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Recasting Shop Financials
Resolving Employee Conflict
Boosting Tech Productivity July/August 2014
It’s more than just fixing cars
3A Automotive Service
Providing Friendly, Honest Auto Repair Since 1975
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July/August 2014
Shop Profile 22 Rischbieter’s Automotive, St. Louis, MO 36 3A Automotive Service Phoenix, AZ
36 Shop Profile: 3A Automotive Service
Features 4
Technology: Electronic Shop Communications
32 Human Resources: Resolving Conflict; Boosting Morale 44 Buying/Selling: Recasting Shop Financials
Sponsored by:
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Human Resources: Resolving Conflict; Boosting Morale
Shop Profile: Rischbieter’s Automotive
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Shop Management: What Every Service Adviser Should Know About Selling Executive Interview: Roy Kent, Federated Auto Parts Shop Operations: Boosting Tech Productivity & Shop Profitability
Shop Owner Staff Publisher
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Contributors
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Customer Service: A Case For Consistency
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In Memoriam
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Founder of Babcox Publications
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Tom B. Babcox (1919-1995)
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|Technology|
by Uwe Kleinschmidt, CEO, AutoVitals
Roger That...
Paperless Workflow Boosts Technician Productivity And Shop Communications The paperless shop operation, including eliminating the paper rack of repair orders and other paperwork, has come a long way. Touch screens or big screen TVs have replaced the paper rack so that everyone can see the status of each vehicle in the workflow. ● The presentation of inspection findings and other information to the motorist on paper at the counter has been replaced by emails containing the inspection results enriched with images and educational videos. ● Technicians no longer have to clock in with punch cards or
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other archaic methods. ● The worksheet on paper has been replaced by its equivalent on the tablet. ● Progress reports flowing from technicians to the service adviser have been replaced by tablets with built-in monitoring that provide automated updates
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that appear right on the service adviser’s computer screen. All of these enhancements have been made possible thanks to the Internet-based IT infrastructure where the Shop Management Software (SMS) and its database is made available in the cloud, so that mobile devices and the service advisers’ screens are updated in real-time. But what about the communication between the technician and service adviser about specific problems that need a fast answer, or when a response is needed for the customer waiting on the phone? Doesn’t the computerization of communication hit its limit for instances when the technician needs to go back to the front office? Are
technicians now forced to use the keyboards on tablets to finger type, making it take 10 times longer than a quick haul to the service adviser? Not really. There is no limit to digital communication and the following text introduces the “(almost) typefree chat” for the technician to communicate.
Speeding It Up With ‘Smart Chat’ “It takes only a few taps to get the message to the front counter.” After analyzing the communication between the service adviser and technician, we found that more than 70% of the back and forth messages are repetitive and can be addressed by sending canned responses. That
Fig. 1
Fig. 2
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applies especially to the technician working on any given vehicle. In addition, important information like the year, make, model, repair order number and the timestamp can be generated automatically. See Fig. 1 on page 6. Technician Jamie W. is using the tablet (on the left in Fig. 1) to quickly chat with ‘Motsen’ R. Motsenbocker, the service adviser, about a status update on the 2006 GMC Yukon Denali. Motsen uses the chat software on his PC, shown on the right in Fig. 1. It pops up automatically and catches his attention every time a message is
Fig. 3
Fig. 4
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sent to him. Nothing you see in Jamie’s messages has been typed out. Since Jamie started the chat by tapping the chat icon while having the inspection for the Denali open, the tablet knows the communication is about this vehicle and adds the YMM and RO number, as well as the timestamp. Using the canned responses dropdown menu, Jamie selected the appropriate message and hit submit. Only four simple taps were necessary to respond to Motsen’s question. Easy, don’t you think? How does Jamie know when
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Motsen has a message for him? No matter what page Jamie has open on the tablet, the chat icon starts flashing with the number of open messages. Jamie then taps the chat icon and the already viewed, automotive-specific chat window opens. See Fig. 2 on page 6 for details. “Clicking on the link from the tablet puts everything about the job right in front of me.” Now, let’s take a look at speeding up the service adviser’s work through a smart-communication leveraging chat. Oftentimes, technicians discover “things” while working on a particular job. They leave a note, snap a picture and add this to the job on the worksheet. Fig. 3 shows the tablet screen at the moment when Jamie is about to hit the “smart chat” button (red arrow) after he selected how far he is into the job (50%, marker A), snapped one picture (marker B) and added a note (marker C). Motsen receives the following chat after that (see Fig. 4, marker 1) and clicks on the link for RO #148258.
His browser opens and takes him exactly to the spot on the work order where the job is highlighted and he can explore the note and image. See Fig. 5. Motsen then asks Jamie to retake the rotor image so that the completed work can be better illustrated once the customer picks up the vehicle.
Decisive Actions In A Heartbeat Communication between the technician and service adviser is crucial for a highly effective workflow in a shop. The tablet for the technician and the computer for the service adviser are on hand, even to do the most eventdriven communication. All information is at both the tech’s and service adviser’s fingertips and, moreover, can be tracked and audited by the shop owner to uncover potential for improvements. The next step is to tap into “big data” and make the technician’s life even easier. I’ll keep you posted about that, so please stay tuned. SO
Fig. 5
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Shop|Management|
by Bob Cooper, president, Elite Worldwide, Inc.
