The Profit WIN Numbers Jim Silverman Automotive Training Institute
Today's Agenda Determine how much money you need to make Pay your bills now Have enough for later Learn how to keep score Fix your accounting Learn how to make money Watch key metrics each week Learn how to create consistency and predictability Standardize your processes
Bills at work Bills at home Investment in your business Retirement assets Creating Wealth
How Long Do You Have?
Terms
Sales (Top Line)
Expenses Cost of Goods Sold Fixed Costs Personal Use
Profit (Bottom Line E.B.I.T.D.A.) Earnings Before Interest Taxes Depreciation Amortization
Sales Cost of Goods Sold = Gross Profit
Cost of Goods Sold - Auto Repair Parts Labor Tires
Can I Cash My Paycheck?
2 Things You Must Know Each Week Gross profit Fixed costs
$10,000 Sales $5,000 Cost Of Goods = $5,000 Gross Profit
$209,019 Fixed Costs
209,019 $209,019 Fixed Costs Per Year
52 Divided by 52 Weeks Per Year
4,019 = $4,019 Fixed Costs Per Week
$5,000 Gross Profit $4,019 Fixed Costs = $981 Cash How Much Cash?
$10,000 Sales $5,000 Cost Of Goods = $5,000 Gross Profit
$9,000 Sales $5,000 Cost Of Goods = $4,000 Gross Profit 10% Discount
$4,000 Gross Profit $4,019 Fixed Costs = $19 Cash How Much Cash?
Profit Model KPIs
Sales - Auto Repair Parts Sales 50% Labor Sales 50%
Sales Goal Per Hour Per Tech Labor Rate Labor % of Sales $85 labor rate 50% labor % of sales = $170 per hour $85 labor + $85 parts per hour
Sales Goal Per Hour Per Tech Labor Rate Labor % of Sales $85 labor rate 50% labor % of sales = $170 per hour $85 labor + $85 parts per hour $85 labor rate 60% labor % of sales = $142 per hour $85 labor + $57 parts per hour Requires 120% productivity rate
Parts Sales 50% Labor Sales 50% Maintaining Your 50% Parts / 50% Labor Mix
Gross Profit Margin - Auto Repair Margi n 60% Parts Cost 40% Labo SM r 0% 0% Margi n 60% Parts 0% Labor Cost 40% SM 0% Parts Margin Labor Margin Best Practices
60% Mark-up is only 37.5% Margin Common Mark-up Mistake
Getting to 60%
Cost x 2.5 Cost + 150% Cost 40% Getting to 60%
Cost x 2.5 Cost + 150% Cost 40% Getting to 60%
Cost x 2.5 Cost + 150% Cost 40% Getting to 60%
Cost x 2.5 Cost + 150% Cost 40% Getting to 60%
Gross Profit Margin - Auto Repair (Loaded) GP Margi n 60% Parts Cost 20% Labor Cost SM20% 0%
Adjusted Gross Margin Auto Repair AG Margi n 50% Parts Cost 20% Labor Cost 20% SM 10% $500,000 Retail Sales
Adjusted Gross Margin Auto Service AG Margi n 54% Parts Cost 19% Labor Cost 20% SM 7% $1,000,000 Retail Sales
Where s Your Money? Point Of Sale System Quick Books or Peach Tree
Income Statement-Auto Repair
Income Statement-Auto Repair Sales
Income Statement-Auto Repair Cost Of Goods
Income Statement-Auto Repair Expenses
Income Statement-Auto Repair Profit
Income Statement-Auto Repair 6.8% Net Profit
Gross Profit is Wrong-Auto Repair
Above the Line / Below the Gross Profit Line Accounting-Auto Repair
COGS Above the Line / Below the Gross Profit Line Accounting-Auto Repair
COGS Above the Line / Below the Gross Profit Line Accounting-Auto Repair
Parts Costs-Auto Repair
Labor Costs-Auto Repair
Income Statement (Corrected)-Auto Repair
True Cost Of Goods Above The Gross Profit Line
Fixed Costs Below The Gross Profit Line
Original Statement Says GP Is Good And Fixed Is Too High
Corrected Statement Shows GP Is Too Low And Fixed Is Good
Creating Your Winning Scenario
Creating Your Winning Scenario
Your Shop Is Open 5 Days Each Week
Your Writer Spends 0.9 Hours With Each Customer Each Day
Your Writer Works 9 Hours Each Day
Gross Profit You Need To Pay Your Fixed Cost Each Year
Gross Profit You Need To Pay Your Salary Each Year
Gross Profit You Need To Pay For Your Business Investments And Retirement Assets Each Year
Gross Profit You Need To Reach Your Financial Goals Each Year
At 54% Gross Profit Margin (Best Practices)
You Need $831,481 In Sales Each Year
At 2.5 Average Production Hours Per Repair Order (Best Practices)
You Need To Work On 38 Cars Each Week
And You Need 0.8 Service Writers
At $85 Per Hour Labor Rate
And 50% Labor % Of Sales (50/50 Parts To Labor Mix)
Each Production Hour Is Worth $170
And You Need To Sell 94.1 Hours Each Week
At 100% Technician Productivity
You Need 2.5 Technicians
Giving Each Technician 1 Bay
You Need 3 Bays
At 30% Gross Profit Margin (Industry Average After Correcting Income Statement)
You Need $1,496,667 In Sales Each Year
At 1.3 Average Production Hours Per Repair Order
You Need To Work On 136 Cars Each Week
And You Need 2.7 Service Writers
At $85 Per Hour Labor Rate
And 60% Labor % Of Sales (Typical For Shop Focusing On Diagnostics)
Each Production Hour Is Worth $141.67
And You Need To Sell 203.2 Hours Each Week
At 53% Technician Productivity (62% Is Industry Average)
You Need 10 Technicians And 10 Bays
How Do You Fix This Mess?
