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.
“The shop owner is typically the lowest paid person in the shop, and that’s wrong," Brower said. "We work from the bottom up to make sure you achieve your goals, starting by determining how much gross profit you need. Then, we work backwards to build you a road map.
“Have the right mindset, a positive mindset," Brower encouraged. "You’re an essential business for a reason. Sanitation and cleanliness are the new norm and aren’t going away; people are always going to expect this. Remain proactive. Stay on top of things as they change. Make this a daily cadence in your business.
"We will get through it. This too shall pass, and when the outbreak is over, you’ll need to hit the ground running.”
Rather than cutting marketing, Brower advised shops to adjust marketing, because there is now greater accessibility to a captive audience, essential workers still need reliable transportation to get to work and non-essential workers fear losing transportation for high-priority errands, medical emergencies and the ability to commute to work once they are re-employed.
“Adjust your marketing, don’t cut it,” he urged. “We need to stand out in times like this. Build your brand, and make it stronger.”
Exploring ways to adjust marketing, Brower suggested offering pick-up and drop-off services and goodwill discounts. Notify customers the shop is open, and educate them about the precautions being taken to keep them safe.
Shops should determine how many more cars they need to offset the car count deficit, and then reach out to customers through warm calling, email marketing, text messaging and social media. Brower also discussed how using call forwarding during the hours the shop is closed can help obtain a couple extra cars each week.
“Your messaging should be since and supportive---not pushy or promotional,” Brower noted. “Let people know you’re there but not desperate. Don’t try to force them to come in. People still need their cars. Make sure you’re doing the things you tell them you’ll do to sanitize their vehicles and keep them safe.”
When it comes to warm calls, shops should prioritize the most unsafe items first, then the items that will become unsafe over time, ending with repairs that keep the vehicle healthy but aren’t unsafe.
“This helps you refill the pipeline and survive. You miss 100% of the opportunities you don’t take,” Brower said.
Text messaging can be used for appointments and other reminders because it’s quick, engaging, affordable and opt-in so customers are agreeing to this form of communication. In fact, most customers prefer text messages, though email can also be an effective marketing tool.
According to Brower, effective emails only include useful content, are easy to skim and are concise, though the return rate on texts is higher.
Using social media to disseminate pictures and videos of the shop, processes and community outreach creates goodwill.
“This is how to build your brand in a time like this,” Brower said.
To schedule a phone consultation with ATI, including a free business health check, visit autotraining.net/register.