What Every Service Adviser Should Know About Selling
Many years ago, when I was still working on cars, I came to the realization that I would someday own my own shop. I also realized that in order to do so, I would first have to learn how to sell service. At that time, I didn’t know how to sell, and I also had little respect for salespeople because I viewed them as people who would take people’s money and, more often than not, do little in return. I was actually faced with two challenges: having to somehow learn how to sell, and also deal with my internal struggle of becoming part of a profession that I had little, if any, respect
found a book that I thought would be perfect for me. The nation’s top car salesman at that time wrote it, and even though he sold cars instead of service, I thought it was likely more
The true superstars will always sell from their hearts, and they know that when that magic moment occurs, and the customer believes in what they believe, then, and only then, have they closed the sale. for. So, here’s what I did. I went to the local bookstore looking for books that would help me learn how to sell and hopefully help change my perception of selling at the same time. To my amazement, I
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closely related to the automotive service industry than any other book I would find. I bought the book, hurried home, and began reading each and every word. I was thrilled with what I was learning, so I
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was circling key phrases and taking pages of notes. And then I came across a part that I will never forget. The author said that every time he was selling a car, he would look across his desk at the customer and view him/her as a bag of groceries. He said the reason he would do this was to convince himself that if the customer didn’t buy that car that day, he would not be able to eat dinner that night. As soon as I finished that passage, I
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folded up the book and put it away. To this day, I have never finished the book, but it still sits on my bookshelf for one simple reason: to remind me of everything I never want to be. With all due respect, that author may have transferred a lot of titles, and he may have run up the numbers, but the one thing that he appears to have forgotten is this: The people he was dealing with were your moms and dads, and your brothers and sisters. They were people with hearts
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and souls, not just commodities, or a means to an end. At the same time, I was also captivated by two people; the late, great John F. Kennedy, and the late, great Martin Luther King Jr., and what I learned from these two has been
were sold on the service. The true superstars will always sell from their hearts, and they know that when that magic moment occurs, and the customer believes in what they believe, then, and only then, have they closed the sale.
The money? Interestingly enough, there is another principle that I’ve learned over the years, and it’s another one that’s timeless. It’s the one that says, “If we do the right things for the right reasons, the money will follow.”
ingrained in my mind ever since. It’s the understanding that selling really has nothing to do with money. It never has, and it never will. You see, what selling really is, is helping people believe in what we believe. President Kennedy was able to unite America by helping us believe that we were the greatest nation on earth, and Dr. King was able to help us believe that all mankind is equal, regardless of the color of our skin. Over the decades, I’ve hired many superstars, and, as a company, we’ve trained tens of thousands of advisers, so I can tell you with a clear heart that the best advisers in America have a number of things in common. Most importantly, they never put money ahead of people, and they understand that just because someone authorizes a repair or service, it doesn’t necessarily mean that they
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The money? Interestingly enough, there is another principle that I’ve learned over the years, and it’s another one that’s timeless. It’s the one that says, “If we do the right things for the right reasons, the money will follow.” Selling service is one of the easiest and most rewarding jobs on earth, as long as you believe that the service is the right choice for the customer, and as long as you sell…from your heart. SO Since 1990, Bob Cooper has been the president of Elite Worldwide Inc., www.EliteWorldwideStore.com, an ethics-based company that helps both struggling and successful shop owners take their businesses to new levels through one-on-one coaching from the industry’s top experts. The company also offers shop owner sales, marketing, and management seminars, along with service advisor training. You can contact Bob at contact@eliteworldwidestore.com, or at 800-204-3548. July|August 2014
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14-16-Federated Executive Interview 7/15/14 9:31 AM Page 14
Executive|Interview|
Roy Kent Chief Strategy Officer And President, New Business Development, Federated Auto Parts Roy Kent joined the Federated Auto Parts management team in January 2014 as chief strategy officer and president of new business development. An industry veteran, Kent’s vast aftermarket experience includes a long career at Federal-Mogul where he held a variety of positions, most recently serving as vice president of wholesale distribution. At Federated, he oversees a number of key areas including membership development, vendor relations and strategic planning. The Automotive Aftermarket Industry Association recently rebranded itself the Auto Care Association, favoring the phrase “auto care” over “aftermarket.” What are your thoughts on moving away from the term “aftermarket”? We have always felt that the term “aftermarket” is an industry term that is not well understood by consumers. We use terms such as “Car Care Centers” for our shop partners and always try to communicate in a manner that will maximize understanding and effectiveness. We fully support the new association name and feel that it will definitely add to the understanding of what our industry
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is all about. Promoting “auto care” is a natural for our members and we will work to support not only the new name but also the concept of taking care of vehicles. There is no doubt that this is a solid upgrade and one the entire industry should be excited about supporting. How does Federated get the right mix of parts on the shelf? Having the right inventory available for our customers is critical. We believe that inventory management is a combination of focus and execution. Our members need as much information as possible on vehicle population, replacement rates, proper pricing, brands, quality levels, national and regional sales and a host of other input. This information is then applied to local markets
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where individual expertise on area demand and customer needs are added together with supplier input and other distilled data sets so that inventory can be tailored for each market. It is definitely not an exact science, but there is more information available today than ever before, providing insight and support for managing hundreds of thousands of items on a daily basis. What particular attributes about Federated give your group a leg up over the competition? We believe the strength of our group is in the collaborative sharing of ideas, insights and innovations. Federated members are selfless in their approach to helping the sum of the total be as strong as possible. This may be in sharing processes, ideas or experiences in the market. This can include areas where cost and inventory efficiencies are leveraged. One example is the Federated Car Care program where members share ideas, approaches and improvement initiatives. Another is eCommerce activities, including our in-house electronic catalog and Enhanced Supply Chain program that allow sharing of the highest quality information. Collaboration also occurs with our member-owned CoMan warehouse that receives tremen-
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dous support from all members and a large number of suppliers. Whatever the area, our members are willing to work together for the common good of all. Individual member success is contingent today on group collaboration and our members are dedicated to this process. The aftermarket truly has become a globally reaching industry. How much a part of your group will be represented by stores or warehouses outside the United States? While we do have members outside the U.S., it has not been a priority focus. Federated exists for the benefit of our customers and our membership. While we may look at global markets, we have not found sufficient advantages to pursue this in a major fashion. If our members see a benefit in increasing the focus outside North America, we will respond to their
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direction and increase the effort on their behalf.
