She’s the boss

Hannah Gordon tells us what is has been like becoming the boss in 2018 as she starts her own garage business

Published:  05 July, 2018

After learning the ropes and being on the tools for 14 years I decided 2018 was the year to bite the bullet and go it alone with starting a new workshop business.

For years I have been working for two or three different garages, enjoying a huge amount of variety and picking and choosing what days I work where. I have been extremely lucky with the people I have met along this incredible journey. Also, working for some real characters of the trade certainly doesn’t lead to a boring work life.

I have always worked for independent garages, the interaction you get with customers and the personal experience you are able to offer is for me what car repairs is all about. I love hearing how much people value their car, not financially but in a kind of ‘member of the family’ way and it fills me with a great sense of achievement when I can get their car back on the road in good working order.

Bright idea
It is not the obvious choice for a ‘young lady’ and I use that term in the lightest possible sense as I can hardly call myself a lady when things go wrong and the air turns blue, but that is another story for another issue. It isn’t a normal career choice but fixing cars is all I have ever enjoyed doing, it is the only thing I haven’t lost interest in and it is the only trade I ever want to be a part of.

So January 2018 came and I had the bright idea of starting up my own business in the village I grew up in. It has been nearly six months now and progress has been slow, trying to keep costs down I am distributing leaflets myself and offering incentives such as 10% off.

Best asset
A workshop business’s best asset is its reputation, and that takes time to build up. I am also finding out that being self-employed requires a million more hours than just turning up to a garage and working.
    
It is not that I am naive it’s just I am rubbish at paperwork, invoicing and doing all the other grown up things that a business needs. To say it is a massive learning curve is an understatement. Before January I didn’t have to bother with business plans and meetings with a bank manager, I didn’t have to spend hours at a computer trying to write down why I am worth investing in and what my plans for taking over the car repair world were.

Passionate
The car repair industry is something I feel hugely passionate about and I firmly believe that when starting a business you make sure it is an area you are knowledgeable in otherwise you will never strive to make it work. At the moment I feel slightly overwhelmed by paperwork and getting on the tools is always first priority but I am hugely excited about the future and what Spanner Tech Services has in the pipeline.

Related Articles

  • Financial understanding in the garage business 

    Once upon a time, conventional wisdom suggested that if there was money in the bank account at the end of the month, things were going reasonably well. Book-keeping and accounting were fine, but only for accountants. Servicing and repairing vehicles was for garage owners and technicians – people like you and me.
        That was then and now is now. In a world of declining margins, what was good enough for our predecessors will not be good enough for the competitive and ever challenging business climate you and I face today and certainly not good enough to sustain an efficient garage business in the future.
        In short, understanding your numbers – especially the key performance indicators (KPIs) that tell you at a glance just how well or not so well your business is doing – is crucial.

    Know our numbers
    Realistically without having a firm grasp where the numbers come from and what they are trying so desperately to show us, we can’t even begin to discuss our financial situation with our accountants. Why should we know our numbers?
        The demographics of most garage owners tells us something. Most are technicians first, businessmen second.  Up and down the country, the story behind most garages will involve a good technician whose core knowledge is based around repairing vehicles all of sudden, waking up to find themselves owning a garage business.
        Most don’t have the skillset needed, the business acumen, or knowledge of marketing, customer service, operational management, reception management etc. Then again, why should they? There is no qualification needed, unlike in Germany where you would have to undertake a three-year graduate programme before you can manage of own an independent garage business. The garage business, like most other service businesses ,is all about raw materials and finished goods. It’s all about commerce – the exchange of goods and services for the compensation of one kind or another; In our case revenue. It’s about creating value, adding value, and creating services and products that we can sell for more than what they cost us, in order to make a profit. Isn’t that what business is all about? Is profit something to be ashamed of? Is it a dirty word?
        As mentioned earlier, the problem with our world is most garage owners and managers lack an understanding of automotive management, especially the labour side of service, given that this is the only commodity that a garage sells, labour. Some may argue that we also sell parts, well we may do. However, we don’t have control over these purchases. These are by-products of what and how much labour we sell.
        More to the point most garage owners and managers fail to recognise the value they add to the process in terms of service, skill, competence, quality, reliability and ability to respond to customer wants, needs and expectations. What happens is that garage owners set their labour rates because it’s the going rate in the given area. The only thing we sell, our only revenue stream – call it what you want – and we decide the value of it by picking a figure from the sky.
        Our numbers come from all the costs and all the revenue associated with operating your garage business. Whether we like it or not, to be successful in our business, understanding the numbers is a good place to start. My experience tells me most of us refuse to take the time or make the effort to really understand what the numbers represent and what KPIs have the biggest impact of our garage.   

