Top shops understand what numbers they can control, and they measure them daily. Stack the deck in your favor.
by David Rogers
The deck is stacked against repair shop owners right now.
Consider the cards we’re currently holding: First, we were dealt the technician shortage. Then we got the global supply chain issues that made it harder and slower to get the parts we need to fix cars. Over the past year, we got handed inflation and rapidly increasing costs of everything.
And now we’re being handed a card labeled “recession.”
It would be easy to throw your hands up and walk away. After all, that’s what hundreds of shop owners have already done. Independent shops have closed to the tune of 45,000 fewer bays in the past five years.
In times like these, top shop owners know that the secret is to focus on what you can control, not what you cannot. Because the truth is, even a recession can present an opportunity for top shops as long as you take action now.
Recession-Proof Your Customer Base
According to a recent survey, shop owners are averaging 51% of their day performing automotive service themselves. This isn’t surprising. Shops are closing, leading to an increased car count for the remaining shops. A growing technician shortage means that owners can’t find the help they need to take care of customers and are being forced to consider turning wrenches themselves.
This situation has created a ticking time bomb in many of these shops, however. Because in many cases, the shop stopped their new customer marketing.
The problem with thinking “I’m busy enough and don’t need to advertise” is that recessions happen. When the stock market gets spooked and the average customer gets scared and stops spending money, the only way to maintain a solid car count is to make sure your customer base is filled with high-quality customers who understand the value of maintaining their vehicle.
Which is why top shops never stop advertising to attract high-quality new customers. When the average shop is slow because average customers are scared to spend money, the top shops are growing…and looking to grab a bigger share of their market.
So how do top shops have the confidence to spend money on advertising even though inflation is driving costs through the roof? They inflation-proof their gross profit.
Inflation-Proof Your Gross Profit
There are only two sources from which to pay expenses in your shop – from gross profit or from net profit. If the growth of your gross profit has not kept pace with expenses, especially over the past year, then you were forced to pay them out of net profit.
In other words, if your net profit has gone down over recent years, then your gross profit has not increased as fast as your cost of doing business. This gets even worse when you factor in inflation!
It’s important to squeeze bloated expenses down, of course. In periods of much higher inflation like we’re in now, it’s even more critical. But much more important is the need to manage and control gross profit percentages in each sales area – parts, labor and sublet – by constantly adjusting your markup to hit your target gross profit percentage.
Top shops do this daily. They start off their day by understanding their gross profit percentages, how effectively the shop is hitting their gross profit targets and the cost of not hitting that target. By making small tweaks to their markups, these top shop owners ensure that the business is successful in any economy.
Just as importantly, those top shop owners know that they can’t raise prices and keep giving the same value to customers. They train their team on how to deliver exceptional customer service, how to set the shop apart from the competition and how to build trust and loyalty with every critical point of customer contact.
Operating like top shops isn’t about what number gets measured daily or what kind of advertising gets sent, however. Top shops are in a position to succeed because of their mindset – they’re not content with business as usual.
Think Like a Top Shop Owner
When times are tough, it’s natural to want to throw up your hands in frustration. It’s perfectly normal to focus on day-to-day survival and try to maintain business as usual.
The problem is that business as usual creates a situation where the owner constantly sacrifices their time, money and happiness in service of everyone else.
You don’t have to do this to yourself. You can own the shop you’ve always dreamed of. Grow and succeed when everyone else is just trying to survive.
But it starts with a mindset change.
Everyone else in your area might have cut back on advertising, but should you? Everyone else in your area might have a similar-looking shop and use similar-looking advertising, but should you? Everyone else is using built-in reports to measure their gross profit after the month is over, but should you? Everyone else is content to buckle down and try to survive…but should you?
Not if you’re a top shop.
Top shops understand what numbers they can control, and they measure them daily. They understand that when others are cutting their advertising, their own shop can grab a bigger slice of the best customers.
And they know that even recession and inflation can mean an opportunity for growth because the average shop is content to shrink and hide as they try to survive.
Use this opportunity to evaluate your “business as usual.” Make sure your marketing is designed to attract quality customers who value the services you provide. Evaluate the tools and systems you’re paying for, and make sure they are making you more profitable and efficient every day.
And above all, make sure your attention is on things that you can control while making your business more successful. You can’t control inflation or recessions or supply chains and focusing on them will only lead to feeling helpless and frustrated.
But you’re not helpless! When you think and act like a top shop, you can grow no matter what kind of hand you’re dealt!