Do program groups look different today than they did, say 10 years ago? If so, how? First of all, there are fewer groups and that is a significant change. Those that have survived have found new ways to add value for their member-
ship and their customers. Certainly the last 10 years have provided an opportunity to address new challenges such as exploding inventory proliferation, new retail competitors, consolidation of customers, national accounts, eCommerce and data needs. Other issues include new efficiency methods, such as bar coding; direct import; and working capital chal-
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lenges. Tools have been developed to help us address some of these challenges, and programs, such as our Co-Man warehouse and data sharing initiatives, have accelerated in importance. Program groups are much more involved today with associations like the Auto Care Association and AWDA. These organizations work on our behalf to address such issues as evolving technology and the impact
of government policies concerning our industry. The bottom line is that program groups like Federated exist today to help us leverage our collective strength in many areas that were not as significant 10 years ago. If we do our job correctly, there will be many new areas to explore 10 years from now. SO
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Shop|Operations|
by Dave Justice and John Fowle, shop owners and creators of Labor Profit Management
Roadmap To Profitability Where Does Yours Start And End? Your roadmap begins with collecting all the labor dollars for your technicians’ time. Through measuring and managing, you can determine whether or not you are collecting all the labor dollars that are available to you, or if you are leaving money on the table. Once you start measuring a few important metrics, especially effective labor rate (ELR), you will be able to make meaningful decisions in your business. Measuring and managing these metrics will help you find existing, hidden labor dollars — and collect more labor dollars — which can boost your bottom line. Are you collecting labor dollars for indirect labor costs? Most shops have a matrix for their parts, but how many shops are using a matrix for their labor? We all know that drive-
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ability testing takes time and talent to perform; that’s why we need to charge differently for that service. For example, say my hourly labor rate is $100, but using a labor matrix, I charge $129. My technician gets paid for the one hour, but because of the equipment and training I need to perform these services, I need to charge an additional $29 for this time. Essentially, you are preventing a bleed-out of financial resources from the indirect and hard-to-measure costs of labor. These costs may seem small per job, but they can add up “big time.” Why is it so important to collect as many labor dollars as possible? We pay our bills from the labor dollars we
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collect for our technicians’ time. Therefore, it’s important that we collect for the time it takes our technicians to complete a task. For example, a job that has an estimated four hours of billed time and is sold at $80 per hour equals $320. If the technician does it in three hours, you should still collect the $320, rather than $240. This is a good, profitable technician and his labor should not be discounted. Again, this profit is what we use to pay our bills, keep our staff employed and keep our businesses afloat.
Tracking technician productivity, efficiency and ELR will help you measure and manage your labor dollars. Productivity is defined as billed hours divided by clock hours (the time your technician is in the building.) For example, if a technician bills 40 labor hours and is in the building for 40
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hours, the technician is 100% productive. Determining the productivity (and efficiency) of your technicians is the first step in determining where your labor dollars are bleeding out. Efficiency is defined as billed hours divided by actual hours (the time spent working on cars). For example, if a technician bills 50 hours and does it in 40 clock hours, the technician is 125% efficient. In order to accurately track efficiency, you’ll need a time clock for the technician to clock in and out of each task. This brings us back to ELR, which is the most overlooked number in a shop. What is ELR and why is it so important to measure? ELR is the actual dollar amount you collect for each hour of your technician’s time. In the gas station business, there is a term called pool margin. For example, if I sell 100,000 gallons of gas at a $0.10 pool margin, I would make $10,000. If I sell the same 100,000 gallons at a $0.13 pool margin, I would make $13,000. Tracking the pennies over a period of time is important to maintaining profitability. The same concept holds true with ELR. If your labor rate is $100 an hour and your technician bills 40 hours, you would expect to collect $4,000 in labor. Let’s say your service adviser gives a discount on the labor to sell a job and only charges $90 an hour for the 40 hours; you would collect $3,600. That’s $400 less in one week off of your bottom line. And, over the course of one year you would lose more than $20,000. Again, tracking the pennies, and in this case dollars, can have a positive effect on your bottom line.
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Menu-priced items and discounted oil changes also affect your ELR. ELR looks at our service adviser’s ability to sell maintenance and service at the rate you expect in order to maintain your profitability. Fixing the labor in your shop costs you nothing. You don’t need to buy another scanner, turn on another light or hire another technician — all you need to do is measure and manage what you already have. When you have a time management system in your shop, you can easily make on-time business decisions. If you set goals for your technicians and they are able to see their progress every day, they will naturally work to get to the goal. And, if you can see a technician having some challenges, you can address them this week, not at the end of the month when the game is already over. We must inspect what we expect. Having the processes in place will bring technician accountability. Determine the type of technicians you employ and pay accordingly. In our industry, we have different types of technicians. The time bandit just mulls around all day at his own pace, making an hourly wage that he’s comfortable with. Then, you have the technician who’s good, but doesn’t know management’s expectations. You can boost the accountability of this type of technician by giving him a process to follow. Lastly, you have the great technician who wants to be recognized for his efforts. Having each of your technicians on the correct pay plan for your business is very important to the success of your
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labor profits. Help your technicians get better, and they will help your business get better. If you are motivated and focused on accomplishing something, it usually happens – that’s human nature. Showing your technicians their goals every day creates a sense of self-worth when the goal is met. Compare it to a golfer shooting below par; there is an immediate sense of accomplishment. Implementation of the processes to help your team reach shop goals is what makes a shop owner successful. What we do today takes care of tomorrow. What are you doing to secure your future? In the end, a road map for optimizing your labor dollars will lead you to profitability. SO Ohio repair shop owners Dave Justice and John Fowle developed a program called Labor Profit Management (LPM). LPM helps shop owners measure and manage technician productivity, efficiency as well as their effective labor rate and labor profit percentage. LPM integrates seamlessly with NAPA TRACS, ROwriter, Mitchell, ALLDATA and TCS. For more information, go to www.assettechs.com.
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Shop|Profile|
by Debbie Briggs, contributing writer
Rischbieter’s Automotive Continues Long Tradition Of Quality Service For some, automotive repair is in the blood — especially when you follow in the footsteps of your dad and his dad before him. Bob Rischbieter, Jr., grew up working at Rischbieter’s Automotive in St. Louis, MO, so it comes as no surprise that he now owns it. “My grandfather, Ted Rischbieter, first opened the doors in 1941 as a filling station along historical Route 66,” Bob says. “Shortly after opening, he saw the need to service those travelers’ vehicles, and he put in an outside lift. Within two years the shop had two bays, one for repairs and the other for washing vehicles.” Bob says a third bay was added in the mid-1960s after
his father, Bob Rischbieter, Sr., took over. By the end of that decade, Bob Sr. removed the tanks and pumps and transitioned into full-time auto repair. “In 1996, I purchased the business from my family,” Bob explains. “I grew up at the shop, cutting grass, cleaning the office and assisting the technicians. By the time I was 15, I was working in the shop and did so all through high school
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From July 1942
Volkswagen turbo diesel,” he says. Bob says techs utilize resources like iATN, Identifix, ALLDATA, the Internet and fellow shop owners for the latest repair information, and they also use Snap-on VERDICT and AUTEL Launch for all engine diagnostics. Also recently replaced was the shop’s tire machine with a new Corghi machine to service low-profile tires or rims up to 30 inches. “To stay competitive as an
Bob Rischbieter, Sr. Ted Rischbieter
and college. I came here full time about two years after I graduated from college.” ieter Ted Rischb And the rest, as they say, is history.
