Here we are, already deep into the fourth quarter of 2024, and beginning to plan for 2025! I feel like I just wrote out my goals for 2024! Where did this year go?
As you look forward, here are a few things to consider and plan ahead for in 2025.
I prefer to begin building my gross sales goal by looking at the data from the previous 12 months. I analyze where we met our goals and where we fell short, taking extra time to analyze why we weren’t able to meet the mark we set. For my shop, that has included staffing challenges and unforeseen closures due to the weather. (Thanks a bunch, Helene and Milton!)
I set my BHAG (Big Hairy Audacious Goal), and then sit down with my team to gain buy-in and strategize how we can get there. Looking at each month and the fluctuations, then dividing the sales goals down into small parts is a great way to ensure your staff understands what part they play in the grand plan.
Each month should have a sales goal. I like to set goals based on the seasonal fluctuations of my area rather than taking the annual goal and dividing it evenly by twelve.
For this example, our monthly goal is $150,000. That figure is divided into parts and labor: 40% parts and 60% labor. In dollar figures that means $90,000 in labor and $60,000 in parts.
The next step is to calculate my Effective Labor Rate (ELR). This es the total labor dollars collected, divided by the total hours billed to collect that amount of dollars. This number will tell me how many billed hours I will need to meet the monthly labor dollar goal. If my ELR is $155, and my goal is to bill $90,000 in labor, I will divide $90,000 by my ELR—that is $155—equaling 580.65 hours.
Dig deeper into the number of hours needed per day. This month has 21 business days. I can then divide those 580.65 by 21 days—which equals 27.65 hours per day. If I have 4 technicians, I divide those 27.65 hours per day by 4—equaling 6.9 per day, per tech.
Your shop may have technicians that can bill out 8 to10 hours per day, or more, and you may also have some that can only produce 4 to 6 a day. Gaining the commitment from each technician on how many daily/weekly/monthly hours they will be responsible for is a critical, and often skipped step in this part of the process. Don’t forget to ensure your advisors have the proper training, skills, and tools to gain authorization to be sure all these hours are available.
Another critical part to look at is the net profit percentage. My target is at least 20%. How is this calculated? Take your total gross sales minus all your costs and that will give you your net profit. Then, take that net profit, divide by your total sales, and multiply that number by 100. If you aren’t happy with this result, start looking deeper into your adjustable expenses. Note: The last place I cut expenses is in salaries and advertising. These line items, if tracked and allocated properly, actually make you money, and cutting them could have a negative impact on your gross sales and car count.
Slashing negotiable expenses by even 10% annually adds straight to your net profit. It is important, when setting goals for sales, to look at the bottom half of your Profit & Loss Statement, too.
Some other places to look:
- Can you negotiate a better rate with your internet/phone provider?
- Are you paying for software or tool subscriptions you don’t use or that are redundant to another software?
- Look at your credit card fees and ask for a rate reduction. Also, ensure you aren’t paying a PCI compliance late fee. I see many people that don’t do the annual questionnaire that are paying unnecessary fees for not filing this.
- Insurance coverage and premium review.
- Uniforms and Laundry - negotiate this bill. They almost always have wiggle room.
- Office Supplies – Can you move more to a paperless business model by asking each client if you can email them their invoice instead of printing a copy? This small ask can compound to a decent savings over a year.
- Trash Disposal – Often, you can negotiate a better deal for garbage or recycling. If not, evaluate whether you could get a smaller dumpster with a more frequent pick-up for a better cost. Locating a metal scrapping company to take used rotors, radiators, and any other parts without cores really saves space in the landfill and potentially puts some money back into the shop.
About the Author
Kathleen Callahan
Owner
Kathleen Callahan has owned Florida’s Xpertech Auto Repair for 20 years. In 2020, she joined Repair Shop of Tomorrow as a coach to pursue her passion for developing people and creating thriving shop cultures. Callahan is the 2018 Women in Auto Care Shop Owner of the Year, nationally recognized by AAA for three consecutive years, testified for Right to Repair on Capitol Hill, and is Vice Chair of Women in Auto Care.