Cost of Goods

While sitting in the airport writing this article, I have observed no less than 100 people walk by a dime someone has dropped on the floor without picking it up. I was taught that a penny saved is a penny earned. To this day, I pick up pennies when I see them on the ground. It probably comes as no surprise that I watch my pennies when buying supplies for the fast lube. Simply put, saving a quarter per oil filter means adding $3,000 to the bottom line on a 40 car per day store every year. Add to that, or should I say subtract from that, a quarter savings on a gallon of oil and you pick up another $3,150 per year. Every penny you save on an oil change is multiplied by at least 12,000 cars for a 40 car per day store. This figure increases if you use more than one penny per vehicle. Twenty percent of your customers will buy an air filter; a quarter savings per air filter will net you an additional $600.

Let us say you gross $500,000 per year from 12,000 cars and that your net is 10% or $50,000. You could increase your net by 1.35% by following the three examples above. You will have saved enough to equal a whole yearʼs worth of work in just seven years. That is a full yearʼs profit just by watching your pennies and buying more carefully. If you have seven stores, you realize this amount is equal to one storeʼs entire annual profit. Judging purely by profit, you have added another store to your chain without the extra manager, techs or administrative work required, not to mention the land, building taxes, and so on.

Why stop at filters and oil? What about uniforms, waste oil pickup, antifreeze, or washer fluid? You control what is on the list.

Cheaper is not always better. I am not advocating the use of inferior products for your customers. I am only asking you to utilize the options you are given.

How do you go about saving this money? Many times your current vendor will match the prices of other vendor to keep your business. It is good for them as well as for you. You know as well as your vendor does that it is cheaper to keep a customer than to find a new one. You both benefit in this situation. You save a few dollars and your vendor keeps a good customer.

It is important that you take advantage of all the programs offered to you through your vendor. Oftentimes you are required to use a certain brand of oil or filters because of up front money you have taken from an oil company. In this case, make sure the rebates and credits you earn for every filter or gallon of oil your shop uses is realized by your lube.

You can also save a significant amount on your order if you pay with a credit card when buying from an independent supplier. If timed correctly, you can do this and still have a 30-day term through your credit card company while not incurring any finance charges. Depending on the credit card, you could earn frequent flier miles for trips to conventions!

Currently, there are more companies available to buy your fast lube supplies and products than at any other time I can remember. They all actively solicit your business each month in every industry magazine.

When was the last time you got a catalog and really compared the prices of your supplier with another? Many vendors sell the exact same parts and products. Why continue buying from vendor ʻAʼ when the prices are lower with vendor ʻBʼ? I will be the first to speak of the importance of relationships with vendors, accountability, and service. A good relationship with the supplier you call on the phone every week is important, but so is the bottom line with which you struggle every day.

Do yourself a favor and call a supplier you see in an industry magazine and compare prices. I have found that it is just as easy to save a penny or two as it is to make the extra penny or two.

I think you will start to enjoy the benefits of ʻbuying smartʼ when you look at your monthly numbers.

Crafting an Inventory Policy

Keeping a good inventory isnʼt easy. Good in this context means accurate and adequate but not excessive. Too much inventory costs you money just as not having the part to sell costs you money.

With all the vehicles on the road your inventory needs to be diverse. As new models roll off the assembly line you need to updated your list of vehicles you have filters, additives, gear oil, tools, etc to service them properly.

Your inventory is ever changing. The trick for you as a lube manager is to keep up. Your lube computer will tell you how many of each filter number you sold the past year, or past month if you ask it to, use it wisely. The orders you make need to be based on fact, not what you “think” is right and the computer can give you the facts. Always keep in mind that location is very important. If you are in a rural farming community without a BMW dealer within 100 miles there are not likely to be a lot of BMWʼs in your town and therefore, keeping a large volume of BMW filters isnʼt necessary.

Some people ask, “How much inventory should we keep on hand” and the answer is that it is different for every location. I have seen fast lubes that are literally next door to auto part stores and keep very little in the way of air filters, PCVʼs, breathers, bottled oil, transmission kits etc on hand, choosing to let the part store keep the stock for them. This is fine if you have negotiated with the part store for good pricing. If your cost of goods is higher with the store next door you will have a lower margin of profit.

How long in between oil deliveries do you have to go? If you have to order on Monday to get an oil deliver the next Wednesday you must have enough oil to service vehicles for 10 days. If you service 500 cars per week that is a little over 700 gallons of oil to leave your facility in the 10 day period, you must have the oil in your shop to service these vehicles. The farther apart your deliveries, the larger your tanks need to be, that is just a simple fact. Why keep your 1000 gallon tanks of 10/30 and 5/30 bulk oil full when you only use an average of 750 gallons a month total? All you are doing is tying up 1250 gallons of oil, or in dollars @ $4 per gallon $5000. Keep an eye on your oil salesman; they have a tendency to keep the tanks full regardless of your needs.

The same can be said for any and all inventory pieces. As I mentioned earlier, the formerly popular air filter may now be a very slow mover and nearly a thing of the past, keeping any more than two in stock would be too many. An air filter may only cost $5 but keeping 5 too many is an additional $25 of stock that is unnecessary if you have 30 air filter numbers overstocked by 5 filters each that is an extra 150 filters at an average of $5 each, $750 additional inventory.

