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Tuesday, June 17, 2008

BIZ TIP: SELLING ALL your labor inventory!

BIZ TIP: SELLING ALL your labor inventory!

by Kelly Bennett, WORLDPAC Training Institute (WTI) Business Development Instructor

In this series of fictional letters from a new shop owner to his former boss, management trainer Kelly Bennett discusses basic business principles that apply to the automotive repair industry.

SELLING ALL your labor inventory focuses on four steps you can take to raise your shop’s productivity… and ease your burden at the same time!

Dear Kelly:

OK. I feel like I am finally gaining some ground. I finished reading The E-Myth Revisited: Why Most Small Businesses Don't Work and What to Do About It, which helped me get my head in the game. And I dusted off the old time clock . . . and the techs are actually using it! But if I am interpreting the number correctly, our productivity was only 56% last month. Correct me if I am wrong but that points to a complete breakdown of shop management. Am I right? I mean, I always knew I might have to fire somebody some day . . . I never suspected it would be me!

- Erol

Dear Erol:

Let’s put it this way. If I hired a manager who let productivity slip to 56%, the next thing he’d have to dust off would be his resumé. What I like, though, is that you’re accepting the blame.

When I was new at this game, I used to blame almost anyone and everyone for my problems. I figured I was working plenty hard, so it couldn’t be my fault that I was losing money. One day when my management consultant arrived for our appointment, I was under the gun, dealing with a comeback customer, explaining to someone else why his car wasn’t finished yet, and helping a technician with a diagnostic nightmare all at the same time.

After putting out those fires, I turned to the consultant and apologized for delaying our meeting. “Oh, that’s no problem,” he said. “This time has been very valuable for me. I’ve learned a lot about your business just by watching you.” My peacock feathers puffed right out. But then he told me what he learned. “It can be a lot of work losing money, can’t it?” he said.

You see, Erol, the biggest problem in my shop was me. I had tried working harder and longer to make my business work. I focused on increasing sales and I got pretty good at it. In fact one year, I had a record-breaking sales increase of $287,000 over the year prior. I was thrilled. However, it’s embarrassing to admit, but when I sat down with the accountant to review my year-end taxes, I realized that my net profit had only increased by $240. I was stunned. I wanted to say “Show me the money!” All that extra money in sales - the result of lots of extra work, but only a lousy $240 in my pocket?!

I’m glad you put your time clock back up. I think it’s one of the most valuable pieces of diagnostic equipment you’ll ever acquire for your business. What I learned from mine was that my productivity problem was costing me thousands of dollars every month. I simply wasn’t managing my technicians’ time properly. I needed a solution. So I created a spreadsheet to track productivity and efficiency every month. (Just e-mail me at if you want a copy – I’ll send it to you.) As I made management changes, I could instantly see the numbers go up. Our sales increased exponentially.

Here are the top four things we did to manage our time better to increase our productivity:

  1. Scheduling

    We realized that we were trying to squeeze as many vehicles as possible into each day. If there were any empty lines on our daily schedule, I thought we didn’t have enough cars. Yet we usually ended up running out of day before we ran out of cars.

    I determined that the biggest problem we faced was the “oh-by-the-way” customer. You know the type. They want more work done than they’d told us about when we booked the appointment. Consequently, we didn’t book enough time for him. “Oh, by the way, it’s been making a noise; can you check that out?” “Oh, by the way, it’s been pulling to the left; can you check that out?” “Oh, by the way, it needs an oil change, can you get that done today?” We tracked it. About 55% of our customers would ask if we could do more work on their cars. We needed some breathing room in our schedule if we were going to get it all done. So now we have 40% reserve time built into our schedule on Mondays (the biggest day for customers without appointments). And from Tuesday to Friday we book about 30% reserve time right into the schedule. It really works! We used to pull technicians off vehicles all the time to handle unscheduled extras. Now it’s a rarity.

  2. Start Times

    I started asking my counter staff to arrive an hour before the technicians got to the shop. That is because I found that the techs used to start their day with a coffee break as they waited for the front counter staff to deal with the morning calls and customer drop offs, prepare the work orders, and dispatch the work. Considering that a tech’s time is worth almost $3 per minute, that morning coffee break was costing me plenty! Now when our technicians arrive, we’re ready for them.

  3. Inspections

    We developed a three-level inspection program:

    Level 1 is a cursory inspection on every vehicle every time it’s in our shop. It’s a simple complimentary “no wrench” inspection that covers 14 major wear points. Our customers are informed up front that the inspection is included so they’re mentally prepared if we find anything.

    Level 2 is a more detailed seasonal inspection. It covers 35 points – includes brakes (wheels off) – and takes about 30 minutes to complete. We charge 1/2 hour (quoted in dollars) and recommend our customers have it done each season of the year.

    Level 3 is our comprehensive bumper-to-bumper inspection, covering more than 200 points, and taking 60-75 minutes to complete. We charge 1.3 hours for them and market them as a great way to keep vehicle safes and avoid costly break downs.

  4. Increased Communication

    We used to have customers who would drop off their keys with a short note and then head out the door. Not anymore. We now tell them when we make their appointment and when we call back to confirm the day before, that we’ll need about 10 minutes of their time when they drop off the vehicle.

    We do a quick walk around when they arrive. A hassle right? . . . Not at all. It gives us a chance to assess the overall condition of the vehicle, obtain the current mileage, check the oil change sticker, and notice tire wear. And it really demonstrates our interest in their particular vehicle. It’s not just another job to us. We’re showing our commitment to the customer.

    We also have our customers fill in applicable forms for such things as drivability complaints, brakes, noises, and vibrations. These forms go a long way in saving our technicians time (which ultimately saves the customer money). Our technicians appreciate those forms so much that they really hold the counter staff accountable. The forms have to be filled out to work.

I’m not saying all of this is easy, Erol. Changes are hard and I did not think I had the time to make and enforce them. I’ve come to see that it was not time I was lacking, but discipline. When I forced myself to adapt a new system, more and more of my time was freed up.

I just finished another book that I know will help you. It is called Now, Discover Your Strengths, by Marcus Buckingham. I wasn’t clear on what my real strengths were until I read this book and completed an on-line assessment (you need a code found in the book to log on). My advice to you is to find out where your strengths lie and focus on honing them. It’s much better than trying to fix the weaknesses!

- Kelly

To learn more about Kelly Bennett's Business Development Classes, visit the WORLDPAC Training Institute (WTI).

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