How Do Highly Successful Shops Do It?
For the most part, I get to a point in the future where I laugh about my mistakes. And there are many—so that’s a lot of laughing! Like the time I realized I was selling engine oil for less than I paid for it, lots of laughs there. That was a fairly simple mistake to find and correct. Other times I had to dig deeper into my assumptions about what it meant to run a good business. I remember an occasion when one of my favorite customers, Anne, brought in her Audi A4. It ended up needing a transmission. I was excited to have found her a very low mileage used unit with a warranty to which she happily agreed to. Upon installation though we discovered the case was cracked making that transmission unusable. I had the salvage yard we purchased the unit from get another low mileage unit on the way and then I called Anne. I assumed she would be happy that at least this transmission would be warrantied and that she was still getting a “great deal.” To my surprise, she was very unhappy. We didn’t offer loaners or free rentals back then and she had paid out of her own pocket for a rental car. It was going to take 3-4 more days to get her car done which was going to cost her and I had not done a good job explaining this scenario to her. In those early days, I was focused on fixing the car correctly and giving customers the proverbial good deal.
It goes without saying that fixing a car correctly is top of mind for most of us, as it should be. But at some point, we all started to figure out there is a lot more to this whole auto repair business, right? We noticed some shops that seemed to have it a little more figured out than we do. And even some shops that are killing it with legendary status. And if you don’t stop and think, “What are they doing to get those results?” then you’re not paying attention and at risk of becoming obsolete along with your business. Times are changing. And best practices for auto shop owners are changing. Fast.
The new year always brings a desire for reflection on changes. What worked well the year before and what needs rethinking. You probably have goals for 2020 and as we get into February it’s time to do the work. Especially if February is a slow month for you. When it comes to goals, people often ask “What should I be doing?” “How should I be spending my time?” or “In what order should I do things?” Often times, budget is a serious consideration when prioritizing the goals. More marketing? New loaner cars? Raises for staff? It’s easy enough to look at where you are and set a far off goal but the much harder part is the space in between, the growth journey. Again… What steps will you take? In what order? And how much will it cost?
Speaking of costs, you can find vastly different opinions on how to run a shop but one thing that everyone can agree on is the importance of the bottom line, Net Profit. And since it takes money to grow, there is a VERY strong case for maximizing what you have currently. A classic example is the shop that needs more work and spends money on marketing to bring in more cars when they have an ARO of $300 and an average opportunity per car of $600. So much is left on the table, it’s like eating half a chicken wing and tossing it with so much meat left on the bone! I guarantee the cost of performing a good inspection, estimating that work, and training your staff to sell it is pennies on the dollar compared to new customer acquisition costs. Even for the most successful shops out there, costs will always be a consideration even if they do have a nice fat new customer acquisition budget.
No matter what size your shop is, there’s always a case for working with what you have before you dig into your wallet. Opportunities exist to grow and get more without increasing your spending. Just like I got past thinking only about fixing the car correctly at a good price, we can all benefit from a fresh perspective on our business. One that can help you grow to the level of a nationally respected shop. There are no shortage of strategies and plans that promise this. One of these that I want to share with you is called, Lean Methodology. It’s talked about a lot but not often in our circles.
For those that have been around awhile, you’ll make the obvious connection to Toyota and their game-changing “lean manufacturing” processes in the 80s. This is one of the earliest uses of the term lean, focusing on processes, waste reduction, and small incremental change among other things. It would be a few decades before the term lean was again used in business, this time in business startups. In 2011, Eric Reis wrote a book called “The Lean Startup” which proposed methods to help startups get off the ground as quickly as possible. Since that time, people have begun applying lean concepts to all areas of business, including service businesses. Given the continued rapid pace of change in our business and the “information revolution” that we are in the midst of, looking at our businesses from the fresh perspective of a startup has value. The mindsets and business knowledge of even 5 years ago isn’t guaranteed to carry us successfully into the next 5-10 years. The operators out there who are questioning their current assumptions and reevaluating will be the who move our industry forward with creativity and new ideas. I mean how many shop owners thought they’d be texting their customers a digital inspection 5 years ago? And what else will be normal 5 years from now?
Lean Methodology as it relates to our business helps us do a few things:
- CUSTOMER VALUES: It lets us determine more precisely what our customers value (so we can cater to that).
- WASTE REDUCTION: It takes a close look at wastes in our business, activities that absorb time and resources without results.
- SYSTEMS AND PROCESSES: It looks carefully at our processes as those will guide our choices and help us achieve the maximum results using the fewest resources.
Sound interesting? Stay tuned next month, I’ll dig into how these Lean Methods show up in our businesses. In the meantime, if you have any great stories where you discovered what your customer really valued, how you reduced some shop waste, or some great processes, I’d love to hear them in the comments!