    Adapt
    What do we need to know? I believe you cannot manage a garage from underneath a vehicle in today’s increasing competitive marketplace. You have to adapt to managing the business rather the business managing you. You almost have to be emotionally involved with those numbers to be successful today. Of course, our business is all about repairing vehicles and most garage owners or managers expertise is in this area. However, it is your responsibility, not your accountant’s or book keeper’s, to monitor and manage your numbers. Having the ability to reflect the health and strength of your business at any given time or a specific period is crucial for your success.
        You can only get out of financial reporting what you put in. Your accountant will only advise you on the information you provide. Everything about your garage will depend on the quality of that information the accuracy of those numbers. The numbers are yours, the business is yours so make sure your reporting and analysis are timely and as accurate as possible.
        Your numbers and accounting are only useful if they are used as a means to an end, a catalyst to change your behaviour, your processes, your attitude in order to change the direction of your business for better financial performance in the future. Remember this: All financial data is historic – it has already happened. Time spent gathering and analysing it is massively important so you can draw the benefits of this process. I urge you to monitor your KPIs daily, weekly and monthly and everything else will take care of itself.

    Cruical
    It wasn’t really very complicated for me even in my early days, as I realised how crucial to my success to stay on top of my day to day data capture was. I made sure it was complete and relevant to what I was trying to measure, whether it was productivity and utilisation of my technicians, the labour and recovery rate, or the fact that every labour hour we sold gave us approximately. another £18 profit on parts.
        Think about how much time you spend learning and understanding and what they are trying to tell you. Determine whether or not your financial professional is helping you to understand these numbers more clearly than you do right. Start the journey right now and I can assure you, your garage business will benefit.  

  • Your profitability and how to increase it! 

    If you’re a regular reader of this publication then you may be wondering if there’s been a faux pas and why my usual technical article has migrated to the business section.  If that’s the case fear not, all’s well.   

    I figured that I’d ring the changes and let you into a secret. Many of you know my love for all things technical but I have another passion - building businesses.

  • What’s it worth to you? 

    As you will have seen elsewhere in this month’s issue of Aftermarket, Automechanika Birmingham 2018 is upon us. Don’t worry, we haven’t found a way to talk about it here as well- although since we mention it, don’t forget it’s on 5-7 June at
    the NEC.
        
    Walking around the halls during the show, looking at all the shiny equipment on display that would look so at home in your workshop, and would make such a difference to your business, have you asked yourself how are you going to pay for it?
    While some will answer by saying they will get a loan, in that you have to pay it back, ultimately your income will pay for it. For the most part, the income will arrive in the form of what customers are paying you for the work done, which will likely as not be calculated on a by-the-hour basis.

    Hour by hour
    Stating the blatantly obvious, from that hourly income you pay for the equipment, the training, relevant subscriptions, parts and consumables, staff wages and the roof over your head. On this basis the hourly rate is a pretty serious thing, and it is essential that it is calculated correctly to cover costs and maximise profitability. That’s sound reasoning.

    Why then is it often such a source of discussion? How much any particular garage charges for its services can be as controversial for other garages as it is for customers. If you charge too little for the local area you may be seen as breaking ranks and dragging everyone else down. Then again if you charge more than average and get away with it, those who lack the nerve to go so high may still not like it. You can’t win.

    Reframing the argument
    What about when you take a different path – by reframing the argument?

    Aftermarket’s Facebook page recently posted a story about Xpress Garage and Tyre, a garage based in Falmouth in Cornwall. The story came from the local Cornwall Live news site, and was promoting the garage’s services to potential customers in the area. The business was offering a ‘Ultimate car service package,’ which it sold for £60 a year. The package included an MOT test, a vehicle health check and a free puncture repair and home-start, if required. The package also covered £15 off a four-wheel alignment as well as 10% off servicing and repairs and 10% off tyres. The package was available to customers within a 10 mile radius of Falmouth.

