Ep 83 - Hunt Demarest | How to Actually Make Money in Auto Repair

0:00You went from making 5% to 10%. Don't beat yourself up listening to this that you're not at 36%. Most of the shops that end up failing are the ones that go from 5% to 50% because it ends up going down to 5%. All right, you don't need to kill it. You probably don't wanna grow 80%. Consistent improvement, right? 3% better every single quarter, every single month is like the kind of stuff you're shooting for.

0:24The following program features a bunch of doofuses talking about the automotive aftermarket. The stuff we or our guests might say. Do not necessarily reflect the beliefs of our peers, our sponsors, or any other associations we may have. There may be some spicy language in this show, so if you get your feelings hurt easily, you should probably just move along. So without further ado, here's your host, Mike Allen, with Confessions of a Shoplifter, presented by TechMetric.

0:52Simply the best software ever made. Okay, dude, it's day 3 of Vision 2026 here in Kansas City. You taught on Thursday, is that right? Thursday morning. Yeah. Okay. We were laughing about it earlier when we were talking because you taught a class on personal finance. Yeah. And investment strategy. Yeah. Which is absolutely not what you do. I kind of laugh about it because I think it happens a lot of like anything numbers related.

1:25Someone's like, well, you're an accountant, right? You do that. So like, can you look at my Social Security statements? Like, we don't do that whatsoever. No, but like I was telling you before, it's pretty cool because I truly just get to teach people stuff. It's my opinion, right? So I'm like, you can't argue with me, this is just what I think. But we don't really do that stuff at all for our clients, but just kind of cool to teach people some hopefully tips and tricks.

1:48Okay, random question, totally unrelated to anything that we talked about already. Where does Parmela stand on like the R&D tax credits and all those kind of things? We're all getting calls from these companies like, "Oh, I can get you $40,000," and that kind of thing. And then when I talk to my CPA, they're like, "Meh." So I'll get you the same, "Meh."

2:10I mean, it's one of those things where it is based in 100% legal tax law. Are you going to get in trouble for filing an R&D credit? No. I mean, these guys are professionals. The reason that you guys are seeing it more now is that for a while they changed the rules where it wasn't really beneficial for your industry. They extended that stuff and you guys probably receive how many calls a day?

2:31Um, we do not prepare any R&D credits for our clients just for a liability thing, right? If we are filing a return with the credit on it, is that going to look good if we did the research to justify the credit on it? So for our clients, we have a couple partners that we use, or some of them have their own R&D.

2:49They go out, get the study done, we file the returns, get the credits back. Okay, so also I think there's probably the concern of what if tax law changes and they go back and start doing audits? You don't have to defend 500 different R&D tax credits. Yeah, so like I tell people, of everything is a write-off until you get audited, right? And so I think my position for a lot of my clients is educating them on where they stand, right?

3:14So like if someone comes to me with an R&D credit and says, hey, this is a slam dunk, no one's ever going to question it, it's $100 grand back, I don't have to look in the mirror, I'm like, hey, it's legal, we're legit here, but like we're on probably this side of the spectrum. Like you could get a notice, you could have to talk to an auditor, but this is why, you know, people do this stuff, right?

3:34It's going to get hundreds of pages. Lawyers have went through this. The IRS might not like it, they might disagree, but you're most likely going to win that audit and move on. So like the audit word is intimidating and frightening, right? So if there's a listener who is thinking about seeking one of these credit programs that you've discussed, what types of questions should they be asking that firm that's cold calling them effectively or cold emailing them about how they defend audits and how they support, or, or do they leave you hanging?

4:07Yeah, I mean, I wouldn't really trust most of these guys for standing up if you were truly to get audited. Um, I'm trying to think if I've actually ever seen an R&D audit in person. Generally, when they do the R&D credit, they give you a massive packet where it's like, hey, if you get audited, here's everything on our position where we justify modify it and things like that.

