June 19, 2013 at 3:49 pm #64303AlbaMember
Hello all,First post here, quick hello to everyone and thank you for setting this place up as an active community for discussing the subject of managing an Auto repair center. It’s been quite hard to find such a forum where appropriate information could be found, I was very impressed with the discussions as well as the information going around here and decided to go ahead and register to share with you my experience; or ordeal as I see it.I will try my best to keep this summarized and as articulate as possible to relay my issue; but I might miss out and make it long, so please bear with me, I am new here. 🙂We own an auto repair center in Kuwait, started operating since August 2012 – It was very hard in the beginning as the market was a bit saturated with this type of business and no proper planning/consultation was done to consider a proper location, the hiring process, poor decision regarding marketing – Basically we had a very bad start.Over the days we picked up the mess and cleaned up the act after learning our lessons the hard way regarding running the business, hired the right people, started running after credit insurance company contracts and have set up a strong solid shop. The main issue we are having though is that we are not able to break-even. Average monthly revenue comes in and around $50,000, but we are always in the red around $25,000 after all expenses are payed.Our location is a total of 1500 Meters sq., 790 are the actual work floor, 210 is parking and the other 500 is the Mezzanine with the customer lounge as well as our offices.Rent comes down to $16,775 per month.Salaries average $30,000 per month for a total staff of 27 people and only 15 are Productive, the rest are Management/Accounting and Admin etc.Our Gross Margin averages 50% monthly, so out of our average $50,000 of revenue, $25,000 go to material and parts etc.Just a summary of what our Pro’s and Con’s are regarding our business to detail it more :-Pro’s :-A) Very Strong set-up regarding the shop, customer’s usually just passing by are attracted by our facade.B) Capability to get several contracts easily due to strong contact’s in the marketC) Very advanced compared to this market (The US overshadows Kuwait regarding quality and customer service plus the usability of technology to assist, some companies are still using paperwork and have a scrap-yard set-up)D) Large Customer lounge with dealership standardsE) Latest Equipment/Fully Equipped Shop and constantly updating technology.Con’s :-A) Expenses are A LOTB) Inability to go above ~$50,000 in revenue even with the multitude of contractsC) There is no proper “System” in place, seem’s a bit disorganized at timesD) There has been no proper study but it “seems” as if productivity is low as well as efficiency, staff seem slow at work.E) Gross Margin is not on our side, 50% of revenue goes to Materials and Parts; according to that calculation we need to generate around $105,000 per month to Break-even.If you reached this far, THANK YOU! I appreciate the gesture of going through those boring details but we are indeed struggling and paying this from personal finances, we are a family business with little experience in this market, it was very lucrative at first but the steps carried out at setup were abysmal.I have a lot more to discuss over the coming post’s but I would to keep this first one summarized to my problem and how to tackle it, it is becoming stressing and time consuming, as a commercial pilot I do not have time to constantly tire with this and am about to throw in the towel.I think to play our my information above into an image and show more of what our business is, including the image gallery, please check out :-Thank you all.June 20, 2013 at 7:39 am #73134nctransmissionParticipant
Sir –I cannot imagine trying to staff, supply, manage, and upkeep a facility as large as that. My transmission repair facility has 3 bays, 3 lifts, 4500 sqft, and does about $50,000 per good month. It seems, as a business, you have gotten in too deep too fast.Have you done your due diligence as to the demographics of the area? Can your local clientele afford your facility? What is your competitive hourly labor rate compared to yours? You mention your unique attide towards the customers, which will take a while to get hold. Customers who are used to one type of treatment will not necessarily know how to react to a different style or method. You need to work that angle with your customers and ask them for referrals, ask them if they know of anyone who can benefit from your work and services.What do you offer, work wise? Can you differentiate yourself by being “VW experts” or “transmission physicians”??Do your employees know what is expected of them, what their duties are and what they should be doing? How is their compensation based? Do they earn commission, flat salary, hourly pay? What is their incentive to “get better”?You need to act NOW to save this investment, and you have a LOT of unknowns going on. Feel free to email me if you’d like to discuss offline or in further depth. I can be reached at daniel at nctransmission dot net.June 20, 2013 at 7:56 am #73136Jon BockmanParticipant
Just off the top of my head I’d say you have too many employees.