Latest Technologies Even with a long history of success, Bob knows that staying successful in today’s marketplace means staying current on changing automotive technologies. “As an independent shop, we have had to stay abreast of all the latest technologies to service a variety of vehicles, whether it’s an oil change and tire rotation on a Chevy Cobalt or a cylinder head replacement on a www.ShopOwnerMag.com
independent, it’s imperative to have up-to-date tools and equipment,” Bob says. Rischbieter’s two ASE-certified technicians also use their combined 20plus years of automotive repair experience to skillfully fix customer cars. And as an ACDelco PSC shop, Bob says they constantly take advantage of online and classroom training. Fortunately, Rischbieter’s has seen very little turnover in its 73-year history. “When I purchased the business, I July|August 2014
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‘inherited’ two techs that were with my father for 20 years each,” Bob explains. “One retired in 2005, the other in 2007. Although it was difficult, we have found not one but two top techs in Jeff Autery and Beau Douglass. “Jeff came on board six years ago as a referral from the parts store we use, and the two knew each other from working at the local Honda dealer-
ago, I re-examined the direction we were heading and chose to remove myself from the shop — focusing on only running my business and not working at Rischbieter’s.” When you’ve poured your heart and soul into a business, backing off can be challenging. But Bob saw an immediate change that not only benefited him, but also his customers.
The shop facade before (above) and after a facelift courtesy of ACDelco’s shop Enhancement Program.
ship. Beau moved over to Rischbieter’s almost three years ago.”
Day-to-Day Operations Any small business owner will tell you that the toughest part of their job is needing to wear so many hats. For Bob, trying to act as owner, service writer, tech, maintenance man and janitor just wasn’t working. “I decided we needed a change,” he says. “About two or three years 24
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“Although this was difficult at first, I have found it to be not just more profitable, but less stressful as well,” Bob says. “When we were busy and I was turning a wrench in the shop, it was almost inconvenient when the phone would ring or a customer would come in. I’m sure the customers could sense the stress. “Now, I’m at the service counter to greet my guests when they arrive,” he adds, “and I have time to listen to my www.ShopOwnerMag.com
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customers and then explain the what, how and why of what will be done to their vehicle and answer any questions.” Customers, though, have always been the focus at Rischbieter’s since its inception so many years ago. That kind of history has allowed the Rischbieters to service vehicles for up to four generations of the same family, proving that even in today’s hectic society, relationships are still important. “It has been awesome forming relationships with these customers as well as my newer ones,” Bob says. “My customers know that when they walk into the office they will be greeted by me. With the relationships we have formed comes the trust that they will receive the best service and repair.”
Shop Upgrades After 73 years of quality services, Rischbieter’s received a facelift courtesy of ACDelco’s Enhancement Program. Exterior and interior upgrades have gone a long way in presenting the shop in the best possible light to its valued customers. “The upgrades included fascia brick removal, tuck-pointing of mortar joints, new windows with supportive lentils, new bay doors, paint and new signage,” Bob says, adding that the office was also “insulated, dry walled, and received a fresh coat of paint.” In addition to building upgrades, Bob says the shop added ALLDATA 26
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Manage as part of the office upgrade, which included a new website that allows for customer testimonials and followup after repairs. “In just this short period of time, we have moved up in Google search,” he says, “and we receive at least one new customer phone call a day from the improved website.” In addition to shop improvements, Bob says it’s not just great relationships with customers that drive success at the established independent repair shop. Periodic meetings with fellow shop owners and managers, and the shop’s primary parts supplier, also fuels positive change. “Our first call for parts is to Lowe Automotive Group in St. Louis since they offer not only high-quality auto parts, but incredible service,” he explains, adding that he has his ACDelco Professional Service Center account through the parts supplier. “About six years ago, the store manager and I started getting together about once every couple months to talk shop. This has grown into a get-together that involves five or six shop owners/managers on any given night. “This roundtable group has been great,” he concludes. “We have all formed relationships that have helped our businesses, whether it’s been for advice, information or even just to borrow a tool.” It’s that kind of collaboration that will keep Rischbieter’s going strong for the next 73 years, providing a great atmosphere for employees and customers alike. SO www.ShopOwnerMag.com
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Customer|Service|
by Steve Ferrante, CEO, Sale Away LLC
The Real Case For Consistency Exceeding Expectations Builds Customer Loyalty No customer likes surprises when it comes to doing business with any type of service provider. When customers can count on consistently great service each time they do business with you, their confidence increases and they are far less likely to shop around for their vehicle service needs.
But when the customer’s experience is inconsistent — exceptional one visit and so-so or poor the next — the customer’s confidence is compromised and, influenced by the perceived risk, they are more likely to consider competing alternatives. Simply put, if the customer doesn’t trust that your business will consistently meet or exceed their expectations to deliver great results, they will not consistently return or become loyal customers.
Lessons: Outback Steakhouse Outback Steakhouse is a great example of a company that uses consistency as a business advantage. No matter which Outback location you visit, domestic or abroad, the customer experience is generally the same. Like most major chain restau-
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rants, the tangibles of the facility – layout, design and décor – are virtually identical. Additionally, what the customer experiences when interacting with employees is consistent. From the door greeters to the friendly wait-staff that looks customers in the eye to the manager’s involvement when there is an unhappy customer, everything tends to be choreographed with precision. Done this way, customers become familiar with the business. Familiarity makes customers comfortable and confident that wherever and whenever they visit Outback’s chain of restaurants, there will be no surprises.
