Don't Overlook The Easy Dollars To Add To Your Bottom Line - Engine Builder Magazine

Don’t Overlook The Easy Dollars To Add To Your Bottom Line

As I began to review the profit and loss statements from last month, I was reminded of something I learned long ago. Financial data, although very useful, is just a snapshot of the past or history.

I’ve seen so many shop owners over the years have the right tools for the job, and they attend training to improve their technical skills, but when it comes to shop management, they look at the financials as if they were a foreign language. Taking control of some of the numbers can really affect the bottom line.

Breaking the Mold

In general, I think we’re all creatures of habit; we do certain things because they’ve ­become patterns. So while change may not always be easy, it’s necessary for a healthy business. I like to really dissect my fixed costs on an annual basis, in an attempt to make changes that will add dollars to the bottom line. For example, this past year, we changed carriers for both worker’s comp and liability insurance with a savings of almost $6,000.

For another example, we’ve been with the same credit card processing company for 10 years and, upon reviewing the costs, I’m in the process of switching to a company that should save us about $350 per month.91538Profit2jpg_00000045856

We also changed vendors on some of our shop supplies. We had been paying $23 per gallon for a specific product, and, by switching vendors, we are now buying a similar product for under $10 per gallon. With usage quantities in the five-to seven gallon per week range, this has resulted in a savings of more than $4,000 per year. Any time I can put $6,000 or $4,000 to the bottom line without bringing in a new job, I’m all for that!

These are just a few examples of ways to put more dollars to the bottom line without selling anything extra. They are “hidden” dollars that I would rather see on my bottom line than on someone else’s. With the daily challenges we all face with just trying to rebuild engines, we sometimes overlook these easy dollars.

Re-Evaluate Your Gross Profit Percentage

Another area most shop owners let fall between the cracks is gross profit on parts. Gross profit is the difference ­between revenue and the cost of the part before overhead. Here’s my ­philosophy on gross profits:

– Lower prices do not always equate to increased sales in the auto repair business; and

– Any sales resulting from lower prices will require you to sell more to maintain the same level of profitability.

Generally speaking, if you raised your gross profit on parts sales by 1%, it would require a 4% increase in sales to realize the same gain. Increasing sales is always a desirable scenario, but, in reality, we have more control over our pricing than we do over sales or potential sales. People who buy from you solely due to pricing are not genuine customers; they belong to whoever has the lowest prices in the marketplace.

So, don’t sell yourself short on gross profit. Maintaining a successful business requires exceeding the expectations of your clients, and this means going the extra mile. It might mean taking care of something that is beyond the warranty period because it’s the right thing to do.

Having a profitable business allows you to do what’s best for your clients. And, building long-term relationships with your customers by exceeding their expectations will help your bottom line.

I have two rules in business. Rule #1 is: Take care of the customer. Rule #2 is: Make money, and, when in doubt, refer to Rule #1. It’s our responsibility as business owners to run a profitable business in order to provide the level of service our customers ­expect.

Know your target gross profit percentage and work diligently to achieve your goal. There are many different thoughts on what gross profit shop owners should target, so you need to come up with a number you are comfortable with. Generally, 40-50% gross profit is in the ballpark. Gross profit is an important component of your shop’s makeup, so don’t leave dollars on the table that your shop needs to be financially successful.

 

John Volz is co-owner of Volz Bros. Auto Service in Grass Valley, CA.

 

You May Also Like

Utilizing Instagram

“When we started, we had no business at all… that’s when I started using Instagram,” Yaghoubian says. “Back then I didn’t know a lot about social media, but it works for business really well, and especially the automotive industry on Instagram.”

The Industry has changed, so should you.

“One picture I posted got 7,600 likes, it reached 112,000 people, I got 982 profile visits from that post, 758 people saved it, and 208 people sent it to other people,” says Aaron Yaghoubian, owner of Arlington Machine in Riverside, CA, talking about an Instagram photo he shared in August of an Evo 8 short block project. “You can’t beat it. Some engine builders are over here crying, but they don’t want to use something that’s free. They have the device in their hand, now download the app and do it.”

Higher Revving Education

We’ve all seen the ads in magazines and online for schools, classes and seminars on tuning an ever-increasing number of engines and even transmissions in today’s cars and trucks. The better ones will include the use of a chassis dyno to show real-time results of the step-by-step methods they teach.

Chassis vs Engine Dyno

We spoke with a couple shops that utilize both dyno types to get their take on the advantages, disadvantages and reasons to have one over the other or both.

Tradeshow Season

While the rest of the world tends to slow down in the fourth quarter, our industry is starting to rev up. That’s because it’s tradeshow season, and the excitement for next year is always palpable!

OE Parts vs. the Aftermarket

Many of your customers believe that OEM parts are better than aftermarket parts. We wanted to dispel some of the myths once and for all. Without getting into the mud about which brands are better. It is important to note that not all parts are created equal, and this includes both aftermarket and OE replacement parts.

Other Posts

Automotive Specialty-Equipment Businesses Remain Optimistic Despite Supply Chain Issues

The record-high sales growth over the past two years for the automotive specialty-equipment industry is beginning to level off or subside, according to the newest SEMA market research report. Despite ongoing economic uncertainty, supply-chain issues, and rising costs, companies remain optimistic as sales remain solid and above pre-pandemic levels. Related Articles – Edelbrock’s Smitty Smith

Southern Style Racing Engines in Pinellas Park, FL

Southern Style Racing Engines (SSRE) & Components Inc., based in Pinellas Park, Florida, is for sale. Related Articles – NASCAR Names New Sr. VP of Competition, Promotions – Midwest Pro Stock Association Set for Rebirth with 7 Races in 2023 – Vance & Hines Shakes Up NHRA PSM Team Founded 50 years ago by current

Ford Announces it Will Split EV and IC Development Into Different Business Units

Ford is continuing to transform its global automotive business, accelerating the development and scaling of breakthrough electric, connected vehicles, while leveraging its iconic nameplates to strengthen operating performance and take full advantage of engineering and industrial capabilities. Related Articles – Hot Rod Power Tour 2023 Dates and Locations – Dayco Recruits Craig Frohock as its

Setting Up an Instagram Account

The old saying goes, “A picture is worth 1,000 words.” Well, in the world of social media, that same picture is not just worth 1,000 words, but could also be worth thousands of dollars in new business for your engine shop. By now you’ve likely seen our features on setting up and utilizing Facebook for your business. Next on our ‘to-do list’ is an introduction to Instagram for those of you who haven’t started utilizing this social media platform.