Monday, April 28, 2014

The Adventures of MACH TWO – Chapter 5 by Mike Lee


(MACH TWO gets his name from the fact that while at work, he is constantly going MACH TWO with his hair on fire.)

In the continuing adventures of MACH TWO, a once mild mannered technician turned automotive shop owner, he is in total overwhelm and he can't seem to find enough time to think.
Chapter Five:
I CAN'T Stand Prosperity
I Am Making Money, So I Need To EXPAND

After  being in business for over a year, MACH TWO runs into a limited space problem.  Because of his great reputation for being able to fix the cars, fix them right and treat customers honestly and fairly, he has outgrown his facilities.  He has cars and customers all over the place.

He is making good money and his checkbook actually has a POSTIVE balance.  His bills are all paid ON TIME for the first time since he started the business.  He feels wonderful and is proud of his business ability.  His head and chest are swelling.  He thinks to himself, "Wow, if I am making this much money on two bays, imagine how much I could make in a 10 bay shop.  He makes a decision to expand.  He is now entering the Blunder Zone.
The Blunder Zone

After looking around he finds a nice seven bay shop that is available for leasing.  Of course, it needs a little fixing up, and he will have to buy some more equipment and hire a couple more technicians, but he is doing so well now, he thinks no problem, what can go wrong?!

He signs the lease and starts the process of getting the new facilities into shape.  He buys a couple of hoists that the new facilities are going to need.  Also, there are lots of little things that he really didn't anticipate, like air hoses, pipe, storage shelves, fluorescent lights, etc.  It is amazing how much all of this little stuff costs.  He has used almost all of the reserve money that he had put aside.  He thinks, "No problem, when I open this new shop I will get it all back."

At this point he is just about to open the place.  All he has to do is move all of the stuff out of the old shop into the new one.  He and his two technicians spend the weekend moving everything and getting the new shop totally ready for their grand opening on Monday.

Grand Opening

Monday morning, the shop is pretty busy, except there is one small problem.  His lead technician hurt his back over the weekend doing all of that moving and doesn't show up to work.  He finds out later that the technician has strained his back and will probably be out for six months.  Of course, that means he is going to hit MACH TWO's workman compensation for a ton.

That is okay, because MACH TWO needed to hire a couple more guys anyway to handle the new big volume that he was going to be doing in this new shop.  So he runs an ad in the newspaper for technicians.  After a week of running the ad, he has two guys (actually zombies) show up and neither seems to be alive.

Now panic is starting to set in.  He decides that he needs help desperately or he is going to run out of money quickly.  It is amazing how much more the monthly nut is at this new shop than it was at the old one.

He decides to try to hire some of the good technicians that are working for some of the other shops in town.  He puts out the word to several technicians that he has heard that are really good and offers them outrageous wages to come to work for him.  He has no choice.  He has lots of work and no real help.  He is working day and night and seems to be falling behind in his bills and he has no reserves left.

Three months later, he has five technicians and himself and he is doing $15,000 more a month than he was doing in the old shop.  He should be making a ton more money, but he seems to be going the other way.  He can't figure it out.  He is doing more volume so he figures he should be making more money.  He is now starting to fall way behind in his business and he is going to have to borrow some money from his mother (he hates to do that) to pay the taxes.  It doesn't make sense, why isn't he making any money?

Symptom:  He is doing more volume, but making less money.

Real Problem:  He lacks management skills.  He is in confusion.  He doesn't know where he stands.  He has no indicators to tell him where the real problem in his shop is, so that he can't go about fixing it.

Solution:  Manage by Statistics.  If he had been tracking the major areas of his business and knew certain industry standards on production and what to pay, he would know that he has low production in his shop and he is greatly overpaying the new guys for the amount of production they are doing.

Also, he would know that his monthly overhead has tripled since moving into the new shop and he needs to either increase his production or raise his prices some or do a combination of both.  If he knew how to manage by statistics, he would at least know where his problem areas are and be able to come up with a plan to fix them.

Management Success!