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Finding the Value

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Finding the Value
Facing sinking profits, Luke’s Automotive changed its operations from cost focused to value focused.

In the summer of 2014, Luke Walker realized he needed to pivot his business, Luke’s Auto in Columbus, Ohio, in a major way. The problem wasn’t sales, which were growing at a 20 percent clip each year, or reviews, which were all very positive.

What he found was that many of his technicians focused on making customer’s bills as cheap as possible, at the expense of the longevity of their cars. Profits plateaued—then started to sink—and the shop had several quality-of-work issues, which Walker himself had to step in and fix. The growth of the company, in both number of bays and size, intersected with a need to change the culture of his young business and create a newfound focus on efficient operations.

“I realized, as a former technician, that I did not have the skillset needed to run a business at the scale that I had,” Walker says.

After seeking out training management, Walker realized he needed to switch his business from cost focused to value focused.

 

Time for a Change

Before starting his shop in 2009, Walker worked as a technician at an independent Columbus shop for five years, giving him insight to the industry and the kind of work he wanted to provide, with a customer-centric focus. He saw some immediate success in revenue with Luke’s Auto, with annual sales rising from $250,900 to $630,800 in his first four years, but major problems soon arose.

Since he wanted to help as many people as possible, it made sense for Walker to start with a price-focused model to get customers in and out with the smallest dents to their wallets. However, Walker also says the price-focused model came at the expense of using quality parts for his repairs.

“The biggest thing I realized was that I had to focus on the product I was offering, and I had to charge whatever I had to charge to offer the product,” Walker says. “Before, I was solely focused on price and not using the best parts, not as focused on the customer experience.”

He tackled this in three main processes:

 

1. Improving parts and equipment

Walker started his new mission by gradually increasing the cost of all parts and labor. From 2014 to 2017, gross profits on parts went from 43 percent to 52 percent, and labor rate increased from $78 per hour to $98 per hour.

He included many facility and repair equipment improvements, investing $20,000 on two car brake lathes, $5,000 to convert to LED lights, and $15,000 on renovating the customer entrance. He says even with the big price tags, these additions improved the appearance of the shop and upped the quality of repairs in the long run.
The shop has also made a significant drive to go paperless to improve efficiency and organization, now recording all of its inspections on iPads.

 

2. Recommending more than the minimum

Walker realized that, to optimize his business’s customer service, his staff needed to recommend everything that could be fixed in a customer’s car.

“We were totally focused on getting the person’s bills as cheap as possible, but it was at the expense of the longevity of their car,” Walker says. “The more I thought about it, I felt like we were not taking care of our customers by not presenting everything.”

The inspection process changed to a more thorough level, where each repair on a customer’s car featured pictures and a digital inspection sent to the customer.

To add on to the repair quality, Luke’s Auto switched from the industry standard 12 month/12,000-mile warranty to a 36 month/36,000-mile warranty.



3. Training his technicians

In order to make sure his technicians catch everything, he needed to make sure his techs were trained and hired to be the best they could be. With the major changes, Walker worked on convincing his service advisors and technicians that raising the prices would provide better services.

The change was difficult for the technicians and service advisors at first, as Walker says the team was wary of making sure they didn’t over recommend anything, and that they weren’t pushy with their suggestions. But they eventually realized it was best for customers in the long run to give them the full picture on their vehicle.

“We had to start by convincing ourselves, and looking at the data to how it helps maintain cars regularly, how it helps in making that car last as long as possible,” service advisor Aaron Mallett says.

The team continued to work on hiring experienced technicians, and had to let go of some staff members opposed to the change in philosophy.

He also helps his shop in finding and participating in continued education. In the spring of 2017, the entire shop went to VISION Hi-Tech Training & Expo in Kansas City, Mo., and took over 180 hours of professional classes.

Walker also focused on ways to improve his statistics on technician efficiency, and started tracking it and putting out graphs.  Over the past few years, Walker has attributed much of his success to an increase in his technological efficiency, bumping it up from 56.4 percent in 2015, to over 104 percent in 2017.

 

Continuing to Climb

Since implementing these changes, business has boomed. The shop topped $1 million in 2016 sales, and is on pace for $1.2 million in 2017 sales as of this writing. Its average repair order increased from $300 in the first half of 2014, to $415 in 2017.

Walker says he likely lost people who wanted the cheapest work possible, but, in the long run, customers got better parts and better technicians working on them.

Reviews for the shop have remained overwhelmingly positive. Luke’s Auto has a 4.9-star ranking on Google, and a 5-star ranking on Yelp.

While before he had to take over nearly every aspect of the shop, Walker says the new value model, paired with a strong team of technicians, has given him a much better work-life balance, which helps as he has two young kids at home. Gone are the days where he had to hover over each repair. Walker mentions a two-week vacation he recently took, where he only had one call regarding a shop issue.

“The shop is pretty much running without me,” Walker says. “There’s probably 5–10 hours that I have to be here per week.”

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