BUSINESS
Financial Understanding in the Garage Business
10
By Andy Savva, The Garage Inspector
Once upon a time, conventional wisdom suggested that if there was money in the bank account at the end of the month, things were going reasonably well. Bookkeeping and accounting were fine, but only for accountants. Servicing and repairing vehicles were for garage owners and technicians – people like you and me.
Appreciate your value
However, in a world of compressed and declining margins, what was good enough for our predecessors will not be good enough for the competitive and ever-challenging business climate you and I face today, and certainly not good enough to sustain an efficient garage business in the future. Understanding your numbers – especially the Key Performance Indicators (KPI’s) that tell you just how well, or not so well, your business is doing at a glance, is CRITICAL.
The only commodity that a garage sells is labour, we can call it skill, time or knowledge. Some may argue that we also sell parts – well we may do, but we do not have control over these purchases, these are by-products of what and how much labour we sell.
The demographics of most garage business up and down the country have been born out of good technicians who really have the skill set in repairing vehicles all of sudden owning a garage business. Most do not have the essential skills in marketing, customer service, operational management, reception management etc. And why should they? There is no qualification required to run a workshop, unlike Germany where you would have to undertake a 3-year graduate programme before you can manage or own an independent garage business.
The garage business, like most other service businesses, is all about raw materials and finished goods. It is all about commerce – the exchange of goods and services for the compensation of one kind or another, in our case revenue. It’s about creating value, adding value, and creating services and products that we can sell for more than what they cost us, in order to make a profit. Isn’t that what business is all about? Is profit something to be ashamed of? Is it a dirty word?
More to the point, most garage owners and managers fail to recognise the value they add to the process in terms of service, skill, competence, quality, reliability and ability to respond to customer wants, needs and expectations. So, what happens is that garage owners set their labour rates because it is the going rate in the given area. The only thing we sell, our only revenue stream, we decide the value of by picking a figure from the sky. Consequently, garage owners who don’t realise or understand the value of the products and services they provide are subsidising the cost of repairs with unrealistic low prices. Almost every problem this industry of ours faces – acute shortage of trained qualified technicians, the lack of interest in
