It’s Your Business
- Author: Terry Greenhut
- Subject Matter: Management
- Issue: Shop Owner
What exactly do you expect from the people with whom you deal every day? Do you have certain expectations of your employees, suppliers, and customers? But the bigger question is, Do they know it? Do they know exactly what you want from all of them, or are you the type who just thinks they should all be able to figure it out for themselves and then if they don’t, get all bent out of shape?
When, for example, you hire new employees, do you put them through any kind of a training or orientation program so that they are fully aware of what is expected of them? Do you have job descriptions in writing that you can give to new or promoted employees that tell them exactly what their responsibilities are other than the obvious ones? Of course, when you hire a transmission rebuilder, his or her job is to rebuild transmissions, but do they know your acceptable standards, and do they understand that there are other tasks for which they will be responsible? Even if you only hire experienced people, they have not been trained to do it your way unless they’ve been working for someone who you’ve previously trained, and even then you can’t be sure. They may not have even been taught to do it the right or acceptable way. How would you know? The answer is to assume that they don’t know or haven’t been taught, and always run a little training program of your own for new hires no matter what their background. Even if they tell you they were trained by some other company, make them go through your training program anyway. Once taught by you, they can never say, “Oh; I didn’t know that.”
There is extra concern when hiring a manager or a service writer who has worked for and been trained by someone else. How exactly were they taught to sell? What values were instilled in them, and do those match with your beliefs about honesty, integrity, job pricing and customer service?
On-the-job training to enhance a technician’s, a manager’s or a salesperson’s skills should be ongoing. In fact, a hiring requirement should be that whenever a training session is available, employees have to attend if it suits their individual job description. You should always be teaching, and they should always be learning. When you stop or slack off on training, they often get the feeling that you don’t care enough to keep them current or that you’re afraid to teach them too much. In my experience there is no such thing as too much. The more you teach an employee, the faster and better he or she can produce for you. Will they ask for more if they learn more? Maybe, but will they deserve more for doing it smarter? If it saves or makes the company money for the employees to know more, doesn’t it pay?
In years gone by, the big fear shop owners had was that one of their employees would learn enough to go out on his or her own and maybe even become the competition down the street. This could happen whether you teach them anything or not. However, it was a legitimate concern when it didn’t cost a heck of a lot to open a shop, but today it costs the kind of money that most employees can’t come up with, and even if they could raise the startup capital, having enough to sustain the business until it started turning a regular profit would be awfully difficult. The point is, I would never be afraid to teach employees everything I know and allow them to go out and learn more on top of it because it’s for sure that I don’t know everything. I would want them to know all they could learn in order to help me while they are in my employ. Will employees leave eventually? You know they will, but getting the highest possible return on the investment you make in them, before they go, should be the goal.
Of course, if you do treat employees well and recognize their efforts, there is a much better chance that they will stay with you for a longer time period. In order for that to happen they must know what you want from them. They have to feel confident that they are fulfilling your needs every day. If they do, they won’t spend their time worrying about keeping their jobs. When employees feel secure, it’s one less problem that gets in the way of production. If they don’t know your standards, with every job they do, they’ll be questioning: “Is this good enough? Will the boss accept it?” That’s not good for morale.
One thing I always taught all of my rebuilders and installers was to not try to save me money by cutting corners. It just doesn’t pay. When they do it, they are gambling with your money, not theirs. If the gamble doesn’t work, as it doesn’t in many cases, it winds up costing the company more to fix the comeback and can easily lose the customer. Make them understand that you are charging enough for the job for them to do it right and still make you money, and that the only thing that impresses you is a job done right.
How about your suppliers? Do they know what you’re willing to accept? Don’t assume that they do. Even though you may not be the type to beat up suppliers and compare prices all over town on every order you’re about to make, many of your competitors are. They beat up suppliers so badly that after a while the suppliers believe that all their customers want is the cheapest parts they can get, so that’s what they start giving them rather than having to try to fight for price. If you’re not that type, and quality and service are your main concerns, make sure all your suppliers know it. I used to come right out and tell them, “I don’t price-shop you, but I do expect you to give me your best price based on the amount of business I do with you. I also expect speedy delivery and no-hassle returns. When I call and you only have one left on the shelf, I want it. That’s my price for being a really good customer. And P.S.: I will spot check from time to time, so don’t ever think that because I make it easy for you is a sign that you can take advantage of me.”
Then we come to your customers. What do you expect from them? Loyalty? That only comes after they’ve been beaten up enough times and start to realize that you get what you pay for and that establishing and maintaining a relationship with a reputable shop saves time and money in the long run. I expect customers to pay my price. I fully expect to get the number I quote. So I say that number with authority like it’s the only number they’re going to get. If they think you believe in your number, they are much more likely to pay it. A word to the wise: Never negotiate price with a first-time customer. If you do, they will expect to play “let’s make a deal” every time they come in. Stand firm but show them where their money is going. Don’t be afraid to explain the charges but at the same time, don’t back off from them.
Knowing your costs and needed profit margins will help you stand firm when quoting on any job. When you don’t know, you might think that discounting the price is OK, but if it isn’t, you will be losing money you just can’t afford to lose. Far too many people in our business are shooting from the hip. They don’t know their costs and therefore are not charging an amount that makes sense in their individual situations.
At a cost-of-doing-business workshop I was conducting for a major auto parts company, we were discussing markups and gross profit margins on parts. At one point I mentioned that the unwritten industry standard for decades had been a 40% gpm. It wasn’t that anyone told shops to price that way. They just all seemed to adopt it. I asked the audience how they determined that they were getting their 40% gpm. One fellow raised his hand and said, “I multiply whatever I paid for the part by 1.4.” When I explained that he was really only making 28% by doing it that way, he about freaked. He said he’d been doing it like that for 30 years. He was not happy, but he also isn’t alone. There are lots of shop owners who don’t understand or know how to work with the numbers and as a result are constantly undercharging customers. It isn’t that the customers won’t pay the right price; it’s that they aren’t being asked for it.
Today many general automotive shops use 60% gpm as their standard on parts because they’ve done their homework and understand their costs. Transmission shops, because there is a much higher probability of comebacks, have been known to go to 67% gpm or higher. It’s an individual decision that should be based solely on cost and profit margins, but we know it isn’t. Owners factor in things like area economics, perceived competition and how well they think their shop rates in comparison to the other shops that customers might consider.
I always felt that my shop did the best work in the area, that we always stood behind it, and we were willing to do whatever was necessary – and then some – to keep our customers happy. As a result, I never had a problem asking top dollar for our work and getting it. That was my expectation; what’s yours?
