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Parts Sales and Profits: First Admit There’s A Problem
“Ahh… hello. My name is Dave, and I’m an ‘automoholic.’ I want to make money when I’m building engines. And…I’m…sorry…”
By Dave Sutton
Yes, believe it or not, I am attempting to show a parallel between the famous Twelve-Step programs plans designed to help one admit the size and scope of addictive or dysfunctional problems and reinforce the need to ask for help for success and a plan we can create to resurrect parts sales and profits in our everyday business.
If you have followed this column, then you know that success from parts sales is a continuing theme. And since all education and learning comes from repetition, I thought I could take some of my points and restructure it to resemble a tried and proven method for self-help.
I have nothing but respect for those who have admitted a need for help from addictions. I plan to use their courage as inspiration to approach needs for change that could help all of us to make our businesses stronger and more profitable.
Here is my 12-step plan:
1. “We admit that we are powerless over current parts distribution networks, and that these networks have made parts sales close to unmanageable.”
I am always asking, “In what other industry does the consumer supply the bill-of-materials and cheat the contractor out of the profits?” We all know the problem, but short of a few reasonably powerful WDs, no one is talking to the manufacturers about this specific problem, that they, and the overcapacity brought about by today’s manufacturing methods, have created.
But talk is cheap. This problem is not going away. We need to address ways to deal with this problem ourselves if we wish to continue to make a profit selling parts.
2. “I have come to believe that a power greater than myself has the answers to help restore my parts business.”
No one is here to talk you into anything. We all choose our own paths to success. I’ve been selling engine parts for years to shops all over this great country of ours. And in those travels I have met some savvy business owners and creative entrepreneurs.
People who continue to sell the parts for the job, and profit from those sales. I’ll admit that profits aren’t always what we’d like, but we are in business to make a profit and you can’t profit at all if you don’t sell it.
3. “I have made a decision to turn my parts sales problems around.”
Now we’ve admitted there’s a problem and we’ve decided we can better ourselves if we address it and come up with some answers. Read on and we can discuss several ways to increase our parts sales, and make some money along the way.
The other piece to this puzzle comes when we realize that by being the supplier of the parts, we take back control of the job. We can control the workflow in our shops better when we are not waiting on someone else. We also protect ourselves and our reputations by ensuring the right parts are used, making for a better job and happier customers.
4. “I will call and wait for parts, as carrying too much inventory could be detrimental to my cash flow.”
Now is a good time to remind you that you will need suppliers for your parts. And though it is often nice to have parts right there on the shelf to pull and put to use, it is just about impossible to predict what might come in the door tomorrow.
Another problem can be paying for the parts. Yes, your supplier may offer you an open account, or 30 days to pay. But no matter what terms you have with your supplier, you should not be on the hook for the parts bill. There is absolutely no reason you should not collect about 50 percent of the cost of the job, up front. This way your customer is well vested in the job.
This will make him much more likely to come in and pay his balance and pick up the job when it is completed, than he will if he has no money down and has since spent part of his budget on some other crisis or toy. This will also help you “read” the customer. If he does not have the money today to use as a down payment on the job, what makes you think he’ll have the money when the time comes to deliver the job?
5. “I will admit to myself the nature of my business and recognize this as my specialty.”
This is important, because you are a professional. Without your services and knowledge (or those of someone else in the trade) this job is not going to get done. Sometimes you have to be reminded of this fact, so you can remind or reinforce this fact to the consumer. Your services come at a price.
Maybe there should be two prices. One price, a highly profitable one, could be used when you are providing labor only. The other is this same price with a discount when accompanied by parts sales.
Let’s look at this again. Some people set a price for their labor, but then try to raise that price later on when they find they are not selling parts on this job. I suggest a more favorable strategy is to set that higher price as your standard. Then you can offer a discount to your customer when they allow you to supply the parts. This comes across much more positive.
Make it part of your sales pitch: “Yes, we charge $225 to bore and hone that block. But where are you buying the oversize pistons you’ll need? Did you know we sell many brands of pistons and we offer a 15 percent discount on the labor when you purchase the parts that go with the job.”
I believe this approach is much more professional than trying after the fact to get more money for the job.
6. “I will not fall back on the idea that defects and warranty are an excuse not to sell parts.”
I hear this far too often. The machinist thinks he has no worries, no responsibility for the job and a warranty if he does not supply the parts. While a direct parts failure may be the responsibility of the parts manufacturer, this is rarely the case. There can be many things that lead to a failure and it can be very difficult to prove that it was a parts failure and not something related to the machine labor you provided.
If this gets really ugly and ends up in court, you will be seen as the last person that handled that part and you are the professional. I fear it will become your responsibility, Mr. Businessowner.
7. “There are shortcomings in the parts business that I will work to help remove.”
Plan on the time that it will take for a common carrier to deliver your parts and also plan on paying some freight to get them. Freight is a necessary evil. And though those Big Box mail order parts suppliers try to hide these costs by claiming “Free Freight,” they do have restrictions and they do charge a handling charge that is often more expensive than the freight charge.