Fix Your Gross Profit Margin
Which Dramatically Lowers The Sales You Need To Win
Fix Your ARO
Which Reduces The Number Of Cars You Need To Work On Each Week
And Reduces The Number Of Service Writers You Need
Fix Your Parts To Labor Mix
Which Makes Each Hour You Sell More Valuable (Increases True Sales Productivity)
Fix Your Productivity Rate
Which Reduces The Number Of Technicians And Bays You Need
Diagnosing With KPIs
Income Statement-Auto Repair 6.8% Net Profit
ATI Shop Analysis
Sales
Sales Goal Per Hour Per Tech Labor Rate Labor % of Sales $85 labor rate 50.9% labor % of sales = $167 per hour $85 labor + $82 parts per hour
Sales Goal Per Week Per Tech Sales Goal Per Hour Per Tech x hours worked weekly $167 hour x 40 hours = $6,680 week $85 (labor only) hour x 40 hours = $3,400 week
Average Repair Order
Average Upsell Per Repair Order $211 ARO $167 Sales Goal Per Hour = 1.26 hours per R.O. 1.26 hours 0.5 oil change = 0.75 average upsell per R.O.
Advertising Investment
Inspection Documentation Estimating Sales Skills
Courtesy Checks For a fee State inspection Pre-purchase vehicle inspection Free 30-point inspection 10-point quick check
Factory Scheduled Maintenance
Estimating Original request Prior recommendations Safety defects Maintenance
Sales Skills Create value Address objections Provide options Ask for the sale!
Sales Goal Per Month Per Tech Sales Goal Per Hour Per Tech x hours worked monthly $167 hour x 166 hours = $27,732 month
Technician Productivity
GP Margi n 54.0% Parts Cost 19.0% Labor Cost 20.0% SW 7% SW 7.7% GP Margi n 23.8 % Labor Cost 28.1 % Parts Cost 40.5 % Benchmark Reality Gross Profit % Of Sales
GP Margi n 54.0 % Parts Cost 19.0 %Labor Cost 20.0 SW % 7% GP Margi n SW 23.8% 7.7% Labor Cost 28.1% Parts Cost 40.5% Benchmark Reality Parts Cost % Of Sales
GP Margi n 54.0% Parts Cost 19.0% Labor Cost SW 20.0% 7% GP Margi n 23.8 SW% 7.7% Labo r Cost 28.1 % Parts Cost 40.5 % Benchmark Reality Labor Cost % Of Sales
GP Margi n 54.0% Parts Cost 19.0% Labor Cost 20.0% SW 7% SW 7.7% GP Margin 23.8% Labor Cost 28.1% Parts Cost 40.5% Benchmark Reality Labor Cost % Of Sales
Mar gin 60% Labo r Cost SM 40% 0% Mar gin 44.9 % Part s Cost 0.0% SM 0.0 % Labo r Cost 55.1 % Benchmark Reality Labor Margin
Mar gin 60% Part s Cost Labo SM 40% r 0% 0% Mar gin Lab SM 17.6 or 0% % 0% Part s Cost 82.4 % Benchmark Reality Parts Margin
Potential
Let s Review Determine how much money you need to make Pay your bills now Have enough for later Learn how to keep score Fix your accounting Learn how to make money Watch key metrics each week Learn how to create consistency and predictability Standardize your processes
jsilverman@autotraining.net 301-575-9140 http://www.autotraining.net/workshops.htm
Don t forget to watch your FIXED COST, and GROSS PROFIT. THANK YOU Thank You!