What to Do With Sagging Sales - BodyShop Business
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What to Do With Sagging Sales

In May, we examined how insufficient volume can put you in the red. But volume is only half the problem. Insufficient production also poses a serious threat to your shop’s sales. Luckily, it’s all fixable.

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Author Patrick Yurek is the owner and president of Collision Consulting LLC (focusing primarily on DV appraisals – www.CollisionConsulting.com) and also owner of Arizona Collision Center in Tempe, Ariz. He has 35 years of industry experience and has held every position from sweeper to owner. Among his credits are several PPG certifications and GM technical certificates. He’s past president of the GM Service and Parts Managers Organization of Western New York and a court-certified expert witness. He can be reached at [email protected] or (480) 984-0800.

We’ve all experienced times when we’ve had more work than we know what to do with – those times when you’ve got so much going on that you have no clue how you’ll get it all done.

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Having a reasonable backlog, or scheduling a few weeks in advance, can be a good thing. But if the backlog is due to your shop’s inability to get the work done, it can be a detriment.

Knowing the difference is a vital part of running a profitable business.

I’ve heard shop owner after shop owner brag about “booking for next month,” only to complain about not making any money in the very next breath. Then, nearly all of them went on to blame insurance companies for suppressing labor rates. While we’d all certainly benefit from a rate increase, that still wouldn’t get the work done.

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Is insufficient production hindering your shop’s sales? Examine the following list to determine if – and where – production problems exist.

Problem: Vehicles in shop not being repaired (not prepared for jobs). This is influenced by:

1. Lack of parts – The No. 1 delay in the repair process is a lack of parts. Because this is an area affected by the estimate – most parts are ordered referencing the prepared estimate – an incomplete estimate will typically delay repairs by two or three days. And this results in unproductive work stalls. Ordering parts in advance off a complete estimate and having a trustworthy parts source are imperative. (It’s easy to demonstrate the advantage of having a reliable parts source instead of a discount. The delays caused by receiving the wrong parts or missing parts can cost a shop a large portion of profits, which easily outweighs the benefit of a larger discount.) Proper tagging and storage of parts while waiting for a vehicle to arrive is also something to be concerned about.

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2. Lack of authorization – Legally, the vehicle owner must authorize the repairs; the insurer cannot do so. Securing proper authorization before beginning repairs or even ordering parts is crucial. If customers plan to use your facility, inform them of the authorization requirement and get their signature before they leave your shop. (It’s legal for vehicle owners to refuse payment if they didn’t sign consent to perform the repairs.)

Another problem comes from the insurance industry. If additional hidden damage is discovered, the insurer may elect to inspect – and that results in a delay. Two important aspects need considered here. First, keep customers informed. Only by keeping them current with the status of repairs can promised delivery times be justifiably adjusted. Second, realize the value of establishing a business rapport with appraisers and adjusters. If an insurance representative knows your facility is honest and ethical, he’ll likely authorize the supplement over the telephone, negating the necessity to reinspect. And this helps to ensure a timely delivery. (Be sure to document this authorization, as well as hold any parts or take photos as requested.)

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Problem: Not maximizing shop capacity (having empty work bays). This is influenced by:

1. Poor scheduling practices – Besides assuring that parts will be available when the vehicle arrives, many other factors need considered when scheduling a vehicle for repairs. Many shops suffer from “Friday-itis” – loading the shop on Monday and watching the work dwindle as the weekend approaches. But repairs should be scheduled at the convenience of the customer and the shop.

Another poor habit is to schedule jobs instead of hours. If a job that had 22 hours on it leaves the shop, that job needs to be replaced by another job with a similar amount of hours on it. See the box called “Calculating Required Shop Hours” for specific information.

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2. Insufficient staff – In an effort to maintain costs, some shop owners don’t hire additional employees when necessary. As long as the shop has a backlog of work, the owner/management is often content to “get by” with the employees already on the payroll. But this, in fact, is the surest way to prevent growth. While the only way to know for sure what kind of production to expect from a facility is to measure technician efficiency, a good rule of thumb is that body/sheet-metal technicians can produce 150 percent (that is, for every 40 clock hours worked, they turn 60 hours), and painters can be calculated at nearly 200 percent efficiency (for every 40 clock hours worked, they can produce 80 flat-rate hours). These figures assume proper equipment and availability of supplies.

