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Road to Green: Is Your Business Too Big to Make Any Money?

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One of the critical elements that independent heavy duty shop owners must realize is that there are times when the shop can be too busy to make any money.  It becomes dangerous when this is a constant.  Management seems to concentrate more on getting more clients rather than concentrating on making “profit” from the clients it already has.  Everyone in the shop is running around trying to get the repair in and get it out, to insure the needed cash flow hits the bank account “today”.  This is a sure signal that the business is heading for trouble.

The most important profit on a sale comes from the billed labor component, consequently ensuring the correct number of labor hours billed per vehicle service, based on the manufacturers recommendations is critical to the shop’s bottom line.

You are in the “knowledge” business, not the “commodity/volume” business therefore your responsibilities to your clients go a lot further than just “repairing what they ask for today”.

Consider that the average client really is unenlightened regarding proper service and maintenance of their current vehicle because they are too busy keeping their rig working.

Consider that to properly advise and educate the client, the front counter person should be aware of how many miles are driven each year, how the vehicle is used (are they stuck in gridlock areas a lot, northern climate, southern climate usage), whether the client owns or leases the vehicle, what the client’s expectations are regarding the vehicle, and the service history of the vehicle.

Consider how many labor hours billed a year the vehicle needs to insure it is in safe, reliable and operating efficiently, at all times, throughout the year, for the client.

It is the front counter person’s job to slow down and clearly communicate to the customer/client the needs for the vehicle based on the manufacturers recommendations. Your heavy duty shop is the messenger of the news, not the maker of the news.  When the shop is “too busy”, everyone says there is no time for this.  It sounds like the shop is working hard and not necessarily smart.

Do this test to see how you are faring out.

1).  Take a random 5 to 10 of your client base that you have had for at least three years, where they still have the same vehicle, and examine the past two years work done on each client’s vehicle. Add up the total number of labor hours from the work-orders/invoices that was billed on each vehicle during those two years.

2). Calculate the total miles driven by each client over that service period (ie. 235,000 miles which works out to 117,500 per year) and record what mileage interval was the vehicle at when the vehicle came into the shop.

3). For the same period of time, look up the service requirements that were recommended by the manufacturer for the same mileage driven and service interval, and add up the total minimum labor hours the manufacturer recommended that should have been spent to ensure that vehicle was properly looked after.

How did you make out?  If you are in the ball park, (10% difference) well done it looks like your system is working and you have a good relationship with your clients.  However, if you are severely short in billed time (you did not get all the work), it may be time to slow down and examine your internal system of how you are dealing with your client base.  Do you counsel them, or do you sell them? Do you have a trustworthy relationship with them?  Is there room for improvement?        

Now move on to the second phase of the test.

Take the same vehicles and examine what the manufacturer recommends for the next two years coming up based on the miles the client is going to drive. (Use the history here).  Calculate the available labor hours to be billed.   Now be very aware of your progress with these clients when they come in.   SLOW DOWN.     Take the time to educate the client.  Show them what the manufacturer recommends by printing out the appropriate service intervals.  You are the messenger here, that’s all. Based on your expertise, and understanding of the client, are these service recommendations a good investment for the client to make?  If so, point out how the relatively small investment to maintain the vehicle makes sound financial sense to the client rather than spending a substantial amount of money, or increasing their debt load, to buy a new vehicle.  If it is not a good investment, counsel the client that it is time to replace the vehicle, and you would be happy to advise them based on their needs.

Your clients are usually too busy to look after their own vehicle. Set up the system to manage these high-tech machines for them. Many HD vehicles are outright abused by the client because of ignorance of the vehicle service/maintenance requirements the manufacturer recommends. Take the responsibility to insure your client base gets an excellent return on their investment.  When you do, I’m confident you will also see the bottom line grow.

When you accomplish the right level of labor service with these clients, now carry on and make it a system of doing business with the rest of your client base.

It’s up to management to make things happen.  It’s up to management to make sure the right system is in place. Take your time, and be patient with yourself to see this through. Give yourself a year of thorough dedication to make this happen.  If it was easy everyone would do it, but the best thing is that your clients will notice the personal attention you are giving them, and that makes you distinctly different in this heavy duty industry.  Being distinctly different gets people talking positively about your business.

Some people dream of success, while others wake up and work at it each day.

