14 Operational Secrets of the Most Efficient Shops
What's your business's most valuable asset? Bill Long lets the words hang there before continuing.
No, it isn't your facility, he says, even though many, like Long's roughly 3,600-square-foot building in Front Royal, Va., are worth well into seven figures. It isn’t your equipment, either, nor any tool, computer, software system, nor any other tangible item you’ve invested in over the years.
The answer itself is much more simple: time.
"We're selling our services—people are paying for our time,” he adds. “How do we maximize that? We only have so much of it each day. ... Everything we do needs to be about getting the maximum out of the time we have each day when we're open."
That’s the key to efficiency, he says, and efficiency is the key to building and running a successful, sustainable and profitable business.
Long knows; he’s done it twice—first, from 1993–2004, before pursuing a lifelong dream of becoming a full-time firefighter; and then, again, when he founded Auto Care Clinic Inc. in 2014, a single-location auto service business that was among the highest-performing in the 2015 Ratchet+Wrench Shop Performance survey.
That survey helped Ratchet+Wrench identify a handful of the industry’s top operators, based on an evaluation of key business metrics. Long isn’t too sure, or too concerned, about such a label; neither are the two other shop owners profiled here. All of them, though, are focused heavily on efficiency, and the intricate operational details that allow their respective businesses to fully utilize their most valuable asset.
“What I have always focused on was how to make this shop the best it can be—how can we produce more in the same amount of time?” — Mike Hines, owner, Bonded Transmission & Auto Repair
1. THE EFFICIENT PHILOSOPHY
Bonded Transmission & Auto Repair is a very different business today than when Mike Hines’ father founded it in 1961. Really, it’s almost unrecognizable to the one Hines took over, along with his brother, in 1988, and grew throughout the 1990s into the leading transmission specialist in the greater Framingham, Mass., area.
For starters, there’s the second half of the shop’s name, which Hines added about 10 years ago. It isn’t just a specialty shop any more (roughly 40 percent of sales now come from general service and repair work). But, more importantly, the business operates with precise purpose—each step of its many processes refined, optimized, systemized, and constantly evaluated for improvement.
Mindset, Hines says, is one of the biggest factors that has led to Bonded Transmission’s transformation into the $2 million shop it is in 2016.
“I never started out to be the best technician there was,” Hines explains. “That just wasn’t my thing. What I have always focused on was how to make this shop the best it can be—how can we produce more in the same amount of time? How can we produce more to compensate our employees more? How can we do more to improve our standing in the community even more?
“It’s that type of philosophy that led to our changes, that you need to lead to any change. You need to always be focused on efficiency, and always working to get better. If you don’t, the results will never be there.”
2. THE RIGHT PEOPLE IN THE RIGHT PLACES
Change isn't easy—but it’s essential to grow and improve, Hines says.
He watched as vehicle improvements each year limited his business’s sales volume in the early 2000s. Breakdowns were less frequent; transmission rebuilds no longer could support the business long term.
The transition to general repair isn’t all that simple, though, especially from a staffing standpoint.
“We had people who have worked on just transmissions for 30-plus years,” Hines says. “It’s hard for them to all of a sudden pull the blinders off and look at the whole vehicle.”
So, Hines didn’t make them. He went a different direction: He added two general repair technicians, and a service advisor more familiar with that business focus. His team today consists of five technicians (two general repair, two tranny specialists, and one who does both) and two service advisors.
Talent plays a key role in efficiency, Hines says. If you don’t set up your shop to allow talent to thrive, your business won’t either.
3. YOU GET WHAT YOU PAY FOR
Speaking of talent, Hines says to think of it in terms of the way you sell work to your customers: It’s all about value.
In other words, you get what you pay for.
“A lot goes into efficiency, and a happy, motivated team plays an enormous role,” he says.
The Bonded Transmission pay plan offers a base, hourly pay—at a level of 34 billed hours per week—with performance bonuses that kick in at 42 billed hours completed; then 47; then 52; and so on.
Scales differ depending on the technician, and Hines has a monthly team bonus attached to specific sales and gross profit goals.
“It creates a real team atmosphere, where everyone is focused on working together to produce quality work,” he says. “And the bonuses are factored into my budget. I plan on paying them each month, and the increased production more than makes up for the increase in pay.”
4. DISPATCH DIRECTLY
With specialized technicians and a variety of work, Hines has had to overhaul the shop’s job dispatching process in recent years.
“One day, I just realized that all it seemed to be was me standing in the shop pointing at what people should work on,” he says. “That was a mess.”
Hines developed a very simple system: Each technician and service advisor has a bin that can hold work order folders. The service advisors put the orders in the techs’ bins in order, front to back, of what the techs should work on first. All diagnostic work is done in the morning (thus new work orders often start the day in front), and when a diagnosis or job is completed, the tech puts it in the correlating service advisor’s bin up front. The service advisor can then either call the customer for approval, order necessary parts, or let them know the vehicle is completed.
