Before becoming a $1.5 million shop, CS Automotive was marketing themselves (and getting a reputation) as “The Cheapest Shop in Town,” in Brentwood, Tenn.
The marketing worked, CS Automotive was getting more customers than ever, and with more work came more profits … well, no.
Kim Auernheimer, co-owner, says she and her staff were actually working twice as hard to only be making half as much.
CS Automotive was marketing to the wrong customers, charging too little and working with individuals that were not interested in truly maintaining their vehicles.
There were holes in CS Automotive’s sales cycle.
It sounds simple, but the first step in any sales process is getting people into the business, explains Ron Ipach, co-founder of Repair Shop Coach, everything else follows suit.
“Without customers, there is no business—it’s really where the cycle begins,” he says.
Once owners are willing to do the research to intelligently spend their money to bring in high-quality customers, they are no longer at the mercy of price shoppers and car owners unwilling to maintain their car—this allows for shops to charge what they need in order to make a profit as well as pay their technicians a competitive wage.
Ratchet+Wrench spoke with coaches, shop owners and general managers to get to the core processes, equations, and methods within each step of sales that could be identified as holes within your sales cycle, and ultimately get in the way of both customer and employee retention, sales, and revenue.
Getting the Customer
“Getting people into the business is where marketing comes into play,” Ipach says.
Over 20 years ago, Ipach ventured into the auto repair industry, and found that his focused energy and passion for marketing allowed him to help other shops looking to boost their marketing—and ultimately, their sales.
Ipach is now known as “Captain Car Count” and has worked with over 7,000 clients to help them better their businesses.
Is your customer base narrowed down?
There’s an 80/20 rule when it comes to a business’s customer base, explains Ipach; 80 percent of a shop’s business comes from the top 20 percent of its customers.
Then, there’s a middle ground, the 60 percent of customers that come in and out, and attribute to some of the leftover 20 percent of the business.
Lastly—the bottom 20 percent, these are the customers that price shop and are unwilling to do what is necessary to maintain their vehicles—the “wrong” customers.
Before narrowing down her “right” customer base, Auernheimer says that her shop was marketing to the “wrong” customer base. The marketing efforts to get “The Cheapest Shop in Town” concept circulated around town took money, energy, and time—all soon wasted.
CS Automotive was marketing to people looking for cheap auto repair, not quality service.
Marketing is representing the people you serve, says Auernheimer, and individuals looking for cheap auto repair, are not the people Auernheimer looks to serve.
Have you identified your avatar?
Before more than doubling CS Automotive’s income, Auernheimer said the business had to turn around some strategies, including who they marketed to.
“We had to figure out who our customer was and who our customer wasn’t,” she says.
To do this, Auernheimer said the first thing she did was identify who her favorite customers were, the ones that she looked forward to seeing every day and who she enjoyed working with the most. Looking at the traits of those individuals gave Aurenheimer an idea of who her ideal customer was, her avatar. She then mapped out what type of people her ideal customers were, and did a geographical investigation to discover what areas those customers lived—all to pinpoint how she could market to others like them.
CS Automotive’s avatars are both professional men and women who work in the nearby office park, and stay-at-home moms. Once identifying who the business's market was, Auernheimer says she had to start designing the business for them, not for herself and her husband, and then market to those individuals.
“Never stop evaluating who you are and who your customer is,” she says.
Are you marketing to pre-existing customers?
According to Ipach, there is only one group of individuals a shop should be marketing to, and it’s its own clientele.
“Everyone wants to market to the whole world,” he says, “but it should be a smaller list.”
It’s not about a high number of customers for Ipach, in fact, he says that each shop only needs 769 customers to be a million-dollar business. Below is the equation for Ipach’s 769 customers concept:
If an average vehicle goes into the shop twice per year, and the average household has two cars in their driveway, that means a typical family will be in the shop a minimum of four times per year. With an average ticket of each trip being around $325, each customer is worth around $1,300—making 769 customers equate to $1 million a year.
“The best people [to market to] are your own people,” Ipach says.
But to get to the average of four times per year, shops need to be marketing and nurturing each pre-existing customer who walks through the door.
Marketing is more than just advertising—it is creating an experience. Every single customer that walks into an auto repair shop expects to get their car fixed, that’s the bare minimum, says Ipach, what customers are now looking for is an above and beyond experience.
“Make it a place I would want to send my mom to,” he says.
Are you thoughtfully budgeting?
As for a marketing budget, Ipach doesn’t like budgets, but he also doesn’t like spending money. He says that it’s not a matter of how much money is being allocated to marketing, but that the money is being used in a smart way.
Considering Ipach recommends marketing to a business's current clientele—his 769 customers concept—he believes that the marketing budget should be spent on that core group of individuals.