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By scheduling in hours and knowing the efficiency rating of its technicians, a shop owner can schedule much more accurately. If workload dictates a need for additional employees, the business must recognize that fact and hire as necessary.

3. Inefficient staff – By measuring employee efficiency, you can determine which employees are productive and carrying their weight and which ones are the weight. To get the most out of each of your employees, it’s also important to understand that employees are human and that each one has different “maintenance” requirements. Some technicians simply want to be left alone to work. Others need to be coached and coddled. This isn’t to say that one is a better employee than the other; a good manager “knows” his technicians – how they act and react in certain situations – and adjusts accordingly. For example, I have one technician who constantly needs to be watched to ensure the quality of his work. He’s not a bad tech, just fast – too fast sometimes. He’s overlooked steps or damage in the past, and I believe that if he thought his work wasn’t going to be checked, he’d probably cut corners.

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On the other hand, I have another technician who unfailingly does incredible work and desires recognition for a job well done. One way I accommodate this is by relaying customer messages when they voice their satisfaction (a good thing to do for any tech). If the customer doesn’t say anything, I’ll often go to the tech and – in front of others – tell him what a great job he did.

We recently had a customer who’d bought an SUV from a used-car lot come to us complaining about the door gap being uneven around the upper frame. The vehicle had been wrecked, and the roof was buckled and the upper “A” pillar was up and back. Repairing this required a bit of ingenuity since the rail had been straightened already, yet the windshield pillar was still off. But this tech sat back and figured out just how to pull the roof down to get the pillar back.

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After he pulled it, I told him that I hadn’t been sure it could be done but I knew if it were possible, he’d be the one who could do it. I could see him swell with pride.

Another part of “knowing” your employees means knowing when an inefficient employee is valuable enough to keep. The first technician I discussed is a prime example of this. Sometimes he needs to go back into a job and finish something he missed. This is very inefficient, but the rest of the time, he’s usually our top producer. Another example is a painter I worked with in the past. When we switched paint systems, he couldn’t get the hang of the new brand. The jobs turned out perfect, but he was extremely slow. The delay in the paint department affected the whole shop. Knowing he was a good painter and an intelligent person, I was sure he’d catch on in a short time. It turned out he was simply being over-cautious because of some misinformation he’d received from a painter friend of his. It took about three weeks for him to realize it, though. And for those three weeks, the entire shop suffered. In the long run, however, he turned out to be one of the best employees I’ve ever worked with.

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Other times, it’s necessary to make a tough business decision and fire the inefficient employee. Don’t let personal issues get involved. You’re in business to make money. Firing someone is never pleasant, but good hiring practices can minimize these uncomfortable situations.

4. Poor attendance – Nothing is as frustrating to an employer than being unable to meet deadlines because of poor employee attendance. Whether due to personal situations or other circumstances, poor attendance cannot be tolerated. Studies have shown that very poor attendance can often be attributed to substance abuse, and someone who’s using drugs or alcohol can’t be trusted to be honest and safe in a shop environment.

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An employee with a poor attendance history must be confronted and given the ultimatum of working or termination. If it’s discovered there’s a substance abuse problem or a personal issue causing a conflict, an employer should consider the employee’s value to the business. Counseling should be considered for any employee deemed to be otherwise valuable and decent.

Problem: Lost production time (re-dos and comebacks). This is influenced by:

1. Lack of quality control – One of the most common causes of comebacks or re-dos is the lack of clear understanding of what’s acceptable. By identifying what defects aren’t considered up to company standards, it’s possible to greatly reduce re-work. The most effective way to convey your expectations is to devise a written “Quality Standard.” Items such as debris in the paint, scratches in body filler, buffing swirls, uneven gaps and excessive texture should be identified as unacceptable in the standard.

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You might also want to give the detail department a checklist to verify that common aspects of repairs are met. By delegating this responsibility to the detailers, problems can often be found and repaired before a final inspection. (There’s no substitute for a final quality inspection by either management or the estimator.)

2. Untrained/inexperienced techs – With the constant changes occurring in automobile design and the availability of new materials and equipment, it’s vital to properly educate and train your repair staff. Plus, the advances made in repair materials and paint systems allow production staff to be more efficient, resulting in better overall repairs in less time.

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But to properly fix today’s vehicles, it’s sometimes necessary to train techs on new techniques and tools. In-house training is often offered by suppliers and manufacturer representatives. Some companies also offer training in classroom settings when you purchase new equipment. Many area colleges and vocational schools even offer evening technical classes. Resources are available; it’s up to you to utilize them.