       

Road to Green: Office Time Each Day is Necessary

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Heavy Duty shop owners are not spending at least 2 hours a day of uninterrupted time working in their office “on” the business. The main reason for this is because they are understaffed and owners are forced to work “in” the business. Management should prioritize to obtain the right staffing levels so the right amount of time each day can be spent “managing” the business in order to move it forward. The fact is you cannot maximize shop productivity and net profit of the shop when it is understaffed.

The question arises as to “what” the owner or manager should be doing in that office each day. Here are some guidelines for you to follow:

  • Calculate the average billed hours per invoice each day, each week and each month and compare to the objective. Come up with a plan to resolve any issues.
  • Calculate what the right labour rates that should be in place for maintenance,       diagnostic, re-flash, and fluid servicing. Check that the time is being captured properly on each job and it is billed accurately.
  • Calculate the total “site” efficiency number each day, week and month. Determine exactly what the issue is if the right site efficiency number is not a minimum of 75% with a target of 80% and draw up a plan to resolve this issue.
  • Calculate what the right HD vehicle count each day should be that is required for your operation to achieve the correct site efficiency percentage and the billed hour objectives.
  • Calculate the potential diagnostic hours available in your shop and review that the objective is being achieved and if not find out why.
  • Calculate weekly each technician’s hourly wages paid based on actual hours that were billed out on that technicians behalf. Draw up a plan to resolve any issues.

These are a few of the things that the HD shop owner or manager is responsible to measure and guide their team to achieve. All the items listed affect net income.

Are you working “on” the business or “in” the business?

Road to Green: Are You Focused on the Future?

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Everyone acknowledges the rapid changes taking place in the Heavy Duty Aftermarket but are you addressing the following?

  • The new business measurement which includes revenue breakdowns involving a minimum of 3 labor categories
  • Your shop site efficiency measurement weekly and monthly
  • Your average billed hours per R/O weekly, monthly and year to date
  • Your sales mix between aftermarket and dealer parts
  • The total hours of training completed for each tech for the year
  • The actual cost per billed hour for the shop on a monthly basis with a year to date average

Those are just some basics as the new aftermarket demands new awareness which in essence means many HD owners must relearn their business to maximize net income. It has been proven that the average HD shop is missing on average $35,000 net profit per bay per year out of the current business coming through the door. The question that must be asked is “where is it in your shop?”

The average HD has a lot of work to do to understand the new aftermarket that is rapidly arriving and how to implement the changes required and building a solid Team culture responsible for the implementation.

If you are an HD shop owner who is not addressing the future and determined to hold on to the methods used over the last 10 years thinking you will be OK then ask yourself this question: Do you take out a minimum of $150,000 per year for my immediate Family, having the highest paid technicians in the marketplace with exceptional benefits and the shop still nets a minimum of 10% of gross sales? Will that remain valid for the next 3 years? If so, good for you. If not then it is time to rediscover the business opportunities that are in front of you today. Enrol yourself and your manager together into an HD shop specific Business Course. Procrastination is not an option.

Road to Green: A 10% Increase in Shop Productivity Makes More Sense Than a 10% Discount on Supplier Parts

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Too many HD parts suppliers always approach the HD service shop owner discussing the parts price issue of what they offer, and then they wonder why the shop owner is only thinking about price and possible further discounts on parts.

Many HD service shops do not really understand the benefit to their business of a productivity increase in the bays. Our HD industry has always spoken about top line activity rather than bottom line focus. When the HD parts supplier brings additional value and helps shop management to understand this issue, it is amazing how the focus of the conversation can change, and for the better of both parties. Does your HD parts supplier bring HD shop Business Management courses to your area?

It is critical to understand that the HD shop is not in the commodity business like a parts supplier but rather they are in the knowledge business. The shop must diagnose the HD vehicle problem and set up the relationship with each client in order to obtain the proper labor hours billed to the client ensuring the vehicle is maintained in accordance with the manufacturer recommendations, is safe and reliable for the client and have the shop service levels exceed the client’s expectations.

One important number the HD service shop should know about their business which measures whether the shop is achieving the right HD vehicle maintenance service levels with each client is the average number of labor hours billed per repair order.

To calculate this number it is recommended that you take at least six months’ worth of labor sales. The longer the time frame measured, the more accurate the number.