4:27That R&D credit is out there for businesses like the ones that you and I work with, also massive, massive, massive organizations, right? So you gotta look at this, it's kind of like the ERTC stuff. I'm gonna guarantee you that if you got $40 grand of ERTC, no one's ever gonna call you, right? If you got $2 million, we've had a couple people get some notices and letters and stuff like that.

4:49All right, we should back up here. We just started talking 'cause that's what I do. I apologize. Introduce yourself real quick. Your firm, and I wanted to learn about a little bit about how you got to where you are in life right now from a business perspective. Cool. Uh, yeah, so my name is Hunt Demarest. I'm a CPA and partner at Parr, Melison Associates.

5:08I don't know to look at you or the camera, right? Either one, it's fine, it's all good. Um, so Parr, Melison Associates is an accounting firm and we specialize in auto repair shops. So we've been around 34 years now. I have not been there for 34 years, but I've been there almost 20 years now. Working with shops and yeah, so loving every day.

5:29Did you like— you went to school, you, uh, you get your license or certificate or what is the appropriate word? Yeah, well, CPA license. Yeah. Okay. And you're like, I need a gig. Did you know the Parmelas team prior to that? Okay. And so, I mean, in some aspects you're like, hey, was this a deliberate of like how you ended up here?

5:48Like Hunt saw himself in Kansas City, like not at all, right? Hey guys, Kari Lynn with Turnkey Marketing. If you are looking to increase cars and you're looking for the right demographic to go after, you wanna get the right people who need auto repair right now, then give us a call. We have a service called Direct Track and it utilizes AI to find people in your area who are the great demographic that you wanna go after, have raised their hand and opted in saying, I need auto repair help right now.

6:17We send them an email as soon as they open the email. We then get their physical address, follow it up with commercial ads on all their streaming services like Hulu and YouTube and ESPN, Fox News, all those different things. And then we also get their physical address and we start sending banner ads and display ads to every single device in that house.

6:39It has been incredibly effective. It has made shops seem like they're everywhere to those people who need repairs right then. And I mean, I'm telling you guys, the return on investment has been huge. So if you want to increase car count, you want to get great people in the door, give us a call or reach out to us and ask us about direct track marketing.

7:00Running a shop for 20 years teaches you a lot, like how outdated systems can make your job a lot harder than it needs to be. I used to deal with slow check-ins, clunky estimates, wasted time chasing down updates. Then I switched to TechMetric. It's an all-in-one cloud-based SMS that lets me run my shop from anywhere. Streamlines my estimating process, keeps customers in a loop with real-time updates.

7:23I'm not telling you that it was all Tekmetric, but I'm telling you that Tekmetric was a big part of it. Since I switched to Tekmetric, my average repair order 4 years ago was $293, and right now it's $916. That's not luck. It's better processes, faster workflow, speed of service that's facilitated by this technology helps me get higher and better authorizations from my customers.

7:46If you're ready for a shop management system that actually works for you, tap the link in the show notes and check out Teugmetric. You're gonna like what you see. Um, but some aspects I think I did, cuz I always knew that I wanted to work for myself. Um, I always kind of had an entrepreneurial spirit. My mom is a college professor. She is actually a CPA that doesn't do taxes.

8:05Um, but from an early age, zero interest in any of this stuff, right? Like people are always like, oh, you've always been a numbers guy. I'm like, that's kind of an insult. Like, What do you think I was doing as a kid? Like, do you think I was like an early adopter of Excel? Asking for extra math homework? Exactly. Like, just taxing friends on stuff.

8:21But no, when I went to college, I thought I wanted to be an engineer. My uncle has an engineering firm and invents stuff and does really cool stuff. And then I went to do engineering stuff and I was like, yeah, I'm not that much of a numbers guy, right? Like, that is really hard math. Yeah, that's like real college. So Kind of tried to figure out what I wanted to do.

