50% Markup isn't 50% Margin - The Operator's Edge Episode 2 — Transcript

Full transcript

1. 0:00The Operator's Edge episode two. You hit
2. 0:03your margin target. Did you actually
3. 0:06win? You just discounted a job to close
4. 0:09the deal.
5. 0:11Do you know what you just did? Do you
6. 0:12know what that cost us? We have a
7. 0:14pricing matrix for a reason. price of
8. 0:19the part [music] that we charge the
9. 0:21customer is determined from that matrix
10. 0:25to keep our sales in line and ultimately
11. 0:28keep our profit where it should be. We
12. 0:31see that scenario a lot. We have
13. 0:33advisers that take the the reigns
14. 0:39and
15. 0:40give the house away sometimes to take
16. 0:43care of the customer that came in for
17. 0:45the job that they needed. Sometimes
18. 0:47they're not confident in their sales
19. 0:48abilities and the customers are
20. 0:50intimidating, so they give stuff away.
21. 0:54Or they think the part is priced out,
22. 0:57the job's priced too high, and then they
23. 1:00start doing discounts to bring it down
24. 1:03to what they think it should be. There's
25. 1:06a lot of things that happen that can
26. 1:08affect their margin. So,
27. 1:11how do we take control of it, fix it,
28. 1:15and ensure that it doesn't happen
29. 1:19as much as it currently is? So, my
30. 1:21question is, why does [music] this
31. 1:24happen? Do they
32. 1:27really not understand that we run a
33. 1:30salesdriven business and that we have to
34. 1:33generate profit in order to keep the
35. 1:34doors open, in order to pay our
36. 1:37technicians, in order to keep the
37. 1:38customers coming in because we can pay
38. 1:41for marketing and all those types of
39. 1:42things. A lot of times they just don't
40. 1:45know.
41. 1:47They don't understand how the business
42. 1:49is actually ran. So, it's important that
43. 1:52we are not just [music] holding all of
44. 1:55the business information back and we
45. 1:59have to educate our people. Number one,
46. 2:01we have to ensure that we are pricing
47. 2:04everything out correctly, setting it up
48. 2:06correctly in the computer if it's not
49. 2:08already set up, and ensuring that we
50. 2:12have enough to pay our technicians
51. 2:16because
52. 2:17without technicians making good money
53. 2:19these days,
54. 2:21they're going to go somewhere down the
55. 2:22street and sometimes it's as little as
56. 2:24for 50 cents, sometimes [music] a
57. 2:26quarter, which is crazy.
58. 2:28And then the worst part about that is
59. 2:31they start telling all their buddies
60. 2:32down at the new shop and then they don't
61. 2:34come back and you become the shop that
62. 2:38doesn't pay or becomes the shop that
63. 2:41can't close the deal because we overpric
64. 2:43or we give the house away. We underpric
65. 2:45and we we can't keep advisors.
66. 2:49So
67. 2:51what are we talking about tonight? We're
68. 2:53going to talk about how to protect the
69. 2:55profit through the pricing matrix,
70. 2:58through educating our adviserss, and
71. 3:00through creating good habits. So, number
72. 3:03one, I want you to focus on one thing
73. 3:05when it comes to the matrix. Every
74. 3:08single part has a certain percentage
75. 3:10that's marked up to ensure that we hit a
76. 3:12certain amount of profit.
77. 3:15Now, that's done automatically most of
78. 3:16the time by the owner, by how they
79. 3:20purchase the parts, who they purchase
80. 3:21the parts from, how much buying power
81. 3:24that they have, stuff like that. So your
82. 3:26job is to essentially just make sure
83. 3:30that we're using the parts markup
84. 3:33correctly, not varying from coupon
85. 3:36program that we have currently in place.
86. 3:38And at the same time, we're not just
87. 3:41going after a percentage. A 80% gross
88. 3:45profit percentage or a 70% gross profit
89. 3:47percentage is not always a good thing.
