A majority of shop owners in the auto repair industry find taking the shop to the next level is their main problem. Their shops have either grown to a certain size in gross monthly sales and have then flattened off, or they can’t seem to take home enough money. It does not matter how big a shop has grown, when it comes to the owner’s checkbook, you should hear him groan.
The Four Stages of Business
The average business goes through four stages of development. These stages reflect the development of the shop owner’s business and management skills. Unfortunately some shops seem to get stuck in one stage of development and are unable to expand beyond it. Other shops are able to grow fairly quickly but can’t seem to make any money.
In this stage we have the technician that has opened his first shop. In most cases, he is doing most of the work on the cars and handling the customers as best he can, along with doing all of the paperwork. Basically he is doing everything himself. This is the normal startup procedure.
Some shop owners get stuck in stage one and never really grow out of this condition. They hit a certain level of monthly sales and that is it.
In stage two we have a shop owner who has decided to go primarily into the front office to handle the customers or hire someone to do this for him so he can work on the cars. If he is the service writer he still helps out with fixing the cars in the shop.
In stage three the shop owner has expanded to the point that he has delegated the primary jobs to others. He has a service writer running the front office and other people fixing the cars in the shop. He helps out in the front with the customers in the morning and then will go into the shop to help solve the problems of his technicians. Delegating responsibility successfully gives him an opportunity to do other things to help the business grow.
Here we have a shop that has successfully expanded to high levels of volume. The owner is not required to be there to run the day-to-day operations. Profits are high and relatively stable. He is at a level where 80% of the shop owners in the country would love to be.
We Work Hard, So Why Don’t More of Us Arrive at Stage Four?
There is a rule of management that you will always expand up to the level of confusion that you can handle. When you get confused you go slow and make mistakes. This means that over time a shop owner may develop a big operation, but unless he really understands all the key areas of his business — personnel, marketing, finance, production, quality control, public relations, sales and management — his bottom line will suffer.
But I Don’t Have Any Dough!
Some shops do a million dollars in sales a year and aren’t making any money! If they are making money it isn’t a good return for the amount of business they have or the amount of effort they put into their business. Time and time again I have found shops doing more than $750,000 a year and not making any real profit.
The Real Problem
If you want to narrow all of these conditions down to one broad statement that defines the problem in the auto repair industry, it would be that the owners of these shops are very good at FIXING CARS. They can solve any problem with the cars in their shops if given enough time.
But the problem that is beating them up is that they don’t know how to FIX THE BUSINESS. They lack management skills and knowledge. Their lack of management skills is the primary reason they are not making enough money in the business.
In each of the four stages of a business, the solution is for the owner to quit being a mechanic and start being a businessman. He needs to learn to run his business. Running the business and making a profit is what a businessman is supposed to do. If the owner does this right he can slowly move up stage by stage.