Up to Standards
- Author: Mike Weinberg, Contributing Editor
The start of a new year is a time for reflection on the current state of business and a time to formulate a business plan for the next 12 months. For most shops in our industry the past few years have been difficult, and many have closed, sold out or changed the way they do business. Twenty-some-odd years ago there were about 24,000 transmission shops in the country, and at this point the latest estimates are less than 10,000 shops that do nothing but transmission work. This is consolidation on a grand scale.
Our market share is being diluted by a number of different factors. The new-car dealer has become our main competition. Low interest rates and very aggressive marketing programs have made the purchase of a new vehicle a very attractive alternative to paying for an expensive transmission repair on an old one. Too often the customer will choose to buy or lease a new vehicle that comes complete with a long factory warranty and will junk, donate or trade in the vehicle you were ready to repair. The trend to longer warranties helps to remove from our shops a large group of potential repairs until they are out of warranty.
Virtually all the major car manufacturers have reman units available for most of their models. Although this does not mean you cannot compete against these programs for the repair work, it definitely sets price trends in the market. The hand writing was on the wall years ago when the Big Three started “crate-motor” programs to sell new replacement engines through the dealer body. The fact that anyone could buy a small-block Chevy engine, brand new, for around $1,500 with a three-year/36-month warranty devastated the market for the engine rebuilders. The same thing is happening in our industry with reman units controlling the prices you can ask for your work.
Another form of competition for our market is the growth of central rebuilding facilities that market reman units with solid warranties to what used to be our “wholesale and fleet accounts,” which now can do the R&R work without us. Obviously, work you performed for garages and fleets was not as profitable as retail sales but gave you cash flow, and the lack of this work severely affects your profits.
Another cloud on our horizon is the lack of available labor coming into our industry. The greatest surplus that we have as a country is in the number of college graduates. College attendance has become a social priority in this society even though there is no guaranty of solid employment opportunities after four expensive years of schooling.
I have nothing against higher education, but when parents guide their children into college as the only future for them, without a clear career path, these graduates wind up flipping burgers, as there are few jobs where a bachelor of arts degree is enough. The skilled trades are belittled in our present society, and most guidance counselors believe that if you work with your hands, you are a failure. This is due to the “ivory-tower view” that most educators have of the real world. Have you been able to find a good carpenter, plumber, electrician, bricklayer etc. lately?
What our society has failed to realize is that we who work with our hands can receive excellent pay and get a lot of satisfaction from our work. We see the end results of our work, and the knowledge that we have created something useful from a product that was not certainly beats pushing an endless stream of paperwork for some large corporation. The trend, however, continues and makes it difficult to find young people to enter our field.
The previous paragraphs may seem depressing and pessimistic to you. Although they are hardly good news, they represent the facts of our market. The worst lie you will ever tell is the one you tell yourself. This is where it is, and now that we have identified the problems we can set up a business plan to prosper in this environment. Yes, I said the prosperity word. Losing is not an option, survival is fine, but you cannot exist on bare minimums, so you have to fight for improvement and prosperity. How do we do this?
The first step is to identify the problems we face, the second step is to ruthlessly examine ourselves and improve what we can, and the third step is to look for market efficiency and opportunity. The fourth step is to seize those opportunities and grow them. This whole scenario demands that we change the way we think and approach our business.
There is an old saying concerning the news media, “Believe nothing of what you hear, nothing of what you read and only about half of what you see,” and you will not be disappointed. The press and the ruling elites (our politicians) spout endless rhetoric about the loss of jobs to other countries. They disregard, at their peril, the fact of market efficiency. Market efficiency is a term used by economists to illustrate how money and goods, unless interfered with by government regulation, will flow to the most-efficient producers.
We must learn more about market efficiency and tailor our business plan to include those realities. You obviously cannot be all things to all people, and trying to be will only have you very busy at no profit. Look hard at your business, and take it apart and examine every aspect of what you do. Do you know your dead-nuts cost of every function you perform? If you don’t know your cost of doing business in very aspect, you have one foot in the grave and the other on a banana peel. The ruthless self-examination will lead you to know where you have market efficiency and where you are unprofitable. Stop doing work that is inefficient and concentrate on the areas you identify that maximize your profit.
There are a number of units you can buy remanufactured more efficiently than you can build them yourself. If you know your cost of doing business you can establish a price structure you must have to be profitable. Anything you are doing that does not meet your profit goals must be changed or eliminated if you are to stay in business. Use the following checklist to examine the aspects of your business and to improve any weak areas.