First… take the closing number of the invoice and subtract the opening number. For example the closing number of the invoice at December 31 is 22474 and the opening number of the invoice on June 1 was 21872. The difference is 602 meaning that 602 RO’s have been written in the shop since June 1.

Second… add up the total dollar labor revenue billed in the shop from June 1 to December 31. For example, let’s assume the total labor dollars billed was $227,056 for the six month period.

Third… divide the total labor dollars billed by the labor rate of the shop. For example if the shop is charging $90 per hour, then $227,056 divided by $90 = 2,522.8 labor hours billed for the six month period.

Fourth…labor hours billed divided by the number of invoices written equals the average number of labor hours per invoice. In our example we would take 2,522.8 billed divided by 602 invoices written, equals an average of 4.2 labor hours billed per invoice.

The average HD shop in the marketplace is currently averaging 5.3 to 5.6 hours per invoice. The industry must achieve a productivity level average of 8 to 10 hours per invoice to provide the professional HD vehicle maintenance to the commercial client. That is the goal to be achieved.

The obvious question to be asked is “What is the affect on the shop’s gross profit and potential net profit if we can get a shop to increase their productivity by only ten percent to start?” In our example, this shop is averaging 100.3 invoices per month (602 RO’s written divided by 6 months) and averaging 4.2 hours of labor per RO at $90 per hour.

Without increasing the volume of RO’s written and keeping the labor rate at the same charge-out rate, if we increased productivity by 10 percent from 4.2 hours to 4.6 hours per invoice, the results to additional gross profit (and net profit) would be as follows:

                                                                                                  NEW              OLD

Average number of invoices written per month           100.3             100.3

Times average number of labor hours per invoice            4.6               4.2

Equals total labor hours billed per month                      461.4             421.3

Times the current hourly labor rate                                   $90               $90

Equals total labor revenue produced per month          $41,526         $37,917

 

The difference between the new productivity and old productivity is $3,609 PER MONTH!!!

This will create an additional $43,308 gross profit and net profit from labor revenue alone for the shop in one year.

These figures can become very significant as the internal processes to build billed hours moves forward. They represent a substantial additional amount of monies earned compared to any discount on parts could ever contribute to the shop bottom-line profitability. In addition to that we haven’t even accounted for any gross profit earned from the part sales that would be made as well with the increase in labor productivity.

Math is a very precise science. The numbers do not lie. Consider talking to your team about how to slow the shop processes down and increase productivity per vehicle rather than spinning everyone’s wheels trying to bring in more volume of HD vehicles into the bays and take a further parts discount from the supplier. Let’s teach the industry to work smarter, not harder.

This is only the tip of the ice-burg when it comes to understanding the affect of professional business management on an independent heavy duty maintenance and repair shop. The affect on true bottom line profitability is incredible. By adjusting the shops business measurements and the front counter processes, one can find a minimum of $160,000 to $250,000 in net profit with the current business coming through the door in an average 8 bay HD shop. How would that additional net income in your shop or everyone’s shop, change their business, their lifestyle, everyone’s stress levels and the independent sector of the heavy duty aftermarket industry?

Perhaps it is time for you to examine exactly what do you talk about with your team when they are looking at their routine with all heavy duty vehicles entering the bays?

Road to Green: HD Shop Business Management Skills Is a Development Process… Not Another Seminar or Sales Course

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Heavy Duty Shop operators from coast to coast are experiencing challenges like no other era ever seen before in our industry.

Consider the level of development of HD vehicle technology over the past five years.  Consider the change in vehicle service intervals.  Consider the cost of diagnostic equipment to even begin the process of entering and sustaining this profession. Consider the technical skill level required today to be on the shop floor.  Consider the uninformed HD client who doesn’t truly understand its complexity. Consider the change in vehicle sales mix with the dramatic increase of import vehicles and the decline of the North America brands. Consider the lack of supply of larger facilities which are required to provide the shop the space to hold more equipment then ever required before in the history of our industry to meet complexities of vehicle service. Consider  the longer period of time required to properly diagnose and service the vehicle to manufacturer recommended standards.

The shop business has changed drastically yet it is not being acknowledged properly within industry.  Every level of the industry still talks about the desire to drive more “sales”.  The commodity side of the industry has the loudest voice and spends the money on marketing that screams to HD shop owners “more activity”, “make more sales with our products and programs, and be price competitive”…………………………..the commodity side of the aftermarket does not seem to understand at all how the HD shop business level has really changed and the need to address the real shop issues called “productivity” and “sustained individual client relationships”. They seemingly give this issue lip service only, without substance supporting or backing up their words.

