Five Minute Focus

Handling the dreaded “Can you do any better on price?” Question….

Every service writer wants to do a great job and develop customer relationships, so they fear the question, “can you do a better price?”…

Let’s breakdown what this question really means, either:

  1. The customer can’t afford your solution
  2. The customer doesn’t see value for the money and want a better deal
  3. The customer has a psychological need to win by negotiating

Thinking about this on a deeper level

  1. The individual’s affordability is not YOUR responsibility. If what you offer is of value and you are asking for a fair price, that others are prepared to pay, it is a moral issue if you sell to someone at a lower price just because they can’t afford it.
  2. If you’re offering a valuable service, you have a responsibility to stay in business and deliver that value – that means you must get the maximum fair price for what you do. Revenues keep your shop in business.
  3. The majority of your shops’ efforts and resources should be put towards the best clients who will make the greatest use of your value – these clients usually aren’t the ones asking you to do a better price, they’re more interested in value.

When a customer asks you if you can “do better on price”, what if you said “I know the value of our exceptional technicians and the price we are asking is really fair. Your question is also important, do you mind me asking, is this about affordability, or is it that it doesn’t make sense to you yet from a return on investment perspective?”

This question isn’t something they’ll be expecting and they’ll have to think a little more to engage in further conversation with you.

The point is, many salespeople are fearful of losing the sale that they don’t ask any clarifying questions when customers challenge the price.

At least having the customer discuss the real issue gives the service writer the opportunity to find a solution:

  • Such as offering available financing if cash is tight at the moment but they have to travel out of town in winter conditions next week or
  • The price point is too high for their comfort level/affordability; this gives the service writer the option to investigate more affordable choices or recommendations

Ultimately your team must protect the shops’ profit margins, but they need the figurative “tools” to do this, and this is a matter of communication on a regular basis to share these approaches.

Was this helpful? Do you discuss sales techniques and handling objections with your service writers?

Want to know if we can help you attain 20% net profit and work fewer hours in your business?

Schedule a call with Milene

Every Customer Is Special

 If you treat customers special, they become special customers.

For every small service, such as oil changes or changing from summers to winters, you have an opportunity to develop a new long term customer relationship.

Ensure that your team and management speak highly of every customer opportunity, don’t speak negatively about a type of job or customer as “oh that’s just an oil change”, ensure you’re highlighting the opportunity of every individual who walks through the door.

With each customer interaction your team has a chance to be a friendly face who eagerly takes care of the customer’s needs and demonstrate that your shop is a valuable resource of information about the proper maintenance and present needs of their vehicle.

Let us look at the basic oil change as a series of opportunities:

  1. Provide 3 or more levels of oil change options
  2. Have posters and counter cards that display the various types of oil changes and their pricing
  3. Ensure service writers speak to the upgraded benefits of the premium options such as:
    • high-grade oil, for a driver with a high-mileage vehicle
  • discuss the benefits of the additives and conditions that help shore up seals, which deteriorate over time.
  • The fact that a. above reduces oil consumption and leaks
  • Reduction in engine wear
  • Better performance, synthetic oil
    • Provides better engine lubrication, especially in temperature extremes
    • Improves fuel economy and reduced engine wear

Taking the time to sell the value of the up-graded options may be all it takes for them to upgrade to your premium service, they won’t mind paying more because they understand the value they’re getting for the increased spend.

Just as your service writers position the shop as a tire professional able to explain the features and benefits of particular tires, they should be just as dedicated to becoming an oil service professional.

When customers recognize your knowledge in this area, they’ll develop trust in your business and your shops ability to service their needs.

Recognizing the professionalism in your team, combined with a positive experience, will pave the way to a loyalty this customer will develop with your shop.

You want your shop to be the first place they call when they have an issue with their vehicle, so be memorable.

Next time a customer reaches out to your shop about an oil change, make sure you have a team of service writers eager to great them and inform them about the options and services you offer.

Want to know if we can help you attain 20% net profit? schedule a call with Milene

Calculating your ideal Labour Rate

I just finished a Profit Maximizing webinar with a group of shop owners.
Some great questions came up and I want to share one of my recommendations with you.
The question was “how do I determine what to set my labour rate at?”.
A profitable shop typically pay their technicians 25 – 30% of their shop labour rate; the other 75% to 70% belongs to the shop.
Here’s how to reverse that into a labour hour rate.

Method 1
Calculate what you pay your technicians on average, loaded (that means including payroll taxes).
Let’s say it’s $35/hour
Take the Hourly Rate of $35 and divide by 25% = $35/25% = you’d get a rate of $140.
Repeat this process but try the 30% end of the range = $35/30% = $117
Now you have a range to work within that relates to “industry” approximations.
This is a great rule of thumb, but because shops might have very different fixed expenses, I like to do this using a shops actual financial data.

Method 2 (caution you should ensure your financials are accurate)
Taking into consideration your shops actual expenses and your individual expectations for net profitability (lets use my target 20% from champion level aftermarket shops).
Using the following figures from my benchmarks document (recommending 1/3 of each tires to labour to parts sales):

Total expenses (including shop labour)

$676,250

Total net profit (after owner wage)

$248,750

Add back dividends (if you withdrew dividends)

$Dividends

Total expenses & net profit & dividends

$925,000

Divide by portion of fixed expenses that are covered by labour sales (in my case it’s 1/3)

/3

Divide by estimated weeks open per year

/48

Divided by estimated labour hours per week (9hrs x 6 days per week = 54 hrs/week)

/54

Minimum required effective hourly rate =

$119

I like method 2 because it is based on the real effective rate required for the shop to attain the “Maximum Profit” benchmarks I promise to my shop owners.
Was this helpful? Do you use one of these methods to calculate your shop rates?

Want to know if we can help you attain 20% net profit? schedule a call with Milene

WORK LESS IN YOUR BUSINESS AND FOCUS ON WORKING ON YOUR BUSINESS.

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