Business advice

[vette427-sbc]

Ill give a little background first. Im a young gun that took over a failing business a few years ago. Its a small 2-3 man shop that previously was mostly aftermarket electronics, window tinting, audio, accessories, etc... Since Ive been there, Im slowly trying to gain a reputation as a classic car/hot rod specialty shop that will do almost anything except bodywork and upholstery. I always try to keep some kind of classic car out front just to get some attention that way (shop is on a major highway).
Anyway, the reason for my post is that my partner and I do not agree on how work is priced out (specifically on the hot rod/classic car stuff). I try to be very reasonable with labor costs so that the customer does not shop around or decide "for that price, I can do it myself". I do not charge a minimum shop charge. If it was something simple and quick, I charge what I think is fair, and hope that they will return knowing they did not get ripped off by a $75 min shop charge just to pull the car in the garage. My reasoning is that by doing that, I now have a customer that will return and hopefully have a bigger project for me to do. This is obviously not always seen right away, it could be a year later, but a return customer is a return customer, no?

My partners argument is that if the work is top notch, they will accept the higher labor rate because they know that it will be done right.

While this may work for some customers, there is already a somewhat limited audience in the area and Im worried that I will get the "for that money I can do it myself" response. I am no business expert, but until Im a better known shop and Im getting clientele from a larger audience, I would be better off trying to make money through volume and not huge profits.

For what its worth, there are very few other shops that do similar work (the biggest shop in the area just shut its doors), and even fewer that will do/know about the pro-touring stuff that we do (aftermarket suspension, modern electronics, big brakes and just general modernization of these cars)

The classic car stuff is far from the majority of the business. The business stays afloat from the window tint/audio/electronics but I need to grow the business more and I think the classic car work may give me what I need. Being a car guy for my whole life and growing up in the "internet generation" I know that this business is hugely based off of word of mouth. What Im afraid of is that if we are charging top dollar, people will say, "man they did a great job, but it was a little on the expensive side". I dont want people to not even come in to get a quote because they know it will be an expensive job.

Thoughts? Comments? Concerns?

[hotrodneb]

You must NOT price yourself out of the market.....you must be competitive with the DIY'ers and other businesses. IF your product, service, and reputation is above the average in your market place, then you can/should charge/profit from that.

The biggest mistake a new business owner makes---under pricing themselves.

[astroracer]

A MINIMUM shop charge turns me off immediately... I wouldn't even consider taking my car to a shop with that rule. I know how I feel about it and would never consider it for my shop. You HAVE to get the guys in the door, just as you are thinking. If you can't get them in the door, a minimum shop charge is of no benefit so what's the point? Especially if you have no reputation.
We all know time is money but you have to be reasonable also. I would rather have the customer come in the door the first time, get some good work done and spread the news about THAT, rather then spreading the word that you are to expensive to begin with. Talk about shooting yourself in the foot... Just my 2 cents.
Mark

[SSLance]

When we started our retail business 10 years ago, We made it a point to try our best to not let a customer walk out the door unhappy, for whatever reason. Sometimes I've had to give up profit on a sale...or even occasionally lose money on a transaction just to keep a person happy. A happy person tells 1 or 2 about their experience, an unhappy person tells EVERYONE about their experience. I figure the losses in as a cost of advertising...

We do some things that are way underpriced for the market, but we also have other avenues that we charge a fair margin for. The underpriced things are generally things that my competitors won't do but specifically make my customers very happy. They are also things that we don't have a lot of fixed costs in, basically just our time. The thought process is the happy customers become loyal and eventually spend money on the fair margin items that we make the majority of our money on.

We have been very successful at building a clientele with this strategy and only have to curtail the low margin products when we just don't have the time because we are busy with the high margin products. Typically the low margin customers completely understand this and will wait if they can.

I guess our strategy is to try to build as many clients as we can, and make some money at the same time...instead of trying to make as much money as we can on every single transaction at the cost of making some of those customers unhappy. Hopefully that makes sense and the original poster can use some sort of a plan like that to build their customer base while at the same time make some money.