Consistent Relationships Success in any business comes primarily from building and maintaining relationships with customers. Once those relationships are built, customers
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It sounds simple, but training only works if it’s consistent.
expect that relationship will exist and be consistent when they return for future vehicle service needs. One of the things that can quickly damage customer confidence and perceptions of consistency is when a shop manager or other personnel that customers have built a relationship with over previous visits is relocated to work at another location. This situation often leaves customers feeling abandoned and frustrated that they need to start over again with someone new. Of course, the relocation of personnel is sometimes necessary to replace someone who left the company, to staff new locations or to fill other requirements. However, unless it’s absolutely necessary, these types of personnel transfers should be avoided to maintain and build consistency with customers.
Institutionalizing ‘Wins’ Recognize that delivering consistency means doing the right thing regularly. It’s easy to fall into the trap of a routine where you’re doing the same things over and over, regardless of whether these are the best things to do for the customer. To achieve world-class customer service, you must be consistent with the positive aspects of your customer interactions and minimize (or eliminate) the negative aspects. Shop managers and employees regularly do wonderful things to improve the customer experience, earn customers’ business and maintain their loyalty. But, often those feats of greatness are confined to an individual shop and not spread to a second or third location. As an example, one shop manager may be effectively managing his or her
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team members to clean customers’ wheels and apply tire shine/protectant on each tire. But at another location within the same business, the employees aren’t necessarily doing that and, in many cases, the manager at one shop doesn’t know what the other one is doing. To achieve consistency and worldclass customer service, top-performing companies institutionalize their wins to create “best practices.” The principle is easy to understand: If a given behavior is producing positive results such as enthusiastic customers at a particular location, that behavior can (and should) be duplicated at any other shop locations to achieve the same result.
Consistency Creates Excellence A successful college football coach once said, “You have to perform at a consistently higher level than others. That’s the mark of a true professional.” It’s true. Anyone can have a “good day.” True professional organizations and the people in them achieve excellence by consistently executing proper behaviors. Inconsistency is a main reason training initiatives fail. All too often, companies treat customer service training like an event. They conduct a training session and, assuming it
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was good, participants get energized with new insight, techniques and tools. Then, with no real follow-up program in place, participants will fizzle out and return to the same level of performance they were at prior to training. Training research has revealed that, without ongoing reinforcement, 90% of what’s learned is forgotten within 60-90 days. It sounds simple, but training only works if it’s consistent. World-class sales and customer service businesses recognize this and typically engage their employees in 100 or more hours of training in their first year with ongoing training in the years ahead. Achieving and sustaining success in your auto service business requires discipline and commitment to continuous improvement, along with consistent training and reinforcement. SO
Steve Ferrante is the CEO of Sale Away LLC and has more than 20 years of successful sales, sales management and sales training experience. He is the producer and host of the Pinnacle Performance sales and customer service training program that helps independent tire and auto service businesses improve customer relations and produce greater sales results. Steve can be reached at 866-721-6086 ext. 701 or steve@saleawayllc.com.
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Human|Resources|
by David Rogers, COO, Keller Bros. Inc. and president, Auto Profit Masters
Leadership & Measurement
Two Tools For Resolving Employee Conflict and Improving Morale Is your shop a hotbed of employee conflict? Even if we look only at generational differences, it’s not hard to see why employees can butt heads and morale can suffer. Millennials are replacing Gen Xers, who displaced the Baby Boomers before them. Each group grew up in a vastly different world, and each has their own ideas about work ethic, customer service and even taking direction from management.
Of course, generational differences aren’t the half of it. If we could overcome employee conflict and improve morale simply by holding a shop therapy session and walking a mile in another man’s (or woman’s) shoes, there would be no need for an article like this. The problem isn’t just that shop therapy sessions don’t work. If that were the case, we could just change tactics, from role-
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playing to a different kind of classroom workshop. The problem is that we simply can’t cram employees into behavior models that predict how they will react in every situation. The truth is, shops don’t need a therapist. They need great leadership. Resolving employee conflict and improving morale is about digging deeper than the superficial feelings of anger, frustration or distrust, and actually addressing the cause of these problems. Understanding the struggles we all face is part of what defines a great leader. But saying that shops need great leadership means that shops need a leader who will set down clear policies, follow those policies themselves and hold employees accountable for following them 100% of the time. Great leadership means
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A great leader must play two roles: the compassionate, understanding leader; and the strong leader who holds his or her team accountable for following policies and procedures. Being a great leader means acting like both General Patton and Gandhi. If that seems like an impossible combination to you, you’re not alone. Many shop owners feel the same way. One example is my own, when I started out at Keller Bros. Auto Repair in 1997. Employee conflict wasn’t simply about a generational divide or frustration between cliques. The disagreement was between a group of
element of what goes on in the shop, you can eliminate the chaos and conflict, and micromanage the outcome. And in a way, that instinct isn’t wrong. But, you’ll be trading your happiness and health for a shop that operates exactly like you want it to. The result will be increased profits and fewer employee disagreements, but in exchange for putting aside your life outside of work. But the problems still won’t be fixed. Any time you step away from the shop — to spend time with family, to relax or to work on your favorite hobby — things will quickly slide back to how they were. If things are only working because you’re forcing them to work, it’s not sustainable. More than that, if you act like Patton 100% of the time, you limit how much your business can grow. Even after years and years of learned experience and training, most shop owners don’t have all of the knowledge they need. Control-
employees who wanted to follow the rules, and a group who didn’t. The latter were determined to squeeze down the shop and dominate the rule-followers. They were in it only for themselves. Keller Bros. isn’t unique. It’s what happens in any shop when the frustrations and differences of opinion are allowed to fester and grow into an open wound. For many, the first instinct is to take command. If you can control every
ling every aspect of the shop means every aspect of the shop can grow only as far as you know how. At the end of the day, if you can’t hire people who are smarter or more skilled than you, you’ll never really succeed. That means you need to build a team that wants you to succeed, something that won’t happen if you’re leading like a dictator. The truth is, shops don’t need a dictator any more than they need a
providing an example of care, consideration and higher principles. Great leadership also means being consistent and requiring follow-through to create great results.