8:41Naturally, I've always had an interest in like kind of finance, the money side of it. So ended up getting an economics degree from Penn State. And then while I was working there, a family friend that I knew, he had an accounting firm and he was like, hey, you should come work with me. And I was like, okay, cool. You know, it's kind of interesting.

8:59And the rest is history. And you spent the last 20 years learning about what a broken hot mess the automotive repair industry is. I mean, Yes and no, right? I mean, one of the cool things of like what I talk about— oh, where'd I lose it? Is it— it's inside your shirt. Did I lose it? Oh yeah, let's get up there. Good.

9:18Braxton, have fun with that shit, buddy. Should I try to clip it on the outside? Yeah, clip it on the outside just to be safe. Good, good, perfect. Could they be any smaller? Is it— blame Lucas if it doesn't work. This is— there. Yeah, that works. Perfect. Does that look ridiculous? Yeah, it looks totally stupid. Perfect. So, you know, I had a recording yesterday with Seth Thorson and Keith Perkins, and they're both on the NASDEF board of directors.

9:54And so— two guys way smarter than me, way smarter than most everyone in the room at any given room. Yes. And I assumed that we were going to talk about right to repair and information access because NASIF, right? And we ended up talking about AI the whole time. And so how does Parmelis flex to maintain efficiencies and viability as a business model with— because everywhere you go, like, oh, AI is going to replace your CPA.

10:22AI is going to replace your bookkeeper. AI is going to replace your accountant. And they're selling to us, right? And so like those same companies are selling to us of like, hey, you can replace your bookkeepers. Hey, you can replace your tax preparer. So just like you guys probably see this in the industry, like AI is a very good marketing tool and a lot of people stick that on stuff that has nothing to do with artificial intelligence, right?

10:41So I had a company, I won't say the name of it. It had AI in the name and they almost tried to act like they weren't talking about AI. So general idea was the stuff came in, you scanned it, right? You sent me all your tax documents. It's going to go down through super smart. I don't have to have my team do it.

10:56It's going to automatically say it's this, that, you know, like it works on 80% of stuff and then, you know, 20% goes and whatever. So long story short, it turns out it was just text recognition and the stuff that it didn't automatically figure out, some person overseas was just manually reviewing this. And so this was 2 months ago with a pretty popular AI thing in the accounting and tax world that has really no sort of smart learning features at all.

11:22Wow. I was just talking to someone yesterday about this of like, hey, let's be real. Like, my job is not rocket science. Like, I'm not going to sit there and be like, how could a computer ever replace me typing into a computer? Like, it's the silliest thing. But we still don't have AI that can automatically download and reconcile a credit card in QuickBooks.

11:40Like, that's the lowest. It should be able to do that right now. All the data's in there. Is QuickBooks' new AI assistant the worst thing that has ever happened? Because it seems like it's freaking terrible. I mean, unless Intuit wants to sponsor my podcast, I would say that most things that they have pushed out are the worst thing in the world. Um, they keep on pushing out updates that no one asked for.

12:01They're pushing out AI that doesn't actually work. And so like, this is kind of a nerdy one, but like, I have to test this stuff out. So I'm on my client's books, and every client I get into also looks different, right? So you complain that you don't like QuickBooks does that. The shop that's a mile down the road has a completely different QuickBooks file for some reason.

12:18But I just typed in there, I said, what is their current ratio? And it calculated, it took like 3 and a half minutes. Like it gave me the answer and it gave me a whole paragraph on it, but I'm like, yeah, we had long since moved on. But, um, that's a good question to lead into one of the other things I want to talk about.

12:33I want to talk about why it's important for shop owners to understand, you know, kind of the three basic tenet financial statements. But explain quick and current ratio, what they are and why we should know what they are. Quick and current ratio, you really put me on the spot here. Um, so the general idea on it is, I think you're talking about, is your money tied up or do you actually have your cash, right?

12:54And so a lot of people look at current assets on it and they say, hey, I'm doing really well. Uh, especially my big tire guys or my big fleet guys get really, really burned on this, right? If you look at this, they have $1 million in current assets, right? And even some of these guys have a very good ratio. They don't have a ton of liabilities.

