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By Bob Cooper

A quick orientation before we get started:

Know Your Shop's Numbers

By Bob Cooper

Over the last 27 years I've been amazed to discover just how many shop owners are lost when it comes to knowing and understanding "the numbers". Without a clear understanding of the right targets and benchmarks, it becomes quite challenging for shop owners to pinpoint where they are falling short of their goals, and where improvements need to be made. Far too many times we've seen shop owners finally start monitoring these numbers closely, and quickly realize that for years they haven't been charging enough for parts, have been overpaying their employees, have been operating inefficiently, etc. 

Since your part cost is one of your largest expenses, it's something you need to monitor continuously. At Elite, our top clients spend no more than 52% of the dollars they bring in through their part sales, on part cost. This means that if they bring in $40,000 in part sales by the end of the month, the cost of those parts should not exceed $20,800 ($40,000 in part sales X 52% = $20,800 part cost.) If you find you are spending more than 52% of your part sales on part cost, then you need to take a good hard look at how you price your parts, any parts that are being replaced at no charge, your warranty failures, purchasing habits, and the possibility of theft.

When it comes to your direct labor (the cost of your techs), the top shops we work with spend no more than 35% of the dollars they bring in through labor sales, on technician pay. This means that if they bring in $40,000 in labor sales by the end of the month, their technician payroll does not exceed $14,000 ($40,000 in labor sales X 35% = $14,000 labor cost).

You also need to pay close attention to the cost of your service advisors, and here at Elite, we like to see that number at no more than 8% of your total part and labor sales. For example, if your shop generates $80,000 in monthly auto repair sales, your advisors should not be costing you more than $6,400.00 ($80,000 total sales X 8% target = $6,400 advisor cost).

You'll need to watch your "operational" benchmarks very closely as well. One key indicator is your labor hours per repair order, and our top clients consistently generate at least 2.5 hours of labor sales with their average repair order. If you are not seeing 2.5 hours per repair order at your shop, you need to review your vehicle inspection process, what's being recommended to your customers, and the declined services.

As a shop owner you also need to pay close attention to your technicians' "efficiency" rate. This is a powerful key indicator that will show you just how good your techs are at getting the work done in a fast and effective way. It's easy to discover your efficiency rate by simply dividing the hours you billed for the repair, by the amount of time it took your tech to complete the job. For example, if you bill a customer 2 hours, and your tech gets the job done in 1½ hours, they would be 133% efficient (120 minutes billed/90 minutes to complete the job = 1.33, which is 133% efficient). The top shops are typically operating at an overall efficiency rate of 125+%. There are a number of things that can bring down the efficiency of the technicians in your shop, including a lack of experience, the lack of proper technical training, and one of the biggest culprits, the wrong compensation programs.

And then lastly, after you pay all your expenses, there's the money that is left over for you. In business we call that profit, and the top shops will typically earn a profit of 15 - 20% of sales. So if your shop is generating $80,000 in monthly sales, in most cases, you should be able to earn $12,000 - $16,000 per month in taxable income. The good news is, if you know your numbers, and if you never put money ahead of people, you should be able to generate these profits in a professional and ethical way.

1. Turn your employees into recruiters by saying, "Guys, you all know we need another technician, and I'd love to find someone that can not only produce, but someone that all of you enjoy working with. Now as you can imagine, I can invest a good amount of money in a recruiting campaign, but I'd rather see the money go into your pocket than into recruiting campaigns. So here's what I'll do: I'm sure you guys know other techs in the community, and I know that you meet them at training courses as well, so if you refer a really great tech to me, and if I hire them, then I'll give you $2,000 on the first day they show up for work, and if they're still with us after their 90 day probation, I'll give you another $2,000. In essence, you can earn up to $4,000 for doing nothing more than helping me find another superstar just like you guys." 

Now before you jump to the conclusion that you'd never pay $4,000 as a referral fee, consider that not only is it an insignificant amount when you consider how much you'll be paying a top tech, but just think of how much it will cost you if you hire the wrong tech. It's intriguing how so many people will not lay down a single dollar for a lottery ticket where they could win ten million dollars, but as soon as that jackpot gets to 100 million, people line up to buy the tickets. It's as though they're saying "I'm not interested in ten million dollars, but when you offer 100 million, now you are talking real money!" We've learned over the years that it's the same with referral fees. The reward you offer has to be large enough to not only capture their attention, but it has to have that wow factor that brings results. 