Step back and consider the following: The manufacturer, warehouse distributor, and part suppliers are in the commodity business and they require volume sales of their products to survive.  All their marketing displays their desired results.  The HD Service Provider, however, is in the knowledge business and does not require the commodities to survive to the same extent, but rather requires proper billed hours at the right rate to survive and prosper. The HD Service Provider owner is not getting exposed to, or taught, the real issues of his/her shop that ensure proper NET income is achieved and retained, allowing them to grow, prosper and enjoy a rewarding professional career.  Instead, shop owners are approached by the commodity side and sold on the idea to attend and listen to a presentation that is, 1, 2, or 3 hours, or a 1 or 2 day seminar that preaches more sales, more vehicles to service, more activity. These are “motivational” or pep talks only and do nothing to teach the shop owner proper business acumen and best business practices. The shop owner is never introduced to his/her own numbers and allowed to work with them and clearly understand what they mean.

This is an absolute tragedy within our industry.

Consider that high percentage of shop owners that have grade twelve level education as their last year of formal education.  From there, they worked very hard, payed the personal price of sacrifice, and achieved the designation of holding a Technician License.  They are knowledgeable about the HD vehicle and the best shops have a concerted effort in place to stay on top of this issue, however, one must ask, “Where were they taught how to read the balance sheet of their own business?  Where were they taught how to measure and manage their current business properly?  Where were they taught the difference between mark-up and gross profit?  Where were they taught the workings of shop efficiency and its effect on the bottom line?  Where were they taught how to manage gross profit and measure net profit?  Where were they taught how to create a shop team through personnel development? Where were they taught the costs of accounts receivable and the “cancer” it can give a business?”

The facts are, the average HD shop today is missing between $30,000 and $35,000 in NET INCOME per BAY per year from their lack of management of their CURRENT business coming through the door.  Independent Heavy Duty shops don’t need more vehicles to work on, they don’t need more “activity”………..they need to learn how to manage properly what they currently have.  If their business was managed correctly through the process of learning to develop best business practices and measure and manage “productivity” instead of chasing “activity”, HD suppliers in this country would be getting paid in full each month and at better margins! The shop owner and staff would enjoy a professional personal income as well as have the cash to move his/her business forward.

Parts Suppliers and WD’s tell me HD shop owners are not interested in business management.  This is true based on the fact Part Suppliers and WD’s sold seminars in the past and called them business management seminars or courses.  They in fact were not. They were sales courses.  This industry does not need another sales course. The Part Supplier and WD failed their customers!! The trust was and has been broken.  They sold the shop owners sales courses and seminars focusing on sales techniques making the shop busier through increased activity and selling more parts forcing shop owners to work harder and not smarter. SALES WENT UP BUT NET INCOME DID NOT.  The credibility of these Suppliers and WD’s has to be rebuilt.

Many HD shop owners, as licensed technicians are nervous about approaching the real issue of Shop Business Management on their own.  I’ve heard from them “I will not understand as I wasn’t that good at school Math and English”. “I’m a tech not a pencil pusher”, “I would embarrass myself”. “That’s why I have a bookkeeper because business management is nothing but numbers and paperwork that bean counters have to understand”. These reasons are seldom spoken to their supplier, ……..instead, they say to their supplier “it is too expensive”, or the big one…. “I don’t have time”,…. or “I don’t need another course”, or “no one can show me something I don’t already know”, or “that stuff isn’t worth it anyway”.  To all HD shop owners clinging to these “excuses”… wake up and do the math…….you bought yourself a job and you know it, and you are covered in debt that has increased your stress to undesirable levels which is affecting your family relationship. Do you want to do something about it or not????   

Understanding real shop Business Management is easier than you think, however you must work with it because it has not been part of your daily activity in your shop throughout your career.    If you are a HD shop owner and a technician YOU CAN GRASP AND UNDERSTAND PROPER BUSINESS MANAGEMENT!!!, however, the real question is “do you want to learn?” If you don’t want to learn, then KNOW ONE can help you and you should wind down your business and get out now while you can as the next three to five years are going to be challenging to say the least!!

