to bite the bullet and go it alone with starting a new workshop business.

For years I have been working for two or three different garages, enjoying a huge amount of variety and picking and choosing what days I work where. I have been extremely lucky with the people I have met along this incredible journey. Also, working for some real characters of the trade certainly doesn’t lead to a boring work life.

I have always worked for independent garages, the interaction you get with customers and the personal experience you are able to offer is for me what car repairs is all about. I love hearing how much people value their car, not financially but in a kind of ‘member of the family’ way and it fills me with a great sense of achievement when I can get their car back on the road in good working order.

Bright idea
It is not the obvious choice for a ‘young lady’ and I use that term in the lightest possible sense as I can hardly call myself a lady when things go wrong and the air turns blue, but that is another story for another issue. It isn’t a normal career choice but fixing cars is all I have ever enjoyed doing, it is the only thing I haven’t lost interest in and it is the only trade I ever want to be a part of.

So January 2018 came and I had the bright idea of starting up my own business in the village I grew up in. It has been nearly six months now and progress has been slow, trying to keep costs down I am distributing leaflets myself and offering incentives such as 10% off.

Best asset
A workshop business’s best asset is its reputation, and that takes time to build up. I am also finding out that being self-employed requires a million more hours than just turning up to a garage and working.
    
It is not that I am naive it’s just I am rubbish at paperwork, invoicing and doing all the other grown up things that a business needs. To say it is a massive learning curve is an understatement. Before January I didn’t have to bother with business plans and meetings with a bank manager, I didn’t have to spend hours at a computer trying to write down why I am worth investing in and what my plans for taking over the car repair world were.

Passionate
The car repair industry is something I feel hugely passionate about and I firmly believe that when starting a business you make sure it is an area you are knowledgeable in otherwise you will never strive to make it work. At the moment I feel slightly overwhelmed by paperwork and getting on the tools is always first priority but I am hugely excited about the future and what Spanner Tech Services has in the pipeline.

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  • Exploiting Aircon 

    Although it may be hard to believe given the weather so far this year, but a lot of customers will soon be starting to use their aircon systems only to quickly realise that their system is not working as expected, leaving them hot under the collar! So an ‘exploitable opportunity’ exists as the people in suits might say, but will you be in a position to exploit it most profitably?

    Modern systems
    With the majority of new cars now having some form of HVAC (heating, ventilation and airconditioning system) fitted as standard, it is no longer considered a luxury, just another part of the vehicle’s array of functions that should work when needed – summer or winter.
        
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    Added value
    The easy way to deal with this is to offer an ‘added value’ service whenever the vehicle is in your workshop – namely a free air-con system efficiency check. If the system does not perform to expectations, or emits a bad odour, then the opportunity exists to sell the service to your customer. So, make sure that you optimise the opportunity that aircon maintenance and servicing presents ensuring that your customers can keep their cool when summer finally arrives.
        
    The fully automatic units available from the leading suppliers will allow full functionality with a minimum of technician’s time – who can still be servicing other aspects of the vehicle while the unit does the work. A printout at the end details what was done and if any problems exist – useful for both the customer and as an activity record for the F-Gas regulations.
        
    If a problem exists with the vehicle air-con system then there is a requirement to diagnose and repair. A good understanding of the principle of operation and system design is necessary to both identify and repair profitably, in terms of time and for fitting the correct parts. The typical mathematics for the return on investment (ROI) are something like (prices as of May 2013 for illustration purposes only):

    Cost of equipment                     £2,795
    Cost of training                         £350
    Marketing materials                   £250

            Total costs:                       £3,345

    Air-con service                          £65 (net workshop revenue)
    2 x air-con services per week     £130 net income

    ROI    3345 ÷ 130 = 26 weeks.


    This excludes any additional repair/parts revenue and is based on only two vehicles per week. With this in mind I really think the decision to invest in the training and technology is a no-brainer.

  • Bigger is better – right? 

    I was asked whether expanding a garage business to become multi-site was practical or, indeed, even feasible, which got me thinking.
        
    Fundamentally, a business exists to create wealth, both as cash and as an asset. This then benefits the owner(s) and employees, or any shareholders.
        
    The basic principles of the business are to provide goods and services to meet the needs of their customers, who pay accordingly. The turnover/cash flow generated then pays for the costs of providing those goods and services (employees, suppliers etc), leaving any surplus as profit, on which tax may be due. Therefore, in a logical process, the greater the turnover and the lower the costs, the greater the profit – simple!
        
