Financial Training is Vital if you are going to take control of your garage business. Most small business owners do not understand the financial element of their business.
In fact it is usually the first job that is abdicated, most small businesses first ’employee’ is the book keeper. Even if it’s friend or family member that does the ‘books’ the business owner is already one step removed from the financial reality of the business.
Setting your Prices
Every transaction in your business must be a fair exchange if you are to be successful
It does not matter if you charge too much or too little for your services if there is an imbalance in what the business or the customer perceives as a fair exchange it will have a negative impact. For example, if you don’t charge enough for diagnostics how can you afford your technicians the time test a system thoroughly?
You can’t…….so they won’t.
If you don’t charge enough you can get by for a time, but it isn’t a strategy for long term success.
If you charge too much for your services there will be an imbalance that could result in the customer feeling ripped off, or you will try and compensate by offering more and more value.
You can get away with ripping people off for a while, but it can never last.
That said increasing your prices to a point where it feels a touch uncomfortable can be a good thing.
Why?
Because it forces you to do better, to offer more value, to do more. This, in turn, delights the customer because they got more than you promised. Remember the principle of fair exchange?
Before a job can be booked in there must be an agreement of what will be done and how much will be charged for that work, including parts and consumables.
If this is agreeable with the customer and the garage a fair exchange takes place.
Contact us to find out how to set your prices using the fair exchange method.
How to calculate your Labour Rate
Based on:
- Fixed Costs
- Equipment Costs
- Training Costs
- Profit
- Efficiency
The process can now be repeated for the other services you provide, such as Air Con, Diagnostics, Wheel Alignment etc.
Most garages do not charge for their services correctly. They base their labour rate on what other garages charge, or what they ‘think’ they can get away with.
A business should calculate their labour rate based on their operational overheads. Sadly most don’t and barely cover their overheads if at all.
This Course Shows You how to Read Financial Statements
Such as Profit & Loss Statements, Turnover, Net profit & Gross Profit
We will show you
- Where you can find your fixed Costs
- What are Variable Costs
- How to Create Budgets
- How to calculate your profit %
- What your Earning Potential is
- How to estimate your current Recovery Rate or Efficiency %
Take the 10% Challenge
Once you start to understand the financial side of your business you will be able to see the impact of any changes you make.
We set the 10% challenge as a means of testing your understanding of financial management.
You simply need to:
- reduce costs by 10%
- increase your leads by 10%
- improve your conversion rate by 10%
- Up your average sales value by 10%
- Get customers to buy from you 10% more of the time
How Much Can the 10% challenge increase the bottom line?
The obvious answer is 10%, but that doesn’t take into account the power of compounding.
Take a business with a turnover of £100K
No of leads = 1,000
Conversion rate = 10%
No of sales = 100
Av. Sales value = £1000
No of sales per annum = 1
Costs = £75,000
Profit (£100,000 – £75,000) = £25,000
No of leads = 1,100
Conversion rate = 11%
No of sales = 121
Av. Sales value = £1100
No of sales per annum = 1.1
Costs = £67,500
Profit (£133,100 – £67,500) = £65,600
In the example shown the bottom line is increased by 262% by making incremental improvements of 10% across 5 areas of the business.
This can only be done if you know how you KPI metrics.