Automotive & HD Business Management Articles.
Bob Greenwood. October 17, 2013. ( over 6 years ago ) 1,094 views
Many of our industry’s better shops are aware of the tremendous value of what a positive, impressive, perception by the client can do toward adding additional net profits to the business’ bottom line. That philosophy in business is supposed to make sense. It can also backfire though… on you.
That great impression also got the attention of your fleet account customers, and they “came a callin’,” looking to bring you some “volume” business, BUT wanted a “special price”… a discount on labour and the parts. Then they promised that you would be their shop of choice.
With the cost of hiring and retaining competent technicians today, their on-going required training, the continuous high investment required in equipment, on-going software upgrades and subscriptions, plus the cost of waiting for your money 45-90 days, it’s time to re-visit their profitability. Calculate your total gross profit for the month from the fleet account. From the total gross profit total, subtract your year to date average total cost per billed hour of your shop times the actual number of hours you billed the account, and add to that number the cost of not being able to use your money for 45-90 days (if the receivable is 60 days old, it’s worth 90% of its original value; if 90 days old, it’s worth 75% of its original value). What you have left over is your net profit from the account.
Math doesn’t lie! *Is the account worth keeping based on its net profit contribution to the shop? *Are you turning over dollar for dollar and not making anything except keeping yourself busy? *What would happen if that account left your business tomorrow? *Are you vulnerable? *Is it better to re-format the business plan as to “how” you deal with fleet accounts so they will become a contribution to the bottom line of the shop? *Should that account be let go and replaced with more “retail” business so a decent net profit can be made?
These are key management business decisions to be made but, they must be based on facts, not emotion.
It’s difficult to imagine that it’s very possible NOT to be profitable when you’re busy. That philosophy seems to go against the grain in the automotive aftermarket business. With fleet accounts though, we’ve found this to be true too often because the processes of dealing with fleet business hasn’t been updated. Break out the key accounts in your business for examination every 3 months, calculate what real profit is being made. With the facts in front of you, MANAGEMENT can now make the right decision for the business, instead of using the “emotional bank account” of “being busy” to guide the shop.