How to grow profitability in a Tyre & Mechanical Store (Tips for the Automotive Aftermarket)
Imagine if you could GROW your Tyre & Mechanical store profits with just a few KEY changes and actions. What would you do with the extra money?
1. FOCUS ON YOUR PRICING & MARGINS
In a turbulent marketplace many business owners are reluctant to put prices up. You are most likely to be “too cheap” and probably havent reviewed prices regularly.
If you are BUSY and sales volume is increasing, then put your prices up regularly! – especially for hard work or difficult customers.
If you are QUIET and your sales volume is declining – then improve your cleanliness and customer service, fix your sales processes (Phone scripts) and do more with local or web marketing. THEN put your prices up!
Many Automotive stores have had great success putting their Wheel Alignment prices up significantly and promoted the value of their great equipment and terrific wheel aligning staff. Staff were given sales training, used sales aids and paid a sales incentive to sell more wheel alignments. Profits soared!
2. AVOID DISCOUNTING WHERE POSSIBLE
Always make sure you set your pricing markup grids and margins correctly in your workshop management software – like Costar or Marlin.
Some stores have set an authorisation override to ensure staff need approval for any discounting.
There is an old saying – “Never let the salesperson set the price.” Death to Discounting! – Also ensure your staff know which high margin products to promote and always sell on VALUE (Reasons Why) and SERVICE.
3. BALANCE YOUR WORKLOAD – CHARGE MORE IN PEAK TIMES
Most businesses have busy and quiet times. See if you can charge a premium on busy days/times and offer a deal on quiet days/times. This is how the cinema industry shifted clients from Saturday to Monday and Tuesday.
Think of other reasons (other than price) why your buyers would buy in the quiet times – e.g. wet day BBQs for Tradies, Quiet forecourt special days, pre-school holiday reminders 3 weeks out.
Balancing your workload reduces the need for extra staff and extra equipment at busy times and is a far more sustainable way to do business.
4. RECRUIT GREAT STAFF AND BUILD A MOTIVATED TEAM
Remember that “you pay staff for attendance – if you want work that is an OPTIONAL extra.” How much you pay your staff and how hard they work is not always related. You can motivate and inspire them with praise, appreciation, recognition and rewards. Always ask for their input and get rid of any continually negative staff.
Consider Upgrading your Staff! – The mining boom has slowed down and more good staff are now available. You can find good staff in your local area – hand any good locals a business card and say “If you’re ever looking for a job call me!”
5. BUILD A STRUCTURED “A TEAM” TO GROW YOUR TYRE & MECHANICAL GROUP
When you have a small family team, it’s easier to coordinate the workflow.
Once you have about 10 staff (and fewer family members) – you really need staff systems like an organisational chart (who reports to whom), roles & responsibilities and job descriptions.
You need regular meetings and toolbox talks for coordination, performance reviews, recognition and reward systems (incentives) and structured training.
6. USE VIRTUAL STAFF TO ASSIST with office admin and marketing
You can get outside help with marketing and graphics projects on www.upwork.com or www.fiverr.com. Have a look at the amazing range of low cost help available – about one fifth to one tenth what you pay for staff in Australia. We have some of the most expensive labour costs in the world!
You can also get help offshore – a great English speaking Virtual assistant (VA) costs about $10k p.a. and can make you twice as productive – See the book Virtualfreedombook.com by Chris Ducker. You can get research, graphics, typing, admin and lots of organising done by your VA.
7. MAKING THE MOST OF YOUR BUSINESS SUPPORT TEAM
It’s really hard to do everything yourself – make sure you make the most of ALL your support within your networks. You could have:
- Local Connections
- Your Supplier Sales Reps to help you grow your sales
- Your Accountant
- A Business Coach
- An old wise Mentor
- A Mastermind Group of friendly stores
8. MAKING THE MOST OF YOUR ACCOUNTANT & ADVISORS
Most accountants are BUSY & OVERWHELMED and sadly many business owners just don’t talk to them often enough. Clever pro-active store owners meet with their Accountant (or their junior accountant) regularly to review business performance and plan business improvement.
Ask your Accountant for more regular meetings (every 2,3 or 4 months), it doesn’t have to be face to face – you can have a Skype or Zoom meeting on your computer where they can share the numbers and show you their screen.
It is critical to turn your NUMBERS into MEANING into ACTION. Ask your accountant what they would suggest to grow your business, what you should focus on next and to provide some budget goals and benchmarking data. If they can’t or won’t do this get a NEW Accountant ASAP!
