9/1/2002
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Conferences And Seminars Offer Many Potential Rewards
By Norm Brandes
Getting away from the day-to-day grind and going to a seminar or conference with fellow shop owners and machinists has rewards that far outweigh the expense, and often may even present new business opportunities. At the Engine Rebuilders Association Tech Expo (AERA) I attended this past April in Indianapolis, a presentation given by John DeBates, owner of Auto Machine, Inc., on business profitability and opportunities offered just such insights.
John came armed with his accountant who helped us to understand a business plan, which we could implement in our own shops. They outlined a strategy to achieve increased profit margins on our core business of engine rebuilding services. This was done by tracking our time to perform tasks and making the proper adjustments to the customer-billed hours.
John also shared with us examples of add-on services that could be beneficial to our more traditional business with carry-over into the non-automotive and industrial customers. John cited his purchase of an EDM machine, which was used to disintegrate broken bolts in cylinder blocks and heads.
He found a company with a government contract that needed to have broken studs removed from metal plates. Looking at the costs in that industry, he was able to charge an hourly rate nearly double that of his automotive equivalent. This example stirred a lot of conversation from the attendees as to whether or not we are charging enough for our services, or whether that industry is overpaying for theirs?
The part of the presentation that interested me was the simple approach the presenters took to look at all business opportunities. They broke them down into segments that included market need, competition, capitalization and manpower. Using this as a cornerstone in a business plan, let’s look at what opportunities we might be missing in our own business by doing the correct service work for OBD II vehicles.
The new technology vehicle looks like it has many improvements and increased durability. So much so, that from the surface it looks like we are going to be dealt a fatal blow as far as machine work is concerned. However, the wildcard within this equation is our same-old customer with the new technology vehicle who neglects to service his vehicle at regular intervals, check fluids and vital components daily or weekly or just plain abuses it by overtaxing its design. This develops a market need that could be a real opportunity.
An example of such an opportunity was on a 1998 Dodge Dakota pickup with a 3.9L V6. It was delivered to my shop on the back of a tow truck because the customer was turned down at the dealership – he missed his warranty mileage by only 1,000 miles. Upon removal of the oil pan, we found a carbon contaminated oil pump pickup. This led us to the conclusion that the oil levels were running very low, causing the oil to carbonize, restricting the oil pickup.
Upon the discovery of an unusual noise, the owner decided to check his oil and generously replenish it. However, this random act of kindness still could not halt the demise of his engine. The fate of the pickup truck was also sealed by the fact that it was used to haul heavy loads and operated on congested highways. These conditions put the truck into the severe duty section of his maintenance manual, which recommends service intervals at every three to four thousand miles, and could have helped to prolong the vehicle’s life.
Similar things can happen when cooling systems are not checked and you have a defective radiator cap causing a low coolant condition. This may not bring us to an overheating condition, but can cause stress on cylinder heads, gaskets and their fasteners, leading to premature failure.
Low mileage, short-trip vehicles are not exempt from an early demise. Late model ventilation systems have decreased their purge flow and cannot handle the contaminants of short trips, thus causing soft carbon sludging, which creates crankcase jelly! These are just a few examples of market needs we can easily address to improve business.
Identifying our competitors and potential competitors will give us a strategy for marketing and pricing. One of the competitors is going to be the new car dealership that has new customers coming to it under the illusion of a "blanket" warranty. These businesses traditionally have much higher overheads and parts markups that will cause most customers to drop their "eye teeth" when they learn that their warranty doesn’t cover the repair. This competitor allows us to enhance our profitability on repairing or rebuilding because of their position in the marketplace.
The presence of a production rebuilding facility in our market is going to be limited by its access to cores and the technology needed to rebuild on an assembly line. The issue of cores is brought on by engine families of the same displacement that have unique configurations because of orientation in the vehicle and model year changes. This will cause these competitors to have several engine part numbers to satisfy just one manufacturer, and it will put a strain on inventories and cores available. The uniqueness of these assemblies will cause production rebuilders to treat these engines as a custom build rather than an assembly line build – at least until they can do more volume and get a procedure established. Repair or short turnaround times can be a greater challenge to them than to us because of their production structure.
Other machine shops may not be competitors simply because they choose not to participate in the OBD market at all. One reason for this might be the training and equipment needed to operate successfully in the OBD market.
Capitalization is going to be unique to your business and may depend upon your philosophy of purchasing equipment. If you usually purchase just enough to "get by," then maybe that ideology will have to be replaced by one that will allow you to accomplish your goal: purchasing state-of-the-art equipment that needs only to be updated.
Realizing that many pieces of existing equipment will allow our competitors to “get by” with pre-OBD engines, we need to look at the precision that we are able to achieve in holding tolerances to the ten-thousandth (.0001˝) not the thousandth (.001˝). These tolerances must repeat from operation-to-operation in order to give you production efficiency.
Such equipment will allow you to take a small-bore, close-tolerance, high-revving, high-output engine, back to the tolerance it had the day it was born. To achieve this feat we need equipment sales representatives who can help demonstrate not only the speed of their equipment, but also the repeatability of their quality across multiple setups.
Manpower
First, there are the bright and cheery individuals – the employees who greet you in the morning and are excited to be exposed to new procedures. And also, the opportunity to talk to customers in such a way that they’re practically begging to bring you their engines! Then there is the opposite – the workers who can’t wait to see how their boss is going to screw up their day and who love to talk to ignorant customers to inform them of their incompetence!
The enthusiasm that it takes to achieve the challenges of finding information, identifying the correct procedures, informing the customer, and the pride and the craftsmanship required to do a good job, should be contagious from the boss to the employees. This helps identify a network of companies and people who want to share with you their knowledge and information.
Such contacts are trade associations, engineers from parts companies, fellow machine shops and automotive diagnostic technicians. One of the methods of attracting good employees is to capitalize on young, part-time individuals who are caught in the enthusiasm of The Fast and the Furious. They may not be knowledgeable about engines, but they are enthusiastic, with the desire to join our industry.
Remember the key word is profitability. What we have here are unique situations that pose a great challenge for our businesses. Nevertheless, the competition is facing the same challenges that you are, so do not weaken and lower your price to get volume, rather raise your price and provide quality. This formula will give your customer the satisfaction and the confidence that the services you perform are the best available.