“Dang it! This is the fourth month we haven’t made our sales target. What’s going on? I’ll bet it was that last price increase. Those tire companies just keep hitting us for more and more, and we can barely get any tires! And, betcha that new discounter in the next town is getting all my customers. We advertise the lowest prices in town. I just don’t understand it. If this doesn’t get better, I don’t know what we’ll do.”

Ever have that one-sided conversation with yourself? Well, for your own mental health, we hope you didn’t get a response. But just about every tire dealer hits a cold streak ®“ a period when sales slow, sometimes to a painfully sluggish pace.

There are dozens of factors that negatively impact sales and revenues. Some you just can’t control and some you can, but the list is long and varied. Local economy. Weather. New competition. Seasonality. Population or demographic shifts. Advertising. Marketing. Salesmanship. Reputation. Unrealistic expectations.

While there are no quick fixes, taking a detailed look at your business ®“ top down and bottom up ®“ can reveal how internal volume, production and efficiency issues may be at the heart of bigger problems.

Then, by isolating the root causes of sagging sales, you can discover hidden ways to boost your sales opportunities ®“ and your profitability.

In other words, the invisble becomes visible if you know where to look.

 

Before You Begin

Of course, all of this assumes you have created a workable business plan for the year. You have, haven’t you? If not, there’s no time like the present. For a quick course on developing a winning business plan, see the cover story in our August 2003 issue.

Your business plan should be the first place to look for answers to disappointing sales results. Did you follow through on the plan? Did you see a big increase in sales last year and, perhaps, have higher expectations for this year? It’s not unusual to expect a sales streak to continue, but sometimes, those expectations exceed what your market will bear.

If you followed your annual business plan and sales are still lagging, there are plenty of other places within your business where revenue/profit problems may be hiding. We’ll skip over the obvious issues like advertising and asking for the sale and look at 13 other “opportunities” to improve your sales picture.

 

Hidden Opportunity 1: Quality Above All Else

Comebacks are profit killers. And, while there is no way to eliminate comebacks completely, you and your team can reduce them dramatically.

Are your techs doing the job the right way? If not, why not? Do they need more training? Do they have the right tools? Are they using the right care and caution? Are there new procedures or processes they haven’t adopted? Do you have less experienced techs trying to do more complex repairs? Do your techs take pride in their work, or are they just working for a paycheck?

With the constant changes in automobile design, tires, accessories and tools/equipment, it’s vital to educate your techs properly. There are plenty of training resources available; it’s up to you to utilize them.

Find out where the real problems are by asking a lot of questions. Ask your techs what they need to improve quality. They are, after all, a large part of your overhead and should be producing a bulk of your revenues. The same goes for your back-office staff and salespeople. You might be amazed at how sales ®“ and profits ®“ perk up if your employees are part of the process, not part of the problem.

 

Hidden Opportunity 2: Flesh and Blood

While it’s great to have employees who want to do a great job, how much work time do you lose every week because they are painfully slow getting a job done? Are they being cautiously meticulous, or are they distracted or disorganized? Or, do they show up whenever they feel like it?

Time is money, especially when overhead costs are sabotaging your sales opportunities. By measuring employee efficiency, you can determine which employees are carrying their weight and which ones are the weight.

At the same time it’s important to understand that employees are human and that each one has different “maintenance” requirements. Some simply want to be left alone to work. Others need to be coached and coddled. This doesn’t mean that one is better than the other; a good manager ®knows® his staff ®“ how they act and react in certain situations ®“ and adjusts accordingly.

Poor employee attendance is another issue. Whether due to personal situations or other circumstances, poor attendance cannot be tolerated. An employee with a poor attendance history must be confronted and given the ultimatum of work or termination.

Studies have shown that extremely poor attendance can often be attributed to substance abuse problems. If that’s the case ®“ or if there is another personal issue causing a conflict ®“ consider the employee’s value to the business. Counseling should be an option for any employee who is otherwise valuable to the business.