9. WATCH YOUR FINANCES & BOOKKEEPER – DO AUDITS
Just a quick tip on effective bookkeeping – Make sure that you check EVERY supplier invoice is correct, that your stock was actually received and entered correctly in your accounting software (MYOB, Quickbooks, Xero etc). Watch out for theft and embezzlement (especially cash)
Many stores are NOT reconciling their financial software and some stores have commonly found supplier invoice mistakes. Don’t pay for invoices that are NOT yours or stock you didn’t receive (you can ask for proof of delivery)!
10. KNOWING YOUR NUMBERS AND LOVING THEM – THE POWER OF KPIs
How’s your relationship with numbers and business finances? Do you find your financial statements friendly or fearful? Some business operators get totally overwhelmed by their financials and choose to monitor just a few numbers – usually overdraft or total weekly sales. Other analyse too many numbers and suffer from ‘paralysis by analysis’ – they just don’t take enough action!
Your Automotive Aftermarket operation probably consists of many businesses – tyres, wheels, mechanical, ag, truck, 4wd accessories or more. Right now there are more than 1000 things that you could do to improve any one of your businesses.
But where do you start? How do you allocate your precious time between working on staff, systems, sales & marketing, suppliers, stock control and sustaining cashflow – then find that extra time for strategic planning.
Measuring your results is one key to running a successful business. “What you can’t measure you can’t manage” is a popular phrase with both accountants and consultants.
But are you really a ‘numbers person’? Do you love looking a P&L statement or do you prefer the buzz of talking to customers? How’s your financial literacy – do you understand a balance sheet?
People come in two broad types – emotional and logical – and the full range in between. Emotional people or “people people” are big on passion, talking and entertaining their patrons. They spend a lot of time out front with customers. They don’t really like analysis, budgeting or financial planning. Logical people on the other hand are task-oriented, more introverted and really happy in the back room. They love the numbers, doing the books and analyzing them.
If you find that you’re not making much of a profit, it’s probably because you don’t like numbers. If you focus on your financial numbers you’ll make more profit. What you focus on expands!
Start by measuring and finding out what’s really going on. So what can you measure easily?
Most point of sale (POS) systems can measure and monitor your sales in detail and give you break down by products sold. You can use this information to increase sales, margins and profits with better staff rostering, pricing & margin setting, stock control, improving staff sales performance and even implementing a rewards and recognition program.
11. WATCH YOUR SALES STATS TOO
To get a handle on your sales and marketing performance you could start counting your enquiry phone calls, email enquiries, web visits, quotes & bookings to calculate sales conversion rates.
Counting the total number of customers on your database or email club can give you a measure of the effectiveness of your marketing efforts.
Finding out source of existing customer enquiries and where they live can focus your advertising spend. Even a simple “Business Card prize draw” can help you find out where your customers work and get more corporate clients.
There are ways to make financials fun for the numerically-handicapped. Use visual feedback, charts & graphs around the office. Get your team involved in simple competitions based on sales results. Get your accountant to provide your numbers as a “Financial Dashboard” or organize a monthly meeting to verbally discuss the trends and suggested actions.
12. FINANCIAL BENCHMARKING FOR A TYRE & MECHANICAL STORE
Comparisons are useful – compare to last week, last month or last year. Watch the overall trend – are we up, down or sideways?
- Look at Measures of Efficiency like sales per hoist ($500k per hoist is great, $300k per hoist could be better)
- Benchmarking – GP 36 to 42% Gross profit
- Stock turnover – Do you have a tyre museum or shelf of shame? – Clear it out on gumtree!
- Calculate Rent or Wages as a % of turnover
- Wheel Alignment to tyres sold ratio (1 in 4 is great, 1 in 10 is poor)
Attract more prospects (walk ins), increase your conversation rate, increase your average $ sale, increase your transaction per customer (return rate) and increase your margins by buying better and increasing prices where you can.
Make sure you have Monthly Management Meetings with your accountant, coach or advisor.
Setting any target or goal is very useful. What you focus on expands. As an old proverb goes “Man who aim at nothing hit it with amazing accuracy”
TONY’S – A TYRE & MECHANICAL CASE STUDY – 3 STEPS TO SUCCESS
Steve Lange, the Founder of Tony’s Tyres in New Zealand grew a huge group of Tyre & Mechanical stores using a formula of THREE steps to Success – a PMA (Positive Mental Attitude) + Procedures that are monitored + Performance targets with incentives.
Remember- What you focus on expands and where your attention goes – money flows!
ABOUT THE BLOG AUTHOR – David Staughton CSP
David Staughton is an Award-winning Certified Speaking Professional (CSP), past board member of Professional Speakers Australia and advisor to a large Australian speakers bureau.
David is also a successful serial entrepreneur and an expert on Future-Proofing your Business
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