Monday, March 18, 2013

What Does it Really Take to Make a Shop Profitable? - by Robert Spitz, Management Success!

Bob Spitz
VP Production
Management Success!
Ten years ago an independent repair shop owner could make a pretty good profit. Today, for many, it’s much tougher. Why? Did the industry really change that much in ten years?

Yes it has.

Many things about running a shop have changed, making it more difficult to make a profit. So, ten years later there are shop owners working impossible hours and literally going broke doing so.

But there are some shops that do make big money—even in the face of these huge industry changes. How is that possible, you ask?

Small to Mid-Size Shops

In most small shops that are doing up to $25K in sales a month, the owners have come from the technical side of the business.  Their time is primarily spent fixing cars.

Other small to mid-size shops have pushed their monthly sales to around $45K.  The owner is usually also the service writer and oversees the rest of the business.  Their technicians fix most of the cars. Sometimes, owners bring in their wives or girlfriends to help.

What these shops have in common is that their business grew to a certain level of monthly sales and then ran into a barrier that stopped the business from growing.

Common Barriers for Small to Mid-Size Shops
  • Problems finding good help.
  • Not enough customers.
  • Working too many hours.
  • Not making enough money.
  • Owner being overwhelmed.  (“My shop is so unorganized!”)
  • Owner has to check on everything or else nothing gets done right.
The barriers become unsolvable.  Owners try everything they can think of to come up with a solution.  When you talk to shops that have been in business for 5 to 30 years and are still struggling with the above problems, you find that most of the owners have given up.

Unfortunately, they often decide to close or sell the shop, turn the shop over to a family member, just hope it will get better or simply keep on doing the same thing until they retire or die. They get to the point where they won’t believe anyone that tells them there might be a solution to their problem.

Bigger Mid-Size & Large Operations

The number of shop owners who have taken their business to the next level is much smaller.  These are shops doing between $50K - $90K in monthly sales.  They will occasionally help the service writer or help in the back, but normally they are not working in the operation on a day to day basis.  But these shops run into barriers, too.

Common Barriers for Bigger Mid-Size & Large Shops
  • Getting someone to manage with the same care factor as the owner.
  • Getting someone to manage the way that the owner wants it to be done.
  • Running into problems when a key person, either the manager or a good technician, is lost.
Here you have owners who can run the shop themselves, but are unable to get the job fully turned over to someone else.

There is another group of owners who have pushed their operations above $90K to over $200K in sales a month.  They can come and go as they please.  Most don’t open their shops in the morning.  They have a service writer or manager who runs the day-to-day operation. Here the owner has successfully turned over the job of running the shop to someone else.

They will tell you that they have no real problems and they are not really interested in taking their shop to the next level.  Eventually, they will start to tell you about the barriers that they have run into and why they have decided not to expand further.

Expanded to the Next Level Then Fell Back

Some owners in this group got the business to the next level then something happened to pull them back down.  Sometimes they lost a good manager or a key technician. Other times, they started to get alarming reports from their good customers along with a drop in business.  When they investigated they found the manager was creating problems and decided to go back to running the shop themselves.

Multiple Shop Locations

Finally, there are shop owners who open multiple locations.  They also eventually have problems.  They expand to a level just beyond the ability of the staff to effectively control and run the business.

The owners are not involved with the operation, they’re doing something else.  They hire a general manager to run shop operations.

During the growth they can make money like mad. They start just opening stores and putting people in place very fast.  But eventually the organization starts to have trouble.  The owner gets frustrated because he tells the management what to do and while some changes are made, most of it doesn’t get done.

Common Barriers for Multiple Shop Locations
  • Expansion happens too quickly to put real systems in place.
  • Owner can not get management to run the locations the way he wants them to be run.
  • Owner can not implement changes in the way things are run.
  • Training staff doesn’t always help.
If he starts going into his shops and inspecting, he will likely find all kinds of things that he has strict policy against.  They are not doing it his way and he can’t seem to be able to implement the changes he wants.  He has all kinds of training programs, some of which help while others don’t.  The operation starts to flounder.

The Real Problem

There are three things that you need in order to be a really successful multi-location operation.  Having a system for production and getting it implemented is one of the missing basics.  Another is the right organizational structure. The last is the ability to find and train the right people to do the job.

The trick is having a successful model in one shop, then be able to duplicate that model in multiple locations. Most owners expand too quickly to control the operation.

The Real Solution

At every one of these levels, there are common barriers that must be handled in order to expand and be more profitable.  The owner’s inability to handle a problem is solely based on his lack of knowledge of how to handle that problem.  The more you grow, the more management knowledge and skills you need.  It is the key. Otherwise, growth stops and profits plummet.

At Management Success! we have helped shop owners to solve each of these problems.  Isn’t it time that you quit being frustrated or just hoping things will get better?  Isn’t it time that you learned how to solve the problem that is preventing you from taking your business to the next level? Isn’t it time you started making the profits your shop should really be making? It is. Now is the time.

MANAGEMENT SUCCESS! "How to Increase Your Profits" Seminar Description