Also, consider the possibility that your own managers might be the root cause of employee problems. Bad decision-making, poor time management, miscommunications, stumbling under pressure, poor relationships with the rest of the staff ®“ all of these impact sales and profits. Some of these issues can be corrected via training; others will take something more. Often, it comes back to how well you train your management team.

Although there’s no easy way to determine if management is the cause of sales or work-flow slowdowns, there are several indicators. Chronic problems with parts delays could stem from a poor choice of suppliers, poor parts ordering practices or improper estimating. If technicians are frequently idle, there could be scheduling problems. There will always be delays for certain tires, accessories or parts, but it’s up to management to minimize these scenarios and, whenever possible, have an alternate plan to compensate for them. Any delay, no matter what the area, should be assessed to prevent further occurrences.

There’s also a possibility that your own programs or policies may be causing management and staff inefficiencies that can impact sales/profits. Outdated practices or procedures that haven’t kept pace with customer expectations or business demands should be reconsidered.

Sometimes, it’s necessary to make a tough business decision and fire an inefficient employee. Don’t let personal issues get involved. You’re in business to make money. Firing someone is never pleasant, but good hiring (and promotion) practices can minimize these uncomfortable situations.

 

Hidden Opportunity 3: Valuable Real Estate

This isn’t all about location, though being on a busy thoroughfare is great for a retailer. No, this is about you getting enough people to request your services. Here are four things to look at:

®′ Demographics ®“ Does your product/service offering match your market’s requirements? Do you know the characteristics of your market area, such as age, income, spending habits and vehicle brand/types? All of this information is available from the U.S. Census Bureau and county vehicle registration data.

®′ Competition ®“ Have any new competitors opened up in your area? Is your market oversaturated? Has your competition changed the way it goes to market or the products/services it offers? Can you better differentiate your dealership from the competition? You can’t answer any of these questions unless you have a thorough understanding of how your competition does business.

®′ Image ®“ You definitely never get a second chance to make a first impression. Does your dealership have curb appeal? Is it female friendly? More importantly, is it clean, and do your people look professional? If it appears you don’t care about your workplace, how can you expect customers to believe that you’ll care about their vehicles?

®′ Accessibility ®“ Consumers want easy access to a business. That means not only convenient driveways and entrances, but also not having to fight traffic to get in or out of your lot. Some things you can’t control, but any improvements you can make will make a difference. Also, don’t try to stray from your core marketing arena. Few people will drive 40 miles out of their way if similar products and services are available close by.

®′ Visibility ®“ Do you know how many vehicles pass by your location every day? If not, you’d better find out. Car counts are vital. If you’re in a high-traffic area and are suffering low sales, something is terribly wrong. On the other hand, if you’re getting swamped, maybe it’s time to look at expansion, longer hours, weekend hours or adding staff. Also, are those drivers passing by even seeing your business? Perhaps it’s time to look at signage changes or other methods of getting noticed.

 

Hidden Opportunity 4: The Big Little Things

How easy is it to do business with your business? Sometimes, it all comes down to the little things ®“ providing customers rides to and from work, free coffee or bottled water for those who choose to wait, clean restrooms and waiting areas, up-to-date magazines and daily newspapers and something to amuse the kids for minivan moms.

Oh, and by the way, if you tell a customer his or her car will be ready by 4 p.m., it had better be ready at 4 p.m. Time may mean nothing to your techs, but today’s busy consumers don’t want to restructure their busy schedules because of your delays. Be reasonable in estimating how long a job will take, and if it looks like it will be later than stated, call the customer immediately. Customers expect that serious repairs will take some time, but they also know that simple oil changes or new tire installations don’t take that long. By under-promising and over-delivering, you can make a customer for life.

 

Hidden Opportunity 5: There IS a Difference

Advertising and marketing are not one and the same. We’re not going to dwell on advertising here. If you aren’t advertising, after all, how are people going to know you’re there?