    The post received a range of comments from Aftermarket readers at the time. Some of these focused on the idea that the garage was pricing itself too low, and took a negative view of the offer. Another way of looking at it would be that the  package itself was actually a smart piece of marketing on the part of the business, as it guaranteed an income and tied in those customers that took it up. While some might be a little sceptical about the idea of a free MOT, you could argue that the customer was actually paying for the MOT at the statutory maximum for a car of £54.85, and then paying £5.15 for access to a range of discounts. No one mentioned the labour rate in the promotion. They haven’t even got to the point where anyone has been charged for time put into a job, and the business already has £60 in the cash register.  

    Time in a bottle
    Let’s take the discussion back a step. Why are we so focused on the hourly rate anyway? Sometimes we forget this. It has been said before, but like many truisms, it’s worth being reminded of the fact. What business are you in? You think you’re in the vehicle repair trade don’t you? If that’s how you see your business, and you approach each job with this in mind, you are making a mistake every single day.
    Believe it or not you are actually in sales. Next question – what are you selling? No, it’s not car repairs, it’s not servicing, and it’s definitely not fault diagnosis. All the tooling and paraphernalia that goes along with a business, all the consumables that go in and out (in a legal and environmentally compliant manner), all the legislative hoopla you have to deal with, and all those staff if you have them, it’s all there to help you transact the essential commodity that you are marketing every morning when you open your doors.

    Time. Your time, the time that you sub-contract out and pay wages to staff for, this is the essential stuff that your business runs on. It can run on, it can run short, if you don’t get the customers through the door it will build up and your business will sink under the weight of it. That’s time.

    All the investment in equipment and everything else happens so you can sell that time. Your hourly rate needs to cover all your costs to enable this to happen. On that basis, if you would like to charge more but don’t feel you can, why is that?  

    Tension
    There is of course the tension between charging a realistic price for your time, and making it work in the more tangible context of your local geographical area. The example of the garage that attracted comment on Aftermarket’s Facebook page is a case in point. A recent survey into consumer attitudes to garages performed by Confused.com found that out of the 2,000 people spoken to as part of the survey, 30% believed they had been ripped off by a garage. Going into more detail, the survey found that on average, those motorists felt they had been overcharged by £205.

    Part of this perception may depend on how much customers believe they should be charged. This changes from region to region. Of course, for some, it’s all ‘too much,’ and it comes back to trust.

    Many of the issues around overcharging relate to the idea of ‘unnecessary work’ being performed by the highly unscrupulous dodgy garage that exists at the fringes of the industry, and often in the fevered imagination of a few ill-informed motorists. The labour part of the bill will have an impact here.

    Unfortunately, these ill-informed motorists are often your customers, and you have to take on board that their perception of a garage will be coloured by all kinds of prejudice, hard-baked by a lack of knowledge about how things work. A customer who is immediately suspicious of a garage is not going to want to hear about all the elements that go into a realistic hourly rate. Equally, with these customers, it might be difficult to charge a higher rate, but they are the minority of customers.

    Assuming you have the trust of the majority of your customers, you need to consider many factors when setting your labour rate. Many of these factors will be affected by where you are, including the cost of labour, and the rate your fellow garages are charging. Some of these rates in your area will be realistic and cover all the costs. Others will not.

    Another survey, this one from Motoreasy in 2017, looked at labour rates across the country. 6,000 businesses were included, and it found that the hourly rates varied widely. No surprises there.  The cheapest found was a Manchester  independent  charging £34 per hour, and the most expensive was a Reading franchised dealer charging £234 for the same time period. Naturally, the consumer press focused on the highest in its headlines, leaving the national franchised average of £99 and the independent average of £56 to nestle half-buried in the body copy of the story. Journalists eh? Going back to our Cornwall garage, its £60 offer was not far above the national hourly average for an independent, and considering the general downward trend of labour rate as you move away from the capital and the major urban conurbations, would be about right for the area. As we said earlier, this was charged before anyone put any hours in. In the end, you need to charge what’s realistic for your business, and attract customers that suit your offering.

    Complexity
    It’s complex issue. We will not resolve it here,  and we will doubtlessly come back to it – There will always be more surveys to show us why some businesses are charging too much, or not enough, or both at the same time. It’s worth thinking about before that next survey drops though.

