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It is always easier to lower your price or to pre...
It is difficult to make a living off of just labo...
It’s All About The Choices
As so often happens when I write this column, it’s what has happened over the past few weeks that influences my writing the most.
By Dave Sutton
When I had difficulty coming up with ideas worthy of the space between the covers of this magazine it took only a couple of phone calls from customers before the light bulb came on: I realized I needed to examine the past to address the present.
After two or three calls from customers relating their oh-so-familiar stories of lost sales to Internet and mail-order suppliers it dawned on me that maybe it was time for a refresher course. Time to go back and remind Engine Builder readers about plans I proposed in this space nearly four years ago.
You may remember that I proposed five strategies to help combat what I so lovingly call, “Walk-In Parts.” The intent is to give you several choices to use depending upon your specific circumstances. If used properly, they will also give your customer choices as to how he or she will spend their (even more so by today’s standards) hard earned cash.
I’m not trying to make this any more difficult than it already is. But as adult business owners we are charged with making hard decisions all day, every day. I’ve simply given you a few more along with the opportunity to let your customers make some of those decisions as well.
The Direct Approach
When I proposed it four years ago, I wrote about what might have been considered a last resort. Today, I’ll mention it again, but I think it’s more of an attitude adjustment. I related the story of an engine builder who’d had enough. He was tired of the customers who dropped off their tired old iron, and then said they’d be back with the parts as soon he told them what sizes were needed.
Our hero informed at least one customer that he needed to pack up his job and get it out of his shop. He sold parts as well as the labor he performed and, if the customer would not at least give him the chance to quote and promote his parts at a competitive level, the guy could take his job somewhere else. At no time did he say he would be cheaper, just fair and competitive. When presented this way, his customer got the idea, and the engine builder got the parts sale.
I had to applaud him for standing up for his business and what he believed in. He simply laid out a couple choices for the consumer in a very direct manner. It’s not always practical, but definitely something to think about when you have that feeling you may not want the job anyway. Unfortunately, over the past few years, I have heard he was forced to soften this approach…so maybe some of the other options might be more effective.
Selling Your Knowledge
I know a high performance engine builder who takes the “If you can’t beat ‘em, join ‘em,” idea to heart. If his customers tell him they plan to shop for price and supply their own parts, take-it or leave-it, he reminds them of the importance of buying the correct parts the first time so they aren’t out spending more money to make up for their initial mistakes. And to help, he’ll charge them just one hour of shop time to put together their shopping list.
This is not a favorite choice of mine, but it is still an opportunity to promote the parts you prefer to use, get the correct parts the first time to keep progress moving on the project and, if you’re any kind of salesman, take advantage of the opportunity to quote those parts yourself. If you’ve done your shopping well, if you haven’t gotten too greedy and you point out that they are also saving $60-$100 for your hour of work, they may just take the easy road and give you the sale. It’s a win-win and you both had a say in it.
Here’s a tip: leave that hour billed on your invoice. Then, when all is said and done, show a credit on the same invoice. This way no one forgets the choice that was made. No misunderstandings at the end of the job.
These next three suggestions can work very well in concert, giving you a solid plan for selling against the “big box” stores, and understanding how to respond when it’s already too late.
Discount for Labor
This can work for you once you’ve adjusted your price schedule and committed to the plan and it’s by far the oldest and most talked about choice. The plan may be simple, but takes dedication and flexibility. Tomorrow, raise all of your labor prices 10, 15 or even 25%. This price schedule is now your new “Labor only” price schedule. But it also gives you room to adjust back to your current price schedule if you are selling the entire job, the one that includes the parts sale.
The plan simply works like this: a customer calls up and asks about the cost of some specific shop operation. “How much is it to bore and hone a V8 block?” he may ask. With your brand new labor price schedule you can quickly tell him how much labor on its own will be. You then point out the additional necessary labor steps he’ll obviously need: cleaning, fitting pistons or pins to the connecting rods and installing new cam bearings and freeze plugs. Now that you have his attention and he’s aware of your expertise and ability to take care of his complete needs, you can follow through with the parts sale.
The next obvious question may seem to be, “Where will the new parts be coming from?” But hold up: I would now inform the customer that I also sell the parts he’ll need to accomplish this job and (here is the choice they can make) that I also offer a discount on the labor charges when he purchases his parts from me.
I sense a lot of resistance to this plan today, but I believe it is because shops are afraid to commit to the whole package. They are often simply afraid to ask for the parts sale or to at least point out that they are also in the parts business. Don’t hesitate to explain why doing the job correctly includes purchasing the part from the person who is doing the job. This ensures a smoother job for the machinist, as well as a more profitable one. Also, the customer can choose to not be stuck between the labor provider and the parts supplier should there be a problem in the future.
