Training Never Stops: Those Pesky New Year's Resolutions
In the December issue of NOLN, the “Training Never Stops” article focused on the end-of-year shop, inventory and personnel evaluations. After spending some time mulling over the data, it is time to tweak the goals for 2017. If you have access to prior year reports, you may want to run some of those end-of-year reports and draw a chart to help visualize trends. Once you have your reports, charts and even some outside reference data, such as the various industry surveys, it is time to set some goals for 2017. Setting goals is a fundamental business practice because, after all, how will you know if you have reached a new height if you do not know how high you have gone? It is also important to understand when setting goals, to be successful sometimes means changing the way you measure success. As with all New Year’s resolutions, the point is to move the goals just out of reach to encourage growth.
In the quick maintenance industry, there are basically two methods of operating. One method is a focus on car count and the second is a focus on ticket average. I have seen both systems work effectively, however, most of us would agree the best method is a balance of the two.
In theory, to obtain balance between the two seems like an easy thing to do. Basically, if you want to improve car counts, perform your services faster. Sounds simple enough, but we all know it is not that easy. However, we are setting goals, and the point of setting goals is to put the goal beyond where we are now. All the industry data and research shows if you want to service more vehicles, the shop will need to perform services faster. The trade-off for increased time of performance is that you cannot also offer as many additional services. The same simple theory works for increased ticket average. If the ticket average is what you want, look for services that have increased profit margins. For instance, there are good margins in gasoline direct injection (GDI) services, but the trade-off is these services take time to perform. The September issue of National Oil and Lube News contains the annual operator survey. In the survey, there is a list of popular services. If you want to increase ticket average, then you need to consider offering additional services.
If you want to make money in this business, control your inventory cost and labor cost. Sounds easy enough, but controlling a revolving inventory in an industry built on speed means you have to have the inventory in stock, even when you have no idea which vehicle is going to come into the shop at any given moment. This is a constant challenge, no doubt. The beginning of the year is a good time to liquidate slow-moving stock.
Personally, my favorite method is to figure out how many times a particular inventory item is turning, cull out slow movers and then match those items with the current customer vehicles’ database. Then you can extend a special offer to those individual customers and discount the item if they pay for other services. As an example, some slow-moving air filters can be discounted if the customer also changes the oil and filter. It is good marketing and a good solution to liquidating slow-moving items. As a target number, cost of goods should be 25 percent of the total expenses.
Employee evaluations are the most difficult and need to be handled with care. However, we have businesses to run, and maximizing personnel performance is critical. In most cases, total shop improvement hinges on personnel improvements. A system that rewards production and personal growth is the best. Unfortunately for most of us, we would love to pay more for our most important assets — the people who make the industry hum, but when the revenue is not there, it is not possible. Like our inventory expenses, labor cost also needs to be in the 25-percent range to maintain a healthy bottom line.
Setting goals is an important role of management. Effective leadership, positive enforcement and leading by example are fundamental to a successful shop. Setting goals is like setting out on a road trip. Look at the map, and mark your landmarks until you reach your destination.
Happy New Year!