The goal for any shop is to be profitable. To be profitable, shop owners must not only understand how to balance their business financially but also how to manage their team effectively by improving communication.
Cecil Bullard, CEO of the Institute for Automotive Business Excellence, broke down the importance of both during his training session, “Improving Communication and Team Work” at APPEX on Nov. 2.
“Without profit you don’t have a business; you only have a stressful job,” Bullard said. Over the past 40+ years, Bullard has been a technician, service advisor, manager, owner, trainer, and consultant in the automotive service and repair industry.
Financial balance
“It’s important to balance your business financially in order to predict and control your profits,” Bullard said.
Finding the right balance starts with knowing your variable and fixed expenses. Variable expenses include technician costs and parts costs. Fixed expenses are anything that is not parts or labor such as rent, utilities, management salaries, equipment purchases, marketing, etc.
Next, is knowing your gross margin, the “most important number in the business”. This number needs to be enough to get you a 20 percent net profit or better. However, in order to have the right gross margin you have to have the right parts and labor margins.
Bullard suggested parts margins need to be over 55 percent and labor margins should be 64 percent or better.
If a shop is not currently profitable, they may believe they need to increase their car count. However, this is not the case.
By increasing the number of cars entering the shop, the shop increases liability and labor costs. Instead, the shop should consider increasing their average repair order, raising their prices, and maximizing what they do have (higher quality of service).
Shops may also think they need to decrease expenses. Again, this shouldn’t be the case. It may work for a short period of time, but it won’t work in the long run. Most shops are already conservative and cost of doing business is rising. Being able to keep good employees and equipping them with the right tools and education is important to taking care of customers, their vehicles, and the shop.
Improve communication
Many business problems can be linked to poor communication. Good communication increases job performance, job satisfaction, and sales.
“Everyone wants to be heard,” Bullard said. “People who are heard feel better about themselves and perform better. People who feel heard and that have a say in their environment and goals have higher self-esteem and are more likely to achieve their goals.”
To communicate better, one needs to know how to listen. Bullard outlines ten ways to listen better.
10 steps to better listening
- Stop talking – you can’t listen if you’re talking.
- Remove distractions – and avoid interruptions such as email, papers, TV, etc.
- Relax and focus – give them your undivided attention.
- Maintain eye contact – watch their body language.
- Empathize – put yourself in their shoes.
- Take your time – don’t hurry them.
- Avoid prejudice – don’t let their habits or mannerisms annoy you.
- Listen for more than words – listen for what is not being said in words but their tone, volume, etc.
- Non-verbal – look for non-verbal communication.
- Repeat – in their words.
“You don’t have to change everything in the company to the way they want it, but you have to listen to them if you want them to buy into the goals of the company and be a part of the team.”
In the end, learning to communicate better will improve your profit and make running your business easier.
