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Wednesday, 03 June 2020 21:22

ATI Shares Five-Step Rapid Recovery Plan for Automotive and Collision Repair Shops for Beyond COVID

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Chris Brower of ATI Chris Brower of ATI

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The Automotive Training Institute (ATI) on May 19 shared valuable information related to the current situation and how to survive the pandemic in “Beyond COVID: A 5-Step Rapid Recovery Plan for Auto Shops.”

ATI Senior Instructor and Coach Chris Brower discussed how to build customer trust and comfort, adjust marketing plans for today’s business environment, restore car count, build cash flow and “prepare to hit the ground running at the outbreak winds down.”

 

“It’s going to be a while before we return to normalcy, and when we do, there will be new norms," Brower began. "We need to understand that and stayed focused on our goals and our vision. We can’t allow COVID-19 to be something that prevents us from moving forward; we can’t let it distract us from what we ultimately want out of our business.

 

"You need to be profitable because it takes money to do the things you want, so we need to get back to some of the basics.”

 

Most shop owners have goals that include more free time, retiring with financial security, finding quality employees, keeping employees happy and making more money, but all those goals begin with having more money.

 

“Shops sell parts and labor, and that should be a 50/50 mix,” Brower explained. “Anything you make money on has to be a cost of goods sold on your income statement. Producing sales, managing the cost of goods sold and then making changes as possible is the most basic way to run a successful shop.”

 

When gross profit is equal to a shop’s fixed expenses, that’s the break-even point. Before a shop owner even opens the door to customers, the shop starts in a deficit where a certain amount of money is needed just to get back to zero. Plus, money must be made on top of that to cover operating costs.

 

“It costs money to operate every day,” Brower pointed out, explaining how to calculate the true cost of technicians, including wages, taxes and benefits.

 

“You need to evaluate this cost for every team member to see who’s pulling their weight, but you also want to look at this as a team number to determine how much the team needs to produce," Brower said. "It takes money to provide your team’s benefits, and the better the benefits you offer, the better you’ll be at attracting, hiring and retaining the right people.

 

“There are too many things in our business that slow us down and are out of our control. That’s why establishing your shops effective labor rate is so important," Brower said. "Your shop's effective labor rate is what your team needs to produce per hour to hold the desired 60% labor margin to remain profitable.

 

"Margins make you profitable, but dollars pay your bills and allow you to accomplish the things you need and want to do.”

 

Brower reminded attendees they need to make enough money to cover their expenses and have sufficient funds to live on. He recommended shops hold around 50% to 55% on general parts margins and charge around 8% of parts and labor sales for shop supplies, reminding everyone shops lose 3% of their total sales from shop supplies. These are parts or items used in the repair but don’t necessarily go on the car, including protective materials, cleaners, wires, lubes and adhesives.

 

Brower also explained how to sell value to justify the shop's pricing on parts, knowing the customer can buy the part cheaper then what the shop is selling it for.

 

When ATI helps a shop build a “Road Map to Success,” it begins by working backwards to examine how much overhead the shop has, what investments are needed for the business and for retirement and how much the shop owner makes, to determine the total gross profit needed.


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