Remember, you’re in business and your prices are now dependent upon the sale of parts to bring labor back to a more competitive nature. It is always easier to lower your price or to present it as a package, than it is to raise your prices later on once you’ve discovered you aren’t selling the parts and you need to make additional revenue from the job. You can also automatically give your good wholesale customers the discount right off, should you choose, parts sale or not. But showing this discount in your quote is always favorable and makes your customers feel like they are getting something for supporting you.
Here is where you take those steps that are related to each other and necessary to complete the job and wrap them into one complete labor price package. Now my strategy says that you promote this package as a choice to the consumer when you are pricing the entire job. We did this many years ago when I worked for a small PER who also was very early in promoting engine kits. If your shop bought an engine kit, you could also purchase a kit labor package that included all the needed block and connecting rod labor at a reduced package price.
You can use this plan in many ways: promote separate 4-6-V6 and V8 labor packages to consumers who purchase an engine kit. Use it when you’re quoting an entire engine: add the parts, block labor package, a labor package for the head work and some time to assemble the engine and you have a profitable complete engine quote. You can always adjust this price as you choose, but it gives you a starting point.
And again, if you feel your labor is not competitive on a job for which you do labor only, you can fall back on the total labor package price without having to discount your individual labor operations. This gives you some flexibility and additional choices.
Check All Appropriate Boxes
This is the strategy you’ll choose when you see the truck backing up to your dock and you recognize not only the block, crank, tin and so forth, but you also spy the shipping labels on the cartons of parts you were never given a chance to shop or sell.
One of my customers took his normal 8-1/2˝ X 11˝ work order and increased it to 14˝ long and even added a second sheet as necessary. In this additional space he spelled out every single labor operation imaginable, including “Inspect and Measure Customer’s Parts” under each major operation. Take the example of boring and honing a block.
If you’re doing these operations and supplying the pistons, you’re going to measure and inspect the piston and pin as just one small but critical part of the process. These additional steps add time time you should be getting paid for, especially if you are working with parts you did not sell in the first place.
Add these myriad services to your work order and use them accordingly. If the customer shows up with his own parts, show him the time he’ll be paying for. Check the boxes and profit from his eagerness to save a few bucks. Also use these line items to show the customers who do support you with parts purchases the items they are getting for free on that job. If it is a quote scenario, show the customer what you are willing to do for free to get the parts sale. Everyone loves getting something for nothing!
With all these options, you have a choice to make. You can continue to watch your income fall as you become just a labor provider and give up the profits that traditionally went to your shop, or you can be proactive. Choose to adjust your price sheet and your sales pitch. Add additional services to your work order and get paid for all the work you provide.
Choose to look at ways to package your services so you have a legitimate deal for your customer and fewer piece prices to be picked apart. Or choose to help your customer find the right parts, but at a cost. Or, you can choose to not play the game at all: take the same attitude that most other service industries have, where the parts sale is unquestionably part of the job and simply refuse to give in on the parts. You don’t have to do the job for a customer if you don’t want to.
But here’s where I am NOT going to give you a choice: unless you’re getting paid for your knowledge, never supply consumers with part numbers in a quote. It has become far too simple to Google a part number and find the cheapest price with no regard to service, freight or handling or any other service that’s related to a sale.
We’ve discussed a strategy, but I’m often asked to supply a cure. Some say the Genie is already out of the bottle and there is no going back. While this may be somewhat true the fight is not over. Shops all shops need to recognize that it is in your best interest to get the parts sales for most jobs. Frankly, it is very difficult to control the job and your legal exposure if you do not.
It is also difficult to make a living off of just labor. Even a small parts sale each month could supply enough revenue to cover something as mundane as your electric bill. Once you are expecting this, it will hurt your bottom line if it were to end. So be proactive and use the time you’re spending on this customer to also “pay your light bill”.
Additionally and I can’t believe this is coming from me don’t forget the importance of tax. We hear a constant stream of views from the media and politicians about who should or shouldn’t be paying what tax. But there were few arguments about paying a consumer sales tax until businesses found that an out-of-state competitor has a price advantage because they do not have to collect sales tax. I often hear that a shop can be price competitive, until the consumer realizes that he can save several percent by not paying sales tax.
Our national deficit will not go away without part of the solution being more tax revenue from everyone. And no matter how much this hurts me to admit, it seems to be very obvious that one of the best tax dodges out there is catalog and Internet shopping. A tax is inevitable, which will eventually help the brick and mortar business become more competitive in the world market. Now where can we find a representative to forward this agenda?
I will reaffirm that these are not my ideas. No, these were strategic plans from successful engine builders and parts sellers that I have witnessed over some 37 years, and my contribution is to share them with you, and to give them a catchy, hopefully memorable, name. Whether you follow them or not is a choice.
It’s about the choices. Choices YOU can make and choices you can help your customers to make.
Dave Sutton’s sources for this column include Lake
Speed, Jr Certified Lubrication Specialist & Member of the Society
of Tribologists and Lubrication Engineers; The American Petroleum
Institute web-site; www.gf-5.com website; and the “SAE Automotive
Lubricants Reference Book.” You can reach Dave at firstname.lastname@example.org.