Set targets, boost profit
How much do you want to earn as the business owner?
This is one of the key questions that international automotive business coaches Dan Gilley and Cecil Bullard reckon are critical to running a profitable business.
The US-based pair recently spoke to MTA members via a webinar about some of the best ways to improve business performance.
Cecil took time to demonstrate his automotive business excellence calculator – a spreadsheet that sets targets of profitability and runs the calculations of the main financial elements of a workshop to reach those targets.
“In the US, our intent is to get to a target of 20 percent net profit. Most of our clients are running at about 18 percent. The average at the moment though in other US automotive businesses is just 6 percent,” says Cecil.
In demonstrating the calculator, he had the ‘owner’ set a target salary of $120,000. “So this means there has to be about $2.1m in turnover to generate enough income to give the owner what he wants and to pay the bills.” The calculator then shows what the various price points need to be to reach the right amount of profit to earn that income. These can be tweaked manually to show options.
Bill for all time
“Repair workshops make their money on parts and labour.” Cecil says businesses need to re-evaluate their labour charges regularly and to look at the productivity of each technician.
Dan, who has run several workshops for MTA in New Zealand, says it is vital that the time technicians spend on each car is fully billed for and that specialist work is charged appropriately.
“Some New Zealand shops have amazing technicians, and they need to charge more per hour for them. Or, if that person can do a job that would normally take 1.5 hours in one hour, then you still charge the 1.5 hours. Charge a different rate per hour if it is a diagnostic job, and a higher rate again if the job has come in for diagnosis after others have failed to find the cause of the fault.”
Cecil says US workshops also charge a higher labour rate if they have to make or modify a part.
He also advises businesses to make sure their gross profit on parts is at least 50 percent. “Customers may say they have seen that part online for much less, but your answer is that you have made sure it’s the right part, it fits, you had to take the time to source it and it comes with your guarantee.”
These are all ways to improve productivity, says Dan.
Inspect every vehicle
Both Dan and Cecil put a big emphasis on making sure an experienced technician does a general inspection of every car that comes into the workshop in addition to the work that was requested.
Photos are often taken of tyres, brakes, headlights, faulty hoses and so on and provided as part of a report on anything that also needs repair or is showing signs of wear. This doesn’t just generate extra income but means the workshop can be confident the customer is made properly aware of the state and safety of their vehicle.
Dan compared the inspection to that of a dentist, who doesn’t just fix the tooth a patient is complaining about, they also check all the other teeth, often including an X-ray.
Both Dan and Cecil see the inspection as a moral obligation. “MTA members are a cut above others and should be known for integrity and professionalism. A customer needs to know what needs repair or what might be coming up.
“It’s not just about making the extra money. If the customer doesn’t want the done right now, still note it on the job sheet.”
Cecil noted that regular servicing and maintenance saves money on replacing parts and can keep the car on the road for longer.
Dan says, “The 300 percent rule applies: 100 percent of vehicles are inspected, 100 percent of inspections are estimated, and 100 percent of estimates are presented to the customer. Make sure everyone is inspecting the same thing and you are consistent in your process.”