How’s the health of your business?
Is your business idling, accelerating or stuck on the hard shoulder?
Published: 10 December, 2018
In my line of work I meet a lot of great garage owners. Dedicated men and women, all committed to repairing their clients’ vehicles to a high standard. They’re intelligent, hard working and persistent people many of which have been in business a good few years.
With all of this in their favour you would imagine that they would be spending their free time pondering the length of their next yacht, or whether they should winter in the Alps or Rockies? Unfortunately this is often not the case, and it’s not uncommon to be asked “How can I increase the financial success of my business?”
We all know that an unfeasibly large income doesn’t buy you happiness, far from it. But I do know this. A healthy business is a profitable business, and a profitable business not only buys you less stress, it buys you choices and options on how you spend your days. Would you like more options? If so read on.
Back to that question. “How can my business be more financially successful?”
‘More’ is a dangerous word and it’s often not attained. A better question would be “What is the maximum revenue, profit and personal income that my business can generate in its current form?”
It is something that a lot of business owners haven’t contemplated. But you really should. Only when you know this, can you decide if your current business is performing at it’s best, and is the vehicle to get you to where you need be financially.
The good news is you don’t need to be an accountant to calculate your maximum net labour revenue. Just using the available hours to sell your labour rate and the number of technicians your employ will get you a long way in the right direction. Take an average hourly rate of £55. It could probably be higher but we’ll come to that in due course. This will yield a maximum net income of £422,000 a year from labour sales with four technicians. If your garage is reaching that level of income (£105,000 per tech) at that labour rate, then you should give yourself a rather large pat on the back. Nice one! Not reaching that? That’s incredibly common. In fact if your garage has a net labour revenue of around 54% of your maximum, then you’ll not be alone as that’s the average for a business when we start to work with them on our business development programme.
Why so low? Why are business owners leaving £50,000 per technician on the table? There are a plethora of reasons but I find the most common answer is one of focus. They’re just focusing on the wrong things.
It’s natural. In fact it’s perfectly understandable why a garage owner focuses on the technical aspect of their business. You know that if you don’t fix the cars in a timely manner to a high standard that your income will suffer and your customers won’t return. So of course you’re interested in technical tools and the latest workshop wizardry that’ll enable you to complete a job that you couldn’t without it, or the same job in less time. But let’s be honest (we’re friends after all) is this laser-like focus healthy? Are you too focused on the next tool, the next gadget, the next BIG THING to the cost of your business? All too often I find that a garage owner is and it’s costing you.
If you’re not measuring it…
All that is required is a change of focus. The success of your business is in the data, and if you would like to claw back that £50k per technician (or at least a large chunk of it) then learning how to measure the right data and use it to your advantage is essential. After all: If you’re not measuring it, you can’t improve it.
So, you want to increase your income and profit, what should you be measuring? Here are a couple of metrics to get you started.
- Technician efficiency – Are your techs completing the work in the allotted time?
- Technician utilisation – Are you selling and using all their available hours at work?
- The good news here is that you don’t need complex systems or expensive software to see some amazing gains in both these areas. With the aid of a piece of A4 paper (not sexy but very effective) we help many garage owners raise their net revenue north of 85%. This means that for no additional cost each tech will earn your business an additional £32,000 a year. What’s not to like about that? Not a lot!
Can I have ‘more’ sir?
Still not enough? OK, I get it. You’re a business owner and naturally you want to make the most out of your investment. Where do you put your focus next?
How about increasing your labour rate? What do you mean “our customers won’t pay it”?
I often ask how busy a garage is, and I’m often proudly told that they’re booked up two weeks in advance. “Well done” I retort. I then ask what their hourly rate is. “£50” comes the reply, sometimes followed by “we’re the dearest in our area.” Why don’t you raise it to £60, or £65, or £75? I ask You know what’s coming don’t you? “Our customers won’t pay it”...
How do you know they won’t pay it? What data do you have? The “they won’t pay it” card is often subjective. Here’s a question for you. How many times are you asked what your labour rate is? Not how much a repair costs, but how much your labour rate is? I’d guess not often. As an experiment ask your front of house team to make a note of how often they’re asked, measure it for a month and let me know how you get on.
Raising your labour rate by £10 will increase revenue (at 85%) by another £16,000 per technician each year. Certainly not to be sniffed at.
Don’t get me wrong. I understand your hesitation. Raising your labour rate should be carried out with a systematic plan, and the first part being an increase in the number of customers, or more accurately, more of the right kind of customer.