There’s no wasted time walking back and forth, Hines says, and the techs don’t need to discuss their schedule with anyone; it’s all laid out for them throughout each day.
For his part, Hines begins the next day’s scheduling process before he leaves the shop in the evening, organizing each tech’s work load.
“You can’t afford to wait until 9 a.m. to know what’s going on that day,” he says. “That’s wasted time and wasted money.”
5. THE RIGHT RELATIONSHIPS
Before transitioning into general repair, Hines says Bonded Transmission received 60 percent of its new customers through referrals from other shops.
That hasn’t changed.
“We were honest and open with each of our partner shops about what we were doing,” he says. “We had long-standing relationships with a little more than 150 different ones, from dealers to independents. We promised that we’d offer all general service work back to them if it was a referral. Surprisingly, almost every time, they just tell us to complete the job.”
The lesson isn’t to strike up referral partners, necessarily (although, it’s not a bad idea), but rather to value an open and honest relationship with all of your customers and partners. You need the right work coming in for your team to be efficient, Hines says. Bad jobs—or a lack of jobs—will leave you stuck.
“Everything has to be about eliminating those roadblocks,” he says. “And so much can go into that.”
“These vehicles are their livelihood. You’re slow fixing them, and you’re not fixing them next time.” David Stringfield, owner, Auto Masters Fleet Service Inc.
6. WORK ON WHAT YOU KNOW
Look at the website for Auto Masters Fleet Services Inc., based in Jacksonville, Fla.
There’s a fire truck in one bay; a tow truck in the next, with a minivan beside it.
If it looks like Auto Masters simply works on every vehicle type, well, owner David Stringfield says it only looks that way.
"We're very particular about our work,” he says, “from the types of vehicles to the types of accounts.
“Fleet is a different animal than a typical shop, and everything—everything—is about efficiency. These vehicles aren’t just transportation to work for these people. These vehicles are their livelihood. You’re slow fixing them, and you’re not fixing them next time.”
“So, why waste time out of your specialty?” Stringfield asks rhetorically.
It’s a lesson he learned quickly since opening his business in 1993—and struggling through seven stagnant, minimally profitable years.
“You’d have accounts with difficult vehicles that were tough to diagnose, or ones that we weren’t fully certified in,” he explains, “and you’d lose days on those. Days.”
The shop now only works on vehicles that its five in-house or three mobile techs (more on that later) are ASE Master certified on. It speeds up diagnostic time and allows for incredible time savings in parts ordering.
7. LET INVENTORY PLAY ITS PART
Technicians stopping and starting on jobs is an efficiency killer, one that Stringfield is no longer familiar with.
Because he has a firm understanding of the vehicles his business will have in its bays, Stringfield is able to keep a large inventory of parts on hand—about $200,000 worth at any given time. His technicians rarely wait for any part on any job, allowing each vehicle to be worked on start to finish without disruption.
That’s not feasible for the vast majority of shops, and Stringfield has an often-overlooked solution:
“Your vendors should be your best inventory department,” he says. “You have options for where you can buy parts. They know that. You know that. If they want to be your partner, they better be stocked and ready for you. You don’t need your $200,000 worth onsite, but you do need it readily available. Make that a critical point in your [vendor] relationship.”
8. GET JOBS DONE—ON YOUR SCHEDULE
Waiting—Stringfield hates that word. And that led, in part, to the formation of his mobile repair team, fully equipped, trained and certified master technicians who will arrive at the scene of a breakdown, or fix a vehicle in a customer’s parking lot.
They can also tow the vehicles back to the shop.
“The idea is that we get jobs when it’s convenient for us,” he says. “Nothing hinders [efficiency] like waiting for a vehicle, or having a bunch of jobs thrown on you at once. We can balance our work on our time, and we can get started on jobs far quicker without waiting for anyone to come in.”
9. TRUST TRANSLATES
Since he opened the business, Stringfield has had two guiding principles: Take care of the customer first and foremost, and do the job correctly the first time.
“It’s really that simple,” he says. “You focus on that—and achieve that—and your reputation will build. Even with [volume fleet customers], it’s not about price. It’s about our focus on getting them back on the road as soon as possible, and not having them just break down again down the road.”
Comebacks kill efficiency, but that’s not the only benefit here, Stringfield explains. Selling work takes time. Selling maintenance work takes even more time, and can be met with resistance.
“But, if you build those relationships and customers have trust in you to accomplish those two things,” he says, “then, you’re not haggling, you’re not waiting on approval, and you’re not getting half the work you took all that time to diagnose. That’s efficiency right there.”