    So, if a business is working well, surely if you just keep replicating what it does in other locations to other customers then you would just keep generating greater profits? Here comes the ‘but’. This concept applies but only in certain circumstances.

    Personal touch
    If we look at a successful independent garage, it is often the enthusiasm, commitment and business acumen of the owner which creates the success, frequently based on good customer service at a personal level. The ‘brand value’ of the business is quite literally in the hands of the owner. It is therefore challenging to successfully replicate this if another branch is opened as this ‘personal touch’ is then split between two locations. If three locations exist, this becomes even more thinly spread and increasingly reliant on the quality and commitment of other staff to deliver the original brand values.
        
    Therefore, a self-imposed ‘glass ceiling’ is created. It is felt that the maximum number of locations that can be successfully emulated is three. However, if you do plan to expand, how do you know when this should happen and what are the key issues to consider to enable you to create successful clones of your business?
        
    The most important point is to identify the key benefit of your business that has created the foundation of your success – your Unique Selling Point (USP). Once you have identified this, it is then imperative that you understand how this can be replicated. It will be important that you can ‘stand out from the crowd’ as any new site will have to establish itself quickly from a standing start. Remember that marketing is not about winning the war to be the best product or service but about winning the hearts and minds of your customers. Additionally, do not be too cautious about setting your prices higher as most customers do not buy on price and carefully selecting your target audience should support your pricing level. Aim to be the leader rather than just another player in the marketplace.
        
    So having identified what your new location will emulate, the next critical step is to understand the automated and integrated systems that need to be in place to allow your businesses to be effectively monitored and managed. This becomes increasingly important as any new site is created as your management time will become increasingly shared. You will not be able to rely on manual systems and the various elements of data will need to become ever more integrated. For example, wages, invoicing, workshop revenue, parts purchases and so on, need to be coordinated, otherwise, quite literally, your numbers will not add up.         Any system that you do implement must also be scalable and have multi-user access, otherwise you will lose the support of your managers and staff at this critical time of an expanding business.
        
    It will not be possible to retain your original ‘hands on’ management style and this will mean that you will lose visibility of the business as well as having to implement new legislative and policy requirements for new staff and premises.
      
    From the purely financial perspective, new businesses rarely fail because of a lack of profitability but fail due to a lack of cash. Any new location will be a cash consumer until it becomes established, so this will require adequate funding and a clear visibility of cash flow from both your existing business as well as the new location as this starts to grow. The key financial elements should include:

    •    Direct visibility of the daily results
    •    Key Performance Indicators (KPIs) and management information
    •    Actual results versus budgets or forecasts
    •    Profitability
    •    Customer debts
    •    Supplier payments (due dates and values)

    The better you can demonstrate the financial visibility, control of the business and achievement of your business plan, the easier it will be, both for yourself and when working with your bank.

    A strong team
    This then leads onto perhaps the most difficult element of growing any business – good quality managers and staff. This creates two immediate problems – firstly, who to delegate your existing business to and secondly, who to appoint to run your new business. In both cases, not only must this individual, or individuals (it could be that you appoint a single deputy and share the tasks) be professionally competent but they must also share your company ethos to ensure that what made your company successful in the first place can continue to be delivered.
        
    Finally, if what you have is truly transferrable then ask yourself if it could be franchised.
        
    My personal opinion is that this is unlikely unless your USP is based on a specialist niche part of the market. If this is the case, although this may create an opportunity, by definition, niche market sectors offer limited potential. You will also have to ask yourself if a potential franchisee couldn’t just do this for themselves without (quite literally) buying in to your franchise offer?
        
    So, if you are considering expansion into other sites, ensure you have the right systems in place, that your existing business USP can be successfully emulated, have competent managers who share you ethos and then it is just a case of finding the right location(s) – which is another different challenge altogether!

  • Price versus quality 

    The perennial question of ‘price versus quality’ surfaced at the Aftermarket Roundtable discussions earlier this year. From the business perspective, this is more interesting than the ‘price versus cost’ question, which is much easier to answer. So, what are the details behind the quality element?
        
