Ah! Over the years, we have heard this complaint on numerous occasions. Shop owners complaining about things getting tight and that there is not enough business and “I can’t pay my bills, etc.”
Let’s go over some basics about business and handling the “tight economy.” A shop goes through cycles or periods of where business is good followed by a period where business is bad. This has been going on since the beginning of time. So we can conclude that it is going to happen again. It appears we are in one of those times when things are a little tough.
Now, if you have been through this before, hopefully, you have learned some things. Some businesses survive and a lot don’t. Why? Most of the time, the shops that survive know how to handle the tough economy!
They do the right actions which helps them through the difficult period. Such as:
Successful shops know when the economy gets tough, they have to work harder. What I really mean is they have to work smarter. Just working an extra 3 hours day will not solve the car count problem. It will not solve a shop that has gotten lazy and dropped out successful actions they were doing when they were small.
The most common of these successful actions is they used to be “hungry”. When they first started in business, they were very aggressive. They did whatever it took to get business in the door. Many times, new shops will pass flyers out door-to-door or in malls promoting that they were a new business that was opening. They passed out business cards to everyone they knew.
But as soon as they got busy, they stopped these actions, even though they contributed to the shop getting busy. So part of the working harder is go back to being hungry and aggressive.
They promote! This doesn’t mean they spend a million dollars on advertising or promotion, but they do actively increase their efforts with their customers. They are able to effectively get results without having to spend lots of money doing it.
When things slow down, shops tend to stop promoting. This is not the right thing to do.
I love people who spend lots of money to learn how to create tricky, expensive promotional campaigns. When in reality, the key to promotion is word of mouth. So instead of spending tons of money on promotion, you can increase your car count by having a plan to spend more time with your existing customers.
Personal contact with your existing customer costs you additional time, but is more effective than any promotional piece ever created. Explaining the bill and what you are doing and why is very effective promotion. There is no promotional piece that will replace having a high care factor and good communication skills in dealing with your customers.
The other day I got an e-mail about a problem a potential customer was having. He was complaining about bad checks, business slowing down and then proceeded to give a full picture of all the promotional actions that he was doing. He was spending a ton of money and he indicated that 50% of his business was new customers. He asked a ton of questions that did not make any sense.
I asked a couple quick questions like what his average repair order was and what was his cost of parts and labor. It was very obvious that he had other problems than promotion problems. The number one problem was the quality of work going out the door.
When 50% of your weekly business is new customers, wow!! Something is definitely wrong in the quality of work. A growing and expanding shop is built on repeat business and word of mouth. The part of the industry that has heavy repeat business needs to have about 90% of their business be from existing customers or you are starting to have problems.
If you are in the part of the business that doesn’t operate on repeat business, then word of mouth is everything to you. Every time you finish a car, you put a referral out in the world. This referral is either good or bad and generally it is up to you to make it a good referral.
First Rule of Promotion: Fix the Car
Second Rule of Promotion: Treat the customer fairly with a high care factor.
I know of shops that do no promotion or are not even listed in the yellow pages, but they do terrific business, because of the way they fix the cars and handle their customers. They have a good number of new customers coming to their shop because of referrals from their existing customers.
In good times, shops tend to get very lax on the control of the money. They start buying things and expanding without looking at the long term effects of this. They take on heavy debt and commitments due to the fact that they are making lots of money and it appears to be no problem.
But when the economy slows down, they begin to get into real trouble because their monthly overhead is now out of sight. While smaller and the overhead was low, they could handle a drop in business and survive rough times.
I find that the most successful operations go back to the basics when business slows down. They work smarter. They get more aggressive on making sure that they are doing everything that they know helps create good customer referrals and repeat business. They tighten the financial belt, make sure that they don’t spend money on things that don’t work and do spend money on those that do!
I hope this helps.