Getting Through 2020 Will Make 2021 Even Easier

Getting Through 2020 Will Make 2021 Even Easier

In preparation for a better 2021, here are a few financial reminders of things that might help.

I think we can all agree that 2020 has been a year to remember, and we will all be glad to see it behind us. In preparation for a better 2021, here are a few financial reminders of things that might help.

TAX implications 

All our lives and businesses have been touched by COVID-19 and the changes in how we have learned to do business have been, in many cases, actual physical costs.  These additional costs may be tax deductible. For example, if you have a public area that has required COVID disinfecting, shields, guards, etc., these are business expenses and should be treated as such.

Of course, as always, keep close track of your expenses and make sure to document the new expenses related to COVID.

There have been a number of tax breaks and grants associated with the COVID crisis, particularly regarding required paid sick leave and expanded family and medical leave for reasons related to COVID-19. Rather than try to explain it in detail here, I’d advise you to go directly to the IRS.gov website for specifics:

https://www.irs.gov/newsroom/covid-19-related-tax-credits-general-information-faqs

You have seen and probably taken part in discussions related to how COVID has affected your life and business. Regardless of your personal stance on the situation when it comes to masks and other personal protective equipment (PPE), please keep in mind that if you and your employees practice careful social distancing, use personal protection and have a good procedures in place for dealing with customers and their property, it can only be GOOD for business. What have you got to lose? Nothing. As we’ve seen in many places around the country, failure to use PPE and lack of a safety plan can result in you (or your customers) facing something worse than an inconvenience. 

COVID Customer Service

The “new normal” terminology is so played out that we are ALL tired of hearing it. It can be frustrating that today is different than yesterday, but being vigilant and consistent continues to be the key to success. 

Yes, of course, there are going to be individuals who will not want to comply with your safety protocols. 

Here are a few things you can do:

  • Have a plan on how to keep you, your staff and customers safe. Stick to the plan. 
  • Look at the new safety protocols as an additional layer of customer service and not as a hassle.
  • Share your improved outlook with the masses via social media and other forms of advertising.
  • Be gentle, but firm, that safety guidelines are designed for the best interest of all and are to be followed.
  • If customers threaten to leave, let them. You do not need customers like that anyway. If people are selfish enough to put you and your team in danger, then they are not the type of people that you want to deal with to begin with. Good customers will appreciate your caring and will reciprocate with loyalty and recommendations.

While these additional steps that we are taking these days may seem like a drag, they are actually an opportunity to show your customer base that you care. If it helps to weed out your customer base and help it grow with the right kinds of people that will make your business successful in the long term, well, that’s just one more good thing to come out of a surprisingly challenging year.

Stay safe. Wash your hands. Keep your social distance. Act right. Be nice.

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Shop Equipment ROI – Tooled for Profit

Understanding how to calculate ROI can help your purchasing decisions.

I’m not a financial scholar by any means, but I know what return on investment (ROI) is. It’s a mathematical formula that yields a representation of the profitability of any type of investment. In the automotive repair industry, we primarily associate this with equipment. Admittedly, I’ve never used the term much, more often approaching things from the standpoint, “Am I making money with this or not?” As technicians and shops, our typical thought process centers on each individual job, how much time and money we have into it, so we’re used to thinking profit or loss, and also pretty good at knowing if we made money, or if we lost our “back quarters.”But over time I’ve learned that the thought process alone is not always the best approach, and making money doesn’t necessarily mean a good ROI. Even if you don’t go crazy with an exponentially long, complicated equation, if you understand the basic idea and process of calculating ROI, it can help you make good purchasing decisions. The base calculation would be dividing your net profits by the cost of the equipment. That’s your ROI. Then, if you want to take it further, you can divide that number to get a time-based ROI average.Let’s look at a basic calculation. You buy something for $10, then sell it for $14. Your profit is $4. Divide profit by investment, ($4/$10) and you get an ROI of 40%. Not bad, but if it took two years to make this profit, then your ROI would be 20% annualized, which is not as impressive. You can use this basic formula to compare products you sell as well, and it may help you decide what’s best to keep in stock or not.Now let’s try something with equipment. You have an old tire machine that’s paid for. You average one set of tires per week and it takes 1.5 hours to complete the job. You decide to buy a new tire machine that is much quicker and more efficient but it cost you $20,000. Now the same job only takes one hour. Based on the cost of technician salary, you calculate that it saves you $30 per job with this new equipment. In this case you would use the formula: savings (additional profit)/investment. At one set of tires per week, that works out to $1,560 per year. $1,560/$20,000 equals an ROI of approximately 8%. That’s not too good. It will take you almost 12 years to pay off the new machine.On the other hand, if you average five sets of tires per week, then your additional profit for the first year is $7,800. $7,800/$20,000 equals an ROI of 39%. That’s pretty good. A general rule of thumb is to pay off any piece of equipment within two to three years. This puts you right on track.But now, here is the problem. This is where we throw the proverbial wrench into the plans. Equipment is tricky. You should also calculate in installation and maintenance costs, as well as the cost of training for the new equipment, and factor in how long the equipment is going to be relevant. This is an especially important factor when considering a scan tool, the required updates and how long before it’s potentially obsolete. In the case of a tire machine, you can also calculate in savings from other benefits of a new machine, such as no more damage to wheels or tire pressure monitoring system (TPMS) sensors, which the new machine can eliminate.Some of this can be overwhelming, and it makes me realize why it’s easier just to fly by the seat of your pants and wonder, “Am I making money or not?” It’s an important business aspect, however, to know what is behind the idea because it can benefit you in so many ways. Even without math, you can almost visualize the numbers in your head.I’ll try it by leaving the formulas out to decide whether it makes sense to buy a dedicated TPMS tool when you already have a full-function scan tool with TPMS ability.If you get a TPMS problem every day and you use your full-function scan tool to diagnose it, most likely it takes much longer to boot and longer to navigate to the function. Even then, it may not cover all you need. Because there’s such a vast amount of information that a full-function scan tool has, it simply takes more for the manufacturer to keep everything current. Plus, you often must still rely on service information for certain procedures and then, if it’s the only scan tool for your shop, it ties it up for use in other diagnostics.Now, let’s compare that to a dedicated TPMS tool. Built with only one function in mind, they can make the process much quicker, have greater coverage, boot quicker and quickly walk you through all steps of any required TPMS resets. When you factor in the savings in time and the fact that your primary scan tool isn’t tied up, you can prove the value of a dedicated TPMS tool through ROI calculations. On the other hand, if you rarely work on TPMS systems, you can prove it wouldn’t make sense at all, since you do have the function on your primary scan tool.While you haven’t done any calculations, you’ve thought of it in that manner and can picture where the calculations might end up. If you’re on the fence, the math will give you the answer. Ultimately, your accountant could take the idea even further, with an undoubtedly more advanced knowledge of ROI, and almost certainly a way to calculate depreciation into the formula. That’s where I sign off, but you get the idea. It’s a great concept that represents fundamental business financials.

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