At Instant Auto we use two established and well proven operating systems to manage our finances, XERO and Mechanic Desk. These sync and give us up to date information of where we are at.
Each month we check our profit and loss statement against our projections and decide what went well and what didn’t. This helps us look at both our margins and profitability. We are at a critical stage where we have a lot of work coming in but not the margins to show for it. In the emerging stage of business we’d do anything just to be busy. Now we are carefully considering our pricing structure and even our ability to keep trading on this small site.
It has been challenging, however after a the losses of year one, Instant Auto Ltd has posted a profit in its second year which while still small represents a turnaround of over $50k. We have budgeted to increase this by a further $35 in our 2018 year. This is based on our increased turnover, tighter stock management and our reviewed pricing. While still offering a car service from $89, we have put in tighter rules around what cars qualify in this category and built better margins into bigger cars and four wheel drives. This is provided clearly in a pricing matrix.
We also believe that there is no advantage in employing cheaper less qualified staff. A trained vs untrained mechanic is $20 p/h versus $30 p/h. The difference in productivity far outweighs the saving in wages. We are increasing our capacity with another workshop bay and more staff.
We are also taking advantage of our position and will become registered motor vehicle traders soon. We can then purchase cars that customers do not want to repair, fix them and on sell. We are currently making contact to import some used cars in small numbers to compliment our operation.
Industry benchmarking is difficult when you are doing something different. The only comparable operations that use similar systems to us are in much bigger markets. I did spend a day on ‘stake out’ outside an Oil Changers® franchise in Palmerston North observing the volume of cars they serviced. This was an interesting exercise.
Other industry benchmarking is done through our associations. Being Motor Trade Assured means; as members, we receive statistical information regarding effective staff salary rates, charge out rates and volumes per staff member. This is important information however it is our firm belief that it is important to focus on our own core business and not get distracted by what everyone else in the industry is doing.
There are a number of indicators as to how we are doing in comparison to other similar businesses in our market. We now know what sales reps to lean on and find out information. Some will ‘sing like canaries’ about other workshops business while I’m very careful what I say about ours. Our waste oil collector comments on every visit how much oil we get through compared to other workshops and likewise our filter collector can’t believe how often he has to visit for the size of our operation. Three reps in July told us we are without doubt the busiest service operation in town. While this is all anecdotal it all helps to paint the picture that we are heading in the right direction. It is important for us now to concentrate on building margin into our jobs to increase profitability. To quote my business mentor Gary Pauly,
‘there is no point in being a busy fool’.