With the new year just around the corner, it is a perfect time to begin thinking about a goal you would like to achieve! Setting a goal is a great thought-provoking process that can help you improve your business.
But, what should the goal be? You have many options to consider and thig blog post will help you decide what is best for you.
Don’t set a revenue goal
People often fall into the trap of setting their goal as a specific revenue number. While reaching a revenue milestone can be cause for celebration, it should not be a business goal. This is because revenue rarely translates into more money in our pocket.
Time and time again, we see shop owners focusing on their revenue and lose sight of the real number that matters; profit. Getting more revenue is easy. You can reduce the prices for your product to sell more. You can hire another technician to complete more work. Or you can take in really large jobs that you may not be used to doing.
The problem with each one of these solutions is that none of them positively affect your margins or efficiency. They may generate more dollars in revenue, but may cost you even more in wages and lost margins.
Focus on You
Your goal should be to make the business run better and be more profitable. As an owner and manager, it is up to you to guide the business to success. It is also up to you to communicate your goal to your entire team. If you can get everybody on board, you will have an easier time reaching that goal.
Start by thinking about the things that take up a lot of your time that or things you don’t enjoy doing. Then, create a plan of action to address these issues. Below are some good goals that you can consider.
Bill XX% of your time
As a business grows, you may find yourself spending less and less time actually working with your hands and more time sitting at your desk. This is inevitable as you hire more people, take on more projects, and your managerial roles increase. But, you don’t necessarily have to spend 100% of your time behind the desk nor should you only be working on projects after-hours.
If you want to get back out in the shop and work with your hands, set a specific goal for the number of hours you would like to bill each week. To achieve this goal, step back and think of what activities take up most of your time.
If you are constantly being bombarded with texts, Facebook messages, and phone calls, consider directing people to email you with all of their questions. You can have your Facebook messenger automatically respond for you and you can change your voicemail to instruct people to send an email. You can also say “Please send me an email with your questions” in a text to get people in the habit of emailing you. Then, schedule specific times each day to check and respond to emails. Before you start working, during or immediately after lunch, and just before you leave for the day are great times to sit and answer emails. Segmenting specific times at the computer will help you focus on the task of answering all the emails.
Does it take you forever to make estimates and invoices for customers? If you are repeating installs with the same parts each time, create specific Tasks and Parts in your accounting system with the name, description, and pricing. That way, when you go to add it again, you don’t have to type in “Labor” or “Part” and then rewrite the description and guess or look up the price. This will save you a lot of time and reduce the time required to make estimates and invoices.
You may also have to relinquish some control in order to get back into the shop and bill hours. This means delegating tasks to another person. To ensure that the tasks are done correctly, you will need to train that person on how you want it done and your expected results. Check out our Roles and Responsibilities blog as a guide to what tasks you can offload.
Adapt your business to function without you
On this same note as above, you can also set your goal to have the business run without you there. Can you imagine being able to take a vacation?! To separate yourself from the business, you need to put systems in place that allow others to do the tasks normally only you can do.
Things like delegating tasks to technicians, scheduling jobs, communicating progress to customers, creating estimates and invoices, and even tuning cars. All of these tasks (except for the last one) can be done in My Shop Assist and anybody can be trained to do them.
This idea is clearly outlined with a famous management book The E-Myth Revisited. It contains insight into creating and implementing systems which other people can perform. This is where we derived the phrase “work ON your business, not IN your business.” Taking this to heart can allow you to step away from the business and not have it burn to the ground, figuratively.
Achieve a service efficiency of XX%
We talk a lot about service efficiency in these blog posts because it is the single most important factor for the success of a shop. We created a video called Determining your Shop Efficiency that you can watch to figure out where you stand.
If you can increase the service efficiency of the shop from 50% to 60%, you will see a significant bump in your profits. This is because you are completing more work with the same amount of space and manpower. More revenue with same expenses equals more profit!
One way to increase service efficiency is to make sure you are charging properly for your installs. If you are a typical performance installation shop, you repeat many of the installs and become proficient at finishing them quickly. If this is the case, you shouldn’t be charging by time, you should be charging by your skill set.
Another good step is to set the expectations for your employees. You should provide your technicians with specific estimated hours for how long you think it should take them to complete an install. If you tell them is should take no more than 4 hours to swap a turbo out, they will usually do it in less time. But, if you just hand them a turbo without an expectation, they may take 5 hours to do the same job.
If you use My Shop Assist, you can assign each task to the appropriate technician and give it a specific number of estimated hours. That way, they can track their time and you can see if they are performing up to your standards.
You can also consider hiring a part-time entry-level employee to offload a lot of the overhead work from the mechanics. This includes tasks such as cleaning the shop, boxing up parts, and running errands. By doing this, you are freeing up your skilled workers to bill hours on customer projects.
Reduce lead time to X weeks
If you are a machine shop and offer specialty machining for a limited number of engines, a lead time goal is an excellent metric! If you find that each project takes 6 weeks to complete, begin to ask yourself why.
You can significantly reduce lead times by investing in a couple cores. This means spending some of your money to purchase new blocks or heads and have them ready to be worked. While this is a large dollar investment up front, it allows you to begin working on the project immediately and not have to wait for the customer’s parts.
You may also consider reducing the number of options you provide. This means not offering every single piston manufacturer with different tolerances. Pick and choose the ones you know are best and only offer those. To take it a step further, you can even keep a few sets of each in stock.
Same goes for hardware for head work. If you can keep the most common springs and valves in stock, it can significantly reduce your lead time to get work finished.
Lastly, organizing the process flow with My Shop Assist can ensure that you are doing exactly what the customer is paying for. This means installing the correct parts to the correct specs every time and ensuring that their specific requests are documented and completed.
One critical aspect to consider is communicating this goal to your whole team. Getting everybody on the same page will help you to achieve the goal. It should be communicated to your employees that a well-running business benefits them all! Don’t be shy in expressing your goal(s) and why it is important that everybody help out.
Your goal It is also not something that is achieved overnight. It may take the entire year to reach the goal! It’s a good idea to track your progress and make sure you are heading toward that goal. If your service efficiency is currently at 40%, write it down in a spreadsheet. Then write down the service efficiency of each month to track the improvements.
It’s also a good idea to write the goal down and display it prominently where you will see it every day. That way, you are constantly reminded to stay on task and reach the goal.
The purpose of this post is to get you thinking on ways to improve your business and not just do more of the same. Having a more organized and efficient shop will result in a better quality of life and more profit. To get to this point, you need to set a goal and think about ways to reach it!