[shmoov69]

Chris, you're going to get 50 opinions on this if 40 people post!! LoL! So here's my .02
First thing is that you both need to decide what kind of shop you want to be? Meaning do you want to be known as a quality shop or a commodity shop. One is looking thru the yellow pages for the rock bottom cheapest price. The other wants a good price, but more so wants their issue taken care of like they would do it. For our company (40+ year commercial roofing company), we know that we cannot be the absolute cheapest all the time and stay afloat. Because unfortunately, there are times that you have to make things right in the customers eyes, and there goes any profit for that job, and sometimes other profits.
That is the second thing, ALWAYS, repeat ALWAYS do your best to do the job like it was your own project. Scratch that, make it like YOU were paying someone to do it for you! Drill that in your employees heads! THAT will bring back business. (With the obvious not gouging the customer on price).
You can never be the cheapest every time and stay afloat, unless you are a monster company like wal mart or something, small companies can't. I'm not saying that you can't (and shouldn't) be the cheapest on some low profit items or "buy a job" occasionally, but I'm saying that you can't consistently be the low guy. Making the customer happy sometimes costs you money and it has to come from somewhere.

Here's a couple quotes to remember:

“The bitterness of poor quality remains long after the sweetness of low price is forgotten.”

“There is hardly anything in the world that someone cannot make a little worse and sell a little cheaper, and the people who consider price only are this man’s lawful prey. It’s unwise to pay too little.”

There is one opinion down, 45 more to go!! LoL! Good luck man!

[andrewb70]

There are some good comments here, but one thing that I haven't seen mentioned is cost accounting. In other words, do you actually know your costs of doing business? Have you figured out your overhead? Have you figured out a way to allocate that overhead across all of the work that you do? Do you actually know if you are making money and how much?

Before you price a product or service you must get a very precise handle on your actual COSTS! Only then can you start discussing how you will charge for your products or services (labor).

Andrew

[vette427-sbc]

You must NOT price yourself out of the market.....you must be competitive with the DIY'ers and other businesses. IF your product, service, and reputation is above the average in your market place, then you can/should charge/profit from that.

The biggest mistake a new business owner makes---under pricing themselves.

Thant is the trouble Im having... It is very hard to compete with the DIY'ers without under pricing. Other local shops are likely in the same price range for general work (probably a bit higher in some areas), but they do not do the custom electronics, or "pro-touring" stuff that we do and have knowledge/experience with.


A MINIMUM shop charge turns me off immediately... I wouldn't even consider taking my car to a shop with that rule. I know how I feel about it and would never consider it for my shop. You HAVE to get the guys in the door, just as you are thinking. If you can't get them in the door, a minimum shop charge is of no benefit so what's the point? Especially if you have no reputation.
We all know time is money but you have to be reasonable also. I would rather have the customer come in the door the first time, get some good work done and spread the news about THAT, rather then spreading the word that you are to expensive to begin with. Talk about shooting yourself in the foot... Just my 2 cents.
Mark

I try to put myself in a customers shoes... I would not be happy if someone threw a min. shop charge at me for something small. Example: The other day a forum member (from another forum) came in with his corvette that had a oil leak that he could not figure out. I had never met the guy, he just happened to be local so I told him to stop in. I spent some time just talking cars with him and pulled his car into my shop onto a set of ramps to have a look underneath. I found the oil leak that another local shop could not find after he paid them to fix it (obviously not fixed). I didnt charge him anything for it. The next day he put up a post on the forum saying thank you, etc... Thats fine with me because I spend a few minutes of my time, got free advertising, and a return customer. BUT, whos to say everytime I "take a look" I will get something in return. They may just say ok thanks for finding the problem now Im going to take it to my regular mechanic and have him do it or do it myself. Its tough to judge what to do in that situation.



When we started our retail business 10 years ago, We made it a point to try our best to not let a customer walk out the door unhappy, for whatever reason. Sometimes I've had to give up profit on a sale...or even occasionally lose money on a transaction just to keep a person happy. A happy person tells 1 or 2 about their experience, an unhappy person tells EVERYONE about their experience. I figure the losses in as a cost of advertising...

