THE LOW ROAD MYTHS
Shop owners are surrounded by myths…misconceptions about how to grow profits, how to attract great customers, and how things should and shouldn’t be in their shop.
These myths lead owners to accept decreased profits, low-quality customers, long hours and small paychecks as simply “part of owning a shop.” Let’s bust these myths and find the TRUTH!
Low Road Myth #1: The Profitability Myth-conception
“You take the LOW road…We’ll take the HIGH road. It’s PROVEN!”
Profitability for repair shops has been the subject of much blogging lately. The latest trend that some are promoting is that shop owners can ignore average RO and labor gross profit percentage and still run a profitable shop.
The truth is that the hundreds of shops I have observed up close and personal (including my own) could not survive without a significant focus and high execution on these two categories.
It’s all well and good to think that any shop can ignore the numbers and concentrate entirely on customer service and/or on trying to increase the volume of low- or no-profit tickets and customers that are seeking the cheapest, fastest deal they can find.
It’s fine if you want to believe that paying attention to and focusing on achieving and sustaining reasonably profitable numbers somehow makes you cut-throat and cold (instead of intelligent, secure and stable like our shop and those of our clients).
But that’s not reality!
Because when you ignore average RO and labor gross profit, you can’t provide the same level of outstanding customer service. Left unattended, low average RO and labor gross profit are the leading causes of negative cash flow and lack of profits in the vast majority of shops in the U.S. today.
When you are bleeding cash, you lose the ability to offer two-year warranties. You can’t afford the kind of people who care deeply about your customers and who understand, are capable, and are willing to hold up the highest standards of care and management of your operation.
You can’t hire skilled, attentive technicians who will stay happy and focused even when they have to work on 9 different cars a day to bill the 8-10 hours of labor they need to feed their families!
You can’t purchase courtesy shuttles, loaner cars, rentals or employ drivers to provide free rides to work and home…and still be able to take home a reasonable income (and sustain that on an ongoing basis)!
And really, at the end of the day, the truth of the matter is that when you ignore (or even just de-emphasize) average RO and labor gross profit, it usually leads to failure.
At the very least, it surely will lead to having your savings account either slowly drained or quickly deposited back into your business until you have no other choice than to go back and do the right thing, the sensible thing: developing a sustainable, profitable auto repair shop!
So as we dig into the Low Road Myths, keep in mind that this isn’t about becoming heartless or ruthless…it’s about being able to sustain real growth in your repair shop business so you can continue to provide the best service to your neighbors.
It also allows you to continue (or begin) to take care of your own family and those families who’ve entrusted their careers and income to you and your shop!
All of that being said, here are the immediate results your auto repair shop will feel if you buy into the myth that you can ignore average RO and labor gross profit.
Reality #1- Don’t Lose Your Emphasis on Average RO
Lack of emphasis on average RO will result in…
- Eroding service advisor skills and effectiveness. If they don’t have to perform at top levels and hit reasonable targets, they won’t!
- Loss of service advisor accountability. If you don’t measure and set good expectations, you cannot manage positive outcomes.
- Less-than-truthful recommendations to the customer. Not measuring the number of recommendations found and closed gives the service advisor license to not tell the customer the whole baseline truth about their car – just so they can “sell” the easy stuff.
- Lower tech efficiency. Inspections, write-ups, and test drives take time per vehicle. If less dollars per vehicle are completed, tech efficiency will go down.
- Loss of technician accountability. If techs are not measured by a high standard of average RO, they will tend to get lazy — resulting in low morale and motivation.
- More chaos. Lack of high goals and expectation always results in less organization and more chaos.
There is MUCH more to be said on this topic, so stay tuned for next time, when I’ll expose more of the TRUTH when it comes to Average RO and Labor Gross Profit, and also dig into the next Low Road myth, the Pricing Myth-Conception