90. 3:50We get paid on GP dollars, not GP
91. 3:52percentage. Remember that. So be mindful
92. 3:56that little tweaks here and there
93. 3:59throughout the day, throughout the week,
94. 4:01throughout the month for not paying
95. 4:03attention
96. 4:05can compound
97. 4:07and really hurt us the last week or the
98. 4:09last couple of days of the month when we
99. 4:11should be trying to get some more sales
100. 4:13in through some extra discounts. But
101. 4:16instead, we're trying to protect the
102. 4:18margin because we don't have [music] any
103. 4:19margin to give up at that point. So I
104. 4:22think the most important part of all of
105. 4:24this is how we deliver the message to
106. 4:27the
107. 4:28service advisors
108. 4:30and to our team.
109. 4:32And it has to be consistent. It has to
110. 4:34be followed up on by us every single
111. 4:37day.
112. 4:39And it really just kind of starts with
113. 4:40some basic business
114. 4:43process and some [music] business math.
115. 4:47So do a quick math check in the morning.
116. 4:51Give them some parts to mark up and show
117. 4:57them exactly what that percentage is and
118. 5:01explain it in such a way like if a part
119. 5:04cost you $100 and you sell it for 200,
120. 5:10then what [music] is that? It's 100%
121. 5:12markup.
122. 5:14What? It's only 50% margin. So then if
123. 5:18you take 20 bucks off of that $200,
124. 5:22you're down to 180. That's a 10%
125. 5:24discount to the customer, but a 20%
126. 5:26reduction in gross profit dollars.
127. 5:30Do that on 10 tickets a day and you've
128. 5:33given up $200 a day, 2,000 over 10
129. 5:35working days.
130. 5:37That's somebody's paycheck. That's a
131. 5:39technician's paycheck for a week. It's
132. 5:41crazy. So
133. 5:44be simple bite-sized pieces. Be
134. 5:47consistent and help them understand how
135. 5:51margin and markup actually work. They
136. 5:54also have to understand that because the
137. 5:58lights have to stay on. We have to have
138. 6:01a marketing
139. 6:03budget.
140. 6:04We have to buy paper and pens and keep
141. 6:07the lights on and all that good stuff.
142. 6:09They forget about that stuff. They
143. 6:11forget. that they just take it for
144. 6:12granted. They they leave the lights on
145. 6:14at night. They buy cases [music] of
146. 6:18pens.
147. 6:19I had a former boss say that they just
148. 6:22love to buy Post-it notes. So, be
149. 6:25mindful of what they're buying. Give
150. 6:27them a budget and and be consistent and
151. 6:30stick to it so that they don't take all
152. 6:34of the margin away on that side. So that
153. 6:37being said, moving on to how we actually
154. 6:41sell the parts
155. 6:43and how we buy the parts and what we can
156. 6:47do to manipulate the numbers in such a
157. 6:50way that you're going to win. Takes a
158. 6:54lot of practice. It takes a lot of
159. 6:56consistency like within yourself and it
160. 7:00takes a lot of communication and
161. 7:02followup. But we got to remember that
162. 7:07there's things that the owner has done
163. 7:09in order to [music] get us the best
164. 7:12price on the part possible. So, it's our
165. 7:15job to ensure that we protect that.
166. 7:17And what we can do are a couple
167. 7:21different things. Number one, just make
168. 7:25sure that everything is to date in the
169. 7:28computer. Stay on top of that. ensure
170. 7:30that we're ordering the right parts for
171. 7:32our technicians so that the parts get
172. 7:34there on time and we don't have to wait,
173. 7:37send back, make a customer mad because
174. 7:39we kept their car action day because we
175. 7:41didn't get the part in on time. that we
176. 7:43have to discount and making sure that we
177. 7:46are writing the the ticket up correctly,
178. 7:48delivering the information to the
179. 7:50customer correctly, and ensuring that
180. 7:51the technician is doing their job
181. 7:53correctly so that we minimize the
182. 7:57risk of having to comp something due to
183. 8:00poor quality. Now, there's one more way
184. 8:03that we can help ourselves.