We do some things that are way underpriced for the market, but we also have other avenues that we charge a fair margin for. The underpriced things are generally things that my competitors won't do but specifically make my customers very happy. They are also things that we don't have a lot of fixed costs in, basically just our time. The thought process is the happy customers become loyal and eventually spend money on the fair margin items that we make the majority of our money on.

We have been very successful at building a clientele with this strategy and only have to curtail the low margin products when we just don't have the time because we are busy with the high margin products. Typically the low margin customers completely understand this and will wait if they can.

I guess our strategy is to try to build as many clients as we can, and make some money at the same time...instead of trying to make as much money as we can on every single transaction at the cost of making some of those customers unhappy. Hopefully that makes sense and the original poster can use some sort of a plan like that to build their customer base while at the same time make some money.

This is pretty damn close to how I try to operate. I do the same with the low margin stuff and try to schedule it for a day when Im not going to be doing more profitable work. Good to hear that Im not alone in my business thinking.



Chris, you're going to get 50 opinions on this if 40 people post!! LoL! So here's my .02
First thing is that you both need to decide what kind of shop you want to be? Meaning do you want to be known as a quality shop or a commodity shop. One is looking thru the yellow pages for the rock bottom cheapest price. The other wants a good price, but more so wants their issue taken care of like they would do it. For our company (40+ year commercial roofing company), we know that we cannot be the absolute cheapest all the time and stay afloat. Because unfortunately, there are times that you have to make things right in the customers eyes, and there goes any profit for that job, and sometimes other profits.
That is the second thing, ALWAYS, repeat ALWAYS do your best to do the job like it was your own project. Scratch that, make it like YOU were paying someone to do it for you! Drill that in your employees heads! THAT will bring back business. (With the obvious not gouging the customer on price).
You can never be the cheapest every time and stay afloat, unless you are a monster company like wal mart or something, small companies can't. I'm not saying that you can't (and shouldn't) be the cheapest on some low profit items or "buy a job" occasionally, but I'm saying that you can't consistently be the low guy. Making the customer happy sometimes costs you money and it has to come from somewhere.

Here's a couple quotes to remember:

“The bitterness of poor quality remains long after the sweetness of low price is forgotten.”

“There is hardly anything in the world that someone cannot make a little worse and sell a little cheaper, and the people who consider price only are this man’s lawful prey. It’s unwise to pay too little.”

There is one opinion down, 45 more to go!! LoL! Good luck man!

Haha I was hoping to get alot of opinions, for, and against my own opinion!
I do not want to be the cheapest shop. People see the kind of work that we do looking at our shop cars at the local car shows. I assume they see the attention to detail and that helps drive our image of being a higher end shop.


There are some good comments here, but one thing that I haven't seen mentioned is cost accounting. In other words, do you actually know your costs of doing business? Have you figured out your overhead? Have you figured out a way to allocate that overhead across all of the work that you do? Do you actually know if you are making money and how much?

Before you price a product or service you must get a very precise handle on your actual COSTS! Only then can you start discussing how you will charge for your products or services (labor).

Andrew

This is not the meat and potatoes of our shop so can I still directly apply this to this work? I have a spreadsheet that I fill out every month so show my profits and sales and compare that to an overhead number that covers the average monthly bills, rent, payroll, and all other costs to run the shop.


Thanks for the comments guys, If anyone has an argument against me I would like to hear it just so I have a view from both sides. Or any other general business advice!

[SSLance]

I try to put myself in a customers shoes... I would not be happy if someone threw a min. shop charge at me for something small. Example: The other day a forum member (from another forum) came in with his corvette that had a oil leak that he could not figure out. I had never met the guy, he just happened to be local so I told him to stop in. I spent some time just talking cars with him and pulled his car into my shop onto a set of ramps to have a look underneath. I found the oil leak that another local shop could not find after he paid them to fix it (obviously not fixed). I didnt charge him anything for it. The next day he put up a post on the forum saying thank you, etc... Thats fine with me because I spend a few minutes of my time, got free advertising, and a return customer. BUT, whos to say everytime I "take a look" I will get something in return. They may just say ok thanks for finding the problem now Im going to take it to my regular mechanic and have him do it or do it myself. Its tough to judge what to do in that situation.