If you do want to learn then plan the time now and enrol into a proper business course that is HD independent shop specific.  I’m confident, if the course is the right one you truly will enjoy it.

You did not create the current industry issues.  This is just reality today.  This business has changed and if you are going to be in it you must clearly understand the business management side of it.

    

Road to Green: Manage Your Working Day With Three Vital Rules

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Let’s face it many heavy duty shop owners have a tendency to overcomplicate their day-to-day function, which in turn can lead to a stressed, unprofitable, business.

It appears the longer you are actually in the HD Service business these days, the “messier”, “more cluttered” your personal day becomes. I hear things like “I’m personally just too busy”, or, “there is so much that I must do”, or, “I’ve got so much on my plate that I must handle”.

The fact is, this happens to every business owner/manager at some time, no matter how good they seem to appear on the outside.

Start to deal with this situation by re-visiting two important words that are repeated time and time again, but truly ignored by so many; “Slow down!!”

Consider making a big sign and displaying it in your office where you are forced to view it constantly with the following advice:

NOTHING SHOULD BE DONE IN MY BUSINESS UNLESS:

  • It makes a significant contribution to achieving worthwhile business goals;
  • It pays for itself in a reasonable and predictable time;
  • It can be explained simply and completely to those that have to make it work.

“Oh if it were only that simple” you say. Well consider putting it to the test with everything you do. When you keep these three items “in your face”, and answer the points honestly, it allows you to evaluate everything you handle and do, in proper perspective to YOUR particular function within the business. If what you are doing as an owner/manager doesn’t fit those rules, you either explain and delegate it to someone else to do, or throw it out and don’t waste your time with it.

Consider that December is a great month to “focus” on what really counts so you can get a proper self-discipline started to address 2018, that is, get yourself into a “daily routine” that maximizes your efforts to enhance your business profits; after all, that is your job, so don’t let yourself and your team down.

Road to Green: HD Vehicle Technology Will Change Labor Measurement

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The progression of heavy duty vehicle technology will make a dramatic difference in measuring a typical HD service shop business. The HD aftermarket will have to relearn this portion of the business all over again. You will find that a typical HD shop owner is going to require 6 to 8 days of management training per year moving forward. This labor measurement is one of the changes that will have to be relearned as the old way of setting and measuring labor rates will leave too much money on the table.

As commodity margins decline and HD vehicle software grows, everyone must understand where their management attention must be directed.

A redefined labor measurement will take place within the next year to maximum 2 year period.

A ?maintenance labor? category will be just that, pure maintenance work based on the manufacturers recommended service intervals and repairs of worn out or broken parts.

Diagnostic labor will be the analyzation of a situation or interpretation of information. (What is the problem, what caused it and what is the solution?)

Inspection labor will be all completed paid inspections.

Re-Flash will be strictly updating the vehicle from the OEM website.

Calibration labor will be a new category as the lining up of sensors after a repair has taken place will become an additional specialty skill within the HD shop. Software platforms will have to be understood.

The key information that will need to be understood is ?what will the mix of each labor category be within the shop?? This brings back the importance of key efficiency measurement for each category as specific training will have to be required and making sure the shop has the right skill set within the team to ensure professional execution of the services on behalf of the HD client. The efficiency measurement of each category will also help establish the billed hours per R/O.

Measuring the ?effective? rate will be critical in the labor mix measurement. How much labor should we be getting from each labor category to justify the staffing level?

All that being said another big change coming to the industry will be the setting of labor rates for each category. Labor rate multiples will change from what they are now based around the technicians hourly wage to working with the individual shops actual cost per billed hour.

Better ?job quoting? skills will have to be embraced because the knowledge for ?how? a job must be done and ?what kind of labor? is involved to complete the job to total client satisfaction must be learned.

As you can see, personnel development and business measurement will become more intertwined than ever before. All of these things combined will affect the net profit of the business.

Our heavy duty industry is changing so rapidly and dramatically and the reason for this is due to vehicle technology and technician competency that will be required to fix and maintain a vehicle properly.

I see this as just the beginning of so many changes coming to the heavy duty aftermarket sector within the next 1 to 2 years maximum. What will happen to the HD shops that don?t have a learning culture in their business or won?t want to re-learn and move in the direction they must? Time will not be on their side. It is this kind of change that will dramatically separate the heavy duty shops in a given marketplace.

