It’s Your Business
- Author: Terry greenhut
- Subject Matter: Sales
- Issue: Switching things up
We’ve covered a lot of topics related to business and shop management over the past few years. Now I think it’s time to find out where the money comes from to fund all of those wonderful things we want to do within our companies. Well, pretty obviously, all the money that comes into a transmission or auto repair facility comes from the sales we make. But just making sales doesn’t get us what we need; making a high volume of profitable sales does. I’ve always felt that if a salesperson was to knock a price down low enough he or she could sell anything as long as there was a market for the product or service. That doesn’t however, so get the job done. Sales techniques are what allow you to get the amount you really need for your work.
Look at it this way. No one in their right mind wants to pay to have a transmission rebuilt or for any other major repair. That means that any price you ask will be too much in their minds. Whether you ask $1,000 or $4,000 to rebuild a transmission it’s too much because it’s money they don’t want to spend. On the other hand if you were selling something they wanted they might not be too upset at any price. Sure, they might start out saying it’s too high, but if they want it badly enough and you can show them all the features and benefits they’ll enjoy from buying it, they likely will.
So people buy what they want, not necessarily what they need. My friend Jimmy who was in what I call “The car and truck decorating business,” told me that people would drive into his shop with something that barely ran and looked like a fugitive from a junkyard and have him put $4,000 worth of wheels and tires on it or a $3,000 sound system that he guessed they wanted to drown out the noise from the knock in their engine. It all sounds weird, but people will do what they want. That’s a fact you can’t change. Jimmy learned it the hard way. He used to tell people that there is no way he would invest all that money in a car that was unsafe or way past its expiration date. All that did was make customers angry and leave to have the work done somewhere else. He eventually learned that he should inform them once of anything he found wrong with the vehicle and then go ahead with the job if they still wanted it done.
Remember that it is never a good idea to call anyone’s vehicle names like, “What a piece of junk.” It might be to you, but not to them. One man’s trash can be another man’s treasure. I remember having cars come into my shop that I wouldn’t spend money to replace a tail light bulb on, yet the owner wanted the transmission rebuilt. The only time we refused was if the car was unsafe to be on the road, and some were. We saw cars with frames that were so rusted out that if you removed the cross member when the car was in the air on a side by side twin post lift it very likely would fold in half. I once chased a customer away with a car like that and later that day I spotted it in another shop having the transmission replaced. I didn’t get to make any money on that job but I did get the peace of mind of knowing that I didn’t put that death trap back on the streets.
I do believe that salespeople should have a level of accountability for what they are willing to sell. After all, in our business they are the experts compared to their customers who rely on them to make the right recommendations.
One thing you never want to do is prejudge customers based on the cars they drive or the clothes they wear. If someone comes to your shop looking like he has no money or if you’re thinking, “This guy won’t spend much to have that piece of junk fixed,” then you’re thinking wrong. You can’t possibly know what someone is willing to spend until you find out enough about their attachment to the vehicle and what their financial situation is to make an informed opinion. Even then, people will surprise you regularly. They will sometimes be driving a fairly late model car that you might think they have to get fixed, but decide not to or the opposite; driving a fugitive from the junk yard that they are willing to dump a fortune into for no reason that makes any sense to you.
If you size up a customer and decide that he doesn’t have a pot to pee in or a window to throw it out your natural tendency might be to offer a lower price before he ever challenges your real price. Don’t do it. Always ask for what you need to do the job right. If the customer doesn’t accept it he will give you some form of an objection, which you can then handle. Just don’t give away the store when you don’t have to or one day you might become the one without a pot or a window.
You see, the simple fact is that the customer really doesn’t care about whether or not you are making a living. If you go out of business because you didn’t charge enough to keep the shop afloat your customers might be a little inconvenienced by you not being there anymore, but as soon as they find someone else to work on their cars you will be immediately forgotten. Just human nature, I’m afraid.
None of that is to say that you shouldn’t care about your customers just because they don’t care very much about you. It is however, your duty to provide them with the best possible service or repair because that’s keeping the promise you make in your advertising and the code by which you operate. But what about the promise you made to yourself to be a success in your business? If you are providing top notch service don’t you think you deserve a price for it that will allow your business to flourish? Well, you do; but the only way to get it is to ask for it. People are not just going to hand over money to you because they see the value in what you are doing for them. Often they won’t have any idea what a job is worth until you tell them what you want for it, so you control the point at which the negotiation starts. If you say you want $1,000 to fix a transmission they might not squawk at all thinking that’s a pretty low number, ask $5,000 for it and the entire ball game has changed. Sometimes you might get the entire $5,000 but often a number that high will prompt a negotiation that might get you less than the five grand but a lot more than the $1,000 you might have had in mind.
You really don’t want to have to negotiate price though. It’s risky business. You want to show customers the value in having you work on their vehicles so that when you do finally state the price it sounds like that’s the real bottom line price. You always want to state it with authority, never being wishy-washy about it. The stronger you sound the more customers will believe that’s the real price and not try to negotiate it.
Customers can be cute though. They’ll say something like, “Is there any wiggle room in that price or can’t you sharpen that pencil a little bit?” The only answer to that question is some form of, “NO.” Any other answer will make them feel there is some room to negotiate and you don’t want to start that ball rolling. A good answer might be, “I already got that pencil as sharp as it could be, knowing you were looking for the best possible price, and this is what it came out to. Can we get started on it now?”
Notice the use of a closing question immediately after answering the price objection. A major rule in selling is that you always follow up the handling of a major objection with a closing question. You do it immediately because given enough time a customer can always come up with another objection.
Sometimes they’ll pluck one out of thin air just to keep the dialogue going so they can bring the conversation around again to the price. You don’t want to keep going round and round. The longer this game goes on the more chance you have of losing the sale or giving in to a price lower than what you really need.
How do you know what you need? In our business it’s really easy to figure out once you have established two basic numbers; your hourly labor rate and the percentage of markup you want on the parts you sell.
Shops use different ways to come up with these numbers. They will sometimes set labor rates based on the difficulty of particular types of jobs, sometimes on whether it’s wholesale or retail work and some will just come up with a single hourly rate that they will apply to any job they might be doing.
For parts markup some shops will use the suggested markup of the parts house even though that supplier has no idea what the real costs are to run the shop’s business. They just come up with an arbitrary number; one percentage fits all. Often that number is 40% when in today’s world 60% might be what shops really need to survive. Then you have dealer parts that are usually discounted to you at only about 10 or 15 percent. If you charge manufacturer’s suggested retail on those you won’t make a dime. They need to be priced using the same markup percentage as you do when you buy them from any other source. Of course the big fear some shops have is that the customer might call the dealer and find out what the retail price is on the part. Out of 100 people you might actually have one or two who would ever make that call and if it ever happens all you need to do is explain that no matter where your parts come from you have to mark them up a certain calculated percentage in order to be there to provide them with great service. Don’t ever make the mistake of running your business based on what a tiny percentage of customers might do. Run it based on what the vast majority will do.
Some shops will also categorize parts by whether they are new, rebuilt, or used and mark them up differently. I’ve always found it interesting that some will charge for a rebuilt transmission pump, valve body, or gear set only if they purchased it from an outside source, but not if they rebuilt it themselves in house. That’s just throwing money out the window.
Another way to throw money away is to look up the time it is supposed to take to do a specific job and then think to yourself, “The customer will never pay that amount,” and then cut the time down before even trying to sell the job.
While it is extremely important to price your work properly it’s just as important to be able to sell at the price you know is right, so over the next several articles we will look at all the steps involved in the sales procedure and how to carry them out successfully.