As long as the time you spent helping him find the source of his problem didn't come at the expense of another project of yours that you were making money on, I think what you did is the right thing to use to help grow your business.

The hard part comes when you don't have the free time available to help others out as you did in this case. It's a fine juggling act...that all small business owners go through, some are successful at it, many others aren't. It sounds like you are on the right track, just be flexible and continue trying to make everyone that darkens your doorway...leave happy.

[minendrews68]

There are some good comments here, but one thing that I haven't seen mentioned is cost accounting. In other words, do you actually know your costs of doing business? Have you figured out your overhead? Have you figured out a way to allocate that overhead across all of the work that you do? Do you actually know if you are making money and how much?

Before you price a product or service you must get a very precise handle on your actual COSTS! Only then can you start discussing how you will charge for your products or services (labor).

Andrew

One thing Andrew is saying here is to definitely look at what's called your "burden rate". That is the same as overhead. Look at things like cost of rent, utilities, payroll, time to complete each job, insurance (of all kinds) etc. Everything it costs you (and some of those that you might have overlooked), is overhead. Things like this is all to frequently overlooked. You have to seriously look at everything that goes out, before you can put a price on what comes in.
Carl

[wayward]

I run a IT service business... One thing i learned for good long term relationship is both parties have to have value. I have contract services and break fix services... I will not sell a contract to a client that is not technology dependent or strategic. In other words it they don't have the need in the business I will only do billable labor and quick short term engagements. This helps keep the expectations in line from both sides of the counter. My hourly bill rate is higher than most and it you are just looking for a guy to fix your computer Im not a good option. I did this on purpose and after 3 years I can say it is a very effective. My goal is to become a trusted advisor and be a part of the decision vs. being on the other side of the table presenting a solution. This only comes with time and consistency.

You must do good business and have the back and front of the house in order... there has been some very good comments here and i'm not going to jump on cost but make sure you align all expense to the revenue and separate your fixed and variable expenses.

There are a lot of ways to make money... focus on the path / vision / reputation you want to build. then look at options/ways to develop that path and figure out how to get return customers and have money left over at the end of the day... Remember the owner gets paid last. My profits really grew when I realized I needed to focus on types of clients..(in my case dependent on Technology) The profit grew because satisfaction grew.. Satisfaction grew because efficiency and expectations were managed.

But now directly to your question? -- are you selling welding wire / gas / and labor or the guaranteed end result? i don't see you to far from my position.... You are building a custom shop but doing mechanic work?

make prices based on skills or tools required... mechanic work, fabrication work, resto work... Tig vs. Mig etc... its okay to bill for skills and the rates can be different... When I pay someone to do something it is normally I don't have the time, I don't want to, I don't have the tools or space. But no matter what, I must trust them and believe the fact they will get it done to my standard and that has value to me...

[minendrews68]

Another point of view, but not to get too far off subject, is to do the best you can do for the amount of money you feel comfortable and profitable doing. I for one don't have a problem with someone charging a set price if I think it's worth it. for example, if I went into a shop and asked them how much would this or that cost to have done, I would think about what I thought it should be and make my call from that point. That being said you've got to weigh a few things into it. Is this guy credible, do they do good work, etc. you've got to be that guy that does these things and build upon your reputation. I've never had a problem with paying for something as to it's worth. If I want something done, we agree on a price, I don't want that person dragging it out to justify the cost. I would rather agree on a price from a reputable company and if he can get it done with the tools he has in thirty minutes and it's a good job I'm all for it. I think build your credibility and you'll do ok. well, that and don't over/under price yourself.