Good marketing, on the other hand, can easily build volume ®“ today and tomorrow ®“ with only an investment of time. One great marketing opportunity is membership in local civic groups, like the Rotary Club, that offer a rich mix of local business owners and residents as members. Marketing can also include holding an open house or a “customer appreciation” event. How about knocking on doors of body shops, other repair shops, service stations or even insurance agents? Or cross marketing with other local businesses by offering coupons at a beauty salon or specialty store and doing the same for those shops?

 

Hidden Opportunity 6: Lose Losing Business

Ever get into a price battle? Every dealer has. But did you ever win one of those and discover you actually lost money? It happens more often than you might think. Sometimes, it’s best simply to walk away from a sale. There are two absolute truths in business: You can’t pay bills with market share, and you will never make it up in volume.

Whenever you price tires or service, make sure there’s plenty of profit in it for you. According to Tire Review’s annual Dealer Profile Study, the average gross profit margin on consumer tires was 28.3%, while vehicle service earned 48%. Medium truck tires delivered an average of 21% gross profit, while OTR and ag tires delivered gross profits of 16% and 22%, respectively. Are those percentages really high enough, or can you do better?

Whenever your service writer estimates out a repair, is he/she making sure not only to cover real costs but also deliver a proper profit? Are you getting paid for diagnostic time? Underestimating a repair job can be very costly, especially if a comeback is involved.

Finally, are you really willing to walk away from an unprofitable sale? Everyone talks a good game, but it’s very hard to do. Just remember, if the car is in your parking lot, you have the advantage. Telling a customer you cannot meet a competitor’s price might still land you a profitable sale because the customer may not want to go across town to someone else.

 

Hidden Opportunity 7: Take ‘Em to School

Some customers will ask about the repair process and which parts will be replaced. These curious customers can be your best patrons ®“ and best advertisements. Walk them back out to their vehicles, and with the help of one of your techs, go over the repair in detail. Don’t talk over their heads or be condescending. Plain English works best.

Take a minute to show them your state-of-the-art equipment ®“ alignment racks, tire changers and balancers and diagnostic equipment. This is a great method of gaining confidence, even if they have absolutely no idea what they’re looking at.

 

Hidden Opportunity 8: Keep It Real

Here are some old truisms: There is nothing harder to overcome than a bad reputation. A bad reputation is always earned, not merely perceived.

Worse yet, the effort and finances necessary to counteract a bad reputation are, by some estimates, at least 10 times those needed to establish a positive image initially. You might want to blame others, but the fact is a poor image is the owner’s fault.

How does a dealer earn a bad rep? Poor quality work for one. Sloppy workmanship is inexcusable. Invest in the right tools and training (and continuous education), and create a work environment that encourages and rewards good work.

Two ways of dealing with quality problems are to institute a written “Quality Standard” for your dealership and create a final checklist to ensure complete, thorough and acceptable repairs. With these items in writing, there’s little argument whether or not a repair is acceptable.

Attitude is another image killer. Is your service-desk manager a positive person, or an unsmiling, humorless individual? Are your techs grumblers? Is there a lot of yelling and screaming in your shop? Do you allow your people to maintain a messy look in their dress or hygiene? The attitude your staff presents is the image customers will remember.

Finally, and most serious, are fraud, theft, criminal activity and poor ethics. Stealing ®“ from a customer, fellow employee or you ®“ and fraud are crimes. Allowing any criminal activity to be conducted on your premises is also a crime. You may not even know any criminal activity is going on at your shop, but you are ultimately responsible and can face criminal or civil charges nonetheless.

Poor business ethics ®“ everything from bait-and-switch sales tactics to selling questionable products to adding phantom “fees” to a customer’s invoice ®“ are just plain wrong. Any dealer who does these things deserves to lose business.