13:11But they are having cash flow nightmares because that million dollars in current assets is all tied up in AR inventory. So AR is a thing that we either have a massive problem with on a client or they don't even know what I'm talking about. Right? Like that's where this— Why would I ever let somebody carry credit with me? Or they've got people that are 90 days plus.

13:28A lot of the fleet guys are even going that way. I have a lot of my fleet guys that just say, hey, I'm not a finance company. They are. And they're just selling off their fleet work or their fleet financing to somebody else. Someone else. Yeah, I mean, I'm— I think I'm relatively good at operating an automotive repair shop. I'm not good at being a bank.

13:45Yeah. So, and, uh, when you look at it this way, especially someone like— you see this a lot where people are negotiable on their terms as they're trying to grow their business, right? Because if you really had enough work, you're going to be like, buy here, pay here, you know, charge a premium. Everyone is, you know, a cash buyer, right? Yeah. Um, but when you're growing your business, you're like, hey, this guy's going to, you know, maybe string me out, whatever, but he's good for it.

14:06Those people are probably operating like a 5 to 10% margin. And the scary part is, is you have a probably 5 to 10% chance that person doesn't pay you. So you do 10 jobs, the one guy burns you, you just lost a profit on all that stuff. Yeah, for sure. Um, all right, so the— from my perspective, and, um, one of my mentors was pointing out to me that I've got a big gap in, in my regular business management practices.

14:37I always look at my P&L closely every month. Yep. And I've always felt like that was the most important document to look at every month. And I checked the balance sheet in passing, and I've never looked at my cash flow statement to speak of. And I'm in a huge cash flow crunch right now for a lot of reasons that are all ultimately my responsibility and, and my fault.

14:58Um, but he's like, Mike, you need to take your January 1st or whatever your date range is. So it's early March now. So we're gonna say your February 1st balance sheet and your February 28th balance sheet, put them here and here, and the cash flow statement's in the middle, and you look and see where the cash flows from one to the other.

15:16What's the benefit of digging into your cash flow statement on a regular basis? Because that's really what you guys understand, right? So like when I send a client financials and they say, Hunt, you're a moron, there's no way I made $30,000. What they're saying is, I don't have $30,000 in my bank account, right? And so yes, we need to understand the profit and loss because in the long run on it, right, the numbers work out, the AR gets collected, the inventory goes up, the inventory goes down, but the cash flow is what you guys live and die off of.

15:45Um, one of the biggest things that shocked me about this industry, and still one that I see to this day, is the volatility of cash flow. Most other industries are not like this. Most other industries, if they had this much volatility everyone would be out of business. Really? If you look at contractors, they're similar on this, and those guys are always broke, right?

16:04And you look at a repair shop, you're paying your NAPA bill one time a month, you're paying your sales tax one time a month, right? Some of these guys are paying payroll two times a month, right? Some of them that have fleet are getting paid once a month from them. Really, really tricky businesses. But even a really, really good business that says like, hey, I made $120,000 a year last year, It's not like they're profitable every single month, right?

16:27Most of my clients are probably profitable 8 out of the 12 months out of the year. The good ones are profitable 12 months out of 12 months. Yeah. Do you think that there's a case to be made for paying vendors weekly? I mean, I know guys that pay vendors daily, right? They don't carry any balances just to manage cash flow like that.

16:48Yeah, we gotta be a little bit careful on it, right? Because if you got them on the auto swipe, they will auto swipe and you have to be overseeing. Seen that, right? Like, I don't know how much we want to go into that, but right, inspect what you expect on this. Make sure you're getting charged for your parts at your prices. I think everyone has enough situations where they've seen that.