How do you know whether you are carrying too much inventory? First, when was the last time you did an actual “hands on” inventory? If itʼs been longer than the end of last month, get busy. You say you know what you have and doing an actual count requires staying after work and is unnecessary. I have done many “audit” type inventories and always find a glaring difference between what managers think they have and what they actually have on hand. I guarantee that if you are not taking a monthly inventory, and sometimes even if you are, there are filters, additives, oils, etc that neednʼt be in your inventory. A common source of over stocked items is “special orders” that customers donʼt come back for. All special orders should be paid for in advance, period. Also, by doing an inventory yourself you are in touch with what you actually have when a customer needs a part that is out of the ordinary. What can you do with the surplus? Talk to your lube supplier. If the items are in saleable condition they will likely give you credit toward the purchase of new, usable inventory. You can order a couple of the new model year air filters.

Devil’s in the Details

The devil is in the details is the old saying and it couldnʼt be more true than in a fast lube! I have often said it and still believe that we are not really in the oil change business. If an oil change is all we had to offer a customer, they would find other sources much less expensive than the typical fast lube. We as in industry are far more than just an oil change. We offer at the very least convenience, piece of mind, and reassurance. Reassurance that the job was done right, conveniently located and the piece of mind that the necessary chore of getting the oil changed is over and done.

It is my belief that these largely “feel good” items are what allowed a small niche industry to become a part of the daily fabric of American society like the fast lube industry has become. These are the things that will keep us in business.

When I mystery shop locations around the country I am commonly unimpressed by what should by the most simple things; unhappy or uncaring customer contact people, long faces, poor grooming habits, dirty lobbies, cold or old coffee in the waiting room are examples. But the biggest and most consistent problem is simply a blatant lack of concern for customers. The average customer doesnʼt feel wanted, needed or appreciated. If a customer doesnʼt feel wanted, why would they return to that business? Everyone wants to feel needed or appreciated. This problem is by no means a unique problem to our industry. When I visit places of business for personal use I get similar results. Poor customer service is running rampant in America and we experience it every day. It has gotten so bad that we are subconsciously lowering the acceptable level of customer service everyday. We are starting to consider it “over and above the call of duty” when someone says “thank you” or “we appreciate your business.” The longer it goes on the lower our expectations get. Getting a live person to speak to when you call on the phone about a bill or account is tough and sometimes impossible. I called an airline this past week to get a ticket and instead got a recording that said they were too busy and to call later! Can you believe that? A customer with money to spend being told, by a machine no less, to call back later to give them money! And they wonder why they are going broke?

Our business like many others absolutely requires customer contact. This provides you a fantastic opportunity to wow and impress the customer with great service and makes them feel as important as we know they really are; the lifeblood of your business!

Operators complain about how hard it is to find good people to give this type of service and I know it certainly presents a challenge, but what more important task is there when these people are what represent you and your business?!

Perhaps there needs to be a shift in the way you recruit or modify your hiring criteria. Do you hire people with mechanical back grounds for work in your fast lube or do you hire people who canʼt seem to stop smiling? I have always said that I could teach anyone to change oil, but I have never been able to teach anyone to be friendly. A lot of people are nice and friendly after you get to know them, but your customer contact people need to show customers immediately upon their arrival that they are not only welcome but appreciated. Good customer service starts with the people we hire.

Remember, it is the little things that count. A smile and hello to a customer, greeting a customer by name when they pull up, a genuine compliment towards a customers car, an appreciative word when they leave. These are the things that bring customers back. The fast lube business relies heavily on repeat business and the competition has never been more intense. Dealers with built-in credibility are going after your customers more than ever. New lubes are being built on nearly every corner.

Unless you can answer the question objectively as to why a customer would return to your location instead of the dealer or the lube on the corner then you need to start paying attention to the details. And remember everyone will change the oil correctly, what else can you do better than the other guy?

Did You Stay or Did You Go?

As you read this the 2004 AOCA and ICA conventions are a memory. Or are they? If you werenʼt there then you probably donʼt remember a thing about them! So if you didnʼt go, the question I have for you is “why”, “why didnʼt you go to the conventions?” Where else are you going to find such a concentration of fast lube and car wash minds? The educational opportunities are one thing – but the networking possibilities are limitless! Even if the educational sessions donʼt peak your interest, the number of tried and true ideas for your lube or wash that are available by the dozen from the people attending the shows, just for asking and are easily worth the price of admission.

I have had several people tell me they get to attend only one show but would love to attend both, but they are usually so close together that people have to choose one or the other. I typically go to both shows, but it really makes it hard when they are so close together and there are years that I just cannot make both shows and I am forced to choose.

Then there are others who tell me they simply donʼt learn anything at conventions. My favorite is the guy who told me he went to “one of those conventions” ten years ago and didnʼt learn a single thing. I have trouble believing that, I really do. For the simple reason that I know veteran operators who are truly leaders of the industry that tell me they learn something every show. And I have to agree with them, I learn something at every single show.

