Changing Your Business Model – Part Two
Keeping Pace with a Changing Industry
We talked about the current vision and business model in the first post, which you can find here if you missed it. So, let’s take a look at the new business model and what your shop needs to thrive in today’s industry:
The New Business Model
Now that we have identified the current business model, you can see that even the best of shop owners using this model are limited unless they begin embracing some new ideas and opportunities. Sustainable planned incremental growth is now an absolute must for our industry shops to survive and prosper.
I have stated many times in many articles, and in training and coaching sessions, that I believe this industry is significantly undercapitalized. Most shops do not have much for financial resources other than credit cards with less than adequate limits, lines of credit that are either being pulled by the lending institutions or are less than adequate. Few have any significant available cash in the bank or liquid assets to afford investments in equipment, training, remodeling, staffing, etc. when it becomes necessary.
As technology continues to advance at a more rapid rate than any time in history, shops will need capital to purchase the necessary equipment, training, and information to compete. Those shop owners who previously relied on the leasing of equipment will more than likely find that they either no longer qualify for a lease or qualify for less purchasing capability than they need. Those shops without adequate financial resources will rapidly become obsolete and eventually disappear.
Primary staffing of a current model shop consists of a combination of the owner, service advisor(s), technician(s), administrative, and maintenance personnel. With the growth of technology as it applies to conducting business, we foresee the need for on or offsite staff to handle all of the office equipment including maintenance and repair of computers, peripheral equipment, copiers, phone systems, software updates and upgrades, electronic security, bankcard equipment, postage equipment, etc. In addition, it is critical for shop owners to have in place a reliable computer file backup system which would also be maintained by the IT person. Many of these types of staff earn upwards of $40K annually.
Advertising & Marketing:
We see a need for support staff, either on or offsite to handle the advertising and marketing processes including the management of customer databases, websites, search engine optimization, email, texting, podcasting, blogs, forums, newsletters, direct mail, just to mention a few, as well as all of the tracking and analyzing of data as it applies to the success of implementing these methodologies. Most of the industry’s shops are not able to compete with larger entities as they don’t have the resources, either in-house or offsite, to assist them with coming up to speed with these latest marketing and advertising methodologies. They tend to be trapped in using outdated technology and methodology.
Parts suppliers have traditionally assisted shop owners with their inventory management. With the new parts supplier business model comes the reduction in staffing and many of the suppliers no longer call on the shops to manage the onsite inventory for obsolescence, reordering, seasonality, etc. The task then falls on the shop owner, unless they happen to be large enough to employ an on-staff parts person. Currently there is a very small percentage of the industry that does enough business to justify a person in this capacity.
Our observations indicate that the majority of the industry employs an insufficient number of service advisors to perform all of the tasks required of the job. Over three years ago, we changed our benchmark for the ratio of service advisors to technicians from one advisor for every two technicians to one advisor for every one-and-one-half technicians. The results were as predicted. Sales improved, CSI rose significantly, technicians became more efficient, and the shops became more profitable.
Just having the ratio of advisors to technicians correct is not enough. Shop owners must invest in ongoing training of all their staff. That includes the critical position of the service advisor. We have observed that during these highly competitive times shop owners are hesitant, if not resistant, to investing in the training of their service advisors. That type of thinking is counter-productive in this changing marketplace. Our industry advisors desperately need training in customer service, communications, negotiating, phone skills, email construction and etiquette, and the new methods of customer interviewing and write-up. The position has changed immensely in the last few years.
Administrative & Business Operations:
Many shop owners have high expectations of their clerical staff. They often expect them to be proficient at bookkeeping along with a host of other duties and responsibilities, many of which they have received little to no training to perform. Some of these duties and responsibilities could include assisting with or solely performing: annual financial forecasts, calculation and payment of city, state and federal taxes, determining employee benefits, paying of bills, banking, budgeting, maintaining inventory of office supplies, tracking vacation requests, tardiness and absenteeism, maintaining files regarding state and federal safety regulations, customer invoicing, customer payment processing, managing accounts receivable, purchases reconciliation, backing up service advisors in answering phones, customer writeup, ordering of parts and any other requests, as well as a host of others. In most instances, this individual is overworked and underpaid.
We’re stopping here and will discuss additional personnel and revenue streams in the final part of this blog. Check back in two weeks so you don’t miss it! And, if you have any questions about how consulting or group support can help your business thrive, give our office a call at 425-988-6812.