As the business owner you want to be committed to keep ?ahead of the wave? and seek out the business knowledge you will need to keep the business moving forward. Hold on for the ride over the next 2 years, it will be a great one for the heavy duty shops that get it.

Bob Greenwood

Road to Green: Do You Have a Problem with Too Much Staff Turnover?

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Everyone acknowledges the shortage of competent technicians, and staff in general, in this heavy duty industry, but it becomes really scary when a HD service shop can?t keep the staff it does find. When a shop can?t keep good people, it not only affects the shop?s general attitude, it affects the profitability too.

Constant personnel ?replacement? is not personnel ?management?.

Too much personnel replacement is not good for business. It creates a situation where too much time by the shop owner is used in a perceived negative process, rather than spending time working on the positive processes of the business that builds a client base, and profitability. If the business is not moving forward, then the fact is, it is stagnant, or moving backwards.

Consider the following:

  • In many cases, it is not the staff that is the problem; it is ?shop management? that is the problem.
  • If an employee would leave a shop for a $4 or $6 per hour raise, then the employee does not ?see? a future with the current shop that would allow him/her to earn in excess of the amount offered, to enjoy a career. The employee sees the current situation as a job. The owner does not seem to believe in, or have the skill to, create positive employee business relationships.
  • Due to a shortage of competent people, it must be recognized that dealing with staff members today must change substantially compared to the 1990?s mentality.
  • It must be recognized that you can buy a man?s time; you can buy his physical presence at a given place; you can even buy a measured number of his skilled muscular motions per hour. But, you cannot buy enthusiasm today; you cannot buy initiative today; you cannot buy loyalty today; you cannot buy devotion to the business today. You must EARN these.
  • Heavy duty shop employers today must learn to be supportive, and willing to take responsibility, of its employee?s long-term ?well-being?. The employer, in essence, is stating, ?You are not easily replaced, therefore, I am interested in you, and your future, and how working with, and being part of this company can meet, or exceed, your personal goals. Let?s talk.?
  • In the past, you would hear people saying ?wouldn?t it be great to work for company X or company Y?? You don?t hear that anymore because in an age known for ?slash and burn?, ?downsizing?, and ?lean and mean management?, which has created a psychological atmosphere within the marketplace, where the prevailing perception among employees is that there are not too many companies out there that VALUE their people.
  • As much effort must be made to nurturing your employees as you do servicing your heavy duty clients. This is a role management must be willing to ?get their head around?, because if it doesn?t, what are the long-term financial consequences to the business?
  • An employee-centered management philosophy makes sound business sense. Any corporation, in our industry, that wants to succeed today, has to care passionately about its business and compassionately about its people because businesses that fail to understand, and act on this, will probably fail.
  • The only sustainable competitive advantage in business today is its people. The competition can copy your technology and latest feature, but they can?t copy the skills, knowledge, judgement, and creativity of your committed workforce. People ARE the edge today.
  • There is a new ?social contract? being made today where companies are asking employees to change, to be innovative, and creative. Employees, in return, are then stating, ?well in that case let me try and do it, rather than watching over my shoulder trying to clone me like you, because I am not you. Yes, I will make mistakes, because no one, including you, is perfect, but I will learn through my mistakes and become a much better employee, and person, for it. When you display, and support, confidence in me, in the long run, I will not let you down. Also, for my concerted effort and dedication to the task requested, it is only fair that I am properly compensated.?

All these are key points, and there is no doubt there are heavy duty service shops who will either agree with them, or argue it is still the employees fault anyway because ?they just don?t want to work.? At this point, with statements like that, one must make an assessment as to whether this shop owner is willing to change the way he/she thinks. People are willing to work when they have something positive to be motivated about that creates the desire to work. A good starting point for management is to have a respect for the employee as an individual, and a respect for the skills that they have worked so hard to achieve. The next hint is to display pride in your ?team?, and each member, openly in front of the client. If you arer not proud of your team and each member in your shop, it doesn?t say much for management?s ability; after all, who hired them, who trained them, and who pays them?

Today everyone must be willing to understand that personnel management is not a ?one time meeting?, but rather a nurturing process that requires on-going discussion and understanding of points of view from both sides over a longer period of time. The over-all benefits to the business, and its bottom line, are enormous. This is truly the expression of ?entrepreneurship? where the

management of the shop is leading the business, and the ?employees? have a strong desire to follow.