“Customers are already spending a lot of time and effort into coming into your shop the first time, and it doesn't take a whole lot to get a customer to come back,” he says.
Although, each business should have goals, and owners have to spend an appropriate amount of money in order to achieve those goals.
“Some shops are throwing money at anything,” Auernheimer says. “Once you identify your target market, it’s a lot easier to focus your efforts on those markets.”
For Auernheimer’s shop’s avatar of the stay-at-home mom in her 30’s and 40’s, she markets directly to them at the local YMCA and fitness centers, as well as wineries around the area.
Identifying the current market of CS Automotive, has aided Auernheimer in spending her marketing dollars in areas she knows will reach her customer base—saving the money she would have been throwing away marketing to the wrong customer.
Have you covered all mediums?
Identifying a specific market, allows for more marketing efforts to be vast and expansive.
“If you’re doing marketing right, you have thoroughly exhausted every avenue of marketing before moving on,” says Ipach
He explains that in order to capture the attention of each targeted individual, businesses have to use a full multi-marketing approach.
Ipach gives the example of a business sending out a direct mail piece on a shop brake special to a couple’s home. The brakes on the truck out in the couple’s driveway have been squeaking lately, but it was the wife of the couple that saw the piece of mail—she drives the CRV and didn’t know that her husband’s truck was having brake issues—so she throws away the piece of mail. The woman’s husband never saw the postcard, and in turn, didn’t end up bringing his truck into the shop that sent it.
The direct mail went to the correct market, with a relevant message, at the right time—it was just the wrong media.
It turns out, the husband would have brought in his truck to the shop if he would have gotten a text message with all of the same information.
“You have to use all forms of media—not a matter of one, but all,” Ipach says.
He recommends shops venture into all types of marketing mediums, including direct mail, texts, email, social media, and live phone calls—this provides a higher chance of customers seeing the message.
“Marketing can be like trying to get the attention of someone in a busy crowd with lots of noise,” he says.
Multiple marketing ventures don’t have to be a large financial investment, phone calls and texts cost very little and still stretch the gamut of visibility.
Are you keeping your marketing efforts consistent?
Doing business is about building relationships, and relationships take constant and involved effort. Ipach gives the example of going to a well and pumping for water—how you can pump and pump and nothing will happen, then a little dribble will come out and suddenly, there will be enough water, so you stop pumping. But that water soon runs down into the well and you will no longer have enough water anymore.
“Never take your hand off of the pump, because starting from a dead stop takes 10 times the energy than when you already have the momentum going,” Ipach says. “You don't know when you're going to have a bad week.”
Ipach suggests that the best time to market one’s shop, is when it’s the busiest—considering a dip in business might be right around the corner, and it’s better to continue the stride.
“One of the easiest things to do is begin to market too quickly and then stop too quickly, because you don’t give it a chance and you don’t think it’s working,” Auernheimer says.
Considering most of the marketing efforts that Ipach suggests are pretty inexpensive or free, it’s easy for shops to continually push them out.
“I always tell shops that they are in the relationship business, not the auto repair business—marketing and advertising creates that relationship,” he says. “Market for the future, because what you do today, you will reap the benefits of tomorrow.”
Are you tracking your progress?
Tracking a shop’s marketing is a key element in the process, and something that a lot of shops miss, says Ipach, it is a vital component of successful marketing.
The best way to track marketing efforts is by having a database that catalogs the marketing efforts going out, and now coming back into the shop. Coupons can be easily marked and assigned in a database, or even just a handwritten invoice number on the top of coupons that are then put it in a drawer, Ipach suggests.
Auernheimer uses specific tracking numbers so she can see exactly where her customers are coming from, as well as ads with tracking numbers. The shop’s cards have a coupon if the customer turns it back in, which can also be tracked. But Auernheimer says the biggest key to identifying where people are coming from and if the marketing is working, is by simply talking with the customer and asking.
Phone calls are another key element that should be tracked, considering a large end-goal of marketing is to get the phone to ring, says Ipach.
“Get the person who answers the phone to ask a few questions: Are you a new customer? Have you ever done business with us before? What got you to call? They’ll let you know if it was a coupon or a mailer,” Ipach says. “Then you will know how that phone call happened.”
Rarely will someone just walk straight into a shop, he explains, 99 percent of the time a customer will call right away—that’s the marketing’s job. Once the phone call has been received, it’s now up to the sales department.
Charging Profitable Rates
The next point in the sales process is being able to charge customers a profitable rate—a rate that keeps them coming back, but also allows for owners to pay their technicians properly and turn out a profit.
“[We’re] always talking about margins, ‘we need at least a 60 percent margin on that,’ so if you don't know how to price your labor, then you are not going to make a proper margin,” Brian Hunnicutt, performance coach with Automotive Training Institute (ATI), explains.
