How Expenses Can Sneak Up on You and What You Can Do about It - Transmission Digest

How Expenses Can Sneak Up on You and What You Can Do about It

Anyone who has been in the transmission or auto-repair business for a while has experienced this: You come to one of those rare points in time when you think you’ve purchased all the equipment you need, all of your major bills are paid, your debts are all manageable, and you start to feel like you can finally take some of the profits out of the company that you worked so hard to make. Then you wake up. It was a nice dream, wasn’t it? The reality is that there is always something more to purchase or a new or increased expense with which to contend. There’s always a new tool or machine that you yourself or someone else convinces you that you just can’t live without, while at the same time every utility and government agency is working as hard as it can to get you, the small-business person, to pay more.

It's Your Business

Author: Terry Greenhut
Subject: Banking and lending
Issue: Understanding current practices

It’s Your Business

  • Author: Terry Greenhut
  • Subject Matter: Weigh consequences of spending
  • Issue: Invent your own board of directors

Anyone who has been in the transmission or auto-repair business for a while has experienced this: You come to one of those rare points in time when you think you’ve purchased all the equipment you need, all of your major bills are paid, your debts are all manageable, and you start to feel like you can finally take some of the profits out of the company that you worked so hard to make. Then you wake up. It was a nice dream, wasn’t it? The reality is that there is always something more to purchase or a new or increased expense with which to contend. There’s always a new tool or machine that you yourself or someone else convinces you that you just can’t live without, while at the same time every utility and government agency is working as hard as it can to get you, the small-business person, to pay more.

Why is everyone after your money? The short answer is that your money is much easier for them to get. The small-business owner is not going to fight the electric company’s rate increase; he’s just going to pay it. He doesn’t have the legal staff nor can he take the time away from running his business to do anything about it. He may not even notice if his bill only goes up a couple of bucks; but multiply that by the thousands of small businesses that are affected and the utility has made a bunch of extra money without even one court battle. If her taxes go up she just shrugs her shoulders and says, “Oh well; there’s nothing I can do about it. I’m just a little guy out here all by myself.” If he runs into a snag working on a customer’s car and someone tells him there’s a machine or a tool that can help with that, he doesn’t have to put the decision in front of the stockholders or board of directors; he just buys it and often without a lot of due diligence being performed before making the purchase. Insurance companies will sneak their rates up on you every year because they think people won’t invest the time or trouble to shop for a lower rate if it’s only a difference of a few dollars.

Most of the time the people or companies that raise their rates to you do so because they think they can easily get away with it, and they can, because the one thing they know about small-business owners is that their focus is much more on finding and executing more ways of making money than it is on running around turning off light switches, trying to save a few bucks.

Salespeople also realize that small-business owners often buy impulsively and, if they want it now, are usually willing to pay more for it. That suits salespeople well because they know that given too much time a customer just might think herself out of buying it.

Maybe you should have a board that you have to run major buying decisions through. One that might tell you there is no way you can make money with that thing if you buy it, or you just won’t use it enough, or there might be a less expensive one available that can do the job.
If you don’t have a board of directors or a business partner or anyone else you have to run a major buying decision through, you should invent one. That way you can tell a salesperson, “I can’t give you a decision right now. I have to run it past my partner first.” That will at least give you a couple of days to think about how much you really need this “thing-a-majig,” if you can afford it, and if it will make you money. It helps you to avoid the impulse buy.

Depositing money in a separate or several other bank accounts to cover things like payroll and sales taxes along with other repeating monthly bills keeps you from thinking you have so much money in your main checking account that it’s OK to spend it. Better you should think you don’t have money so you only purchase what’s absolutely necessary. Mind you, I am not inferring that when you really need a new machine or tool, you don’t buy it. Just don’t impulse buy. Weigh the consequences of your actions before you carry them out instead of after, when it would be too late to do anything about them.

As an example, let’s say you wanted to buy a new 60-ton press. You decided you need it because from time to time you have to press on a gear or a bearing, and since your press isn’t big enough you have to farm the job out to a local machine shop. The machine shop of course charges you some amount for doing the job; they have also been known to damage an occasional part while working on it, and they can’t do it for you immediately like you could if you had the right press. So there’s the cost, the aggravation, and the time wasted. All of which are good reasons to have your own. Now for the reason you may not want to. The cost of the machine compared with the number of times you might use it may not make sense. Before you plunk down a grand or two for it, you need to do a bit of due diligence. Start by asking yourself how many times during the past year have you had to farm out a pressing job? How much time did you lose by farming it out as opposed to doing it yourself? Can you use it enough to justify the floor space it uses or the technician’s time it takes to perform the operation? How much were you charged each time you farmed one out? Were you able to pass the cost along to your customer and possibly even mark it up to make a profit on it? If so, would you charge separately for pressing if you did it in house, or would you basically give it away by just lumping it into the total price of the job?

If you don’t think that last question is important, then you might be like one of my shop managers who was only charging the customer for a rebuilt transmission pump if we bought one from a parts house and had to pay out money for it. If we rebuilt the pump in house, by doing the exact same things to it that the parts supplier did, he didn’t charge for a rebuilt pump but considered it as part of the overall job. So think about that. Before you buy any piece of equipment, can you charge for its use and will it make you money?

Once a salesman came into my shop trying to sell me an oven to heat up bearings and gears to facilitate their installation. The oven was $750. He didn’t see the $20 Crock-Pot or the $30 toaster oven on the bench that we had successfully used for years to accomplish that task. His oven was pretty and it probably worked well but we didn’t need it so we didn’t buy it.

I did buy several tow trucks over the years, even though I never charged for towing. Back then I was the only transmission rebuilder who owned a tow truck in my area and was willing to pick up and deliver vehicles from wholesale and fleet accounts at no charge. Doing so gave us a reputation as being the shop to call when you wanted the job done with no hassle. Just one call handled everything. As a result we were able to build a higher class of clientele who were willing to pay a higher price for our services. The trucks paid for themselves many times over for the convenience that we and our customers enjoyed, not to mention the advertising advantage to having rolling billboards all over the county every day and making sure retail customers weren’t left to get their own tows and maybe wind up at another shop by mistake.

As with other piece of equipment, the questions had to be answered:

  • Why do I need my own tow truck?
  • Can I get enough use out of it to justify owning it?
  • Will it save time and/or money?
  • Can it make money?
  • Can I afford the payments if business takes a downturn for a while?
  • Will it make enough to sustain a driver’s salary?
  • What about fuel, insurance, and maintenance costs?

If you can’t conjure up positive answers for all of your questions, you probably don’t need that piece of equipment; so just pay as you go until such time as the need grows big enough to justify buying one of your very own.

There is something you can do to save on your electric bill in some areas. Often power companies charge a higher rate when usage spikes. In other words, if you come into the shop in the morning and throw on all the lights, the parts cleaning machine, the air compressor and whatever other high-drawing devices you have all at once, you pretty much pin the needle. The problem is that whatever the power spikes at is the rate they charge not only for that moment but for the day, the week, or who knows, maybe even the month. The solution is to turn on your devices gradually over the first hour, so that you are there on the premises to avoid the all-at-once surge. The power companies also charge a higher rate for peak usage periods, such as summer, when they know that people are apt to have their air conditioners running 24/7. The answer to that one is “don’t.” Don’t run the air conditioning when it isn’t absolutely necessary, and if it’s daylight saving time and you don’t need all those overheard lights on, turn them off and only light work areas where there is a need for extra illumination.

Don’t worry, you’re not being paranoid when you think that everyone out there is trying to get your money – because they are. The key is to control how much of it they get by doing a bit of careful planning and execution.

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