[BonzoHansen]

You can't complete with DIY on price, so do not try (IMO). You can on quality & service. Those things cost money. When I was at STS (for you non NJ types think Firestone/Goodyear type service facility) I got into an argument one day with the then president of STS. We were at a store they just opened that was in what I considered a real blue collar working class area. Not our typical meat & potatoes as we were one of the pricier independents around. Our best store was in Princeton. We were talking about reasons the new store wasn't going gang busters. So I asked him what our target market was. He said everyone with a car. Yeah, wrong answer. I asked 'so you want the guy who shops at pep boys and the guy with a 5 car family with a median income of $150,000?' He said yes (did I mention he was fired not too long after this lol). Well, that cannot happen. You either lead by price or quality & service. It is fairly difficult to do both unless you are willing to settle for very low margin, which they were not. If I were to open a shop that catered to old cars/performance cars, I'd would not want to be too cheap unless I did cheap work. What is your target market and what is your level of quality? What is your target gross margin?

It's a fine line. IMO people do not value free or time. Even if I did free or very cheap things they got a receipt showing full price then a discount at the end. Be careful what favors you do. Get that reputation and it will draw flies. That said, nickle & diming tends to drive away the 100s & 1000s. A regular good customer might get a free taillight bulb installed (assuming it's a 5-10 minute job) - that is the guy you want spreading your gospel. You become 'his guy'. Plus he is spending money so that free light has no real impact on margin. Although the ironic thing is he does not care if you charge him. A new customer? Maybe cheap but not but free. A guy who only comes in with loss leader oil change coupons but has 4 new tires from somewhere else? Full price. I can't keep giving him my money and I cannot reward that behavior - the guys in the shop relied on me to some degree for their paychecks. And I won't even get into the inexact science of trying to read a new customer. You can't tell a book by its cover, except the ones you can read from the other end of the lot.

But we did free brake checks all day. Brakes made money. Would I roll a guy in n/c in to eyeball (not dye check) an oil leak? Sure if time allows. Fix it for free? If it was snugging down the drain plug or something equally quick sure. Otherwise no way. Free check, give estimate or directions to the place down the street that would do dirty work I wanted nothing to do with. And there is a reverse correlation to free estimates and how filled my lot & bays are.

Not sure if I helped at all lol


BTW I spent time at the STS near you in Hazlet.

[Todd in Vancouver]

^^^ makes some really valid points and is very close to how I advise my clients.

I do business consulting for a living in the Automotive world. This is much more complex then you can get on here through a forum. In short, your both right and there has to be some compromise made. Feel free to PM me and we can certainly chat.

[vette427-sbc]

I really appreciate the time you guys took to post your opinions and advise. Thank you for that. I think Im starting to see where my partner and I can both compromise for the better of the shop. Hopefully we can turn the classic car stuff into something that will bring some much needed revenue to the shop.

And Scott, that was actually a really helpful post.

Todd, I may be in touch with you later. Thank you for the offer!

[ccmc]

Great post and comments!

[shmoov69]

One other thing that my dad always told me (but unfortunately didn't listen too much!) was to "spend time doing what you're good at and make you're money there, pay people to do what they're good at and spend your money there". That is what a lot of "car people" need to hear and it seems only the older ones figure out. Which is EXACTLY what your market should be IMO. Might not be bad to even have a sign that says that in your lobby! LoL!

[Bonehead]

Theres a couple of ways to look at it.

First calculate your shop cost of business per hour. Rent, utilities, equipment (and depreciation), employee salary (your biggest expense), benefits, insurance, yada, yada, yada. It takes awhile to do and you'll need to constantly update it, but you have to know what that shop is COSTING YOU before you can set an hourly shop rate. I've done this for two decades and almost every shop I talk to just guesses what their rate should be to cover their costs. I can't run my business flying by the seat of my pants like that. I need to know what its worth, what to charge and what my profit is.