I guess I have a few more questions to ask, like what’s your daily car count? How do you pay your Technicians and Service Writers? How many lifts do you have? How many Service Writer, do you have? How many techs, do you have? What are the kind of jobs mix are you doing now, i.e. oil changes, cars that broke down, vehicle maintenance? Are you marketing your services? What kind of list do you have? What is your hourly labor rate? What do you stock in inventory?
I think once you can answer these questions, then I may be able to further assist.June 20, 2013 at 8:07 am #73138Joe MazurParticipant
Aziz,Welcome to the forum! you will find a lot of good info here, and hopefully it will help you make some tough decisions for a very tough situation.The first thing that stands out to me is that your rent is WAY too high for your current sales, as is payroll. Ideally, rent should be 5% of sales (you are 34%) , and payroll should be no more than 30% (you are 60%).There are some really tough decisions that need to be made here. I would argue that even 105,000 in sales would not be enough to keep you afloat. You need to increase sales dramatically, or find a more affordable location. If you dont increase sales, there is no way to overcome your fixed expenses. You also need to look at your pricing structure, because if 50% of sales goes to materials and parts, then you are either paying too much for parts or not charging enough. Ideally, 50% of revenue would pay parts, materials, and labor costs. Another thing to consider is how you pay your employees. Your employees should be on a pay plan that bases at least 50% of their pay on their production. Putting employees on a commission type plan would probably boost your sales figures. Another thing you should do is make sure that you are separating the mechanical and body shop,because each has its own benchmarks.There is a lot to cover here, and there is a lot of work still to be done to turn this around. Best of luck to you.June 20, 2013 at 8:27 am #73139Jeff RuffingParticipant
Your expenses are just so far away from what those sales can justify….
I do about $50k a month in sales. We do that with 2 techs (with 1 right now) and a part time bookkeeper, and me as the SA. My rent is around $3k a month.
I’m not making enough money, and I’m looking to lower my expenses further.I think it would be pretty difficult to increase your sales the amount necessary to make that rent figure work. Everything everybody else has said it exactly right.
I’d consider moving to a less expensive location, and I think you need to cut staff from 27 people, to about 4 people.
That’s the easy stuff. Pay plans do need to be changed, inspections & upsells need to be a part of the process.June 20, 2013 at 10:03 am #73140Frank Scandura IIIParticipant
Welcome to the forum.
I can help shed some light on the mechanical repair side – if my conversion is correct you space is about 16,000 square feet, the cost per square foot seem in line with prices here.
Systems and procedures for work flow are critical – when written down, there is no excuse not to follow them. Then it’s all about production, correct gross profit and controlling expenses.
Parts/materials gross profit targets should be around 50%, labor gross profit 60%.
If you have 15 production personal consider production based pay. You need to set a minimum level of acceptable performance, for example, what if the minimum number of hours produced in a day is 7.
7 hours per day times 15 men = 105 billable hours per day. 105 hours per day times five days is 525 billable hours per week.
525 hours times your labor rate, let’s assume 100.00 per hour. That’s $52,500 labor sales PER WEEK.
Your parts sales should be between 45,000 and 50,000 with the above labor sales.
Let’s assume you can do 50,000 parts, 50,000 labor – your sales should be $100,000 PER WEEK
Then the other expenses can be looked at separately (support staff around 12-15% of sales, service advisors 7-9% of sales. If you were doing half of that, you would be far better off – the goal I try to get my clients to is 15-20% net profit. I’ve listed minimum numbers above; it can really change the bottom line when you get the guys producing 115% (or 10 hours per day, per man)
One of my locations is 12,000 square feet (1115 meters square) with 4 technicians we average 32,000-35,000 per week in sales.
With that said – consider looking into coaching, as recommended so you can learn how to implement the correct strategies, pricing and cost control.
