Profit is the lifeblood of any truck repair shop, even more so in many small, struggling shops. Profit is the difference between success and failure. Today we explore ideas for increasing shop profit, some of which include reducing costs, and then spending to beef up profit.
Overhead is any expense not directly related to repair and maintenance actual sales. It includes the cost of the building (rent or mortgage payments), utilities, insurance, supplies, special tools, office costs including wages of office personnel, equipment, and marketing efforts.
Marketing is an especially important overhead expense that must remain within means yet still help to increase business. It can include such things as advertising, business cards, flyers, meet and greets through association memberships, cold calling, and a website with a blog providing interesting and relevant content for potential and existing customers for the purpose of nurturing relationships. Essentially any tool that gets your shop name to new leads.
Cost of Labor
It’s important to consider whether you pay technicians an hourly wage rate or if your shop uses the flat rate system. An hourly rate may be competitive in your location, but it may tend to make your techs take their time on jobs, relaxing while working and not expediting work.
A flat rate pay scale is paid by the job. Incentive is given to those who complete work quickly. The more jobs they finish, the more they earn. It is important though to ensure techs are not taking shortcuts that can lead to shoddy performance.
Billing flat rate is based on manuals that list the time required for each job and applying your shop labor hourly rate. Set an appropriate labor rate based on your specific market conditions by finding out what competing shops charge. Make sure you are charging customers an applicable rate for shop supplies used; these must not be freebies. Billing them will reduce overhead.
No matter which wage payment method you choose, you need to know whether the performance of your techs is either optimum or lacking. The easiest way to track their performance is with a software based shop management system. It tracks tech performance in real time and will easily display who is great and who needs help getting up to speed on repairs.
Set high standards for your techs by consistently preaching high quality to them. Quality work will reduce costly comebacks that hurt you more by tarnishing your shop’s reputation. Let your people know why this is so important to shop success.
Steady customers are your bread and butter. They are your happiest customers. Your shop does all their PMs and repairs and they keep the doors to your shop open. They also spread the good word about your facility and its people. When they see you and your people working with a shop management system they will recognize your shop as cutting edge. Focus your marketing efforts on getting more of these dependable patrons.
Do your homework on this to make sure you are not marking up parts beyond the going rate. Ask suppliers for discounts. Negotiate on frequently used items that reflect volume purchases. Don’t keep too much in inventory that you can get quickly, easily, and reasonably. Again, a shop management program will better manage inventory and will even recommend parts purchases based on techs recent usage.
Benefits of a Shop Management System
The software shop management system you employ will reduce costs by eliminating many outdated shop and office procedures and performing them digitally, thereby freeing your manager and office workers from the drudgery of endless paperwork.
Documents such as repair orders, invoices, tech times, purchase orders, PM schedules and checklists can all be created without hand writing and are transmitted electronically, in some cases via email. While the cost of the shop management system is added to overhead, office costs and office supplies are drastically reduced.
But the real bonus of a software system is that your shop’s productivity increases due to streamlined procedures and you’re able to take on additional work without pressure. And more work means more bottom line profit for your shop.
FleetSquared by BrightOrder Inc. is the management system we recommend for your small maintenance and repair shop. It streamlines many facets of shop work to help increase throughput. Best of all, the cost is not prohibitive. We made it affordable for small shops. And it comes with a free 30 day trial with no obligation to purchase. It’s easy to use and includes training videos to get your people up to speed in minutes.
We know FleetSquared has the power to transform your shop. Try it out. Sign up with your email to start your free trial today.