The Road to a Better 2015
In a fast-changing industry, many believe 2015 will be a crucial year for the automotive aftermarket. From increasingly advanced in-vehicle technology to more savvy customers to rising costs of doing business, there’s no shortage of obstacles facing an independent shop today.
All of it leads to one question: What does a shop need to do to be successful in 2015?
Ratchet+Wrench posed that very question to three longtime industry veterans—each current or former shop owners who, today, work to guide other operators on the issues that plague shops across the country.
They all agree: 2015 will be a year of challenges, and a year of opportunity. Most importantly, though, this is the year your business must secure its long-term future.
4 Sure-Fire Strategies for Battling Consolidation
“The reason there’s consolidation is because it works. It’s effective, and there are lessons everyone can learn from it.”
— Greg Sands | Automotive Aftermarket Entrepreneur
The wait’s over; 2015 will be the year the automotive aftermarket sees a substantial jump in business, says Greg Sands, serial shop owner and industry entrepreneur.
“This is a big year for the industry, in a lot of ways,” he says. “Car sales have been increasing steadily for the last four to five years now, and this is the first year the aftermarket will start to really see those effects. There’s a lot of opportunity out there in 2015.”
But that goes for everyone—chains, franchises, dealers, and independents alike. The dollars will be there, Sands says, but it’s up to each business to make sure it gets its share.
That’s always been Sands’ expertise.
He’s opened 81 shops since 1993; he’s spent more than 20 years growing, building, buying and selling facilities. He founded industry marketing firm Mudlick Mail a few years back, and now operates a $70 million aftermarket empire that includes 26 full-service repair facilities.
Sands feels great about his companies’ futures, he says, and that should worry you, the independent shop owner.
“Consolidation is the trend, that’s the way this industry is heading,” he says. “Trust me; I know. I am a consolidator.
“If you want a clear image of this industry’s future, look at pharmacies, dentists and doctors. The market’s there for all of them; it might be the healthiest it’s ever been. There’s a pharmacy on every corner, but they’re all the same brands—CVS and Walgreens—everywhere you go.”
Now can be a great time to sell, Sands says. He recently sold eight of his (although, he is opening several more in 2015). But, if you’re not quite ready to call it quits, Sands has four ideas for you to compete, taking advantage of what makes big-box stores and chains so appealing to consumers.
“The reason there’s consolidation is because it works,” he says. “It’s effective, and there are lessons everyone can learn from it.”
1. Convenience is King. Let’s get back to the dentist and doctor analogy for a minute. Sands says they are one of the best comparisons for the service industry.
“The majority of our customers have no solid knowledge of what makes a repair a ‘quality repair,’ as we like to call it,” he says. “It’s just how we have no idea who’s better at putting a crown on, or which doctor provides ‘high quality’ medical treatment. We almost always pick for convenience—proximity and hours they’re open.”
A service center in 2015 must provide convenient hours of operation to its customers; there’s no way around it, Sands says. Provide limited evening and weekend hours and services, Sands says, even if it’s to do simple work or to get a vehicle into the shop overnight.
“Be available to customers when they need you, and they’ll choose you,” he says.
2. “Chips and Salsa.” Sit down at a Mexican restaurant, and what’s the first thing you expect?
“Chips and salsa, right?” Sands says. “You go to a Mexican restaurant without it, or that charges for it, you’re probably not going back. Well, we have our ‘chips and salsa’ in the aftermarket: oil changes, windshield wipers, those small items we’re not making money on but need to use to draw people in and keep them coming back.”
Sands says that always making time to offer these services to customers gives a shop an advantage. Turning vehicle owners away because you’re too busy to waste time putting on new wiper blades is an enormous mistake.
“Look at it this way: You are telling the customer you are too busy to do small work,” he says. “What they get from that is, ‘Well, if they’re too busy to do the small stuff, no way do they have the time for my big job.’ And that work goes somewhere else.”
3. Buoyed by Buy-in. One of the largest complaints Sands hears from shop owners is about “finding good help.” A highly skilled technician is in high demand, and it’s difficult to keep them in your shop long-term.
So, how do you get a tech to buy into your business long-term? Well, try letting them actually buy into your business, Sands says.
“Create a scale at which techs can advance in your business; I like to think of it similar to military rankings,” he says. “Each ranking—as they get more experience, advance in training—gives them different benefits, and one that can really make a difference is giving an ownership stake in the shop.”
It can be small; it can be difficult to achieve. But the incentive, once reached, changes the entire mindset of an employee, Sands says. You get a permanent partner (no matter how minor) to replace a potentially temporary employee.
4. Size Does Matter. Lean and mean, that’s the idea for the modern repair shop, Sands says. With Mudlick Mail, Sands and his team monitor the markets and databases for their roughly 2,000 customer shops. And to a shop, no matter the location, it’s pretty much universal: Eighty-five percent of customers come from a 2-mile radius of a facility.
“So, if you’re pulling from a 2-mile radius, what good does it do to have 20 bays?” he says. “The average person isn’t going to drive 10 miles, passing seven other service centers to come to you. Some might, but not enough to justify it.
“I say it all the time: I would rather have an eight-bay shop open more hours—nights, weekends, etc.—than have a 16-bay shop that’s always closed for my customers. It’s that convenience factor again, and it’s the overhead. Lean, profitable businesses are the ones that will survive.”
