This is the time of year for articles congratulating you for a year of hard work and giving you hope for a brighter 2024. Throw in some resolutions about how to take your shop to the next level, maybe some predictions for the next 12 months, and call it a day.
This is not that article.
I’ll be straight with you: inflation has been running roughshod over all of us in ways we haven’t yet begun to feel.
If you’ve never given inflation much thought, it’s a measurement of how much less a dollar is worth. If you used to be able to buy a candy bar for $1.00 and now that same treat costs $1.04, that’s direct evidence of 4% inflation.
Four percent is about the cumulative rate of inflation in 2023, by the way, according to government reports. Some things cost much more, like groceries, gas and rent; some cost much less, like home heating gas.
Why the threat isn’t over, and how you can protect your business and retirement.
How relevant is that 4% number to you and your business? The answer depends on several other questions. For example: how much did parts costs go up in your area? How about the increases in cost to hire that new A tech, or the raises you had to give your employees to retain them and keep them happy? How about other expenses like insurance and shop and office supplies?
When you add it up, many shops have seen their costs go up by over 10% the past couple of years!
Which, first and foremost, means that if you didn’t grow your sales by at least 10% over last year, there’s a very real danger that your business is going backward because you are not increasing sales fast enough to outpace inflation. This is the hidden danger that comes with the status quo: you work as hard as ever toward a retirement that is getting further away.
Unfortunately, this is only part of the inflation problem.
Because while businesses can raise prices to cover their increased costs, customers don’t have that luxury. Their food costs more, their gasoline costs more, their everything costs more, and the only way to make their budget work is to spend less money. Suddenly, money for auto repair and maintenance is in the same category as eating out at restaurants or going to the movies.
Worse, this lasts long after the “inflation crisis” is over. When pundits or government officials declare inflation over, that only means that the value of everyone’s money is devaluing at the normal rate. Prices aren’t going back down. Things aren’t suddenly more affordable again.
Let’s bring these two ideas together, though. If your customer base is primarily made up of people who are deeply impacted by inflation, and your business is fighting for the same dollars that get spent on entertainment and other non-essentials…what does that mean when you’re heading into the holiday season when that disposable income is about to be spent on travel and presents?
The inflation rate may have been at a peak earlier this year, but shops have yet to experience the worst effects of it.
So, what solutions exist for fighting inflation in your shop?
First and foremost, control what you can inside your shop. Top operators know that even in times of relative price stability, you should be measuring your gross profit daily and adjusting your pricing. You can literally see your neighborhood grocery store doing this each morning as they scan items to check for price changes. In times of inflation and price instability, it’s even more critical to measure and adjust as close to real-time as possible.
But protecting your gross profit is only half the picture. Beyond that, you must continually work to attract high-quality customers who understand the value of vehicle maintenance and who have the disposable income required to keep up with that maintenance.
This is why it’s so dangerous to turn off the faucet to your marketing.
When you’re booked out for weeks and drowning in cars you aren’t even advertising to attract, it’s natural to want to save some money by cutting the marketing budget. But doing so invites multiple problems.
First, it shuts off your pipeline of quality customers in favor of customers who choose you because you’re close or convenient. This means you’re not controlling the types of work you’re attracting, or targeting the kinds of customers who both value and can afford vehicle maintenance.
Secondly, and even more dangerously, it leaves the door open for your competition to lure away your best customers…the ones you need to visit this fall and winter so you can end the year strong.
Together, these problems represent the case for instituting a seasonal marketing plan. In the summer, when car count is plentiful, such a plan would focus on creating and maintaining relationships with your best clients and attracting the kind of work you want to be doing. In the winter, when business starts to slow for the season, such a plan would focus on driving new, high-quality customers who are looking to buy.
Season in and out, however, you’ll notice there’s no off button. There’s never a point when you can stop caring about profits or the quality of your customer base. Not for top operators, at least.
That’s because – even long after it disappears into the background of our national attention – inflation will destroy your wealth like creeping death.
Say you were able to put $100,000 into savings each of the last three years.
The $100,000 you put into savings in 2022 has the buying power of $95,319 now.
The $100,000 you put into savings in 2021 has the buying power of $88,256.
The $100,000 you put into savings in 2020 has the buying power of $84,296.
Your savings account may say $300,000 but that’s in 2020 dollars. Here, in 2023, your money only has the buying power of $267,871 because everything costs more. Almost 11% of your money has evaporated.
And, if that’s not eye-opening enough, if you had repeated that exercise for the last 20 years – $100,000 into savings each year – your bank account would read $2 million in 2003 dollars, and inflation would have eaten six and a half years of your hard work. Your buying power with those two million dollars would be $1.35 million.
Inflation is relentless and vicious. It eats away at your savings, it destroys your customer base, and unless you’re constantly fighting it, it will erode your retirement and the buying power of your paycheck.
The battle against inflation is winnable, but it requires constant vigilance. There can be no off days when your shop is busy enough to stop caring about controlling profits or improving your customer base. Inflation never rests, and neither
But the good news is you CAN win. With exceptional marketing and a bulletproof plan, you can build an inflation-proof customer base. With the right tools and teaching, you can not only control your profits, but train up a team that wants to HELP you control profits.
Knowing all of that, then, I’ll leave you with two critical questions: Is your marketing designed to help you defeat inflation? And, does your shop have the tools to help you fight inflation in real-time?
If you can’t answer both questions with a loud and confident “YES,” then you must wonder…what is inflation doing to you and your retirement with each relentless tick of the clock?