You will definitely want to watch your freight costs and consolidate your orders as much as possible. But you should add a Freight box to your work order. This gives it the appearance that this is an everyday charge and a normal part of doing business.
You should also be able to negotiate a predetermined purchase level with your supplier that will entitle you to free or a lower freight charge by placing orders that meet the level.
8. “I will list all machine operations and charge for all the time I have invested in a job.”
It is important to get paid for all the work you do. I feel this is doubly important when you are doing labor only, and not selling the parts.
When you sell the parts, it is assumed you will be responsible for making sure the sizes are correct and that includes inspection of the part. If you are not selling that part, than you should charge for the time invested in measuring and checking these parts.
I’d add all the machining and inspection activities I could think of to my job sheet and price sheet. You can show the customer the services that are free or included with parts sales, but charge for the invested time when you have not made the parts sale. An example of this might be a charge for “Inspection and sizing pistons @1/4 hour.” But this could be a “free” service if you are doing both the machine work and selling the set of pistons.
9. “And I will amend my ways. I will never give a customer part numbers, and whenever possible I will sell complete units or sell kits.”
Why would you hand the consumer a list of part numbers and prices in this day and age? You do that and five minutes later a quick Google search will net them every online distributor and all the cheapest prices in the world! Yes, you have times when you have to give out an estimate. In these cases, use generic descriptions do not give out part numbers. Or, better yet, give them a total parts price only, at the bottom of the page.
Selling kits or packages is also a good method. Anything that protects you and the people you might purchase parts from. You both may have time invested in calculating the parts needed for doing the job. Why give someone else a chance to undercut your price and make it easy to boot?
Of course there is another way. I have heard of shops supplying their customers with a specific shopping list. Most charge one hour of labor to prepare the list of items needed to facilitate their job. Needless to say, this is not a popular method with me for selling parts. You are selling yourself out cheap, if you ask me.
10. “There will be mistakes. And when I make one, I will admit it. When someone else is in error, I will work towards a resolution, not a guilt trip.”
Things are tough enough, as we’ve described. Why do we need to get into any “blame game?” Resolution to problems, especially parts problems, only comes when parties work together to resolve the issue. We cannot always control catalog errors, incorrect computer inventories, wrong or false information, mis-pulls, goods damaged in shipping or the multitude of other problems that arise every day in the parts business. Take a deep breath and resolve the problem.
I can guarantee that half the errors have the potential to be made at your end. It doesn’t feel good to have that finger come back and be pointed at yourself every other time.
Always work to find the best remedy to the problem and live with it. That is how it is going to play out anyway. I am sorry for those who think it is a good time to get all macho and brave when they are protected by the miles of airspace known as the telephone lines.
11. “I will seek out the correct information through questioning, not prayer or meditation and try to assure that I get the correct parts the first time.”
Has anyone here ever heard of a “VIN number?” People, you need to get all of the right information in your first contact with your customer. Time is money. And it is worse when you waste other people’s valuable time as well. I know your work order has a place to note year, make, model, cubic inch and, most importantly, the VIN number. Today, I might even ask if the car has an AM-FM radio/CD player! You just never know what separates one model from the next.
Use your head. It is much easier to obtain the correct info before the customer leaves the shop or gets off the phone than it will be after you have pored over five parts catalogs and wasted a call to your supplier. You don’t want to track Joe Customer down at work to get info you know you should have asked for in the beginning. It is not like the ’70s. Engine kit catalogs may list 1,400 kit combinations, and this still does not cover them all. Do yourself a favor: do not assume anything or guess at anything. This will only waste time and potentially the profit you might make on the parts sale.
12. Now that I am aware of my responsibility, I will carry the message to the public that “The bill-of-materials will be supplied by the builder!”
That is what a sign and policies are for. Remember, it is always easier to break your policy to accommodate someone, than to come up with some excuse over and over again. Determine what your parts sales strategy will be and stick with it.
I received a call from one of my favorite customers a few years back. I was preparing for some problem. But I was surprised and happy to hear him describe his new parts policy and what a success it had been. He had raised all his labor prices 30 percent, and made it a policy to discuss the needs of his customers and to offer them a 20% discount on labor when they purchased kits and parts for that job. He realized that this not only gave him a raise (do the math), but it also gave him an opening to ask for the parts sale.
In many cases and I have witnessed this many times while making sales calls we can often be afraid to ask for the sale. I believe many engine builders are becoming so used to the changes that are happening in distribution, that they assume the customer will be supplying his own parts. Sometimes, while standing there waiting, I could just jump out of my skin when this critical part of the job is overlooked or postponed. Worse yet is when the customer has to ask if the shop sells parts (Take a deep breath, Dave. Relax.).
Parts sales are not what they used to be. I will admit to this. But parts sales can add dollars to your bottom line. By supplying the correct parts you can protect yourself and your reputation. You can also be more in charge of the flow of work as it makes its way through the shop, contributing to busier employees and happier customers in the long run.
Now, go have a smoke, a cup of coffee, then go and sell something.
The Twelve Steps were first published in the book, Alcoholics Anonymous: The Story of How More Than One Hundred Men Have Recovered From Alcoholism in 1939.