185. 8:07And it's almost like we're protecting
186. 8:09ourselves before we even go to the sale
187. 8:14as the as as the service adviser.
188. 8:18And this is something that an owner
189. 8:21[music] or a general manager would be
190. 8:22doing if they have the ability. And that
191. 8:26is understanding that we live in a world
192. 8:30of Amazon
193. 8:33car parts.com
194. 8:35and buy stuff from junkyard sometimes.
195. 8:38And you have to [music] remember that
196. 8:40some of that stuff is pretty cheap
197. 8:42because where they get it from they get
198. 8:45in the Amazon of the world they buy in
199. 8:48massive bulk. So they get really cheap
200. 8:51prices and so that they can price it
201. 8:53very low. the parts stores are in the
202. 8:55same way. So, what is one way that you
203. 8:58could actually
204. 9:00stay competitive
205. 9:02and [music] not have to discount parts
206. 9:04all the time? The best way to do it is
207. 9:07to ensure that you're competitive in
208. 9:10your market with labor, priced
209. 9:12appropriately for the work and the costs
210. 9:15of delivering it.
211. 9:18ensure that the part is not moved in
212. 9:23price when things go up as much [music]
213. 9:26as you may think you need to, but
214. 9:29instead you can move your labor up a
215. 9:32little bit. And so if you incrementally
216. 9:35move your labor up a little bit faster
217. 9:38than you move your part price up on the
218. 9:41revenue,
219. 9:43then you're going to not have so many
220. 9:45conversations about the Amazon purchase
221. 9:48that the customer can get online and
222. 9:51they want to bring their own parts in.
223. 9:54You don't want to argue with them. You
224. 9:55want to ensure that advisers are
225. 9:57confident in what they're selling. they
226. 9:59can go up to the customer. They have a
227. 10:00good price and the technicians
228. 10:02ultimately they know that they're going
229. 10:04to get the sale because all the other
230. 10:06things are working up front. All they
231. 10:07got to do is fix the job or do the job
232. 10:09right and have any comebacks and we all
233. 10:13[music] win. I don't know if you've ever
234. 10:14thought of that,
235. 10:16but that's a little hint or a little
236. 10:19pointer on what you can do. So the more
237. 10:21that we're out in front of things, the
238. 10:23more that we
239. 10:25have things in line when it comes to
240. 10:29pricing correctly in the computer,
241. 10:31minimizing [music]
242. 10:32costing mistakes, having confident
243. 10:35salespeople, and [music] ordering the
244. 10:37correct parts, technicians having the
245. 10:39good quality of work. Yep. Then we will
246. 10:42win. Remember, we're here for number
247. 10:46one, the customer. We have to make sure
248. 10:48that we we stay competitive [music]
249. 10:50in our pricing. Two, we're here for the
250. 10:53technician. When we're [music] mindful
251. 10:56of those two, that means that we all
252. 10:58win. So, at the end of every day, I want
253. 11:01[music] you to write down four things.
254. 11:05Ask yourself four questions. Number one,
255. 11:08did we generate gross profit dollars
256. 11:10today that we needed? Number two,
257. 11:14did we hit our margin percentage within
258. 11:17the range that we set for our team and
259. 11:21communicate and follow up with? Number
260. 11:23three, did we take care of our customer?
261. 11:26And lastly, number four, one of the most
262. 11:29important, probably the most important
263. 11:32right there with the customer, did we
264. 11:34take care of our technician? The fourth
265. 11:35one definitely matters because if you
266. 11:37don't sell the job to the customer with
267. 11:40a good price, you can't get the
268. 11:42technician fixing the car and ultimately
269. 11:45we are definitely going to lose. DM me
270. 11:48the word scorecard on Instagram at
271. 11:50ribo8222
272. 11:52and I'll send you my free daily
273. 11:53scorecard template. My name is Ryan and
274. 11:55this was the operator's edge. Next week
275. 11:57we're back with another episode. Hit
276. 12:00subscribe so you don't miss