The Two Critical Faces of Leadership
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therapist, which is why leadership is about striking a balance. In our shop and through our training, we call this balance the “Two Critical Faces of Leadership.” One mask — the concerned, caring side of leadership — is what you wear when your team is doing what they need to do. In this role, your job is to make it absolutely clear that you’re happy with their performance. The other mask — the drill instructor side of leadership — only comes out when things are broken. When employees aren’t following policies or procedures, your job is to make it absolutely clear that you’re unhappy with how they’re performing and how they can fix it. There’s no other mask to wear in leadership. There’s no lukewarm, unfocused gray-area role to play. The important takeaway here is that these are masks. If you naturally fall on the side of the spectrum where you prefer playing a caring, compassionate leader, you don’t have to change who you are. You just have to be willing to wear the mask and play the role of commandand-control leader when people are acting incorrectly. Your team needs to know how serious you are or they’ll never change. The same goes for leaders who naturally fall on the drill instructor side of the spectrum. If your team doesn’t know when they’re performing well
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and never sees you happy and content — if they don’t see you wear the mask of a shop owner who is pleased with their performance — they won’t want to help you succeed. If you’ve seen the movie Patton, you’ve seen what it means to wear one of these two masks of leadership. After General Patton has done something outrageous to motivate his troops, one of his staff officers says to him, “You know General, sometimes the men don’t know when you’re acting.” Patton responds: “It’s not important for them to know. It’s only important for me to know.” Being a great leader doesn’t mean changing who you are. It just means convincing your team.
A Measured Approach to Leadership Left unsaid to this point, however, is how you can know what role to play and when. The truth is, unless you have reliable, daily production numbers, it’s hard to know who is following your policies and procedures, much less which of your two critical faces of leadership to show. In other words, until you know where you shop stands, where the holes are, where your employees need to be trained, how to fix these problems and provide the necessary training, you can’t be an effective leader. This is far from everything you need
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to be a great leader. Bedrock principles like chains of command, daily accountability meetings, setting appropriate targets and daily team building are fundamentals of both employee conflict resolution and great leadership.
that we have to learn to be great leaders before our shops can have great teams, but it’s the truth. Truly resolving employee conflicts and fixing morale issues doesn’t boil down to a policy or a procedure, but to great leadership. I know because I have the
The good news is, the path to becoming a great leader is straightforward: measure, hold accountable, train, adjust and repeat. But shops aren’t fixed by piecing together solutions. Downloading a chain of command resource from the Internet can help in resolving employee conflicts, but without good leadership to enforce a chain of command, it’s just another document in the employee handbook. Similarly, if your staff is in turmoil because of cliques and divisions, the fix may include a shop therapy session, but the fix begins with the kind of leadership that provides clear expectations and accountability. The bottom line: resolving employee conflict starts with good shop measurement. It may not be easy to hear (or read)
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battle scars to prove it. The good news is, the path to becoming a great leader is straightforward: measure, hold accountable, train, adjust and repeat. SO
David Rogers is chief operating officer of Keller Bros. Inc., president of Auto Profit Masters and creator of the RPM ToolKit™, which integrates with shop POS software to help owners identify problems in their shop and get one-click training solutions. Reach him via email at contact@autoprofitmasters.com, tollfree at 1-866-826-7911, or online at www.AutoProfitMasters.com.
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“I believe that my No. 1 job as the president of 3A Automotive Service is to create an environment where everybody involved wins — the customers, the company and the employees.” —Jimmy Alauria, president (left) with father Jim Alauria, owner
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Shop|Profile|
by Debbie Briggs, contributing writer
3A Automotive Service
Where Friendly, Honest Auto Repair Equals High Profitability and Customer Satisfaction Let’s face it: No one likes working weekends. Saturdays and Sundays are a chance to catch up on chores, visit with friends and, most importantly, spend quality time with family. It’s why 3A Automotive Service is closed on the weekends, and it just might be one of the reasons President Jimmy Alauria doesn’t have much trouble staffing the facility in Phoenix, AZ.
“My dad started closing on weekends back in 1998, and we have never seen a decline in weekly production as a result,” Jimmy explains. “Plus, that gives us a huge advantage when hiring. I’d say that 90% of the techs I interview are looking because they are tired of working weekends.” Jim and Earlene Alauria, owners of 3A Automotive Service and Jimmy’s parents, have been providing “Friendly, Honest Auto Repair Since 1975,” as their tagline accurately states. By focusing on both employee morale and the customer experience, the family-owned shop has remained profitable throughout its 39 years of operation. “I believe that my No. 1 job as the president of 3A Automotive Service is to create an envi-
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ronment where everybody involved wins — the customers, the company and the employees,” says Jimmy, who has handled day-to-day operations of the shop since 2002. “Our commitment to our staff is to ensure that their standard of living is improved by working with our company.”
High Morale, High Profitability So, how do they achieve a positive 38
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work environment and high employee morale? First and foremost, Jimmy says, special attention is paid to productivity. “The only happy environments I’ve ever seen are productive ones,” he says. “We spend a lot of time ironing out any stops or bottlenecks in our shop flow process, which starts from the scheduling all the way through to the customer picking up his/her car when it’s completed. That process is essential for allowing each person on the team to be really good at what they do, and they can count on their teammates to be really good at what they do.
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“When that process is dialed in, you get high production, high quality, happy employees and happy customers. That’s the makeup of a championship team, and winners like to be a part of a championship team so they aren’t likely to leave.” 3A Automotive currently employs six ASE-certified technicians, four of whom have earned Master Technician status, and it’s not only the techs who attend training, but managers and service writers as well. “I think that we, as an industry, need to up our game a lot when it comes to training,” Jimmy says. “With new technology like electric and alternative-fuel vehicles, as well as telematics, this game is going to change a lot over the next five years. It’s not just training the techs either: Owners, managers and service writers are all going to need to be educated on how to market and sell as an independent repair shop.”