But to learn at these conventions you need to work just as hard as you would at a regular day at your business. This includes the employees you take with you. This is not an all expenses paid party for your people. Plan you and your employeeʼs days out. What booths do you want to go to and what questions do you want answered at each booth? What educational seminars do you want to go to? There are usually multiple sessions I want to see that overlap. So send an employee to get the information and report back with the details of the session. By sending your employees and getting a debriefing from them afterwards gives you the opportunity to work with your best and brightest on a one on one basis. This is invaluable. By covering the sessions together you get a better idea how your employee views things and they come to understand better what you want and expect from them. So, in a way even if you donʼt personally learn anything from the session (which is hard to believe) you are giving yourself a perfect opportunity to train your manager or top employee in the ways you want your facility run. This is a golden opportunity and I encourage you to take full advantage. With all the “companion” air fares and frequent flier mile programs the trip should not cost you that much. The opportunity for education and networking for your manger or employee is excellent. I know of many managers that keep the networking up with their acquaintances from shows, via e-mail or phone throughout the year. You are gaining the experience of another manager at a different lube and it only cost you a trip to the convention. You can use the trip as a benefit to the manager or lube tech of the year award.

The last excuse I usually hear for not attending conventions is a usually a lack of time and or money. What I recommend is to stop working IN your business and work ON your business. If you are literally doing hoods or in lower bay at your lube then you are the most expensive tech possible. If you help clean up the shop you are the worldʼs most expensive janitor. Put your efforts and talents where they belong and work ON your business not IN your business. Conventions are a great way to work ON your business. Take the opportunities offered to network and speak to as many other operators as possible, take notes (lots of them) and then decide which of their ideas can work for you. I guarantee the ideas you get will far outweigh the cost of the trip, but you have to work at it. Think of it as an investment. Spend the money but be darned sure that the investment pays off!

How to Improve Ticket Average at your Lube

The oil change “pie” is being split up in more pieces now than ever. Dealers once again want the oil change business just as muffler and brake shops are turning to oil changes and maintenance items to boost their profits. This has taken its toll on car counts at many fast lubes around the country. Many owners are trying to figure out way to keep the net profit from slipping away when doing fewer cars. Most operators are coming up with ways to profit more per car by adding services varying from cabin air filters to windshield repair

Some in the past have said that you cannot have a high ticket average and high car counts, but we have proven that old adage wrong time and time again. And it is never too early to start improving on your ticket average even if you are happy with the car count your lube has now. If you already have a strong car count a higher ticket makes you more profitable. If your car count is slipping then you can strengthen your net profit by having a higher ticket average.

When trying to improve your ticket average, here are a couple of things to keep in mind.

One of the first things necessary to achieve high ticket average is “buy in” from the customer. The customer must believe you have their best interest in mind. Usually the easiest way to accomplish this is to take the emphasis off of the dollars and focus it on the service aspects of your business. It may seem rather odd, but it is what I have found works the best. Trying to teach sales skills to the average lube tech is usually unsuccessful. Hiring “sales” people at lube tech wages is not likely to happen either. So why try and Getting lube techs to “sell” anything? They really don’t want to and feel uncomfortable when you force them to put the sell on.

And donʼt forget customerʼs perception. No one wants to be “sold” anything, but everyone likes to buy things. We love to buy things. In fact buying things makes us feel good. We work hard and deserve to be rewarded, and buying things is how we reward ourselves. Just donʼt sell it to us, we want to buy it. So donʼt sell your customer, educate your customer on what his car needs to be properly maintained.

So if you are not selling there can be no overselling. Create a comfortable environment for the customer. Educate customers on the maintenance and upkeep of their vehicle. You never ask them if they want to buy something. You simply let them know the service intervals recommended by the manufacturer and make it easy to say “no” to your services. If these things are done properly the customer will make informed decisions on taking care of their vehicle. If the relationship has been developed properly everyone wins. The simple fact is that people are more likely to spend money if they are comfortable with your shop and employees.

Fast lubes, like many other businesses are so reliant on repeat business. By focusing on your customer service skills you are encouraging relationship building over sales. Again, the more comfortable they are, the more likely they will be to do whatever service you recommend.

A reasonable ticket average typically starts around $45 and goes up from there. Just so everyone is comparing apples to apples, we consider ticket average the net dollars after discounts divided by number of oil changes.

You can draw a straight line between ticket average and customer confidence, perceived value and level of customer service the shop provides day in day out. The more comfortable with you and your service the customer is, the higher the ticket average. Our lube shop customers average well over $50 per car because they provide complete customer service, not because they pressure customers for sales.

The trouble nationwide is that people want to take care of their cars, but have trouble deciding whom they should trust to do the work. If a fast lube builds trust and confidence with their customers by educating them about services and recommending only those that are necessary, then the ticket average will improve. But they must first trust you. We in the fast lube industry must overcome the stigma caused by a few but well publicized cases of “mechanic fraud.”

Be up front with your customers and they reward you many times over.

« Older posts

© 2017 Pitstop Consulting

Theme by Anders NorenUp ↑