As this sample problem has shown, if the owner is not prepared to change, then one must accept that the shop will not grow, and will actually experience serious financial difficulties, if not already there. Entrepreneurs must devote their time to the progression of their business, because they realize that their shop will be one of the few that will be here in five years, coupled with a ?team? standing alongside with them. Everyone has each other?s back !!!

Take the time to learn about your employees. Express, and show, your concern for their future, and I believe you will be amazed at the positive response you will get from the better technicians/staff in the marketplace.

Taking the steps to strengthen your relationship with your employees is good business sense. Strengthen it by having open discussions about the industry, the business, and every individual?s role within the business. It does take time. It does take several meetings. It does take commitment, but the long-term rewards are great. The choice is yours.

Effective personnel management takes creative thinking. Consider that anyone who has ever taken a shower has had an idea. However, it?s only the person who gets out of the shower, dries off, and does something about it that succeeds.

If you?d like help, I?m here; it?s my specialty. Reach out and e-mail me: greenwood@aaec.ca

Bob Greenwood

Road to Green: Business Checklist

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The following is a checklist of items for consideration to be measured each and every month.  Keep in mind that ?if you can’t measure it, you can’t manage it?.  Get focused, measure your HD service business properly so you can make the right management decisions to move forward and achieve what you want to achieve.  

  1. Labor rates ? fluid service rate, maintenance rate, diagnostic rate and re-flash rate.  Are you up to date on the right multiples to achieve between the amount paid hourly to the technician and the rate charged to the HD client?
  2. Effective Labor Rate  ? what are you really achieving in your labor rate after it is measured against the shop?s potential? Knowing the shop?s potential number is a critical calculation to understand.
  3. Number of R/O?s written each month.  Are you controlling your volume or are you missing potential revenue because the service shop is too busy?
  4. Average Labor Hours Billed per R/O.  Are you measuring productivity accurately or just sales?
  5. Average Sales and Gross Profit per invoice.  What are you really making on that average sale in your shop?  Is it growing or shrinking? Measure the total Gross Profit dollars against your total cost per billed hour times the number of hours billed on that invoice.
  6. Average Labor produced per technician. Are your people above or below average, and are they improving as their knowledge increases?  Minimum 8 hours billed for 8 hours worked? If not why not?
  7. Daily Operating Expense of the Shop.  What does it cost to turn that key in the morning? Are you giving more thought to the ?common sense? expenses of the shop?
  8. Current Ratio.  Is the business getting more ?liquid??  Can all the bills be paid when due?
  9. Age of the Receivables.  How long is it taking to collect the average receivable from the HD client?  Is progress being made to eliminate receivables?  What is the true net profitability of each account factoring in the number of days to get paid?  
  10. Age of Payables.  Are we paying all bills when due and taking advantage of discounts offered for prompt payment?
  11. Labor to Total Wage Package Ratio.  Helps measure the effectiveness of management?s ability to ?make the shop productive?
  12. Gross profit by Revenue Category.  What is the contribution to our business of each revenue category?  Are we focusing on the important issues that drive ?net profit??
  13. The Shops Sales Mix.  What is the breakdown which, when analyzed properly, can tell what type of client base is in the service shop, therefore competent management decisions on the type of staff, equipment and training can be made.
  14. Inventory Turn / Earn Index.  Is the shop carrying the right level of inventory in each category or are we under or over stocked? Cash is king and we want to make sure it is working properly for the business.
  15. Shop Efficiency. This seems to be the most misunderstood term in the Heavy Duty industry and yet ?inefficiency? is the biggest cost per hour in running a service shop.  Is the shop meeting the right site efficiency percentage for the HD client it is serving?

By following the trend  in your business (always analyze the year to date numbers), one can start to maximize profitability, enhance business relationships, and really move their  HD service shop to the next level that is necessary today; the level that is required to ensure you do not buy yourself a job and therefore allowing you to enjoy a career.

Make the time to learn Heavy Duty Business Management techniques and get focused on your future. One of the biggest factors in success today of any Heavy Duty service shop is the courage to understand something. Enroll into a class and really start the process to understand your business.  If you are interested in a personal business coach to help guide you to move your business forward let me know and we can discuss the depth of what is involved and how it works in your favor.

Robert (Bob) Greenwood, AMAM
1-800-267-5497
greenwood@aaec.ca