Auto Repair Shop Owners Dig Deep into their Numbers WeeklyApr 26, 2021
Dig Deep Into Your Numbers Weekly by Rick White, President 180BIZ
The biggest enemy that you have to your business is the status quo. It is the comfort zone. The comfort zone is where your dreams go to die. If you are in the comfort zone, if you are in status quo, then it is SSDD. Same Stuff Different Day. And it's just like yesterday is going to be the same as today is going to be the same as tomorrow. If you are stuck in that rut, there are only two things that are going to change it. Number one, something's going to happen. A situation, circumstance, event, or person is going to interact with your business and it's going to create a reaction. It's going to create anxiety. It's going to be something that you're moving away from. It's going to be something that's forcing you to be different, to do different. And that is a big deal.
The only other thing that can change your SSDD is if you're pursuing something. When something happens to you, there's reaction, an emotional reaction. When you are emotional, you don't make your best decisions. You're not creative. You tend to make poor decisions in reaction mode. However, if you're going toward something, if you're pushing toward something, if you are striving for growth, it's all about creation. And I want you to see, something's kind of cool. If you write down the word reaction and you write down the word creation, they're the same letters they're just arranged differently.
That’s what the KPIs are all about. Having a destination that you want to achieve, not a direction you want to go, not a direction ahead, not to avoid something behind you, but a destination. And then you need to make sure that as you're digging that trench toward that destination, that you are on track. I used to dig ditches, no lie. Back in the nineties when things got really, really slow at the shop and I had a family to feed. So I spent two days working in the shop in three days, literally digging ditches. And that's why I use that analogy. So often it really means something to me. So when you're digging a ditch, remember we're going to pick a destination and we're going to start digging. Well, I learned that if you were working smart, you put a piece of rebar in where you started. And then you would walk down to where you wanted to be. And you would pound a piece of rebar in there at the end. Next, you would tie a string. And that was your guideline. That made digging the trench much faster. Remember, trenches are 3-D. It's not on a plane. It's not 1-D it's not one-dimensional. It's three-dimensional. So not only do I have to be going the right way, I have to make sure it's the right depth and I have to make sure it's the right width. And that's what the KPIs help you do. They help you make sure you move in the right way that it's wide enough and deep enough. Last week we talked about the five daily numbers. You want to look at your daily numbers pretty much the way it sounds every day.
Now we have weekly numbers. These are numbers that we're going to step back a little bit. And instead of being on the ground in the forest, we're going to climb the trees and we're going to see it a little bit further. The first weekly number to keep an eye on is your gross profit number. Now I'm using that term weekly based on payroll frequency. If your payroll is weekly, then you can look at your gross profit every week. If you do it bi-weekly or bi-monthly, then that's going to be the triggering event to be able to look at gross profit. There's no number more important than your business besides billed hours than gross profit. Gross profit is what pays the expenses and creates your net profit. So you've got to make sure that gross profit is on task every single time. Don't wait until the end of the month. Don't wait till the end of the year or the quarter to look and see how you're doing. That’s too late. If you're looking at it weekly, you can effect change within that month and it can make a difference.
You also want to look at your parts to labor ratio. Are you selling your labor appropriately? Typically when you have more parts than labor sold, then you have a problem. You have a problem because you're giving labor away. What else do we want to look at? I like to look at the percentage of oil services. Oil services are an opportunity. Stop thinking that oil services are a waste of time. Stop thinking that they're just a bang ‘em in and bang ‘em out kind of thing. This is the only service that your clients know they need to do on a regular basis to keep their vehicle running.
You know that changing one fluid is not going to do that for them. And we need to educate them on that. But that's another number. What else do we want to look at the percentage of new customers? What is your percentage of new customers? Do you have a growth number for new clients? Every opportunity you're ever going to experience in your life is going to come from another person. You need new people. Your database is shrinking 17 to 20% a year through attrition, moving out, passing away, whatever the case is. You need 17 to 20% just to maintain your database and 30% to grow. What else do you need? How about reviews and referrals? Are you watching them? Are you measuring those? Do you have a goal for those? Watch them weekly. If you're not getting them, that's an indication of the type of service your clients are getting.
I almost never heard someone refer someone else to an airline. Have you? Because they all suck. They all do. It's just which one sucks to lease for this or which one can I get the best price on her or which one's got the non-stop flight. That's it. And that's a big deal. So you've got to know what your reviews and referrals are looking like. You must watch those numbers every week. You need to be watching your AR, your accounts receivable, and your AP or accounts payable. Make sure things aren't going crazy climbing up or your AR isn’t getting out of hand. You'd be amazed at how many times I see an owner that isn't aware of what's going on at their front counter. What's being given away to get the sales numbers up.
And for every 30 days that goes by your chances of collecting those dollars, go down 10%. So make sure you're watching those numbers. And what I'm going to ask you to do is please stop reacting, stop going in every day, same stuff, different day, and start going in every day with a vision and a purpose that excites you, that get your team behind you all going toward the same goal. That is where the magic starts to happen. So KPIs are simply a lagging indicator to see how you're doing. So the mindset here is not to be reacting, but to create. If you do that the skies will open up for you.
It's simple, but not easy. It takes work. I actually had to sit down with my grandson this past weekend. He's 12 years old and he hates homework. We had to talk about if you want to be anything you want to be, if you want to be anywhere you want to go, you must do the work now. Because if we do all the work, we have all this opportunity, but the less we do, the less we're engaged, the less we do that's a problem. You have fewer and fewer opportunities.
Thank you, God bless, stay safe and go make some money.