    Firstly, let’s start by understanding the definitions of what we are considering – what is price? In detail, it is ‘a value that will purchase a finite quantity, weight or other measure of a good or service’. As this is the basis for the exchange or transfer of ownership, price forms the essential basis of commercial transactions. It may be fixed by a contract, left to be determined by an agreed formula at a future date or negotiated during the course of dealings between the parties involved.

    Defining price
    In commerce, price is determined by what:

    • The buyer is willing to pay

    • The seller is willing to accept

    Competitors allow a seller to charge. With the mix of product, service, promotion and marketing, it is one of the business variables over which organisations can exercise some degree of control. This is then more commonly known as the ‘market price’.
    Importantly, it is a criminal offence to give a misleading indication of price, such as charging for items that are reasonably expected to be included in the advertised, listed or quoted price.

    Quantifying quality
    Secondly, what is quality? This, perhaps, is much more subjective but is something like ‘the non-inferiority or superiority’ of something or is an inherent or distinguishing characteristic or property. It can also be the nature or degree of the grade of excellence.
        
    In manufacturing, for example, a measure of excellence or a state of being free from defects, deficiencies or significant variations. If a vehicle manufacturer reports a defect in one of their vehicles and makes a product recall, customer trust in the quality of the vehicle could be lost.
        
    In your aftermarket business, how does all this apply? Actually, in just about everything you do, both internally and externally. For example, internally, your staff need to be able to provide what you need to deliver to your customers, which will include ‘quality’ elements like the work they do, the time needed to conduct the work and the competence to complete the work without faults (even if they develop in the future). This comes with a cost attached (i.e. the wages you pay) and there is probably a certain acceptance that you pay just enough to employ the level of employee needed – which I am sure will be less than a formula one team, who pay the most to get the best – obviously there is a balance.

    When you start to consider more expensive elements like workshop equipment, price should not be the first consideration. Capability, reliability and longevity are just as important. These workshop items are acquired to earn you money, so they need to do the job and be reliable.

    Image counts
    In the direct ‘customer facing’ side of your business, the fixtures and fittings of your premises should not be the cheapest. Look after the design details of your public areas, the quality of the furniture, even something as simple as the coffee or the wi-fi you may provide, should be subject to the price versus quality. It might be provided free of charge but the quality still needs to be acceptable. The perceptions that your customers form will lead to how they perceive the overall quality of your business and, in turn, how your business will treat them and their car. A simple example is how much time, effort and money is spent on the detailed design of many of the vehicle manufacturer’s franchised dealers. They need to portray a certain image of quality.
        
    So, externally, the same considerations should apply to your business, including signs that are clear and easy to read, parking that is safe and clean, well lit public areas and the list goes on.
        
    When it comes down to the service that you provide to your customers, recent research from the Institute of the Motor Industry (The IMI) showed that although cost remains high on the agenda, with 52% citing it as a key factor, quality of work came in a close second at 44% and rising to 51% amongst women. This was further reinforced by 66% of all respondents and 71% of women feeling that a recognised quality standard was very important when selecting a service provider.

    Memorable experience
    Customers are also worried about the quality of work but a good overall customer experience will also have a knock-on effect to your business’s reputation and affect how your business is promoted via word of mouth. The value of good customer service is appreciated by most but can be difficult to quantify. Avoid cutting costs if this diminishes the quality of the service you can provide.
        
    What are some other key aspects which support the perception of price versus quality from your customer’s perspective? One of the most important will be the price of the work you are charging against the quality of the service you provide. This is not just your hourly rate or the cost of the work but is the complete ‘package’ of what the customer experiences. This will normally include the work being completed correctly and on time but, will also include the choice of parts, the way that the booking-in and final invoice are handled (i.e. a clear explanation of what will be/has been done), also any additional items that are included. These can be additional costs, such as the environmental disposal requirements, or additional items included free of charge, like a check of DTC’s, washer fluid top-up or even cleaning the vehicle before it is returned.
        
    As long as all of these customer experiences reinforce their perception of a professional business which employs well trained and competent staff and which delivers a good quality of service, then price becomes a secondary issue. However, the higher the price, the higher the customer’s expectation of quality. The challenge is to deliver what your customers expect at the price they are willing to pay.

    Want to know more?
    Find out how Neil’s consultancy for garage owners can benefit you please visit xenconsultancy.com.


    Aftermarket archive: December 2014 Aftermarket | www.aftermarketonline.net


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