2. Ask every applicant for leads. When you have a tech or advisor filling out an employment application, always ask that they list two great techs they've worked with, or presently work with, as references. Not only can those references serve as a good source of info when you are performing your reference checks, but if you build relationships with the references during your calls, they may very well become employment candidates as well. 

3. Make an offer that is hard to refuse. Go to your local dealerships, introduce yourself to the service manager, and say something like this: "Larry, the reason I wanted to speak with you is I am looking for a superstar technician with ___ experience. Now for the purpose of clarity, I'm not looking to recruit any of your employees; that's not my interest. What I'd like to do is speak with any of the superstars who have worked with you in the past, and for whatever reason, are no longer working with you here at your dealership. Now if you're able to provide me with their names and contact info, or if you just reach out to them and have them contact me, this is what I'll do for you... If I hire them, I'll give you $2,000 on the first day they show up for work, and if they're still with us after their 90-day probation, I'll give you another $2,000. In essence, you can earn up to $4,000 for doing nothing more than putting me in touch with one of the superstar techs who has worked with you in the past, or that you may know of in our community." 

4. Sponsor a tool raffle. Tell your local tool truck driver that you will sponsor a raffle for a specific tool set, test equipment, etc. that has a value of $500. Now here's how it works: You pay for the tools, the driver is able to sell raffle tickets at $5 each, and gets to keep all the ticket sales as well. The techs fill out each raffle entry with their contact info, and you get their names, phone numbers and email addresses. 

In closing, the superstars are out there. All that you need to do is connect with them, then share your goals, your Mission Statement, the culture of your company, and how you can provide them with what every superstar is looking for: An opportunity to grow with an amazing shop, and help a lot of people along the way. 

Thank you again for enrolling in our Complimentary Tips for Shop Owners. We hope that you've found our initial automated series beneficial, and that the new tips you'll receive every 2 weeks from here will continue to help you build a more successful auto repair business in ways that have a positive impact on your employees, your customers, your community and our amazing industry.

• When to hold your meetings 
• How to ensure everyone is well prepared 
• Which points need to be addressed in every meeting 
• How to facilitate your meetings and keep them both positive & productive

• Why understanding your labor inventory is so critically important, especially during these uncertain times. 
• How to set your goals based on your labor inventory.  
• The technician efficiency & productivity targets used by the industry''s top shops. 
• How to help your techs become more productive.  
• How to put more money on your bottom line. 

We''re writing to share a final reminder that Elite''s complimentary online training session, How to Sell More Testing, is tomorrow from 10:00 - 10:45 AM Pacific Time. This is your last chance to enroll at no charge!

• How to handle "Other shops don''t charge for testing, why do you?", and other tough sales objections. 
• Which testing benefits make customers want to buy. 
• How medical analogies will help customers understand the process. 
• How to get your customers to start thinking in terms of "testing" rather than "diagnostics". 
• How to sell more testing, while generating happier customers.

This all-new complimentary webinar will be held this Tuesday (3/24) from 10:00 AM - 11:00 AM Pacific Time.

During this session Bob Cooper will share a step-by-step Action Plan that you can use for managing your business, your people and your finances during these uncertain times. In addition, you''ll receive recommendations from a panel of the top leaders in our industry: Bob, Joe Marconi, Kevin Vaught & Darrin Barney. 

Not only will this panel share their personal recommendations, but you''ll be able to participate in a full 30-minute Q&A session where you can ask any and all questions you have about how to manage through the coronavirus. 

Don''t hesitate to respond to this email or give us a call at 800-204-3548 if you have any questions at all, or if there is anything that Elite can do for you to help you through these uncertain times. We''re all in this together.

Have a nice weekend,

Your friends at Elite

• How to easily find hidden profits in your Profit & Loss statements 
• How to reduce your rent expense or property mortgage 
• Simple tips on controlling your labor cost  

• How to handle "Other shops don''t charge for testing, why do you?", and other tough sales objections. 
• Which testing benefits make customers want to buy. 
• How medical analogies will help customers understand the process. 
• How to get your customers to start thinking in terms of "testing" rather than "diagnostics". 
• How to sell more testing, while generating happier customers.

Wishing you the best,

Your Friends at Elite