    If you are attending Automechanika Birmingham with a view to checking out some new equipment, it might be worth checking out the seminars that focus on business too in order to see if you have considered all the variables and have priced yourself correctly. You can always learn a little more, and with that extra knowledge you might make more money. That’s a double win!

  • Connecting to tomorrow’s lean workshop 

    In a previous article, I had written about the fourth industrial revolution, but I suspect that this may not have been the most threatening topic that you were thinking about concerning your day-to-day workshop business – the business of diagnosing and repairing cars, using a range of workshop equipment and agreeing ‘partnership’ relationships for the technical data and replacement spare parts.

    The way that you work may have evolved over the years, mainly due to the increasing vehicle technology, but the basic principle has remained the same. You have customers who choose to come to you due to the good service and competitive pricing that you provide. However, the world of vehicle repair is changing and if you do not adapt, you will die. Unlike previous industrial revolutions, the pace of change is now much faster. So how is this going to impact the aftermarket?

    Approach
    The ‘internet of things’ (IOT) will change the approach to diagnostics, service and repair of vehicles, but also the way that the workshop equipment will be connected, the way that you handle your customers’ data and the way that you exchange data outside of the workshop, both as a consumer of data, but also as a data provider in data trading eco systems. All this will change the way that you do business. This might all sound like some science fiction concept, but this is already happening today with many vehicle manufacturers and their associated main dealer workshops. If the aftermarket does not start to develop the same approach and service offers, then it will not be able to compete.
        
    However, to understand this better, let’s start with today’s ‘classical business model’ and then see what will change. Today it all starts with your ability to directly communicate with both your customer and with their vehicle and (for the more difficult jobs once that vehicle is in the workshop) your ability to offer a competitive quotation.
        
    Once the vehicle is in your workshop, the diagnostic work or the replacement parts are identified, the parts ordered and the ‘complete repair process’ is conducted. However, there are three fundamental aspects to ensure that this process can be fulfilled – firstly, being in direct contact with the customer, secondly, being able to directly access their vehicle via the OBD plug and subsequently its data and thirdly, using that information to conduct
    the complete repair process in the workshop.

    Internet of things
    So, what is changing and how will the ‘IOT’ help to implement new and ‘lean’ business models to remain competitive? It will still all start with the ‘repair process’, but this will no longer be with the customer initially calling you or coming into the workshop with a question of ‘can you fix my car?’, but it will be through remote monitoring of the ‘thing’ – the vehicle (via OBD plug-in devices or in-vehicle telematics platforms) to conduct remote diagnostics, prognostics and predictive maintenance services. This will inform you when the vehicle needs work and should lead into being able to contact the customer and offer a competitive quotation for the work needed that ultimately should still result in the vehicle coming into the workshop.
        
    When the vehicle does arrive, you will already know the details of the vehicle and the necessary work, so can configure the workshop resources (which ramp, what workshop equipment, what technical data, what replacement parts etc.), before the vehicle arrives.
        
    You can also ensure that the various ‘external data’ that may be needed for the job is pre-arranged and can be downloaded into the specific workshop equipment which is needed as part of the repair process. This can be a ‘just in time’ download of the technical data, the diagnostic test routine, the replacement part fitment method and so on. All this can easily reduce the workshop time needed to complete the repair process by 50%.

    Captured
    This may already sound like a great move forward to be lean, more profitable and more competitive, but there is even more! You also now have new ways to use the data that you have captured. Not only will you know the faults of the specific make and model of vehicle, which in turn, you will store in your database (non-personal, machine generated data), but you will also be able to use this data to exchange or trade data with your existing suppliers or other (new) partners to reduce both your costs and theirs. Welcome to the world of data trading – and get used to it, because it will be your future.  The internet of things, means linking to the ‘thing’ (e.g. the vehicle and workshop equipment) and then handling the data created, by using it in new ways to make the whole workshop and vehicle repair process more efficient, as well as supporting new business models beyond just what you can do today in the workshop. However, let’s also take a step back and look at workshop equipment as part of ‘the internet of things’. It already starts with a new range of ‘connected’ workshop equipment that will not only be able to be remotely monitored by the equipment manufacturer to ensure better reliability, together with faster and cheaper repairs, but will also be the basis for ensuring that the technical information you require for the job ‘in hand’ is supplied not only ‘just in time’, but also charged for on a new competitive bidding basis from a range of suppliers and charged on an individual job basis. Going a stage further, you may be able to exchange data with your equipment suppliers so that they can collect ‘big data’ from all their customers and use it for their own new data trading business models and in turn, use this to offset supplying data or services to you at
    a lower cost. This may also apply with your parts suppliers to provide them with better forecasting and trend analysis.