But even the best trained techs learn by doing; hands-on experience is an invaluable teacher. Obviously, hiring technicians with a solid background in autobody repair is the best choice, but that isn’t always possible. Some trade schools, however, do have internship programs where the students work in shops as part of their education. Even minimal experience can be beneficial. And as long as the training process is thorough, these students can be excellent alternatives when more experienced technicians aren’t available.

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3. Poor work environment – Poor work environment encompasses much more than the physical facility. A work environment also includes the general atmosphere of the business, along with the relationship between management and staff and among the technicians themselves. If techs dread coming in, this can negatively impact the quality and quantity of produced work.

Employees should be praised for good work. And when a customer comments positively, let the repairer know. If possible, have the customer compliment the technician personally. The sense of pride associated with a job well done reflects in the quality of future repairs, too.

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Equally important is providing a clean, safe and healthy physical environment. Aside from showing potential customers a more positive image, a clean workplace is less hazardous. Production lost due to accidents is costly in several ways, so be sure all safety regulations are strictly followed. Don’t allow used parts or other clutter to collect, and keep tools, equipment, air lines and extension cords in good condition.

Problem: Promised times not being met (jobs not leaving on time). This is influenced by:

1. Poor scheduling practices – Again, we delve into the issue of scheduling. While it’s one thing to have a healthy backlog of work on the calendar, it’s an entirely different matter when that backlog is in the shop. In the past, a common practice was to take the vehicles on and then put the owners off when it came time to deliver. Today, that simply isn’t acceptable (not that it really was before). People rely more on their automobiles these days. Vehicles have gotten so expensive that very few families have an extra car sitting in the driveway or garage. And with more and more families having two working parents and children going in all different directions at the same time, sharing rides can be nearly impossible. Consumers want and need their vehicles back quickly.

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By closely calculating repair completion times, not only can repairers keep customers happy, but they can more efficiently flow work through the business. Once you know your average turnaround time, scheduling one hour in for every hour going out is a great way to start this improved flow. It’s also necessary to have the required parts on hand ahead of time to keep this flow going.

2. Lack of communication – One of the most commonly overlooked reasons for production problems is communication. The production staff needs to know when vehicles are scheduled to leave, as well as be made aware of any schedule changes. This can be done by simply writing the due date on the windshield. It’s amazing the business sense a dedicated painter and body technician can display if you merely keep them in the loop. Not only will they feel more important being part of the team, but their sense of pride can result in better quality repairs.

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But displaying the due date isn’t enough to enhance communication to the level necessary to become an efficient facility. Daily release meetings must be held with all parties involved. A couple dozen donuts and a large pot of coffee is a small price to pay to keep the entire team moving in the same direction. By openly discussing the priority jobs, any foreseen delays, special promises made to customers or problems found with the previous day’s customers, the team can work together to avoid recurrence and make that day’s deliveries go smoother.

Problem: Poor management. This is influenced by:

1. Inexperienced management – Although management experience is often preferred and may even be a deciding factor in the hiring process, a person with good people skills and the ability to make sound judgments can be trained for management. An ideal candidate for an assistant manager’s position is a person with limited experience whom you can train and groom to match your business’s needs and methods. Why? Because a person with greater experience may need to be re-trained to match your business’ methods, and this can sometimes be more difficult than starting fresh.

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Problems often arise when not enough time is spent training an inexperienced but eager-to-learn manager. Misconceptions and misunderstandings can lead to problems in many ways. If you choose an inexperienced person as a management candidate, you have to make a dedicated effort to properly and thoroughly train that person.

2. Inefficient management – Inefficiency in management can be attributed to several factors, not all of which are the manager’s fault. Sometimes programs or policies already in place detract from the manager’s ability to perform. Outdated practices or procedures that haven’t kept pace with industry growth demands (such as those associated with direct-repair programs) may overload management to the point where administrative duties hamper their ability to accomplish goals.

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In other cases, it’s truly the manager’s ineffectiveness that initializes problems. Additional training may be a consideration for an otherwise valuable employee. Instructions on better time management, improved paper flow practices or similar assistance may be all that’s needed. Receiving input from the manager in question can also be vital to correcting inefficiencies.

