Last month, I introduced you to Cory Donenfeld who, along with his brother, owns and operates two Northwest Auto Body locations in Idaho, and I shared how he is using key performance indicators (KPIs) to improve their business.
Here are a few other examples:
Cory said one KPI he keeps a close watch on is the shop’s total expenses for each dollar of labor sold in a month.
“That’s your overhead expenses,” Cory explained. “For instance, in one recent report it was 65 cents per dollar of labor sold. That’s not too bad – sometimes it’s closer to a dollar – but overall I want to see that come down.”
Cory is right to want to see that number remain under a dollar. I’ve seen shops where it costs them a dollar or more for each dollar of labor sold. That means they are surviving only on profits from parts, sublet and materials. For Cory and his brother, the number may be higher than in some other collision repair businesses because of their current costs related to buying the business from their father. So he’s smart to be focused less on what the actual number is than on seeing a downward trend in it overall.
KPIs also are helping Cory and his team analyze a number of other aspects of the business.
“Some of my guys thought it was more profitable for us to do repairs as opposed to replacing a part,” Cory said, for example. “So one month, when there was a borderline decision, that could go either way, we opted to replace the part. The following month, we did the exact opposite. We checked the KPIs and found that because of our discounts and other aspects, it’s more profitable for us to replace parts than to repair them. So if there’s a borderline decision, that’s the way we go. I feel like we’re just started this, that there’s so much more we can learn from these numbers.”
But one of the other real powerful uses of tracking KPIs is using them as a management tool. Cory shares his monthly KPI report with his team, highlighting areas that appear to need some attention.