Presentation
Do your business and your people present an image to the public that says, “We are the people you can trust and the people you want to deal with”? You get only one chance to make a good first impression. A clean, orderly facility is a must in attracting new business. Women make up about 50% of the customer population. If you want their business you must appear and perform as a professional. Men don’t know any more about transmission repair than women, but women will admit it, whereas men will not. Women are acutely affected by cleanliness, polite and sincere communication, and dress and manners, and they appreciate a careful explanation of the costs, time frames and other details of the problem they are facing. Give your customer knock-down, drag-out service, and price becomes less of an issue. Make your facility a place your customers want to come to.
Sales technique
Do you really know how to sell your product? Do you take the time to know your customers and their needs? This is an area where taking the time to understand your customer, ask the right questions and provide detailed explanations of benefit and value-added services you provide are a must. Everyone is busy, but you cannot rush your communication with the customer. A quick, off-the-cuff price quote will either cost you profits or have the customer go to someone else. Learning proper sales techniques will benefit your business immediately. If you can’t sell the work profitably, you don’t need to know how to repair the vehicle.
Purchasing
Do you spend a lot of time trying to buy the cheapest parts, or do you try to buy the best-quality parts at a competitive price? With the cost of comebacks reaching into the thousands of dollars and your reputation on the line, do you really want to use cost as the only guideline in purchases? If you are pricing your work correctly you can afford to pay for top-quality material; if you are giving your work away, do you put pressure on your suppliers to cut prices so you can see some profit? Examining what you are really good at will lead you to save time and money by buying reman units from a quality supplier in those areas where you are not efficient. Buying some reman units will free you to concentrate on those units you can do well and profitably, give you quick turnaround time for your customer, lessen your warranty liability and give you opportunity for new areas of sales.
Technical proficiency
Look in the mirror and ask yourself whether you have what it takes to professionally understand and diagnose everything you are working on. If not, identify your weaknesses and get more proficient. About 50% of the electronically shifted transmissions and transfer cases that come back as cores to the remanufacturers did not have enough wrong with them to justify replacement. This means that they were misdiagnosed and that the technician working on the unit will now have to learn where the faults in the vehicle are to make the new unit work properly.
Are you making enough of an investment in yourself in educational materials, service manuals, diagnostic tools and manuals, technical hotlines and the latest scan tools or software to be current in this change-filled world we live in? If you have a toolbox with 30 grand in tools, is it worth anything if you don’t know where to use them to make a profit? The diagnostic information is the first tool you must have before you can use any of the others.
Growth potential
Examine your market area, and make a plan to locate areas where you can grow your business. It is useless to fight a battle you cannot win. Do not try to take on the big corporations toe to toe on price. Use them where you can, and identify areas where you are more efficient and responsive to the customer. At current interest rates, the acquisition of new equipment is as cheap as it will ever be. Is there a need in your area that is going unfulfilled? What more can you sell your customer as value added to increase your profits?
Performance products generate good profits, and you are dealing with people who want to spend money. You are already set up to do driveline work, so why not expand into other areas. Driveshafts, specialty shocks and suspension pieces, exhaust etc. can establish you in a niche market that sets you apart from the pack. Become a diagnostic specialist, maybe invest in a chassis dyno, be the 4X4 expert in your area. Research all avenues with an open mind for new areas of profitable, efficient work that the big companies do not do or cannot react fast enough to gain market share.
Value added
What more can you sell your customer while you have the vehicle? Does the car need brakes, a new radiator, a new catalytic converter? Why would you give this work away to another shop that will not send work back to you? Do you offer transmission and cooler flushes, or power-steering flush, oil, lube and filter changes? You have the car, and the customer will be thankful for any other value you can transfer to them so they do not have to go to another facility.
Do you offer free pickup and delivery, loaner cars, TV and coffee in the waiting room, or any of the hundreds of little things that make a customer yours for life? Do you set up maintenance schedules for your customers to keep their warranty in force? Not all value added has to be sold; some things are just as simple as a thank you or birthday card. A friendly reminder to have the transmission checked before the snow flies or a post card saying the vehicle is due for an oil change may help to keep your customer loyal.
If you examine every aspect of your business and learn your local market inside out, you will find potential for growth and profit. Become efficient and be open to new opportunities, and instead of fighting a battle you can’t win, use that which is available to your good. Dare to be different and discover products or services others don’t have, and you will grow your business.