Although there’s no easy way to determine for sure if management is the cause of reduced or inefficient production, there are several indicators. Chronic problems with parts delays could stem from a poor choice of suppliers, poor parts ordering practices or improper estimating practices – all of which could be a management problem. Also, if technicians are frequently found standing idly around, management could be scheduling improperly. Any delay, no matter what the area – from parts to paint tints – should be assessed to prevent further occurrences.

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There will always be parts delays for certain items and customers will occasionally be late (or not show at all), but it’s the duty of the management staff to minimize these counterproductive scenarios and, whenever possible, have an alternative plan of action in place to compensate for them.


There Are No Quick Fixes
The information in this article – and last month’s – isn’t intended as a cure-all or quick-fix for depressed sales and slow business. The process of re-establishing acceptable volume and production is lengthy and requires a serious commitment. The good news is that while all individual businesses vary in some form, this template can be used as a stepping stone to get your shop on course and moving in the right direction.

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Calculating Required Shop Hours
The best way to calculate “required shop hours” is to work backward. A shop owner should set a reasonable goal for income – for both himself and the shop. (The shop should turn a profit of its own in order to grow efficiently, and the owner’s salary should come out of the profit the same way the technicians’ pay and other overhead does.)

Once the figure is set for both the owner’s salary and shop profit, calculate the gross profit (sales minus immediate expenses such as parts, materials and technician pay) as well as net profit (gross profit minus all overhead such as employee benefits, heat, electric, telephone, mortgage/rent etc.). Once you know these numbers, you can figure out just how much gross sales (all sales minus taxes) you need to make the desired profit.

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By analyzing the average jobs coming in your shop, you can see the ratio of parts to labor to materials to sublet. And once you know the profits earned in each of these categories, you’ll see how many gross dollars you need to book in each week to get the desired profits.

Once you’ve done the calculations, it becomes quite clear how scheduling “hours” instead of “jobs” can be beneficial since you’ll know roughly how hours relate to the overall profit of a job. Of course, some jobs will be more profitable than others, but in the end it should average out.

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Shop Figures for Fictional Shop USA

The following chart is based on benchmark numbers, which most shops aren’t meeting. In addition, most shops have higher overhead expenses.

Non-Production Payroll (a)

Weekly

Monthly*

Desired Pay for Owner

$1,250

$5,375

Manager’s Pay

$700

$3,000

Secretarial Pay

$300

$1,290

Desired Shop Profit

$290

$1,247

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Total

$2,540

$10,912

Overhead (a)

Weekly

Monthly*

Mortgage/Rent

$465

$2,000

Electric

$58

$250

Miscellaneous 

$895

$3,850

Telephone

$29

$125

Heat

$58

$250

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Total

$1,505

$6,475

Total Expenses

$4,045

$17,387

 

Average Job (a) = $1,300

Job Breakdown

Average % of Job (b)

$ of Job

Gross Profit % (b)

Gross Profit $

Labor

40%

$520

(g) 60%

$312

Parts

45%

$585

(g) 25%

$146

Materials

10%

$130

(g) 25%

$33

Sublet

5%

$65

(g) 20%

$13

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Total

100%

$1,300

130%

(d) $504

Average Labor per Job = $520

Labor Rate = $36 (a)

Average Hours per Job = 14.4 (c)

Average Profit per Job = $504 (d)


No. of jobs per week required to reach desired goals (e) = 8

No. of hours per week required to reach desired goals (f) = 116 (b)

* Based on 4.3 weeks per month

  Includes insurance, advertising, benefits, uniforms, etc.

(a) Based on a fictional shop

(b) Based on “benchmark” numbers

(c) Derived by dividing the average labor dollars per job by the labor rate

(d) Derived by adding the gross profit for each category on an average job

(e) Derived by dividing the required/desired profit by the average profit per job

(f) Derived by multiplying the average number of hours per job by the number of jobs required per week

(g) Derived by dividing profit dollars by sale amount. (Profit dollars are calculated by subtracting individual immediate expenses, such as technician pay (labor), parts, materials or sublet cost, from the sale amount.)

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Writer Patrick Yurek has 22 years of industry experience and has held every conceivable position in a collision repair facility from sweeper to management. Among his credits are several PPG certifications and General Motors technical certificates. He was the president of the General Motors Service and Parts Managers Organization of Western New York until he relocated to the Charlotte, N.C. area, where he’s now the manager of the Griffin Chrysler, Dodge, Jeep, Toyota, Pontiac, Buick, GMC collision center in Rockingham, N.C.

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