The ultimate goal of any business is to provide a service or a product that customers want. Once that is decided on, the next step is to monetize the idea, allowing the business to become profitable and grow, eventually providing a comfortable living for the employees and owners of the business while they do the things they like to do.
The perfect way to start a business would be with the guidance of a small business program such as the one offered at the University of Pennsylvania Wharton School of Business. They will guide you through a process that, though it doesn’t guarantee you will succeed, it gives you a much better chance of doing so. Matter of fact, the building of a complete business plan eliminates many want to be entrepreneurs just by the sheer scope of creating a business on paper.
Yet many shops come into existence just because someone liked to fix cars and trucks in their garage while having people paying them for their services. Some continue to operate like this forever while others started to grow, getting more customers so they rent, lease or buy a building and hang their name on it. Other times it can be tech who doesn’t want to work for someone else, so they open their own shop to be their own boss.
These shops grow despite the steep learning curve and finding out what they need to know as a business through the school of hard knocks. Eventually, they get to that point where they realize how hard they are working just to survive. They are too busy to consider alternative ways of running the business. Still, they want more. They want to stop working so hard and wish to live life more comfortably.
Instead of driving themselves crazy just trying to keep up and letting what happens happen, these shops need to stop, take a deep breath, and see where they are. They need to know much money is coming in and going out, what supplies are they using, what kind of profit are they are making, are they charging enough for the work that they are doing and so on. They need to measure the multiple facets of their business.
Measuring your business will give you an idea of where you stand. Knowledge is power since you can now make changes and measure the results to see if they were effective. You can find and eliminate the places that your shop is losing money. Doing this will make your shop more efficient and that in of itself will help you succeed.
Once you get your shop functions under control, through measuring and keeping tabs on everything, you can now start to make the plans that will allow your shop to grow. You can begin to set goals for this growth. Instead of just hoping for the best, you now can aim for the targets that you set because you can watch them and make adjustments along the way.
Your shop management system is one of the tools that you will use to measure your shop’s functions. It’s the point of sale program that you write up customers in and provide them with invoices from. Shops use them every day. All major shop management systems (SMS) have reports and other functions that can be used for measuring your shop functions in many ways. Unfortunately, in many cases, the reports are probably going to be inaccurate.
The reasons for this ineffective situation vary from shop to shop. In my experience one of the main causes of this is that your shop received very little help in setting up the SMS and had a limited amount of training showing how to use the system when you first bought it. Some shop managers and owners tell me that they have not seen their SMS representative for years since they installed the SMS at their shop. It also has been mentioned that the training was very quick and rushed.
Making matters worse, the shop in trying to keep the flow of cash and work going, figures out their own way of using the software getting it to do just the basics that they need and continue using it that way for years. Many important functions that would benefit the shop are not used because no one knows about them. Because of this, the data given by most of the reports will be inaccurate.
The bottom line is that you need to get your management system fixed and you need to learn all that it offers you. I recommend that you reach out to your software provider to properly set up the software and then get the training you need to use it correctly.
Properly setting up the software will include getting all your vender accounts input, shop data, tables and descriptions. Of course, some of this maybe already done, you just need to be sure it is done correctly.
Some shop management systems have items such as categories that need to be set up. The initial install may have some basic categories in place, but it is best that you build on what is provided since categories will help you sort out much of what you do in the management system. They help in writing estimates, organizing parts and labor, in addition to making reports more meaningful.
Taking advantage of the different options that SMS offer will help you in the long run. Many have estimating windows where you can build estimates with parts and labor. Others allow you to list recommendations for referring to and keeping the customer informed. Realize that using the basic functions of the management system will also allow you to run reports measuring such things as sales of recommended work, missed appointments, referrals and much more.
This information will come from the reports that you can now run and get accurate information from. There are different reports in different management systems, so you will have to learn what your SMS offers you. Let us talk about a few generic report types that you can run giving you the information you need.
In Mitchell 1 you will find a report that will show you how well you are using your categories. Run the Category Profit Summary. This report will list all the categories you have and how much money is coming in with each. If you find you have a Miscellaneous Category with lots of money in it, you probably are dumping many unrelated jobs and services in here. Because they are mixed up, you have no way of accurately seeing what your money makers are. It’s time to clean up your categories if this is the case.
Most management systems allow you to run a report that is a summary of your sales and can help you measure your shop’s growth daily, monthly and yearly. Watching your sales is one of the best barometers you can have. See how any advertising you may have affects your sales to determine the effectiveness of each campaign. Know when the slow season comes and put a plan into place to get more vehicles in at that time.
Checking your ARO (Average Repair Order in dollars) will show you how effective your shop is in selling and servicing vehicles. A low ARO can mean that you are working much harder than you need to as you move many vehicles through your shop and getting very little return. A higher ARO shows that your shop is efficient in finding and selling more items per vehicle. This also helps keeping you from over working your staff since they are moving less vehicles in and out of your bays.
Another report to consider running would be measuring your technicians’ efficiency. Realizing that the techs are the main drivers of your shop’s success. Keeping them working in the bay with as few interruptions as possible, making sure parts are there when they are needed, are just a couple of things that affect the tech’s productively. Tweaking the system and measuring the results is a good way of increasing your techs’ efficiency because you will have hard numbers to show it happening.
These are just a few ideas for you to consider. Your management system is your foundation. Once set up and used properly the management system can become your measuring tool. You now can look over the different facets of your business and see where you can make adjustments and aim for the targets that will make your shop more successful.