Frank Scandura, President Frank’s European Service http://www.frankseuropeanservice.com
Business Development Coach, Independent Representative Elite Worldwide, Inc.
http://www.EliteWorldwideStore.com, Blog http://www.EliteWorldwideStore.com/blog
PO 9630 Rancho Santa Fe, CA 92067
(800) 204-3548 fax (858) 756-4781, Outside the U.S. call 1 (858) 756-3102
Frank M Scandura IIIJune 20, 2013 at 11:29 am #73141[email protected]Member
Obviously there is a challenge here, but I don’t think that there is enough information here to offer suggestions just yet, so I would like to clarify your business. Based on your summary it appears that you are an automotive collision repair business correct? And secondly, your production area is 790 meters sq. which is equal to about 8,500 square feet? How many repair bays do you have?June 21, 2013 at 12:20 am #73143RCSTJRMember
I hope all is well for you in Kuwait.
Please forgive me if I am I telling you what you already know. I have no experience actually running a shop as do the other valuable seasoned observations being offered here. My expertise is shop management software. I noticed you did not mention the effectiveness of your current CRM process or the effect of customers coming back for oil change and vehicle inspections. Possibly it is such an obvious part of your business model you did not separate it out, or possibly it is something you have not fully considered. This is a critical aspect of your business. You should get at least 70% return business.
Traditional U.S methods for CRM (post cards, email) are probably not going to work for you in Kuwait however every customer you have in Kuwait owns a cell phone that can receive oil change service reminders by text messages as well as seasonal special offers such as the upcoming Ramadan. You should be taking full advantage of this to increase your business and make sure all employees are busy with returning customers.
If your automotive business software cannot send out regular text message service reminders in multiple languages then you should inquire with your software developer to have the ability added quickly since it will be the difference between success and failure. If you are unable to have it added then let me know. We have provided software for years to the Precision Tune International franchise group in Oman. You may even be interested in acquiring a Precision Tune International branding and business coaching for your shop. They are doing an excellent job in Oman. In the last 3 years the Oman franchises have seen a 300% increase.
Sam HunnicuttJune 23, 2013 at 7:45 am #73145joecvalParticipant
A) Expenses are A LOT
Have you sat down and made a spreadsheet of where every dollar goes? If you use quickbooks or some other accounting software that’s OK but really you need to go deeper than that. For example under the expense of “Marketing & Advertising” you will probably have a dozen or more expenses in that catergory ( business cards, website, vehicle lettering, signs, pens, trinkets, etc) breaking this down gives you a better handle on where it is all going and makes it’s easier to manage and most importantly for marketing is tracking what is working and dumping what is not. Also then you can create a budget for your shop – a preplanned guide to where and how to spend your money. It’s just a guide – it’s certainly not always set in stone but at least you have a set amount you plan on spending for “Marketing & Advertising” so it forces you to prioritize and be intentional and thoughtful with where you invest your dollars. I am by no means an expert on it but have learned through experience such as yours that this does help.
EXPENSE CUTS – This can be challenging, but if the work load (the sales, the production, the profits) don’t pay for all the expenses it’s time to trim. My initial thought on your situation is that you are over staffed for your work load. It may be time to look at trimming staff, and working with the staff that make the cut to be more productive- do more with less. Systems and organization as well as motivated staff are keys to efficiency. Chances are the reality of co-workers being let go will fuel the fire a little to improve.
Non-employee cuts – Try negotiating to save on your expenses, asking for the best deal and the best value. I have found that just being honest with the situation we are facing helps to negotiate a better rate, a better price, or discuss options with vendors to reduce costs. Sometimes a phone call and 45 minutes can result in saving money on your expenses. I’ve even had success negotiating my rent down due to economic conditions and comparable shop spaces that were available.
Do your due diligence, stay focused and positive. If you take no action the entire company will suffer and possibly everyone will be out of a job and you’ll be broke, but if you apply intentional pruning the pain will soon lead to stronger growth. Good Luck!
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