Hunnicutt has been a coach with ATI for over 11 years and has had a journey within the automotive industry that aids in his view of all things service and maintenance. Before becoming a coach, he was working in all facets of the industry, at multiple different locations and following a gamut of processes.
Have you calculated the right rate?
In order to ensure that a shop has the correct labor rate, Hunnicutt suggests the following equation:
Take the highest-paid technician and multiple that pay with the load, which includes all of the extras—uniform cost, FICA, FUTA, SUTA, unemployment, workers’ comp, insurance—the load will typically be 25 or 30 percent on top of what the tech is being paid. The total figure is then multiplied by 2.5 to get to the 60 percent—this will be the minimum labor that needs to be collected.
Although, if a shop’s effective labor rate is too low, the margin will go below the 60 percent, Hunnicutt says.
A past expected norm was for shops to give a percentage of its labor to the technician—around 50 percent, he explains, but the load wasn’t typically figured in. This left technicians making 60 percent of labor and the shop making only 40 percent.
Hunnicutt recommends that owners pay a straight flat rate to their technicians, this way, they don’t have to worry as much about losing their labor rate, or their technicians getting an immediate raise off of raising the labor rate.
Are you worried about staying competitive?
Labor rates come with a wide-array of misguided beliefs, says Hunnicutt. The first and foremost misguided belief is connected to the biggest competitor of independent repair shops—dealerships. A majority of owners think that their shop’s rates can’t exceed the local dealerships around them.
What owners don’t realize, explains Hunnicutt, is that most dealerships can not be more than 10 percent above what the labor rate around it is. Meaning, if shops don’t raise its labor rates, dealers are unable to raise its either.
“The dealer would be charging $200 an hour right now if we let them, but the aftermarket [industry] is the one holding dealers back from charging what they want to,” he says. “By us not raising our labor rates, the dealers can't raise their labor rates and we become landlocked.”
Have you broken it down by the hour?
Another misguided belief system connected to a raising labor rate is the notion of ripping off customers, says Hunnicutt, along with the local discounted competing mechanics charging only $50 an hour. Both of these factors can make owners think that they would lose their business if they raised their shop’s labor rate.
Raising labor rates does not result in a lost business, says Hunnicutt, in fact, a shop’s labor rate does not have to increase by all too much for an owner to notice an impact on sales.
If a shop is running 2.5 hours per car, and the labor rate goes up by just $10, that is only an added $25 a car, he explains, and an increase of $25 will not chase business away.
“It’s important to break it down to the hour,” says Hunnicutt.
Have you compensated for the tech shortage?
Another large reason to raise a shop’s labor rate, is to be able to pay the technicians at the shop more.
“If technicians are getting harder to find—and they are—we’re going to have to pay them a lot more money to attract the best ones,” says Hunnicutt. “We are going to have to pay someone $50 an hour to get them to come to work for us.”
A higher-paid technician, means a raised labor rate. If a shop pays a technician $50 an hour, and that gets multiplied by the 30 percent load (an extra $15 bucks) times 2.5, that gives a rate of $162 an hour that would have to be charged in order to pay that person.
“Why can’t we pay our technicians $50 an hour and why can't we charge $162 an hour?” Hunnicutt asks.
For comparison, Hunnicutt currently works with some shops that have a labor rate of $160, $180, and $190 depending on where the shop is located and what work they do—European, specialty, or general repair.
“I have ma and pa shops at $150 an hour, and it has not had an adverse effect on their business,” he says.
Are you charging for foreseen growth?
Hunnicutt says that when an owner considers raising their shop’s labor rate, they should have more in mind than just their technicians’ current pay.
“It’s not just a matter of what you are paying your best tech right now, but a matter of what you would you like to be paying your best tech right now,” he says.
If a shop’s best technician is making $28 an hour, the owner should ask themselves how long that technician has been making $28 an hour, and if they have a progressive plan that will soon put the technician on track to make $35 or $40 an hour. If not, the owner should create a progressive plan to make it where the technician can soon make more money, and allow for the shop to make more as well.
Closing the Sale
The last portion of the sales cycle is, arguably, the most important—closing the sale.
Bringing in customers and charging the correct labor rate won’t aid in the sales process if the end sales are not made.
Ricky Jordan, general manager at Fifth Gear Automotive, in Lewisville, Texas, has been able to aid in a 30 percent revenue increase over the past year by getting his shop’s closing ratio to around 90 percent.
“We have a practice of always closing, and we have created a culture that prioritizes closing,” Jordan says.
Jordan has been in the industry since high school, following in the footsteps of his father Rick Jordan, who started his own business with Bill Bernick in 2004. Ricky started at Fifth Gear Automotive in a sales role, and has since moved his way up to being the general manager of the shop.
