Shop Management Part 1: How We Got Here

This is a multi-part blog post designed to help shops change how they operate and improve their financial situation

Hard Work Doesn’t Always Pay Off

For many performance shops, flying by the seat of your pants is a way of life. Running a business is more about passion and drive then a well thought-out plan.  We (myself included) built cars, tuned them, and made a name for ourselves by racing and having fun doing what we enjoy. We worked out of our garages and never thought about doing it full-time.

That passion is what drove us to start helping friends. Then friends of friends. Eventually, the word of mouth spread to the point where we would spend every free minute helping others modify their car. At this point, a dedicated few will give the operation a name and make a business out of it. With no formal training at running a business, we do what we think works and assume that the saying "Hard work pays off" is true and that these long days will lead to success.

For a tiny fraction of us, it is true and the hard work pays off. However, that success seems to be more a stroke of luck and good timing. I've seen countless people putting in crazy hours with aspirations of making it big but get nowhere.

However strange it may feel, the realization that hard work and determination doesn't automatically mean success is really freeing. It allows you to take a different perspective on how to approach your business. Instead of spending 80-100 hours per week at the shop with no relief in sight, we can apply business tactics to increase your chance of success.

Work Smarter, Not Harder

This is another saying that is often brought up by success businesspeople, and it holds true in the aftermarket performance world as well. If you are struggling to stay afloat working 70 hours per week, bumping it up to 80 hours isn’t going to solve your problem. You may take in more revenue, but you also incur additional expenses and the quality of work may suffer

Everybody is working hard in this industry so the only way to get ahead is to work smarter than them. Having talked to hundreds of performance shop owners over the past few years, I have seen many people think about this on the surface. But fail to implement any significant changes in the way they think about or actually run their business. They have pushed hard for years doing the same thing over and over, and just assume that 12 hour days is how you make it. I have to admit that I used to fall into that category of people. You can listen to my podcast interview with Reid to find out how bad it used to be.

Many performance shop owners focus on the Gross Revenue to gauge their success. I have found that it is very easy to increase revenue; just hire more technicians. But more revenue does not equate to more profit.

The point of this blog is to help people think of their business as a system with processes that can be measured, improved, refined, and controlled. Take a look at your shop right now. Do you know the following metrics or can you find them quickly?

    • Labor Income
    • Shop Efficiency
    • Parts Income
    • Profit Margin
    • Technician Efficiency
    • Parts Inventory

 Focusing on revenue instead of the metrics mentioned above will lead you to be more stressed and reduce your chances of success.

Success is never guaranteed, but here are some reasons why so many performance shops struggle:

  • Generally speaking, we don’t come from a business background - Accounting is hard and it sucks but you must do it properly
  • Luck doesn’t pay the bills - Managing cash flow and keeping a steady stream of work does
  • Hard work is a requirement, not an asset - Everybody works hard so don’t think that working harder will make it better
  • The definition of insanity is doing the same thing over and over expecting a different result - We are all insane
  • You’ll never know if you are winning if you don’t keep score

Continue on to Part 2


Leave a comment

Please note, comments must be approved before they are published