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:
- TMD Friction launches workshop platform: GaraShield
TMD Friction has launched GaraShield, a new software platform designed to help garages document their work.
- Wow or WOAH factor?
Do you work in a quality business? Or a quantity business? Is it possible to have a garage business that has both? How do we define quality for that matter? You see everyone’s perception of quality is different, which makes it difficult to work towards a particular grade of quality.
If you examine the excellence and quality movements in detail as I have in the last 15 years or so, you will see that what the really offer is to turn back the clock, applying the standards of bygone days to today’s profit-based material age. The premise is that if you get back to product or service supremacy through quality you cannot fail. Sadly, it is an entirely false premise.
Customer satisfaction is no longer enough. Satisfied customers are not loyal customers. They shop around – they may like you, but not enough to resist the temptations of your competitors. Truly loyal customers can’t imagine doing business with anyone else. They become advocates for your garage.
Companies who have such customers have managed to create a customer experience that is consistent, intentional, differentiated, and valuable. To do this they use all aspects of the business, marketing, operations, and the most important factor the human element.
Superior service
You could have a quality product or service but if not matched with a superior WOW factor service experience you have no hope in succeeding. Let me give you an example, Curry’s sell quality products, yet the service in most cases and what I have experienced is really lacking. These stores are huge, selling hundreds of lines yet hardly anyone works in them, and if you do find someone to assist you they have very little product knowledge.
Now, take off your business hat and ask yourself, as a consumer, how many genuine quality businesses do you know? If you can think of one, perhaps even two or three, where you are constantly and consistently super-impressed, not just with what they do but how they do it, you are doing well. You have seen the WOW factor at work. You may even have glimpsed a miracle. My guess is that you will be thinking of a business that puts its relationship-building substantially in front of making the next sale.
These are the kind of businesses that share one of my philosophies about customers: that it’s far better to concentrate on what you do for customers than what you do to customers. Despite all the new technology, and the mind-blowing rise of call centres which in my view do very little in increasing the customer experience and other magic customer service-enhancing devices, companies still frequently fail their customers.
The reason is not so often that the computer system has gone down, although that happens frequently enough!) it is mostly because the culture, philosophy and ideals do not exist. When this happens, it’s a people issue.
People power
For those involved in selling, and that’s what we do in our garage businesses, this is a mammoth task. Selling has, it seems, been quantity-driven since time began; but, in the last 20 years, it has become quantity-obsessed. This obsession has, in my view, led to practices and standards in our garage sector that can barely be justified. There is no mitigation. We are all to blame. We have all seen the £99 service, MOT, three-course meal and the kitchen sink deal. Someone please explain to me how anyone can charge so little and offer a quality WOW Factor experience?
Given the choice – and they will be – no customer in their right mind would want to deal with a person driven by quantity objectives. Customers already know that, so often, quantity objectives work against quality objectives. Look at the classic high-commission businesses and the reputation they have: double-glazing or perhaps even office equipment. There are many more, including, sadly in our garage sector.
What next?
Find where you and your business are, and remember it well. If you do nothing to give your customers the WOW Factor, the future has some difficult and frightening times ahead, times of uncertainty and high risk.
Far be it for me to put the fear of God into you about the future, but that’s exactly what I think might need to happen. I, and many others before me, have pointed to change being the cause of this fear. Not just change itself, but its rate and frequency and scope. In such circumstances you must look to make yourself and your business stronger, more resilient. I have two suggestions for this.
The first lies in your business process, I witness so many garages lack of processes that do not consider the customer journey and the impact it has on them.
The second lies in the quality objectives you need to create that are understood and breathed by everyone in your business. For one aspect of the quantity/quality discussion we have not considered is this; quantity only builds immediate sales; quality builds friends. Friends, in the long term, build greater quantity, which yields the miracles that create the WOW factor.
Lastly, just before I end this article, Id like to point something out. It may seem obvious, but don’t look for a switch. There isn’t one. You can’t turn a miracle on. There is nothing anyone can flick to change your environment from quantity driven to customer driven. It is truly a pendulum. The only thing you need to know about this pendulum is that its relentless: It was for me running my last garage business it was actually unstoppable.
- Shifting demands, shifting gears
Garages that thought they would be veering away from MOTs in favour of essential repairs during the Coronavirus lockdown are still doing MOT tests at roughly the same rate, it has been suggested.
While DVSA figures showed a 78% drop in MOT performed between 30 March and 24 April, marketing agency Digital Incubator says the independent garages it works with that remained open during the lockdown have not seen such a steep drop.
“We have a lot of garage clients that have switched from MOT campaigns to clutch and gearbox work,” explained Jamie Stoulger, Sales Director and Operations Manager at Digital Incubator. “However, our clients are still generating a steady flow of MOT enquires.”
Campaigns
The marketing agency works with garages across the UK, and currently has over 1,200 motor trade campaigns ongoing. 80% of customers are in the independent sphere.
Jamie continued: “Regardless of the MOT not being relevant, people are still getting their cars picked up. A lot of our clients run a collect and delivery service. We are running that via the ad campaigns and on the website.”
There has been an impact, Jamie confirmed, but a mild one at best, and work overall continues: “MOTs have slowed down slightly, that just what it is, but regardless of us being in the middle of this pandemic, if someone still has to go into work and their car breaks down, they still need to get it repaired. They are not going to just leave it on the side of the road and deal with it six months later. You need it done. As a result, our clients are still generating leads.”
Performance
We asked Jamie he thought this has taken many of their garage clients by surprise. “I wouldn’t say so,” he replied. “There are a lot of franchised dealerships and service centres that have just closed their doors without even thinking about it. They just went ‘we can get funding, let’s just put everyone on furlough’. The garage businesses that decided to pummel through this, they are still performing. There might be a small dip in some cases, but across the board, our averages have not really dropped. I don’t want to make a bold statement and say it isn’t affecting anyone – it is – but they are on average not far behind where they usually are. It has hit them, but we are not talking about 50%. The drops in business are probably around 10% to 15%.”
Situation
On what has been in many cases blanket closure by across much of the franchised network, Jamie observed: “I worry about the outlets that are closing their doors without making the slightest attempt at generating business. It’s still out there. People forget that. Across the board, if you think about it logically, there might only be 50% of the business available, but if 80% of the outlets are closing down, the garages staying open will benefit. I think a lot of businesses are going to come back to a very big decline in their own customer base. Their customers have had chance to test another garage out. If they had a better service, I know where they will go the second time around.
“I think some businesses have taken things a little too far. There are things you can put in place, like contactless pick-up and delivery. Dealerships could have put in place what the independents have done to keep their workers safe and the customers safe. If you can, do everything contactless. A lot of companies are going to go bust because of this. The best bet is to do things safely, ensure it is all contactless, but keep the doors open. The business is out there, they just need to be a bit more open about how to get it.”
- 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.
