Use Data To Analyze Your Business, Improve Bottom Line -

Use Data To Analyze Your Business, Improve Bottom Line

With the increasing ability to collect data electronically, shop owners are sitting on huge piles of data relating to various facets of shop operation. What are the best ways to comb through the data and determine the metrics that describe the productivity and efficiency of your business and allow you to impact it?

By Uwe Kleinschmidt, CEO, AutoVitals

With the increasing ability to collect data electronically, shop owners are sitting on huge piles of data relating to various facets of shop operation. What are the best ways to comb through the data and determine the metrics that describe the productivity and efficiency of your business and allow you to impact it?

Since looking at raw data often covers up the real trends and is highly time consuming, business owners should be looking for ways to:

1. Define the metrics ­important to run the business;

2. Know what values ­represent the range between “below expectations” and ­“outstanding performance;”

3. Select the low hanging fruits, which promise the best bang for the buck results in the short term; and

4. Explore new metrics, which are made possible through better methods of ­capturing data.

Inspection Reports

With the introduction of digital inspections, new types of reports are possible. What was once hidden, or extremely hard to get, is now obvious and can be used to ­determine:

Technician effectiveness; and consistency of inspections.

Let’s take a look at a snapshot of a technician effectiveness report from one of our clients. See Chart 1.

chart 1

This report lists by inspection type, technician (here 3 techs sanitized to 1, 2 and 3) and what percentage of topics inspected ­resulted in a ­recommended ­action.

Let’s start with the overall shop numbers. Out of 1,490 appointments in three months, 874 appointments included a courtesy inspection.

The shop owner can immediately assess whether his or her policy of performing courtesy inspections is ­followed or not.

The next potentially interesting ­conclusion is whether or not the habit of pencil whipping (the repeated checking off of ­inspection topics without ­performing an inspection) is ­present for any or all ­technicians.

If it’s a habit, a significant number of inspection topics would show consistently low numbers of recommended actions. If this is not the case, it ­indicates that the techs are motivated to perform the courtesy inspection.

Now let’s explore individual inspection topics for individual technicians.

Windshield Wipers: Tech 2 recommended only half of the recommended actions, compared to Tech 3 (see Deviation 1).Battery Check: Tech 2 recommended only a little more than one-third of the number of recommended actions, compared to Tech 3 (see Deviation 2).

Assuming both technicians inspect the same Year/Make/Model (YMM) and odometer readings across the board, there is clearly a different quality standard for Tech 2 than for Tech 3. The shop owner can now determine the difference and adjust ­accordingly.

One way of finding out the reasons for the significantly different values might be the tech’s attention to detail or procedures used. The time needed for the inspection plotted for both techs might reveal great information about the root cause of the difference. It definitely shows:

• The consistency of time taken for the inspection; and

• The trend of whether policy changes or the introduction of new tools changes the duration of the ­inspection.

chart 2

See another portion of a ­different report in Chart 2, which lists technicians’ time needed for an inspection sorted by YMM and technician. Note that the technician doesn’t need to clock time for the inspection. The software on the tablet used for the inspection automatically detects periods of activity and inactivity and determines the correct duration.

Filtering by technician and YMM ­allows owners to compare each technician’s inspection efficiency, and ­filtering by YMM allows owners to ­compare duration by YMM.

As you can see, this is just the start of finding meaningful data trends, ­enabled by digital inspections. Techs’ ­adherence to policies can be monitored, and highly efficient technicians can be used to set standards for all technicians in the shop or group of shops.

Motorist Retention Rate

Chart 3

Another very important area of reports, with tons of data and different definitions, is the customer retention rate. See Chart 3 for a business summary that determines the retention rate and other important metrics for a shop’s business.

Initially, two very important metrics are listed for the shop in question:

1. How many first-time customers visit the shop as a percentage of total visits, and how many of those return for a repeat visit?

2. How many of the repeat ­customers follow the shop’s advice for preventive service intervals? We call that the retention rate.

As shown in the chart, these ­numbers are really put in context when compared with a reference or goal, like with the results of the best shop in the network. The best shop is not one shop based on all metrics. It’s the best result per metric combined ­together to represent “the best shop in the network.”

Compared over hundreds of shops, these reference metrics become a real guide for the individual shop owner who wants to improve his or her ­business.

The next level of detail is comparing key business metrics per month. These key metrics contribute to the retention rate. By breaking them down per month and also comparing them to the best shop in the ­network, seasonal trends can be eliminated (e.g., the lower number of new customers in November due to Thanksgiving, etc.) and concrete conclusions for one’s shop are ­possible. ­Positive (or negative) trends ­represent the ­results of the ­measures taken.

Uwe Kleinschmidt is the CEO and founder of AutoVitals in Santa Barbara, CA. The company’s Web-based services focus on the independent automotive repair industry. AutoVitals’ products facilitate highly effective Concierge Auto Repair ­services, covering all aspects of the service advisor’s interaction with prospective and existing customers. Highly effective and optimized websites, workflow support in the shop, as well as customer retention and social media ­services are just a few ingredients. He can be reached by ­visiting www.autovitals.com or calling 1-866-949-2848. 

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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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