If you’re in business then you’re in sales, and to make sales you need to find customers. That’s right. FIND customers. The whole “build it and they will come” business model just won’t cut it in today’s world, so you’ll need to become a competent marketer to ensure you have a steady stream of the right kind of client through your doors.
Fish where the fish are!
Marketing should be considered to be a long term investment in your business that is carried out continually and increased when required. Definitely not a reactive “I’m short on work let’s do some flyers” take on this critical element of your business.
Like every critical aspect of your business it’s a skill, and once honed will deliver consistent results. Just like angling though you need the right bait for the right fish, and this is where it often goes wrong for a garage owner. They can’t decide which fish they’re aiming to land.
A carefully crafted marketing campaign will have a very clear picture of the customer. With the customer at the forefront of your mind, a sales message can be crafted that ticks all of the customer’s boxes and leads to them lifting the phone and making a booking. Anything other than a planned campaign is akin to trying to catch tuna with maggots. You may get one or two that leap into the boat but that success will not be repeatable long term.
At the top of this article I asked “Is your business idling, accelerating or stuck on the hard shoulder?” and it’s an important question. Like the saying goes: If you’re not moving forwards then you’re going backwards. And it’s with this in mind that I urge you to consider what’ll you do to change this. It doesn’t take much to change. Just one step in the right direction followed by another and another can have an unbelievable impact on your business. Regularly monitoring and improving the key metrics mentioned along with finding new clients is a pretty good place to start for many. Doing this for the rest of 2018 could well have you set to accelerate your business into 2019 and beyond!
- Do you have a business or a profitable job?
It’s a favourite of mine, and one we ask of all garage owners that join the Auto iQ business development programme...
“Do you have a business or a profitable job?” Not sure which one you’ve got? Carry on reading.
That question is a doozie and is often met with a few seconds of silence followed by a mixed range of answers whilst the questionee arranges their thoughts. The question is designed to be thought-provoking and entice the garage owner to work through the differences between the options.
Different sides of the coin
What’s the difference between a profitable job and a business? It’s a fine line with a BIG difference.
Quite simply if you have a profitable job the income from your work (where you spend your hours in the day) reduces when you’re not doing that work. You might be able to get away from the business for a week or two but longer than that will have you sweating, you’ll wonder if your techs are efficient without you in the building, concerned that your numbers are going south.
A business on the other hand will run without you being there for a significant length of time. Which one do you have?
I can feel the tension elevating as some of you may be rising from you chair ready to give me a good talking-to. Hang fire though and hear me out. In no way am I saying that having a profitable job is wrong. Quite to the contrary. If that’s what you set out to achieve then who am I to say any different? Here’s the deal though. Most garage owners don’t embark on this amazing journey to be ‘self employed,’ they do it to build a bigger and better future for their families. They did it to have more time with their loved ones, the funds to allow this and probably have early retirement thrown in with the business providing the income. Can a profitable job do this or do you need a business that’ll run without you? I think you know the answer.
What’s the difference?
So you’ve decided that a business is preferable to a profitable job. But is there really that much of a difference? Let’s take a look. It often comes down to nothing more than a state of mind that separates these different sides of the same coin.
Let’s compare the owner with a profitable job and the business owner. At first glance I’d challenge you to notice the difference. They’ll both have a business that they’re proud of and rightly so, they’ve worked hard to build it. More often than not they’re both skilled technicians, have the respect of their team as well as their customers. Then how can it be that one earns significantly more than the next. One word, focus.
Our owner with the profitable job will be very focused. He’s focused on his own ability to fix the vehicles in his workshop often working shoulder to shoulder with the technicians. The technicians respect him because of his technical ability and work hard alongside him. All admirable qualities.
Our business owner also has a laser-like focus, his target is a little different though. His gaze is firmly fixed on a vision of the business he’s building and knows that long term success requires not only focus but patience. He’s acutely aware of the one thing that will bring freedom and the time with his family (the reason he started this venture) is the team he builds and trains.
This isn’t to say that he doesn’t roll up his sleeves and lead from the front when required, it’s just that his daily focus is on the strategic functions of the business that drive success, rather than the day-to-day tasks that so many owners get caught up in. There’s a huge benefit to this as well. You get to keep the skin on your knuckles.
Dominant thoughts
It’s a proven fact that we all move through our day in the direction of most dominant thoughts. What does your typical business owner ponder?. Now I can’t read minds (how cool would that be?) but I do know that these are the questions that need to be answered:
- The Garage Inspector - Training dates
The Garage Inspector a.k.a industry consultant Andy Savva has announced a number of one-day business training course dates.