 

Hidden Opportunity 9:

Quit Playing Favorites

Do you have a favorite parts supplier or other vendor? Most businesspeople do. But do those suppliers really deliver? How many repair jobs have taken longer than necessary because your favorite parts jobber never has the parts you need when you need them, is slow in delivering or provides you with sub-standard parts? How about your tire supplier? Do you keep getting shorted on your orders?

Here’s a better question: How long are you going to continue patronizing businesses that cost you sales? It’s great to have strong relationships with suppliers, but those relationships have to provide you with a positive business benefit.

 

Hidden Opportunity 10:

Sort Out Scheduling

Consumers want and need their vehicles back quickly. Make better, more efficient use of your service bays by scheduling intelligently. Set aside some bay space or bay times specifically for tire installations or rotations. More difficult service work should have its own space.

Schedule by the hour (or half-hour) instead of by the job. And, when you’re full-up for the day, be honest and tell incoming customers that you won’t be able to get to the work until later that week.

By closely calculating repair completion times, not only can you keep customers happy, you can more efficiently flow work through your shop. Once you know your average turnaround time for different jobs, scheduling one hour in for every hour going out is a great way to improve flow.

 

Hidden Opportunity 11: Maintain Sales, Not Costs

Some dealers contain costs by putting off hiring additional staff. As long as the business has a backlog of work, the dealer is often content to get by with the employees already on the payroll. But this, in fact, is the surest way to prevent growth.

The only way to know your dealership’s production capacity is to measure technician efficiency. But do you know what your service and tire technicians’ efficiency should be? The rule of thumb in the body shop industry, for example, is that a body/sheet metal tech should produce at a 150% rate. That means for every 40 hours worked, the tech should be billing 60 hours of time.

While there are no industry standards for the tire business, you can set your own. Compare work-hours to billed-hours for each of your techs over a period of a few months. Determine who your most efficient techs are, and use those results as the basis to establish an efficiency rate for everyone to meet.

More importantly, you can use this measurement to determine just when to hire more employees. If your service techs, for example, are exceeding their efficiency rates, and there’s still work left to handle, it’s time to hire.

 

Hidden Opportunity 12: Be Enviro-Friendly

A poor work environment can break your bottom line. More than just the physical structure, work environment encompasses the general atmosphere of the business ®“ including the relationship between management and staff and the relationships among employees themselves. If your salespeople, techs or back office staff dread coming in, this can negatively impact the quality and quantity of work and your valuable customer relationships.

Employees should be praised for good work. And, when a customer comments positively, let the employee involved know. If possible, have the customer compliment the individual personally. The sense of pride associated with a job well done reflects in the quality of future work, too.

Equally important is providing a clean, safe and healthy physical environment. Aside from showing potential customers a more positive image, a clean workplace is less hazardous. Sales lost due to accidents are costly in several other ways, so be sure all safety regulations are strictly followed.

 

Hidden Opportunity 13: Talk Ain’t Cheap

Keeping your employees in the loop can work wonders on productivity. Not only do internal issues have to be dealt with but, more importantly, everyone needs to be on the same page when it comes to work flow. What does the day’s schedule look like? What has priority? Have there been schedule changes? What sales calls need to be made? Are there new opportunities that require focus?

A couple dozen donuts and a pot of morning coffee is a small price to pay to keep the entire team moving in the same direction. By openly discussing priority jobs, any potential delays, special promises made to customers or problems found with the previous day’s customers, the team can work together to make the day’s efforts go smoother.

 

No Quick Fix

Lastly, remember that there is no quick fix for depressed sales. Re-establishing acceptable volume and profits is a lengthy process and requires a serious commitment.

However, giving your dealership a complete head-to-toe physical can not only help diagnose hidden sales-busters but also serve as the basis for long-term business wellness.

 

This article was based on a story by Patrick Yurek that appeared in Body Shop Business, a sister publication of Tire Review.