17:06But yeah, for a lot of people, right, don't let them do an end-of-month statement. You know, say, hey, give me a weekly. Maybe you chip away at it. Even a lot of guys I have that they just put it all on a credit card and they just are constantly paying money at that credit card. So yeah, you can kind of change that cash flow But sometimes people get spoiled with it and try to push stuff ahead and then they end up getting burned.

17:27So you've had 20 years of looking at the train wreck that is automotive financials. Um, the good, the bad, everything. Are you seeing new or new trends or new patterns that you haven't seen before? Uh, and if so, what, what are you noticing? Yeah, so I started— I graduated high school in 2006, so I started working part-time, par mellis, in 2007 or So some stuff is exactly the same, right?

17:54If you look at the financials like a little bit farther back, these are the exact same thing, right? Parts labor mix is very similar. Shop supply stuff. So in that aspect of it, you sell parts and labor, you do it well, you're going to make a lot of money. That has not changed whatsoever. The scale has, right? Like the magnitude of like how much I had people selling for, the size of what kind of a normal person can have in a shop.

18:19The kind of margins that some people are making. Yeah, absolutely. Like the extremes have really become extreme where in the past most people were really right here. What's up guys? I was just coming to talk to you about one of my favorite pieces of software that we use in line with TechMetric, our point of sale system platform that we're using, and that is Detect Auto.

18:42And you've heard me talk about Detect Auto for almost a year at this point. My team loves it. I enjoy it. It makes life easier. And I just want to talk to you about one of those features and that is as just their maintenance tool. If you know how time-consuming and tiring it can be to go back and search history one by one by one by one to get a picture of a vehicle service history before you make your maintenance recommendations, this is gonna save an enormous amount of time.

19:05In 30 seconds or less, it's checking CARFAX service history, it's checking OEM service interval recommendations, and it's checking your own internal customized service interval recommendations, and it combines all that information to give you a picture of the maintenance that has been missed or is not known. On that vehicle and adds those recommendations automatically to your inspection process. With just a couple clicks of buttons, that can be added also directly into your repair order and your estimate.

19:30I think it's a great tool. It's a great time saver. I love it, and I think you will too. You should give it a shot. If you want to find out more, check out the link to Detect Auto in our show notes. Right. They all sold for a similar multiple. There was kind of a max potential of what you could make. There was kind of a max potential of what people are doing per bay.

19:54If you would have told me back in 2007 that some of my clients were doing $3 million out of like 1.5 or 2 bays, you're like, it's just not possible, right? Like it's physically not possible. But I think the highest labor rate we have right now is $386 for one of our shops, which like you said, is just absolutely absurd. That's crazy.

20:13Yeah. Are they on the island in Long Island? I mean, where are they? California. Wow, you could have guessed that. I'm gonna go Silicon Valley, San Francisco, somewhere around there. Yeah, yeah. So, um, second highest is somewhere in Texas though. I will butcher it if I say I know it's in Texas, but you're like, oh, isn't that by there? Um, but yeah, he's like mid-300s general repair.

20:34General repair, mid-300s? Yeah. Holy shitballs. Just to make everyone feel better though, I think you've seen the benchmark report that we do on this. So we take all of our clients' data, benchmark, all right, how much these clients making, um, who's profitable, who's productive, what's your labor rate, where are you? There's zero relationship between our client's labor rate and profit. Yeah, like there was— like you would think, I was like, there has to be something of like, if you're selling this thing for $350, like it has to be profitable.

21:03But those places are at super high cost of living, right? Really hard to find guys. You can find guys, but you got to pay them a lot of money. So it's like all economies of scale. Yeah. Yeah. I've always been told that the gold standard target for net profit is 20 points. Yeah. Why is it 20 points? I mean, that's what I use too, right?

21:24So I'll agree with that one. So the 20 points, where it comes from for me is the general target is overhead should be 30% of your sales, gross profit at 50%. 20% is just the difference between your gross profit and overhead. Yeah.. And so a lot of people come back and they like say, well, hey, I want my GP to be this.

