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Business numbers talk to you, when you know what to look for

Shop owners throughout the Atlantic region are struggling with changing times and the economic downturn taking place throughout North America. Panic can be your enemy in business. Measurement and thought can be your friend. Perhaps it is the latter that shop owners and managers should start to embrace.

Bob Greenwood

The Independent sector has always looked at its “activity,” (sales) or car count to measure its health. There is so much more to managing this business today to ensure its health and survival. Why not test your knowledge of your business management acumen to see if you are up-to-date. Is your business moving forward under control or are you still holding on to the old tools the industry gave you in the 1980’s and 1990’s.

See if you can answer the following questions. Take your time. Involve your bookkeeper if need be to see if your “Management Team” is up to date. The answers will be available online here. Click on the blue “Handout” tab at the top of the home page and enter the password “autoatlantic.” The answers will be posted there until March 31 2009.

The following questions are the BASIC management measurement criteria that all Independent shop owners should know and clearly understand. They are critical for survival and to maximize net income of the business. They should be measured every week and month in the business.

  1. What is the minimum legislated employer burden for 2009? With shop benefits added into the wage package of an employee such as group insurance plans and other employee “perks”, what is the employer burden percentage rule of thumb recommended for 2009?
  2. What is the number of tire unit sales per month objective per hoist to be obtained in a well managed average Independent shop?
  3. What is the labour revenue to total parts revenue ratio required today in a successful shop?
  4. How many minimum labour door rates should be active in a successful shop today?
  5. What should be the average billed hours per invoice for consumer vehicle maintenance today?
  6. 6. What minimum percentage of sales should a successful shop NET before income tax?
  7. In a shop averaging a parts sales mix of 83% aftermarket parts and 17% dealer parts, what percentage of total shop hours billed should have been billed out at a diagnostic labour rate?
  8. If your shop extends credit (allowing people and companies to charge) what is the maximum percentage of average monthly sales that the account receivable should be at any given time?
  9. What is the minimum shop efficiency percentage required today in a successful Independent shop operation? What is the perfect shop efficiency percentage range to obtain as a shop average?
  10. If a shop averages an over all gross profit of 66% and nets 3.5% of total sales working at 58% efficiency, how much revenue would it take to replace a $485 bad debt?
  11. What percentage of work goes through the bays in an average Independent shop that does not create $1 of net income to the business?

Oh how shop measurement has changed

Most Independent operators just watch sales along with their bank account balance, hoping they are up. They desire always to be busy. In a successful shop today, if management is focused on NET profit, the shop does not want to be busy; the shop must be steady. The best shop operators in the country understand how the questions above are calculated and what numbers to watch for. They monitor their businesses “checks and balances” weekly and monthly. They not only run an above average bottom-line profitable business, they enjoy a professional personal income on top of that.

The questions I have asked above are only a few of the basic management criteria required today that a competent shop owner and manager must understand and embrace today. Don’t be intimidated if you didn’t know the answers. You are not alone, however, what will separate you from the rest of the crowd, is the action you take this year to learn and understand how a successful shop must work today.

The facts remain that an average Atlantic Region Independent shop business that averages $500,000 to $750,000 in annual total sales is missing out on $30,000 to $90,000 in NET income from the current business coming through the door. Why would Management not want to embrace 3 or 4 days and focus in on learning how to go after that kind of money? They got the business coming in, why don’t they want to maximize its potential? Scary isn’t it or are you one of many shop owners that don’t believe it to be true? Well you may know my saying . . . “The math does not lie, prove it right or prove it wrong, but do the math!” It is there right now waiting for you, and if you only achieved one half of the missed $30K to $90K income stated, that is still a heck of a return for the time invested to find out how.

Is 2009 going to be a year of struggle for your business or a year of renewal? The current critical economic climate creates tremendous opportunities for the shop owners who know how to go after it.


About The Author: Mr. Robert (Bob) Greenwood AAM (Accredited Automotive Manager) is President and C.E.O. of Automotive Aftermarket E-Learning Centre Ltd. (AAEC), a technology company focused on sustainable Business Management Resources and Development for the Independent Sector of the aftermarket industry utilizing the internet environment.

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