Sometimes, Mid-Course Adjustments Are Required
Whether it’s F1 at Monaco; Hypercars at the 24 hours of Le Mans; the roar of a crowded basketball, football or soccer stadium; the serenity and insanity of cycling the Tour de France; or any other competitive sport, they all have one thing in common: mid-way adjustments just might make the difference in achieving victory!
As we close the books on spring and the season turns to summer, it is the perfect time to review the trajectory we are on as a shop and make minor and sometimes major corrections. Sometimes the strategy you began the year with isn’t getting you where you expected.
LAX to JFK
Even just a little bit off can make a huge difference at the end of your journey. One of the best examples of this can be illustrated by looking at a flight from LAX to JFK.
By air, the trip is right at 2,469 miles, so just imagine if, just after takeoff, the pilot is off course by 1 degree. It’s not a lot when you think about it, but over the duration of the flight that tiny increment turns into a massive miss. Each mile the plane travels, the plane is off course by 92 feet, so when the plane arrives in NY it will be off course by 40 miles – you may be landing in Mahwah, NJ, or the Atlantic Ocean.
The little things do make a difference the longer they are left in place. This is the second most popular flight route in the U.S. – considering that 26,000 planes take that route each year, so you can see the importance of a pilot ensuring he’s on course each and every flight.
Closer to home, in motorsports racing, choose the wrong tire compound and traction wanes; even worse, your tire fails completely due to rapid wear and can cause catastrophic failure. Crew chiefs keep a close eye on track temp, tire wear and climate conditions, making adjustments to the car and tires throughout the race.
Let’s take a look at some of the critical indicators that will help us to stay on track for the best results possible.
1. Top-Line Sales
Top line sales are an OK measure of where your shop is headed profit-wise. There are a lot of factors in play each day that will boost or threaten the day’s profitability. Sales might increase, but what category of service is responsible for the gross sales? Choosing the right sales mix is critical to maximizing your team’s strengths and bay efficiency. As an owner, you need to be aware of this mix and market to keep the bays full, wrenches turning and cash registers churning.
Keep in mind that, just because the dollars are flowing, it doesn’t mean you are seeing revenue go to the bottom line. Top-line sales are a fantastic measure of a shop’s growth, BUT chasing sales dollars simply to say you’re a $1 million or $2 million shop is not the way to go.
You may be busy, but are you profitable?
2. HPRO – Hours Per Repair Order
With an industry average of 1.5 to 1.8 sold hours per repair order, the typical shop needs to see about five cars per tech per day to achieve the benchmark of nine sold hours per tech. Many of our clients have an average hours per repair order which exceeds the industry benchmark of 3.0.
Is your shop selling the work for fair value? Are you overriding your labor multiplier, missing combination times or failing to charge for non-standard labor such as frozen fasteners, rust factor or pre-repair cleanup of the vehicle? If so, you are shortchanging your organization and a course correction now might just make the difference in your team achieving their year-end bonuses.
3. Sold Hours Per Tech, Per Day
Recently, one of our clients lost a technician and filling the position with the right person for that role took a lot more time than it did a few years ago. While searching for the right candidate, a review of the entire team’s timekeeping records revealed that the techs still had time available during work hours. It became clear that they could generate more hours per day, provided they had the right motivation.
Over the previous 10 months (with a full team) the techs averaged 7.5 sold hours per day. During the time that they were down a tech, their focus shifted to generating their absolute best. They quickly began turning 11.5 hours per day. The results came from the right motivation from the boss and challenging themselves. This made up more than the shortfall from the lost tech.
Additionally, the advisor had the right mix of work, estimated the work accurately and, with motivated techs, increased their output by 73%. With seven months to go in the year, imagine what the year-end number will look like at this shop?
What is your tech sold hours per day? If they generated one or two more sold hours each day, how would that impact your team and your shop come December 31?
4. Expenses
Expenses have the single largest impact on your bottom line! Save or lose one dollar and you will see your net profit shift the same amount. One lost can of brake cleaner, bottle of oil or jug of coolant a day will add up to significant dollars annually.
Maintaining control of costs in the shop is an effective way to improve profit along with the operational expenses of the shop. Set aside some time to review your income statement, looking for areas where you can save a few bucks. Any savings made this month alone will yield significant cash at year end.
5. NOI – Net Operating Income
Ensuring that your net operating income is on track simply comes down to monitoring it. You should expect only what you inspect. Make sure every dollar collected is accounted for in the proper accounts and each dollar spent is a wise spend. When things get really busy and the shop is flush with cash, some owners tend to relax.
An extremely relevant and insightful quote, “Watch the pennies and the dollars will take care of themselves,” is attributed to Ben Franklin. Long-term profitability and wealth are built one day and one dollar at a time over the long run.
6. Training and Education
Review your training logs. Is everyone on pace to hit their 40-hour goal for training? And, this includes you, the owner! If not, you’ll need to double up to hit the goal. There are plenty of resources out there, whether training takes place in the bays, a local classroom or via online sessions.
In addition, there are several trade shows including AAPEX coming up in the fall; now is the time to make plans to attend and book your classes while seats are available. At AAPEX 2023 there will be 36 classes specifically for shop owners, techs and advisors. Check out www.aapexshow.com for more information on how you can elevate your shop.
7. Look For 1% Each Day
A simple idea is brought to life by James Clear in his bestselling book, Atomic Habits. Clear says, “If you get one percent better each day for one year, you’ll end up 37 times better by the time you are done.”
Just like that flight from LAX-JFK, being 1% off course can make a huge difference in the end, yet making even the smallest course corrections along the way will make the difference in achieving, exceeding or completely missing your goals!