    Data centric
    The classic business model of today that is ‘customer centric’ will change to become ‘data centric’ that creates added value to the consumer’s experience, but also to the service provider – you!

    This change of accessing the vehicle, your customer and use of the vehicle-generated data is a disruptive evolution that will drive (no pun intended) a revolution in the aftermarket. However, the key issue will be the ability to access the vehicle, its data and in-vehicle displays to offer your services when the vehicle needs work and that is likely to be a legislative issue as the vehicle manufacturers try to use their technological advantage to dominate and control tomorrow’s repair and maintenance business. It’s up to you to fight not only for your ‘right to do business’, but for your ability to evolve your current business models into those of tomorrow.

  • part two: A FINE PENSION MESS and how to avoid it  

    Pensions auto-enrolment, the government’s drive to have everyone saving towards their retirement is just over five years old and recently, this last February, completed its rollout. However, while it might be the end of the rollout as far as the government is concerned, for businesses, the process is never-ending as the obligations continue… forever.
        
    Ignoring the rules and failing to meet the obligations can lead to very painful penalties being imposed by The Pensions Regulator.

    Don’t fall foul of any changes to the rules
    The government has done a pretty good job of improving the rules as they go along, even though they may seem rather onerous at first. Nathan Long, a Senior Pension analyst at Hargreaves Lansdown, explains more about how firms can be caught out by the law.
        
    Nathan says that there “is a ruthless determination to ensure auto-enrolment remains successful and the government recently made recommendations as to future changes to the legislation.”
        
    The two key changes for employers are that staff will need to be automatically enrolled from age 18 as opposed to 22; and contributions will accrue from the first pound of earnings, whereas currently the first £5,876 can be excluded.
        
    Nathan says the changes are great for pension savers, but will impact on some sectors more heavily, especially those that employ large numbers of younger people: “These recommendations will not only mean people retiring with more income, it means they will have greater control over leaving work. In fact, someone with average earnings could increase their pension pot at retirement by over £60,000.
        
    “Increasing the reach of auto-enrolment is great for the long-term retirement prospects of the nation but adds yet further costs for businesses. The government is clearly mindful of this alongside the ongoing Brexit uncertainty and so opted for a long implementation period, with the changes not due to be rolled out until the mid-2020s.
        
    “Even so,” reckons Nathan, “it is widely recognised that 8% contributions are not enough for a comfortable retirement, with a growing consensus that contributions of 12% are more appropriate – the government has also recommended reviewing the minimum contribution levels from April 2019. Small businesses in particular should be alive to the very real risk of increased costs coming down the tracks.”
        Empirical evidence is showing larger employers driving higher levels of understanding and engagement amongst their staff by embracing workplace financial education programmes. Nathan thinks that smaller businesses may struggle to offer these services: “A possible solution to improved engagement could lie in allowing staff to be able to select where their auto-enrolment pension contributions are paid if they already have their own pension plan.” There would still be a company appointed provider for anyone that doesn’t choose, however anyone who has truly got to grips with their pension planning could continue to contribute to their preferred plan. The responsibility would then be on pension providers to engage their customers in order to retain their business.

    Nathan thinks this solution need not add more administration for employers: “In the same way that you require an employee’s bank account details, so you can pay their salary, simple details of pension provider and policy number could allow correct payment of pension contributions. The technology to enable this already exists, it simply must be adopted for this revised purpose.”

    To finish
    The key message for employers of any size is that auto-enrolment is an on-going exercise and crucially requires on-going compliance with any rule changes. First up will be the contribution hikes in 2018 and 2019, but employers need to keep their wits about them. Whilst it may seem The Pension Regulator is out to get small businesses, actually the opposite is true and its website is a great source of information for businesses of all shapes and sizes: www.thepensionsregulator.gov.uk


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