The next thing is to obviously see what your competitors are doing. Even if its just a regular repair type shop. Quick change oil place. Tire shop. Get a feel for the threshold. If you really are producing world class service and work, then the line of thinking is to charge accordingly. However, we all know that everyone likes to shop around and will go where they can save a nickel. There is ZERO loyalty with consumers. Zero. Its all about the almighty dollar. On the rare occasion you do find someone who isn't driven to save a few pennies and they come back to see you? Ask them why. Find out what it is they value and then be the best at that every time. So you have to make a decision. Where do you want your rate to fall? On the healthy side, or somewhere a little less healthy but still hopefully covering your costs. Hopefully by now you have some idea of what your common service business looks like and can price it out separately. Chances are, these will end up being repairs where you don't make a heck of a lot, but will hopefully lead to more work (if your techs are on the look out for other things that need repair or replacement).

The last area is the industry where I work. Your wholesale suppliers. Remember what I said about loyalty? Most WDs on the traditional side and on the aftermarket side offer some sort of incentive program. Find the one that fits you best, which one you like dealing with and the one with the best service and STICK with them. Don't shop around too much and beat them down for every nickel you can save. In the long run, you'll be glad to be a good customer.

[RobNoLimit]

I have been fortunate to meet a lot of successful people in all types of business. When I get the chance, I like to talk with them about business, as well as about thier cars or projects. Also I've been fortunate enough to listen. So, I'll pass along some ideas for you.

1) About 20 yrs ago I was talking with a friend of mine, a hot rod chassis/suspension builder, about his pricing. He told me of his belief that there was 'value' in the percieved price itself, and he proved it. As a manufacturer he made a part that he could manufacture, package, advertise and sell for about $365.00. At this rate he could make a profit, and still offer 25% to dealers. But, he had difficulty competing with other companies and growing sales. The average market price for such an item was around $390.00. After some time, he raised his price to $399.00, and sales increased. He could also now offer a 30% discount to dealers, and he made more profit. The idea here is that the price reflects the quality and service that you will get. - as long as you can deliver the value.

2) Another friend that ran a very successful Hot Rod shop, paint supply shop, and a few other businesses, told me once, "... There's no money in selling, the moneys in the buying." Your customers will come and go. Even the best ones. Every dollar you 'save' them, is one you don't have. Spend time developing relationships with your supliers ^^^^^, Any money you can save with them goes directly into your profit. Dave ended every conversation with "have some fun today". I miss being able to talk with him. R.I.P.

3) You can have the best quality/service/product out there, and you can price yourself out of business on BOTH ends. Pricing yourself too low, and setting your business on the path of a slow death is of no benefit to your customers. You will be gone, and they will have no one to help them. - Sometimes you may need to remind them of this.

4) There are all types of customers, and this is important. YOU CANNOT WORK FOR ALL OF THEM. You don't have enough time, space, employee labor,.... You just can't do it. You MUST decide which customers you want. Look at it like this. There are Walmart shoppers, Sears shoppers, and Nordstom shoppers. (don't start hating here) In our shop, we look for somewhere in the Sears/Nordstom customer range. You cannot compete with Walmart. Sam is too smart.

5) The advice above is great. Read it twice. Your shop labor may be different for different tasks, and it may be higher/lower than local competition. Our labor rate is 95/hr, but we have a lot of equipment, and we get a lot done in an billable hour. ?? A bill-able hour. Yes, we only bill out for the time that we actually acomplished something. Those two things make us cheaper than many of the 60/hr shops in our area. The big number also scares off some of the customers that we probably don't want.

Best of luck to you guys.

[andrewb70]

I have been fortunate to meet a lot of successful people in all types of business. When I get the chance, I like to talk with them about business, as well as about thier cars or projects. Also I've been fortunate enough to listen. So, I'll pass along some ideas for you.

1) About 20 yrs ago I was talking with a friend of mine, a hot rod chassis/suspension builder, about his pricing. He told me of his belief that there was 'value' in the percieved price itself, and he proved it. As a manufacturer he made a part that he could manufacture, package, advertise and sell for about $365.00. At this rate he could make a profit, and still offer 25% to dealers. But, he had difficulty competing with other companies and growing sales. The average market price for such an item was around $390.00. After some time, he raised his price to $399.00, and sales increased. He could also now offer a 30% discount to dealers, and he made more profit. The idea here is that the price reflects the quality and service that you will get. - as long as you can deliver the value.