Satisfied Customers While marketing is important at 3A Automotive Service, constituting about 8% to 10% of the shop’s income, word-of-mouth can’t be discounted. “Word-of-mouth still dominates and is even more prevalent today with the Internet,” Jimmy says. “It used to be that people would ask a neighbor or friend for a referral to a mechanic. Now those referrals happen on the Internet through review sites like Google Reviews, YP.com, Yelp.com and Angie’s List.” The result is that the shop’s organic marketing efforts online support more traditional paid marketing tactics. “When we send a direct mail piece out, that potential customer is likely going to go to the Internet to check us out before they call. They will be greeted by well over 200 customer reviews on our company. Then, when a new customer calls, they have a lot of confidence that we are their best option.” Those new customers are greeted
“With new technology like electric and alternative-fuel vehicles, as well as telematics, this game is going to change a lot over the next five years. It’s not just training the techs either: Owners, managers and service writers are all going to need to be educated on how to market and sell as an independent repair shop.”
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by an inviting shop appearance, both inside and out. The building has been professionally painted and landscaped, and customers appreciate the relaxing environment in the waiting area. “It’s not uncommon to hear comments about how clean it is, and that it’s not what customers expected,” Jimmy says. “Our building definitely looks like a shop, but we’ve tried to make it about as appealing, warm and welcoming as possible because image is everything — especially when 70% of your customers are women!”
Customer Appreciation In an effort to not only educate but also show their appreciation for the customer, Jimmy says the staff hosts
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an annual Women’s Car Care Clinic that’s always a hit with customers. “This year, our NAPA store sponsored the event and provided goody bags, beverages, tables, chairs and even a pop-up shade so our team could just focus on the event details,” he says. “The customers love it, and it’s a great way for them to see a more personal side of our staff, while also getting a chance to learn a little more about their cars.” Getting to know the staff is key, Jimmy says, as service writers and front office personnel have the most direct contact with customers and, therefore, the most opportunity to
interact with them during the repair process. “I believe retaining customers has everything to do with who is running the office,” he says. “The shop manager, service writers and receptionist are the ones dealing with that customer, and they either have a good experi-
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ence, an OK experience or a bad experience. We try and give them a ‘wow’ experience: We want to make sure we have agreements on the problem, solution, price and time all along the way, and when they come to get their car all they can say is, ‘Wow! That was the best automotive repair experience I have ever had.’ “Nobody likes spending money to fix or service their car,” Jimmy continues. “But the right people with the right training in the office can take the mystery and fear out of that experience for the customer. The best customer retention strategy available is a happy, well-informed customer.” Part of ensuring customer satisfaction at 3A Automotive Service
is providing each vehicle and repair with the utmost attention to detail. A system of checks and balances ensures that each vehicle leaves the shop fixed right the first time. And if there is a problem, customers need to know it will be corrected. “When the economy crashed in 2008, we had car counts drop 30% to 50%,” Jimmy explains. “We knew we couldn’t drop our prices because that would only make things worse financially. So, we decided to really take a look at our quality and improve the perception of value that the customer felt when dealing with us. “Now we make sure every car gets checked out by another technician before it leaves. Every car gets a car
“When that (productivity) process is dialed in, you get high production, high quality, happy employees and happy customers. That’s the makeup of a championship team, and winners like to be part of a championship team so they aren’t likely to leave.”
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wash. Every new customer and all repairs over $500 get a phone call within a week after pick up. And every customer gets a comment card sent home with them at checkout. The idea is that they know we are 100% committed to their satisfaction, and if there is a problem, they have no reason not to inform us and allow us to fix it.”
Expansion Plans Currently, two more bays are being added to the existing 10 at the shop to handle the influx of mostly American, Asian and light-duty diesel vehicles that the shop services on a regular basis. But in addition to physical work, the shop is also expanding virtually. Every shop owner, Jimmy says, has to make web marketing a priority. “We are always working on our website (www.3AAutomotive.com),” Jimmy says. “But it’s not just the website as much as it is a web presence. A website is one location. A web presence means that you are a part of the conversations that are going on with regard to auto repair. Email open rates are going down, so being a part of social media is becoming more and more important. We’re currently working on the production of videos that will serve as free information for anybody to use, but they will position us as the experts.” Overall, Jimmy says staying ahead of the curve when it comes to marketing and training is essential to remaining profitable in today’s social media-driven society.
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“There’s a generational and technological swing happening right now that I believe is crucial to the success of shops today,” he explains. “We need to become better at the marketing and sales of our product — automotive repair and service. “There are also fewer young professionals coming into this industry,” he points out. “At the same time, the qualifications necessary to work on the modern car are getting tougher and tougher. The only shops that will make it will be the ones that can offer this younger generation the things they want and need. Studies show they want good pay, benefits, retirement plans, vacations and continuing education. The shops that will attract this new qualified workforce will be the ones that can fill the bays, profitably sell the work and create enough of a positive effect with their customers to survive a social mediadriven world.” With an eye on the future while maintaining a track record of honesty, integrity and customer appreciation and satisfaction, 3A Automotive Service is poised to remain profitable for many years to come. SO
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Buying & Selling|An Aftermarket Business
by Art Blumenthal, MBA, CBI
Will Your Tax Returns Drastically Understate The True Value of Your Auto Service Business? Properly Recasting Your Financials Will Showcase Your Aftermarket Business and Accurately Justify the Selling Price You Had Hoped For After more than 30 years of owning and successfully running the town’s well-known and successful auto service business…starting out long ago as a single location and growing to multiple sites over the course of his career…Dan the Auto Man is about to make the biggest decision of his professional life. Dan has decided that it’s time to find a buyer for his aftermarket business. He looked ahead a few years ago and planned to sell at an unspecified date in the future. Now is that time. For years, as his family grew and matured and became involved in the business, he had assumed one or more of his children would carry on the legacy of the firm. But, as adults, they have now clearly told their father that the 60-hour workweeks and personal sacrifices they witnessed Dan experiencing for so many years, along with all the inherent risks in running a family business, do not interest them. Dan’s fallback had been to sell to trusted long-
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term employees and retire on the note payments and rents that he would receive out of the future earnings of the business. But after taking a long, hard look, Dan realized that as skilled as his employees are, the downside risks of his financial security being dependent on his employees are too great. He was not sure he could sleep well at night, worrying about whether or not they could run the business as well as he has and provide for his comfortable retirement in the process. So, the optimal option, Dan has determined, is to find a buyer who can grow and expand his legacy while also receiving a cash settlement that he could safely invest for his retirement. That being the case, there is one particularly significant task that must be done to prepare for successfully selling at a price that will justify the years of hard work Dan put into his business.
