Every shop owner wants to make money. And while the obvious way of doing that is to increase your shop's gross sales, not only will that not happen overnight, there are also numerous ways to approach that challenge.
As W. Scott Wheeler, president and founder of Automotive Consultants Group Inc., says, “There is more than one way to skin a cat, as they say in Georgia.”
And it’s true; there are many ways to increase gross sales, but one of the most common is increasing car count. While it works in many instances, the misconception is that car count is the only KPI to focus on.
That lack of understanding around car count can create problems down the line for your shop, whether that means overworking your technicians or maxing out your facility, according to Wheeler. Car count is also seen as a Band-Aid for all issues, he says, so it’s vital you determine if that’s the best method for increasing gross sales.
“Before you go to raise car count, is that the real problem?” Wheeler asks.
In order for an increase in car count to work effectively, other KPIs need to be considered and perfected beforehand.
Before You Start: Set Benchmarks
Wheeler says there is often a misconception that increasing car count will automatically increase gross sales. However, car count needs to be assessed with other KPIs, such as average repair order (ARO), gross profit margins (GPM), net operating profit (NOP), productivity and efficiency.
Most importantly, those KPIs need to be tracked on a daily basis using some sort of system. You have to know what you’re doing day in and day out, Wheeler says. He typically gives his clients his version of a KPI tracker using Microsoft Excel.
That’s why the first step needs to be identifying the right car count benchmark that your shop should be consistently hitting. Identifying that benchmark should start by asking yourself the following questions:
What is your current car count?
Start with the basics; where your shop is now and how much more work you are willing to handle.
What are your current gross sales?
Set a goal of how much you would like to increase overall sales.
What NOP are you trying to achieve?
Most shops, according to Wheeler, hover around 5–7 percent net, while exceptional shops hit double digits.
What are your GPMs?
Most shops have two profit margins—parts and labor—and those numbers need to be looked at differently because the gross profit margins on parts differ from the margins on labor. You should also know the breakdown of how much of your sales come from each category.
If you find that your current numbers are not matching up, then you may want to evaluate what numbers need to be worked on before increasing car count.
Wheeler says that every shop has a “sweet spot,” but since all shops are different, there isn’t an exact number as to what that can be.
Five Considerations for Increasing Car Count
After getting your current numbers together, you have to start thinking about the bigger picture. Are you actually capable of handling more work? Wheeler says these are three factors to consider:
Physical Space. Increasing car count is a great starting point to increase sales, but you need to be aware of the the actual physical limitations of your business, Wheeler says. You can increase car count, but you will reach your max at some point.
Technicians relative to car count. If you don’t have enough technicians to withstand the increase of cars, you will run into issues down the road. Wheeler puts it this way: If your shop is on the small side, you need to know the capabilities of your technicians (such as their efficiency and productivity).
If car count is too high, you run the risk of the warranty going up because the technician is more prone to making mistakes due to pressure. Mistakes can vary from lack of communication to feeling too rushed. Warranty in relation to gross sales should be less than 1 percent.
If your warranty numbers start to go up, you are pushing the limits of your facility and the technicians’ capabilities, Wheeler says.
Ratio of technicians to service writers. Wheeler says if you are looking to double car count, that is going to double or even triple the number of phone calls coming in, creating high demand for the service writers and technicians.
A good ballpark, Wheeler says, is a 3:1 ratio (three technicians to one service writer).
Marketing efforts. One aspect of increasing car count that larger shops, in particular, struggle with is getting enough work. Wheeler says if that is the problem, then getting more work is predicated on your marketing efforts.
He says a good way to start is with offering promotions, like a free oil change if the customer refers three customers.
If additional marketing is a route you need to take, Wheeler says that you need to know your ROI on marketing. If you wish to increase car count, then, in theory, you would need to double the amount of mailers you send out. Establish a ratio of ads sent out to car return.
Productivity. Relative to technician capabilities, how much work are your technicians churning out? Wheeler says that productivity needs to be at 100 percent or higher. If it’s not, then increasing car count will not solve the problem.
If your shop is productive, Wheeler says, increasing car count will absolutely help. If your shop is struggling, though, with technicians that work eight hours per day but only turn around four hours of work, then solely increasing car count will not help.
The higher the productivity, the more car count you can handle, but you also have to find out how soon it will be until the technicians will be maxed out. If your technicians are maxed out, that’s an indication that you will need to hire an additional technician.