2) Another friend that ran a very successful Hot Rod shop, paint supply shop, and a few other businesses, told me once, "... There's no money in selling, the moneys in the buying." Your customers will come and go. Even the best ones. Every dollar you 'save' them, is one you don't have. Spend time developing relationships with your supliers ^^^^^, Any money you can save with them goes directly into your profit. Dave ended every conversation with "have some fun today". I miss being able to talk with him. R.I.P.

3) You can have the best quality/service/product out there, and you can price yourself out of business on BOTH ends. Pricing yourself too low, and setting your business on the path of a slow death is of no benefit to your customers. You will be gone, and they will have no one to help them. - Sometimes you may need to remind them of this.

4) There are all types of customers, and this is important. YOU CANNOT WORK FOR ALL OF THEM. You don't have enough time, space, employee labor,.... You just can't do it. You MUST decide which customers you want. Look at it like this. There are Walmart shoppers, Sears shoppers, and Nordstom shoppers. (don't start hating here) In our shop, we look for somewhere in the Sears/Nordstom customer range. You cannot compete with Walmart. Sam is too smart.

5) The advice above is great. Read it twice. Your shop labor may be different for different tasks, and it may be higher/lower than local competition. Our labor rate is 95/hr, but we have a lot of equipment, and we get a lot done in an billable hour. ?? A bill-able hour. Yes, we only bill out for the time that we actually acomplished something. Those two things make us cheaper than many of the 60/hr shops in our area. The big number also scares off some of the customers that we probably don't want.

Best of luck to you guys.

Excellent advice.

Just because this is not your shops "bread and butter" it does not mean that you shouldn't apply the same due diligence on the cost accounting side. You have to allocate all of the overhead no matter what kind of work is being done. The fixed expenses must be paid whether the doors are closed, you're making peanut butter, or working on customer's cars. Any capital (tools and equipment) purchases must be done with the goal of boosting efficiency. As Rob said, their labor rate is based on billable hours and because they have a lot of equipment, this allows the work to be done more quickly (but the equipment still has to be paid for).

Rob's point number 1 is right on target. What he is describing is a very well studied phenomenon in marketing. Price is a direct reflection of quality and values, especially when it comes to services. In marketing we call certain services "credence" services. It means that consumers have a very hard time judging the quality of the service and thus they use price as a proxy measure. Custom auto work falls right into the category of credence services, right along with other professional services, like doctors, lawyers, and healthcare.

Andrew

[Todd in Vancouver]

Todd, I may be in touch with you later. Thank you for the offer!

It sometimes takes a bit to reach me, as I'm busy with clients, but I'd be more than happy to discuss with you. It may sound a bit cliche but I'll share two things with you that I tell all my guys;

1- you need to spend time working ON your business and not working IN your business.
I've seen lots of good folks who work very hard everyday in the shop go broke. Slot some time to work on the business and take that 40K' view and ask what you need to do to get better. Pick one thing and make it happen. Slot time every week to do this, Thursday from 2:00-3:30 I'm busy on working ON my business kind of time.

2- nobody will care more about your business than you do.
Don't wait for others to do things that you think may help your business. Make a plan, put into action, measure the results, evaluate the data, hold people accountable. Repeat with next item.

Regardless what anyone tells you, the automotive business is hard and the good old glory days are gone. Be smart and use the KISS method and don't get caught up in all the noise/fluff that people tell you. If you are a reader then shoot me a PM and I'm more than happy to suggest some good reading for you that can help you get to where you want to go. Most of all, have fun. We are not solving world hunger or peace and these are just cars, yes I said it, so don't get caught up in the life and death mentality I see out there. It's amazing what happens when we bring a bit of fun back into this business. Staff are happier and productivity goes up.