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Recasting: Because a Buyer is Buying His Future, Not Your Past One of the biggest mistakes a seller can make is simply providing a buyer copies of the business tax returns or unadjusted financial statements. The objective of most owners and their accountants is to do everything that they can to minimize taxable income. This is effective for reducing taxes, but it paints an incomplete picture when it comes to showing a potential buyer the true cash flow, and hence the maximum value, of the business. If you want buyers to get excited about your auto service business, they need to truly appreciate the full financial benefit and actual income-generating ability. By “recasting” or adjusting the financial statements for presentation purposes, the “real” financial performance of the business can be demonstrated. A “recast financial statement” is a reconstructed representation of the earnings that a buyer would be able to
company may raise eyebrows for those that have not heard the term before. However, just as a homeowner “stages” their house before putting it on the market, you will want to legitimately dress up your business financials. You certainly can work to improve its appearance physically, and you also should make the numbers look as attractive as possible. After all, those cash flow numbers will be a crucial element of how buyers will determine the price they are willing to pay for your business and how much money that a bank will be willing to lend to the buyer. Dan himself was not well versed in the practice of recasting and was not sure what it entails, so he is using the services of a business broker to guide and assist in the process. Keep in mind one key principle of the selling process: A buyer is buying his future, not your past. The only way to accurately highlight your future profitability is by recasting your histor-
Keep in mind one key principle of the selling process: A buyer is buying his future, not your past. enjoy from the business. It “normalizes” the figures by removing all the unusual, non-recurring and one-time items that would not likely occur in the future for the buyer. Recasting supplements the owner’s compensation listed on the tax return with all other “perks” or fringe benefits, while also adding back depreciation, amortization, interest payments and capital investments in equipment or property improvements. Recasting financials before selling a www.ShopOwnerMag.com
ical financials so that the buyer can use these figures to project out three to five years, using the new recast baseline as their starting point. So if your broker does not have an understanding of the automotive service business or does not take the extra time to dig into your financials for all of the appropriate add-backs, your base year could understate your profitability, impacting what buyers will pay for your company. July|August 2014
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The person providing the recasting service will ask you lots of questions about your expenses and request supporting documentation to find as many legitimate add-back items as possible. Brokers who have sold dozens of automotive service businesses will have the skills and knowledge to quickly spot expense levels that are above industry norms and search for non-recurring purchases or personal perks that can be added to maximize your cash flow.
financial information.
Recasting Checklist
The most important recasting adjustment is to clearly document the “owners benefit,” including all perks and personal expenses that may be run through the business. Dan worked with his CPA and me utilizing the following checklist to adjust the past income statements (the last three years) for Dan the Auto Man to document all of his benefits of ownership beyond the salary shown on the tax Case Study return. Every business and situation is For example, let’s assume a buyer is different, but in Dan’s case it was looking at two similar auto service appropriate to add back the following companies for sale. Both are generatexpenses: ing similar levels of revenue. • All health, disability and life insurance premiums and company contriSeller A gives the buyer a 2013 tax butions to his retirement acreturn showing $50,000 in net incount; come and $75,000 in officer salary. • Dan’s wife’s Thus, Seller A is disclosing Seller B salary for part $125,000 for this year in Seller’s Discretionary $ time Discretionary Cash Flow. 250,000 Cash Flow administrative Seller B has his broker prepare work which could a detailed marketing package including three years of recasted financials documentSeller A ing $250,000 per Discretionary $ 125,000 year in Seller’s DisCash Flow cretionary Cash Flow. Which of these sellers do you think will receive a better offer? With this example, you can see how vital recasting is in protecting you from offers that are too low. One caveat: My discussion of recasting presumes your financials are in good order and expenses are categorized accurately. If not, you need to start there and get your financials cleaned up first. If not, no matter how carefully you document your recasting, your actions could be based on inaccurate 46
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be done by a buyer; • Dan’s teenage son’s wages, since his occasional work cleaning up around the shop was not essential to the business; • The cost of Dan and his family’s cell phone, personal vehicle and maintenance expenses that were run through the business; • Parts purchased by the business to fix up Dan’s classic 1965 Ford Mustang convertible; • Travel and entertainment expenses that were not essential to the business; • Legal and accounting expenses paid by the business for Dan’s new will and estate planning services; • Training and seminar expenses for Dan’s networking group; and • New computers at Dan’s house and his personal laptop In addition, other recasting actions could include adding back: • Depreciation and amortization; • Interest payments on the business bank loan; • One-time cost of a major writedown in inventory to remove obsolete parts; • Equipment lease payments since the small remaining balance could be paid off at closing; • Rent paid to Dan as the owner of the property over and above the amount to be paid by the buyer; • The purchase of two new lifts, including installation, and a brake lathe that were expensed in full by the business; and • Charitable donations and certain advertising/sponsorship expenses that would not benefit the business.
You Are Not Trying to Mislead Buyers Adding transparency and portraying
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the actual potential of your business will make it more attractive to buyers. To do this, recast financial statements to adjust your income statement to show what would have been real, operational cash flow. Although it may take some time, don’t underestimate the impact recasting financials will have on how your business value is perceived. It’s time well spent when selling a company. The goal is to make the potential cash flow of your business clear to a buyer, their accountant and their bank. But be prepared to justify all add-backs with supporting documentation such as invoices and payroll records. Most buyers and their accountants will demand a due diligence period to verify all claims. A good broker will orchestrate this process by anticipating the questions and being prepared to quickly respond. Showcase your business as attractively as possible to attract the buyers you have targeted. When it comes to maximizing the sale price, don’t leave money on the closing table by not investing in professionally prepared marketing materials and cash flow statements. Your retirement income and peace of mind is dependent on recouping all of the value of building a successful enterprise. SO
Leveraging more than 30 years of experience as both an aftermarket business owner and aftermarket technology executive, Art Blumenthal LLC provides business intermediary and advisory services to both buyers and sellers of industry businesses of all sizes. Art is a member of IBBA (International Business Brokers Association, Inc.). For more information, or to initiate a no-obligation confidential consultation, visit www.art-blumenthal.com.
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