Running a Shop Leadership Finance

The Production Turnaround

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RW1117_CaseStudy

Bob Noriega has consistently remained busy since opening AutoWorks of Tampa, Fla., in 2013, but being busy didn’t necessarily mean that he was making a profit.

Despite a fairly steady car count, Noriega wasn’t making the money he should with such high volume, so he crunched some numbers. In 2014, his parts and labor revenue was $198.05 per hour which meant that each of his techs was worth $3.31 per minute.

But to fulfill those numbers, your techs would have to be 100 percent productive. So if they’re only 40.5 percent productive, that number drops significantly to $1.33 per minute per tech. That’s only $80.22 per hour per tech. In a 9-hour work day, that’s only $721.98 per tech—barely enough to sustain a shop’s operational costs. And that’s the situation Noriega found himself in. It wasn’t until he started tracking KPIs that he discovered his shop’s productivity was tepid, at best.

 

The Backstory

Noriega grew up working on motorcycles, go-karts and cars and after graduating high school. He decided to work a part-time job and go to school while building a repair clientele out of his home. Eventually, the business proved successful enough for him to quit his part-time job, hire another technician and move the business out of his home.

In February 2013, Noriega purchased his facility after an exhaustive search. After moving into his new shop, it wasn’t hard to create an initial customer base, as all of his in-home customers merged over to the new location.

But as his business grew, it became obvious that despite being busy with a steady monthly car count of 70 in 2014, the shop wasn’t necessarily making money.

 

The Problem

It wasn’t until Noriega went to a service advisor class that he started to track KPIs. And when he did, he realized that his shop's productivity was running around the 30–40 percent mark.

This was killing the shop's bottom line; there was no profit. The shop was grossing around $30,000–$35,000 per month.

As he invested in more management training, Noriega began to break down his system and found where his problems originated in relation to productivity.

Noriega soon realized that there was a lack of process in his shop, particularly with scheduling. In short: There was no schedule; techs jumped from car to car, there was no checkout list, techs didn’t write their own labor, and the shop didn’t charge for diagnosing charges.

The techs slowly became unhappy because they were walking into work not knowing what to expect due to lack of organization.

 

The Breakdown

2014 Part and Labor Revenue —> $198.05/hour —> $3.31/minute per technician

At 40.5 percent productivity —> $80.22/hours —> $1.33/minute per technician

 

The Solution

Noriega found that he needed to get a solid system in place in order for his techs’ productivity to increase.

The first thing he implemented was detailed estimate write-ups and a dedicated write-up sheet, which the shop still uses today. The write-up sheet has a simple layout, front and back, and outlines the action item that needs to be done, why it needs to be done and what parts are necessary.   

The service advisor now prewrites as much information as possible during the appointment-setting process, converts it into a repair order and passes it along to a technician.

Second, Noriega implemented better scheduling. He says he was disrupting his techs’ workflow by dropping another task on them that they weren’t going to be able to thoroughly go through. And because of that, morale decreased.

After figuring out that he needs three cars per tech each day, Noriega schedules all his appointments for a drop off between 8–9 a.m. with only two “waiters,” which equates to one per tech. He says he does this because he wants his clients to come in as soon as possible to ensure that his techs are not waiting on cars.

These days, he has started using a point-of-sale system that allows him to block out his techs’ time. They can view which car is coming in and for what service. This way, customers are not coming in and out during the day without set appointments for their vehicles.

Noriega figured out that now with two techs, he’s looking for six appointments per day, but schedules seven in case of a no-show.

They’re currently planning on going to a digital point-of-sale system and becoming paperless.

Lastly, Noriega made the decision to start charging for diagnostics instead of missing out on the possible revenue. At the time, when Noriega began charging for these services, his technicians were 70–80 percent productive.  

The shop now bundles different “test packages,” which vary depending on what is needed for the vehicle, testing everything from runnability to electrical issues. The packages are priced for a value and are pre-authorized by the customer, which helps in the scheduling process.  

Noriega says that he’s essentially selling hours. But, this way, he never has to present the customer with hours. It’s also crucial for improved efficiency and productivity; for example, he can sell a package worth two hours that only takes his tech 1.5 hours.

 

The Aftermath

While it is still a work in progress, after four years of implementation, the shop’s productivity is now at 108 percent.

While he used to have three techs, Noriega says that they are now getting more done with two techs than they were with three. The shop grosses $72,000 per month with an average monthly car count of 90 and ARO of $800, which means the shop is now profitable, allowing Noriega to invest back into the business. But more importantly, his staff appreciates the change.

“My technicians, as far as morale goes, are happier because they have a more predictable day,” he says.

This year, the shop is looking at 18 percent net profit. Noriega says that he has invested back into his business and now has subsidized health insurance, 401(k), dental and vision for his employees, allowing the shop to stand out amongst the competition.

 

The Takeaway

Noriega says that he now understands that everything needs to be measured and managed and that maintaining and building on that is easy.

“There is a systematic way that things can be done that creates harmony within your place of business and it creates a sustaining business that will be there for us,” he says.

SHOP STATS: AUTOWORKS OF TAMPA  Location: TAMPA, FLA.  Operator: Bob Noriega  Average Monthly Car Count: 90  Staff Size: 5  Shop Size: 2,100 sq ft Annual Revenue $864,000  

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