During February, we are inundated with messages of love. You cannot go anywhere without seeing hearts, cupids, diamonds, and chocolates! But what if we took a moment to fall in love with our businesses? I know that sounds silly, but you likely became a shop owner because you had a passion for this industry or your customers, or maybe, like me, you entered this industry following someone else's desire. Admittedly, I didn't love owning my shop until a few critical things happened.
I Got Coached
The first thing I did was hire a coach. If your first thought is, "I can't afford that!" then you must hire one. A good coach will quickly teach you to earn whatever you pay for their services, provided you implement what you learn. If your average repair order (ARO) is $200, which is incredibly low compared to the industry average ($536.04), and a coach is $1,600 per month, they only have to help you bring in eight more cars per month or two per week to pay for their services. If they increase your ARO to $400, which is better but on the low side of average, and still bring in those eight additional cars, you just put $1,600 in your pocket. That's an excellent start to bringing back that loving feeling.
I Managed What I Measured
Learning and managing my key performance indicators (KPIs) was critical to increasing my love of shop ownership. Flying the plane while you're building it isn't any fun. I recall attending events where successful owners talked about their KPIs and how important it was to know and manage my numbers. Acronyms like ARO, ELR, and SOP were always flying around, and I felt like the only one with no idea what all that jargon meant, much less how to find it! I feared admitting my ignorance and kept quiet while furiously writing notes to Google later and pretending I understood. Hiring a coach changed all that. Your coach will want to see and track your KPIs while teaching you how to measure and manage them.
Here are the top three to start tracking today if you aren't already, and why they matter. I recommend making this a daily, weekly, and monthly habit and suggest writing them on paper. Writing things down helps you remember more by forcing you to slow down. Becoming aware of your performance will improve it! What we focus on happens!
ARO: Average Repair Order. Total sales dollars divided by the number of repair orders. (There is some division on including zero-dollar invoices in this calculation. I choose to include them, but it's your shop. Be consistent.)
Why track ARO? Knowing how much you collect per vehicle helps you manage productivity and understand the stress level of your staff.
Hours per RO. Total billed hours divided by the number of repair orders.
Why? This profoundly affects your ARO and staff attitude. Your staff will likely be stressed working low hours on too many cars if it's too low.
ELR: Effective Labor Rate. Total labor dollars collected divided by billed hours sold. This is what you're collecting for each hour of labor you sell. Hopefully, it’s within 90% of your posted rate. If not, talk to the coach you hired in the first paragraph.
Why? Your posted labor rate might be $175 per hour, but when you consider oil changes or menu-priced items that haven't been updated in a decade, you may only be collecting $120. Now you're giving away $55 per hour, every hour, all month long. If you billed 500 hours monthly, that's $27,500 and $330,000 annually.
Understanding your KPIs will help you fall in love with your business. Once you know what is essential to track, you can understand how to change those numbers. Once you can do that, shop ownership becomes fun, and who doesn't love to have fun?
I Found My People
Another big thing was finding a tribe of people to support and hold me accountable. I did this through my coaching group peers, joining a local shop business development group, and joining Women in Auto Care and online groups like Auto Shop Owners Group (ASOG). Having the "iron sharpens iron" experience of sharing successes and weaknesses with owners of similar shop demographics while introducing me to peers who broadened my knowledge and understanding from all over the automotive aftermarket industry has been a game changer for me and the success of my shop.
Bottom line: Ask for and accept help. We are not alone. We really do raise the industry by helping each other be better operators.