Out of the box ... into a dealership
Auto dealerships are focused on new vehicles, and that includes their service departments. Sands sees a gap in their business plans—and an opportunity for forward-thinking entrepreneurs.
“If I were to start an entirely new business [format], I’d go to a dealer and say that I will handle all of their aftermarket service,” he says. “It would be a store within a store.”
The idea, he explains, is to be an independent, contracted service department for a dealership, and do it onsite. It’s a guaranteed revenue stream for the shop, and by using the more advanced and modern business practices for a shop, you’d be able to be a customer-retaining service for the dealership.
“It would be a home run for a dealership and for the aftermarket,” he says.
First Steps to a Measured Approach
“I don’t care if it’s electronically or you use a stick to scratch in the dirt, you need to start tracking now; grab that damn stick and start scratching.”
— David Rogers | Colorado Shop Owner & Business Coach
David Rogers views 2015 as “the year of illumination” for the industry; as in, it’s the year “that shops need to get their heads out of the sand and stop living in the dark and in denial.”
“It’s too hard to run a business today if you’re not realistic and if you don’t have a firm grasp of your business,” he says. “I don’t care if you’re looking to retire this year or in 20 years, with all the changes in the industry, 2015 will be the year your business either sinks or swims.”
OK, so here’s the plan: Measure—measure everything, every day.
Numbers are what drive your business, Rogers says. Car count, average repair order, gross profit on labor, gross profit on parts, your effective labor rate, net profitability—all these metrics are tools to run your business better. And today’s industry is far too competitive to leave yourself unequipped, Rogers says.
And he gets it; it sounds daunting. He used to be reluctant to do it himself with the shop he co-owns, Keller Bros. Auto Repair in Littleton, Colo.
“I was like so many owners: I thought my experience and my knowledge of the industry meant more than what a metric might tell me about my business,” he says. “I was wrong. Dead wrong. That’s how you fail—and you don’t even know it. You don’t know anything until you can measure it.
“There is no excuse to not track everything in your shop today. No excuse. It’s an absolute necessity, and this has to be the year you start doing it.”
It’s his main focus with his coaching clients through Auto Profit Masters. There are sophisticated, electronic management systems that make this a breeze, Rogers says. He recommends using one; it simplifies everything. A lack of one, though, isn’t an excuse not to track metrics.
“I don’t care if it’s electronically or you use a stick to scratch in the dirt, you need to start tracking now; grab that damn stick and start scratching,” he says.
Once you’re armed with that data, then you can truly plan for success. Rogers says it becomes a simple process: measure, analyze, train for improvement, make systematic adjustments, and implement new processes.
Constant monitoring. Continuous improvement. Long-term viability.
“Reality has to dictate your plan for the year,” Rogers says. “I’m not talking about resolutions. When you say you’re going to make a resolution—saying you’re going to lose weight this year—you’re just throwing a wish out there. You wind up gaining 10 pounds.
“What we all need to do is set plans, put plans in place. You need a goal, and that pathway to get there.”
How to Get More out of Less
“Vehicles aren’t the same as they were 20 years ago, 10 years even. So, why do we have the same service packages we did then?”
— Jim Piraino | Business Coach & Former Shop Owner
Looking back now, the vehicles were terrible, Jim Piraino says, and that was perfect for his business.
During his 33-year run as the owner of a Southern California shop, Piraino always focused on one thing: car count. Service intervals were short, and cars were made poorly and regularly broke down.
Piraino built Camarillo Car Care Center into an industry staple, and was named the 2002 NAPA/ASE National Technician of the Year. He did it by being ahead of the curve—engaging in community marketing, focusing on increasing average repair order and lean business operations.
Those are the principles he still looks at in his business coaching today with Elite Worldwide.
Only, he admits, it’s a different game today for shop owners. Vehicles don’t break down as often, and their recommended service intervals are even more infrequent.
“I bought a new Ford Edge a couple years ago, and in the owner’s manual, under service, it said to change the oil whenever the ‘change oil’ light came on, and it said it might not come on in the first year,” he says with a laugh.
2015, he says, is the year shops wake up to this change: “Vehicles aren’t the same as they were 20 years ago, 10 years even. So, why do we have the same service packages we did then?”
If you make one significant change to your business in 2015—one adjustment to cover vehicle trends—Piraino says to create a modern service package.
Look at it this way: The traditional interval for time between oil changes used to be 3,000 miles; today it’s more like 5,000 (and that might be low, he says). So, if the average customer drives 15,000 miles per year, that turns five visits a year into three.
“Just on that calculation, you’re seeing increasingly diminished car counts,” he says. “One solution is to widen your customer base, which you should do. The second is to change what you’re doing on each visit.
“Everything you were doing for that vehicle over the course of five visits in 15,000 miles, should now be done in three visits in 15,000 miles.”
Alter your service packages. Create higher-priced options that involve more services, and educate the customer on the difference.
“Maybe instead of a simple oil change, your basic package is a service that includes oil, tire rotation, wipers, other things that you’d normally recommend over a couple visits,” he says. “These are the services their vehicles still need, and if they’re not coming in as often, they’re not getting them.
“You need to let the customer know that it’s our job to keep that car running for them, and that’s what we’re doing here. Cars are different, and if you’re going to make any adjustment this year, have this be it. It’s simple, quick and will give you that higher ARO with the same car count.”