21:41A service advisor is not a cost of goods sold, it's an expense. It all comes down to that 20 though, right? Of like, well, hey, your GP just has to be 20% higher or 20 points higher than your overhead percentage on it. So you think that GP at 50 points is, is the right target? Well, it's all relative, right? Because it depends on what's that GP number, right?

22:00If that's GP at 50% with, you know, just parts or something like that, it's probably a different story than that's all of your labor including, you know, 5 relatives that don't actually work there. Yeah, well, you see some of that, right? Well, and that's, I think, that the biggest thing on it is like, hey, if you're beating yourself up and you're like, I'm not making 20% net income, the last 5 guys that did that, they were making it and they're just running their personal life down through there.

22:23Yeah, right, which is good and bad, right? Um, if you don't have a good understanding of your financials, it's tricky because you're adding variables to this and you're like I said, beating yourself up for being a bad business owner, and you're probably being a decent tax planner here by leveraging some of these benefits. But we measured a little bit differently— owner compensation plus net income— because that's a big variable.

22:44If I have a shop that the owner takes $10 grand in wages, right, and another one that takes $200 grand in wages, same bottom line, I can't look at those the same. Yeah. So the highest percentage that we had last year is a shop He's going to do probably $2.4 million. 36% ended up in his pocket. Yeah, that's awesome. That's amazing. And so like, that's the big number I look at, like, for my top shops.

23:06Does Homie give benefits to his employees? Yes. Okay. Really good. Yeah. So like, of my top shops, of the guys printing money, most all of those guys are working pretty hard for it. Not— they're not working 3,000 hours, but they're in there with the guys and they're treating these guys really well. They're almost all at like 115 to 120% productivity. Only one thing was ever directly related to profit that we've been able to like actually analyze, and productivity.

23:32If you're productive, you're making money. If you're not productive— How do you define productivity? So productivity, the way we do it is we have some of the numbers from the Shop Management System. Not all of our clients are on something that have it. And so generally we'll back into it. We'll say, all right, how many technicians do you have? What's your labor rate on it?

23:48And be able to divide it out based on their labor sales. So we're just going, hey, what was your labor sales? How many hours did you sell over 40 hours? We're even giving you guys some benefit of the doubt because some guys are there for 50, 60 hours. But generally we're taking it on how many hours did you sell at the street rate that you want divided by 40.

24:09So, okay, I had to ask that question because every guru— I think you were going for that one, right? It's like, how many hours did you sell? So mine's a little bit different because I will, in this example, will ignore effective. Right? And so if you come to me and you're like, "Hunt, I sold 40 hours for a total of $200," I said, "Mike, you sold 1 hour for this exercise."

24:30Yeah. Like, you cannot ignore effective labor rate. You are gonna end up at the absolute wrong decision. But from a benchmarking perspective, it's the easiest way to do it. I gotcha. Um, across your, across your clients, what's the average net profit? Average net profit. So I think when we did it last year, again, net profit plus owner income was like 19.2 or something like that.

24:54What percentage of— I mean, this is anecdotal because you don't have the numbers in front of you. What percentage would you sit here and calculate? Do you think would be over 10 points net? So again, we got to be careful. You have outliers that drag it down. You have outliers that drag it up. And especially, I think that if we're saying strip these things down of what they're really doing, over 10% net income, that's probably a pretty low threshold.

25:19I would say 95%. That's awesome. Yeah, good. Because, you know, the number that always sticks in my mind that I've heard Lucas Parrott over the years is like the average across the industry is like 6%. It's really low. Yeah, yeah. But they're going off of tax returns, right? Your net income from, you know, I always tell this, guys, right? Like, look, September, October, November, all of a sudden after December it's like been a horrific month, right?

25:41And not always due to Christmas bonuses or whatever it is. So Yeah, you got to be careful on some of these public surveys because they're going off of public data, which is just a tax return, which, you know, when you sell your business, you're not saying, hey, just look at my tax return, right? Yeah, I'm selling it for exactly what I said on here, right?

