Sunday, 30 November 2003 09:00

Planning is essential to keep shops in business

Written by Mike Kunkel

As the end of the year rapidly approaches and people take time to evaluate their personal and financial situations, these are words to take to heart. Many of the salvage yards and repair facilities that I talk to are complaining that business is flat or down. The economy is having a tough time getting going and business has been better, but it has also been worse. One of the problems that I see is that people have difficulty shrinking their overhead to match the current sales volume of their business. 

The financial success of a business today requires a plan. The days of "laissez faire" management -- just letting things happen -- have resulted in the current poor business climate. Rather than accept low profits on small volume and blaming it on the economy, create a plan to generate more sales or better profits.

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Is your financial house as orderly as it could or should be? Try going line item by line item to evaluate your situation. Is each expense essential or is there room to cut? How about the systems and processes that are in use? Are they streamlined for maximum efficiency and producing the desired results?

For example, Uncle Hank has been here forever and nobody is sure what he does but he gets paid every week. Is Uncle Hank performing a necessary function? It may cause some problems within the family but in operating a business, sometimes the tough calls need to be made. When family and business collide, one must be very careful to handle the situation delicately in order to provide the proper balance to be successful professionally while still being happy personally.

Plan for education

While reviewing the financials, plans must include training for the upcoming year. How many points are needed to maintain I- CAR Gold Class status and which employees need those points? This is the time to budget for those training expenses rather than waiting until the deadline to take a class. While I-CAR training is of utmost importance, other training can be very worthwhile and add to the bottom line. Estimators can be educated on better closing techniques and managers can learn more about efficiency and systems. Clerical personnel can be cross-trained on certain tasks to save time and payroll expense.

Another area to evaluate is the flow and scheduling of work. Regardless of the mechanical, body or salvage side of the industry, work must move fluidly to keep production at its highest level. It is imperative that tools be organized; parts rooms must operate efficiently and provide needed items in a timely fashion. The work flow should be balanced to keep the shop from being overloaded at some times and having too little work at others.

One issue to examine is expansion. Should mechanical services be added to the body repair menu or vice versa? Is the facility being used to the fullest extent? Is it organized and structured to allow high revenues per square foot? Is our advertising effective - enough or too much?

Planning is blueprint for success

These are just a few examples of the many areas to be reevaluated and for which plans should be composed. The planning stages are the blue print for success in today's market and changes may be necessary to remain competitive. The financial plan also gives something to reference when decisions need to be made throughout the course of the year.

A deal on baseball caps is only a deal when the money to pay for the caps was in the advertising budget. If you have already exceeded the advertising budget, you must cut expenses elsewhere to cover this additional cost. With a budget, simply declare the additional expense unacceptable because the money is not available.

Bringing managers into the budgeting process can offer an additional perspective. They may have some idea of the areas that are important to them and feel need the most attention. They will also be able to point out some areas of waste that might not be obvious or explain why something that you might feel unnecessary is seen by the manager as a value-added service that customers appreciate.

In the end, a number of clichés hold true. "Failing to plan is planning to fail." "Improper planning on your part does not constitute an emergency on my part." My favorite was used by my automotive professor at Northwood University, which he referred to this as the 6 Ps: "Piss poor planning prevents proper performance."

While the language may be crude, the meaning is clear. Planning for success is vital because success rarely happens on its own. Success has been described as the "intersection of inspiration and perspiration" and a good plan is the map to that intersection.

I sincerely wish everyone a happy and safe holiday season while working on individual business plans for the New Year.

Mike Kunkel is the general manager for American Auto Salvage in Fort Worth, Texas, and also a member of the national steering committee for the PRP program.