10. INVEST IN EFFICIENCY
Stringfield learned early in his career as a shop owner that there are areas to cut expenses, and then there are areas that no shop can afford to skimp on.
Training falls squarely in the latter.
To have members of his team ASE Master certified in every make it services and repairs, Stringfield spends roughly $50,000 per year on training. In 2015, he paid more than $10,000 to get two of his techs certified, trained and equipped to work on emergency vehicles. It netted a more than 1,000 percent return, as the shop landed a six-figure annual contract to work on a large fleet of fire trucks.
No matter how strong the rest of your operations are, Stringfield says, if your team isn’t properly trained, certified and equipped to complete its work, efficiency will suffer.
“[Your team] is the most critical thing you have in your building,” he says. “Being prepared can cost a lot of money, but being prepared before you ever get the vehicle is what makes you efficient and makes you profitable.”
“A lot of shop owners are paralyzed—afraid to take the next step in their businesses. What you should be afraid of is standing still and wasting time.” Bill Long, owner, Auto Care Clinic Inc.
11. UNDERSTAND YOUR SURROUNDINGS
Maybe it goes back to his experience as a full-time firefighter—or maybe Bill Long simply despises a wasted opportunity.
Either way, Long often finds himself looking around the shop floor at his Virginia facility searching for ways to make improvements. He has 1,800 square feet of space for his three technicians to work. There are three bays, but one is hampered by a lower ceiling.
Still, by using a detailed dispatch process (very similar to that of Hines’ at Bonded Transmission), and standard operating procedures, Long nearly has his facility maxed out.
His third tech wasn’t hired until late November. With just two techs for the majority of 2015, the shop did more than $720,000 in sales. Each tech nearly topped 140 percent in total efficiency. Long expects sales, with the additional team member, to top $1 million in 2016, as they’ll be able to move more jobs through and take on work they’d been forced to schedule out or pass on previously.
But Long isn’t done there. He’s adding three more bays onto his shop, giving him the ability to hire on at least two more technicians. He sees the new setup becoming a $1.5 million business by the end of 2017.
“The biggest thing, though, is understanding what you have to work with, what you can reasonably get out of it, and building your [systems] to that,” he says. “I didn’t want to expand and push out until I was really utilizing my space.”
12. BY THE BOOK
Everything in business is borrowed, Long says.
"Any 'brilliant' change I've ever made came from someone, somewhere," he says. "There are a lot of people who have done great things in business. Why not take the time to learn from them?”
Long worked with 20 Groups and attended management seminars in the early stages of his career, and today works with a business coach. He also reads constantly (his three favorite business-related books: The Toyota Way by Jeffrey K. Liker; The E-Myth: Revisited by Michael E. Gerber; and Profit First by Michael Michalowicz).
“There comes a time when everyone hits their limit of what they can do on their own,” he says. “Don’t be limited by what you know right now, or what you knew when you started. There’s more than one way to become efficient.”
13. WARRANTIES WIN
Too many shop operators, Long says, look at their warranties as an afterthought. It shouldn’t be, he says, if you’re really looking for maximum efficiency.
“I really want our warranty to be something that we stand for, something that drives us to do better work,” he says.
It’s why he’s moving to a lifetime warranty on all but wearable items in 2016.
“We spend a lot with CARQUEST, and most of their parts are warrantied if they fail,” he says. “In most cases, the only thing you’d be spending on is the labor. But, if we make it a sense of pride not to have those come back, that not only creates better and [more focused] work and customer satisfaction, but it also improves the efficiency in the back. Everything is done right the first time. What more can you look for?
“A warranty can’t be an afterthought. You need to stand behind it, and have it drive you.”
14. MANAGE BY NUMBERS
All of these elements that lead to efficient operations—every little process and procedure, metric and benchmark—it doesn’t add up to an improved bottom line.
At least, Long says, that’s the wrong way to look at it.
“What you need to do is start with that bottom line, start with what you want to achieve,” he says. “Then work your way back, reverse engineer your whole business to meet that.”
Long’s overall gross profit sits just a hair above 60 percent. His net profit is at 21 percent. Those aren’t by accident. Those are his goals (actually, 20 percent is his net profit benchmark), and everything he does aims to achieve that.
Long says an intricate focus on his shop’s key performance indicators allows him to keep its overall pulse, day to day, month to month, year to year. And it allows him to watch how efficiency plays a role in all of it.
“We set all of these things up, monitor all of it, but in the end, it still comes down to how you utilize the time you have,” he says. “We waste 30 minutes looking for a part or struggling on a diagnosis, that’s a half hour you never get back.
“Why’d it happen? We need to make changes to find solutions. A lot of shop owners are paralyzed—afraid to take the next step in their businesses. What you should be afraid of is standing still and wasting time.”