Making New Equipment Pay For Itself In 90 Days - Engine Builder Magazine

Making New Equipment Pay For Itself In 90 Days

Purchasing shop equipment is no small decision. After all, new equipment carries a hefty price tag and no guarantee of a return on your investment. In the best-case scenario, the new equipment pays for itself, increases trust and loyalty with your customers, improves efficiency, and leaves you with no regret. But, the opposite is always a possibility.

Purchasing shop equipment is no small decision. After all, new equipment carries a hefty price tag and no guarantee of a return on your investment.

In the best-case scenario, the new equipment pays for itself, increases trust and loyalty with your customers, improves efficiency, and leaves you with no regret. But, the opposite is always a possibility: the equipment never pays for itself, it goes unused, it breaks down and makes your team inefficient, and ultimately makes you wish you never wrote the check.

When I can’t think of anything more important than buying that new equipment RIGHT NOW, I force myself to answer the following question:

What is my plan for making this equipment pay for itself in 90 days?

This turns my internal debate into a pretty simple math problem.

If I buy a machine for $2,000, and I sell $2,000 worth of business for it, is it paid for? If you said ‘no,’ you’re correct! If your gross profit is 25%, and you sell $2,000 worth of business, you’ve only made enough to pay back $500 of your bill.

In other words, you’ve got to figure out your labor first. If your profit is 25%, your goal is to sell $8,000 in business in 90 days. If you charge $150 for each job, that equates to selling 54 jobs in 90 days.

Which means that the next step is to plan your marketing for this service. 

Is it even possible to sell 54 jobs in the first 90 days? If you buy a machine in February when everyone has already had that particular job performed, it will be summer before you can even start selling the services you need to pay off your purchase!

If it is possible to sell 54 jobs in the first 90 days, do you have the right marketing in place to educate your customers? Do you have the right kind of customer base who understands the value of that service?

If it isn’t possible, why not just buy the equipment now and pay it off in a longer timeframe? The answer is because all you’ve done is create debt. It’s no different than if you had handed your company credit card to your spouse or kid and let them go on a spending spree at the mall.

Buying equipment the RIGHT way means patience and delayed gratification.

Forcing yourself to come up with a plan to make the equipment pay for itself in 90 days means you might end up saying, “This may not be the right time,” and waiting.

Most people buy something because somebody sold it to them, but being sold something means skipping the critical parts of the buying process: research, planning, preparation and training. Skipping these steps leads to being in debt and makes you unable to pay bills. It means chasing instant gratification at the expense of your shop’s success. (This is the same reason why educating at the front counter — instead of selling — is so critical.)

roi graphicBeing Successful vs. Appearing Successful

If you want to appear successful, then it doesn’t matter what I write here. Buy more house than you need, buy more car than you can afford, buy a new machine because you want to look good to your techs or the salesperson.

If you want to actually be successful, then you need to prepare for success.

In our shop, we go one step further. After we figure out how many services we’ll need to sell in 90 days, we decide that the time is right, and we get our marketing plan in place, then we get the team involved.

• We create contests for who can pre-sell the most jobs.

• We teach the team the features, benefits and value of the equipment and the service, and make sure our service writers are equipped with our Pocket Guide to Selling Preventive Maintenance.

• We quiz each other on those features, benefits and value until it becomes ingrained.

These are little things in the grand scope of running a shop. One contest to pre-sell maintenance won’t make a machine pay for itself, but research, preparation, marketing, planning, training and a contest? The little things all add up to success.

If you’re trying to make a machine pay for itself in 90 days and your technicians aren’t doing a good enough inspection to identify which customers need that service, you’ll never win. Which is why one of the most valuable things you can do when purchasing equipment is to measure daily.

repair tech with car and clipboardAre your techs doing thorough inspections? Are they identifying all of the needs on every engine, or are they pencil-whipping the inspection and doing the things they want to do? If your technicians are identifying every need, but your service advisors aren’t going over all of those needs at the front counter with the customer, they’re creating distrust between writers and technicians and tamping down sales. If your real labor gross profit is lower than the estimate you used in your plan to pay off that new equipment, you’re fooling yourself and putting your shop further in the hole. But, you’ll never know this if you aren’t tracking shop benchmarks like these on a daily basis.

No ‘Easy Buttons’

If there’s a theme here, it’s that there aren’t shortcuts to running a repair shop. There are no “easy buttons.”

Running a profitable shop takes daily measurement, daily training and daily accountability. It takes hard decisions and careful choices. It means sacrificing looking successful in order to actually be successful.

It means making a choice: I will do the hard things that will make my shop and I successful.

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