Are you basing conversion on estimates?
An ideal closing ratio is widely debated—in an ATI meeting that Hunnicutt was in, the subject came up and garnered a lot of varied responses. One coach said that the ideal closing rate should be 50 percent, another said 60 percent, and the conversation continued until it reached its way to 100 percent.
Hunnicutt says that the subject of closing ratios, is not a simple one, because the KPI can mean different things to different shops. If a shop is referring to being able to sell one thing on a car, and then that one thing attributes to the rate, that would make the closing ratio 100 percent. Meaning, a shop that sells one air filter to 10 cars, would still have a closing ratio of 100 percent, but be making no money, he explains.
Because of this, Hunnicutt recommends looking at closing ratio through total estimates. To do that, owners need to know what a good estimate amount is to begin with, and then what a substantial conversation rate is off of that estimate average.
For European shops, Hunnicutt says that the estimated average should be around $2000 or more. A good estimate for an Asian or ma and pa shop should be $1250–$1500. That allows for a shop that is looking to have an ARO of $550, to divide that $550 by $1250 to get to a conversion of around 44 percent.
Have you isolated the shortcomings?
The best place to start when beginning the process of strengthening a shop’s closing ratio, is to isolate the factor(s) keeping the rate from growing, says Hunnicutt.
First, the ARO should be evaluated to see if it is tall enough, if it is not, the labor rate is too low, and needs to be addressed. If that is not the issue, it could be the shop’s courtesy check and maintenance process. The courtesy check should be performed completely and properly, and everything from the courtesy check should be listed in the estimate. Maintenance should be recommended based on time and mileage, he says.
If none of the above factors are the issue, it then comes down to the actual sale, says Hunnicutt. Either not a strong enough relationship is being formed, the customer is not being educated correctly, or the customer is not be cashed out properly.
Are you changing your shop culture?
Jordan says that Fifth Gear Automotive’s sales and closing ratio have both improved significantly and dramatically over the last two years, almost solely because of the shop’s changing culture.
“We’ve created a culture that—because we have such high technician efficiency—the technicians understand that if they make an investment in the job getting sold, they have a much higher chance of running more hours,” Jordan says.
The communication and trust between Jordan’s technicians and service advisors is what, he says, has been the reason for the 30 percent sales increase in the past year.
“We don't quote jobs any differently than any other shop—what happens is, when we get in a situation where a customer is not willing to make the investment in their car or it’s a budget issue, the service advisor is empowered enough to have a conversation with the technician,” Jordan explains. “The advisor will say ‘look, this is where we are at and this is what the quote is—I have a commitment from the customer that if I can get to this price point I can get the entirety of the job to sell.’”
This communication and culture shift allows for the service advisor and technician to be able to turn a $1,000 ticket into a $4,000 ticket. This unique style of selling began with one employee in the business, now the foreman, who spread the culture throughout the shop.
“Our number one focus is our culture—every meeting and every conversation that we have, centers around that,” Jordan says. “It’s about being adaptable to create sales, and that's how it spread—it’s an expectation of each team member.”
Do you educate customers on maintenance?
Customers not being properly educated by staff may result in a low closing ratio. Hunnicutt suggests walking the customer out to their car and asking whether or not the customer likes their car or not, and how much longer they intend on keeping the vehicle. Then, show the customer why they should keep the vehicle by educating them about maintenance. There are lots of online tools out there to do so, says Hunnicutt, like edmunds.com, which showcases the true cost to own a vehicle, and how much it would cost to replace.
“If you can educate the customer about that—along with building a great relationship—when you call them later to try and hold the line on the sale, it’s much easier because they have already bought into the maintenance aspect, Hunnicutt says. “You're not a sales pitch anymore, you're an educator—and that makes your conversion rate go up exponentially. ”
Continue the education into when the customer completes the transaction by letting them know what future maintenance events are coming up for their vehicle, he says. If you let them know what is coming in future events they can plan their money and it’s a lot easier for them—and you— to maintain the vehicle properly.
Are you not finding the “yes?”
The mantra at Fifth Gear Automotive is to “find the ‘yes,’” and is what has aided in their extreme sales growth in the last year. Service advisors are trained to figure out how they can get a “yes” from each customer. Sometimes it’s price, sometimes it’s time frame, and sometimes it’s just tweaking the way the shop services the vehicle, says Jordan—but identifying what needs to be focused on and working to adapt is what gets them the amount of “yeses” they do.
“Having a service advisor that understands how to prioritize for a customer is the difference between truly selling, and someone who is just regurgitating a courtesy inspection off a screen,” Jordan says. “Having quality sales guys that understand the relationship side of the business and being able to prioritize a set of events is a big part of the sales process.”
