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Working Smarter To Boost Profitability

It took Terry Keller many years of trial and error to realize one of the most important aspects of running a repair shop: the only way to fix problems, capture profits and grow sales consistently is by measuring daily, tracking daily and holding others accountable daily.

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Terry Keller is a shop owner, service writer and AMI-Approved trainer for auto repair shops. He is also the CEO of Auto Profit Masters and creator of the RPM ToolKit™, which integrates with shop POS software to help owners identify problems in their shop and get one-click training solutions. Reach him at [email protected] or (303) 795-5838.

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My story might sound a lot like yours. After years of working as a technician, I had the opportunity to buy the shop when my boss was ready to retire. I figured my years of experience as a tech would make for an easy transition when it came to running my own shop. After all, I could figure out how anything on a vehicle worked and fix it…was a business any different?

As it turns out, fixing a car and fixing a business don’t have much in common.

There was a lot of trial and error along the road as I built my business. One year, my CPA had to prepare 102 W2s for tax season because there was so much turnover in my shop. And while I was able to grow sales to $1.5 million, I was losing $50,000 per year because of breakdowns in my processes and systems.

Busy days meant communication problems, inspection breakdowns and poor customer service. All of this translated into lower average repair orders and the loss of our best customers in the effort to bring in new ones.

hiresAnd worst of all, it’s only in hindsight that I can see how much money I was losing. I wasn’t ignorant — I knew we had problems — but I had no way of knowing where to even begin fixing them. My accountant would tell me how I did after the month was already over, but until that point I had no idea where I stood, what was broken or how to fix it.

I knew if I wanted to better grow the shop, I would have to work smarter. I would have to find the leaks in my profitability and bottlenecks in my production.

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I started taking night classes to learn Microsoft Excel. My point-of-sale system was helping me manage my customers, and my accountant was helping me manage paying my vendors, but there was nothing helping me to manage the business daily. I knew that I was going to have to build it myself.

Measure & Track Your Numbers

It took me so many years of trial and error to realize one of the most important aspects of running a repair shop: the only way to fix problems, capture profits and grow sales consistently is by measuring daily, tracking daily and holding others accountable daily.

Believe me, I tried everything else. I listened to gurus. I listened to the CPA. I listened as they told me the numbers I needed to hit, but not how to hit them. I listened as they told me how I had done the previous month, but not why it happened.

If it wasn’t for those night classes in Excel and a hell-bent determination to get to the bottom of my numbers, I’d probably still be stuck at $1.5 million.

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Even today, point-of-sale systems are great at telling you what happened, but not why it happened. They can’t tell you whether things are improving, or show you where the money is being left on the table. Even so-called gurus are looking at the month long after you can do anything to change it.

So what does that mean for you?

There’s good news: it doesn’t take night classes to learn Microsoft Excel anymore. You can start tracking today.

Excel can’t tell you what your gross profit margin should be or how to hit it, but at the very least it can let you do some rudimentary tracking so you know where you’ve been and where you’re going.

My business partner, David Rogers, says, “I don’t care if it’s electronically or you use a stick to scratch in the dirt, you need to start tracking now. If you don’t have a computer, grab that damn stick and start scratching.”

You can start doing that today. There’s nothing stopping you from understanding where your business stand, except you.

I spent years pouring over spreadsheets and tracking the numbers from my point-of-sale system to learn what they meant in my shop and how they affected my bank account.

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These spreadsheets would eventually become the basis for the RPM ToolKit, the management tool that David and I developed to give shop owners access to their numbers. We poured the insight, measurement and training we’d collected over the years into this tool. We turned “tracking our numbers” into a sophisticated management system that we still use every day to run our shop.

But no shop management tool can help you fix your shop if you’re not curious about what’s broken or eager to find solutions. Nothing will improve until you’re ready to change.

work-smarter-post-itMake Smarter Decisions

The other benefit when you start to measure and track metrics is that you don’t have to rely on emotional decisions anymore. That’s because numbers don’t lie, and they don’t get emotional.

If there is a problem with an employee, it will show up in the numbers. If your marketing is bringing in the wrong customers, you’ll see that in the numbers, too.

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In so many shops, owners don’t know their numbers, and it locks them into emotional decisions.

I know, because I was there.

I have ignored a problem employee because I liked them personally.

I have kept family members in the business when I should have fired them for no better reason than they’re family.

I have let smooth-talking salesmen sell me advertising that didn’t work because they had a compelling pitch.

But as soon as I saw the truth in the numbers, I was forced to change my ways. Although it hurt to admit I was doing things wrong for so many years, it was clear what I needed to do when I saw the impact on my bank account.

What Will You Do?

In some ways, I suppose it was easier to fly by the seat of my pants in those early days and work off of my gut instincts. But if you want to get to the top, you have to know everything going on in-between your four walls. Because I started to measure, I was able to see what was working and cut out what was not. I could make better decisions. I could work smarter, not just harder, and train everyone on my team to do the same.

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Numbers are what drive your business. But if you don’t know how to read the numbers or listen to what they are telling you, you’ll never be able to sustainably grow your shop.

It’s up to you: will you grab that stick and start measuring?

Measurement Case Study

“It took me 10 years of struggling to realize that there is far more to this business than fixing the car,” an RPM ToolKit customer told me.

This owner purchased a 2,500 sq.-ft., two-bay facility in rural Wisconsin. He had started as a technician, and came into shop ownership without formal business training or service advisor skills. He had only “a smile and a desire to fix cars.”

He was eager to grow, but first there was work to do. He knew that he needed to work smarter in order to be successful.

“My shop was doing good business, but we were looking to expand, and I knew that I did not want to go into a bigger facility before fully reaching the maximum potential of this one,” the owner said. “I realized that if we had shortcomings here, that a larger scale would only make those problems worse.”

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As he started tracking numbers and implementing training, the owner started fixing those problems. This started with service advisor training for himself and for his employees. The training taught him to overcome objections and build trust with customers.

Additionally, using the RPM ToolKit, he was able to break the numbers down to see what needed to be improved.

“The proof is in the numbers,” he said. “When you can see it broken down, you can focus on what needs to be fixed to get to your goal. All of my numbers have seen significant improvement since coming on board.”

After a year of measuring, adjusting and training daily, his sales nearly doubled and gross profit dollars grew by 64%. The shop has since moved into a larger facility and continues to grow.

“We have set our shop apart from the competition in a way I did not think possible in a small rural community. I feel that we are now ready to expand, and I feel good about it. It is no longer a gamble. I am certain that with what I have learned, we will exceed our goals,” he concluded.

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