- Dealing with customer complaints
Running any business, and perhaps more so a service business like an independent garage, you have to learn to recognise there are different types of customers with different expectations.
How we deal and adapt our services, the customer journey to meet and exceed these expectations are essential if we are going to succeed in having a healthy profitable business. This function must be adopted by everyone in your garage regardless of size.
Occasionally however, we are faced with challenging customers who complain, usually in a passive aggressive manner. These customers feel they have a reason to be upset. I always used to say to my team at Brunswick Garage, that there will always be a small percentage of customers that we will never be able to please, and importantly we must not let these handful of customers taint our view of all customers. When you find yourself having to deal with a disgruntled customer, remembering a few simple techniques can help to defuse the situation. Both parties being upset and defensive will not amount to anything positive.
Listen
In my experience running independent garages, I came to the realisation that in virtually every case of an unhappy customer, all that was needed to resolve the customer concern was to listen to the customer, or recognise actually they weren’t being listened to.
The customer isn’t always right, but it’s not always okay to tell them that, sometimes you have to act as if they are right. Active listening, eye contact, nodding your head in agreement, being on the same level with them, expressing empathy, and relating to how the customer is feeling can be incredibly helpful. Remember to place yourself in the customer’s position or frame of mind and never patronise a customer or look for excuses. We are working in an industry where many aspects of the customer journey have to come together from the initial phone call to returning the customers vehicle keys, so we have to accept that sometimes things go wrong however much we try to avoid mistakes.
Rapport
Once you have been able to establish some rapport, you may find a mutually agreeable resolution to the problem, and you must do whatever you can to achieve this outcome. Explain to the customer what you are going to do to help the situation. It could be engaging the customer in a test drive to better understand the complaint, admitting the garage made a mistake, or if possible, offering the customer a lift back home, work or a loan vehicle while you resolve their issue. You must assure at all times the customer feels that you are truly trying your best to resolve their concern and provide them with the least convenience as possible.
Research indicates that customers prefer the person they are speaking with to instantly solve their problem. However sometimes complaints have to be moved up the chain of command, but make sure they don’t add to the customer's frustration. So, wherever possible, resolve the issue yourself. This has the added advantage of demonstrating to those senior to you that you are willing to manage difficult situations yourself without resorting to escalation.
If you really can’t solve the customers concerns, take ownership of the issue and ensure that the complaint is effectively escalated and that you follow up to see what the outcome is.
It’s also worth mentioning that if you say you are going to do something, you should always do it. Don’t be tempted to tell customers that someone will get in touch with them in an hour when they might not get a call for a few hours. The customer won’t thank you for it in the long run. Always be sure you can meet the promise you make.
Perspective
Many of us have worked in the automotive sector for so long we forget what it is like to bring our vehicle for repair. Knowing what your competition is doing can also pay dividends in other ways too. It can help you set yourself apart by creating a business experience, an atmosphere that is different from any other garage locally and far beyond.
Keeping perspective when it comes to the customer experience will help you to create a positive customer experience and maintain a solid customer base. At Brunswick Garage we were of course never happy to receive complaints, however we used it as a prompt to better our service and if a customer made the effort to write or email us with a concern, we displayed their comments in reception with the thank you letters. We wanted to show our customers that we were not perfect, but also show them we took complaints very seriously and we always aimed at achieving a positive outcome. Learning to handle challenging customers will build respect for your business and ultimately result in higher customer retention and profits.
Positive/negative
When we receive complaints, we often look upon them in a negative way. However, complaints can be really useful to any garage and although it doesn’t feel like it at the time, the complaint is extremely positive in that it helps highlight problems with our service and procedures.
The alternative to receiving customer complaints is not receiving them and carrying on just the way we are, oblivious the negative impact our actions are having on customers who perhaps won’t return or will be complaining to their friends rather than to us. This is extremely damaging as we never get the chance to put right the errors that we don’t hear about. It’s a bit of a cliché, but complaints really are a gift.
- Top Garage 2020 launches
op Garage 2020 begins its run today (Friday 1 November). Following last year’s amazing competition, thousands of businesses are expected to take part. Those who go through the various rounds will face a number of online tasks, which culminate in a live final on Saturday 20 June 2020.
- Top Garage 2020 launches
Top Garage 2020 begins its run today (Friday 1 November). Following last year’s amazing competition, thousands of businesses are expected to take part. Those who go through the various rounds will face a number of online tasks, which culminate in a live final on Saturday 20 June 2020.