25:58There's usually a slight difference. That's a good point. Good point. Cool. So if one of our listeners is considering, you know, going away from doing their own books or, or looking for a new CPA, Yeah. What is it about Parmelis that, that makes it the go-to option in your mind? I think we just have the unique luxury of we've seen this, like a lot of the stuff I talk about, like I can't even really take credit for because I've learned from other shop owners and seeing this.

26:26And so like when someone comes and says, well, hey, can you help me with my financials? If you don't know what a good shop's financials look like, then how can you get in beyond like the very basic of like, hey, I heard online that the ratio should be this. So being able to kind of get beyond just a surface on, hey, let's make sure you have accurate financials, but let's make sure that this is set up in a way that you can compare this to your shop management system.

26:51Right? When you start talking stuff like that, most people are like, my accountant's not looking at Tekmetric, doesn't even know what it is or why I need to bridge the gap between the two. Because I think for most people, they don't have a very good financial understanding because they see Tekmetric, they see Shopware, whatever, and then their financials, and they don't really get it.

27:10And a lot of times, if you're not doing this stuff correctly, if you're not accruing it, if you're not, you know, putting in the receivables, then it is two different stories. And so kind of painting a picture of like, hey, this is what you're doing in real life, or this is a good month, this is what it looks like, and here are the financials set up on it.

27:25I think it gives them a ton of clarity. Okay, you do a lot of tax advice also, right? Yep, tax planning advice. So I'm— I think in terms of like my inner circle of advisors that I should have that should know each other and have the ability to communicate. There's a financial advisor, right? There's the business attorney, there's CPA and tax advice, uh, there's probably an estate planning attorney, right?

27:49Um, who else do you think needs to be in, in that? I mean, I think that's a business coach. Yeah, I mean, I would say 90% of our shops have a business coach on it, right? There's different areas like you could go try to figure out how to do this all yourself. I, like I say time and time again, my job is not that hard.

28:07You could do your own taxes, you could do your own books, you could do your own everything, right? But you're going to choose to do other things that are more profitable use of your time. You're buying time. Yeah, exactly. So, but rely on those professionals. The worst thing that I have is people that have that circle, they have those people to go to and they end up asking ChatGPT for this, right?

28:25Or I always get the, well, my brother-in-law said I could do this. Right? Like, if you have a question, if you think that's the right idea, if you think it's not the right idea, call your lawyer, call your accountant, and get the answer before you do it. Yeah, my guy sometimes fusses at me because I call him to tell him that I did something.

28:42Exactly. That's all fun calls. Well, Hunt, uh, you're either going to be really happy with me or really mad with me. I'm like, let's hear it, right? Um, as the business has grown and evolved, and from the outside looking in, it feels like it's grown a lot in the last several years. How many clients are you personally working with on a day-to-day basis versus are you managing the team?

29:02Yeah, I'm managing the team. So I have a handful of clients that I still work with. Most of my clients that are like kind of my pet projects I've been working with for 15 or 20 years. So like, if you sign up with me now, am I going to be doing your bookkeeping? No. Do I still do bookkeeping for a couple shops and used car dealers?

29:18Like, yeah, don't get me started. I probably shouldn't be doing it. Um, grudgingly, you need to pass them off. Yes and no, right? Because I think it's super important that if you If you wanna like guide your business, if you wanna be able to guide shop owners, you can't get too far removed from it, right? I think that we've all seen people trying to give advice that get too far away from what they're actually doing, and you're like, well, how can you help people if you don't really know what people are struggling with and stuff like that?

29:42So am I out here working 100 hours a week? Like, believe me, no, I'm absolutely not, right? I always joke that I'm a podcaster and like a telemarketer, 'cause I just talk on the phone all day. But really, yeah. All my clients have access to me, right? My email's really easy to guess. It's hunt@parmelas.com, right? I have 100% reply ratio, but mostly that, right?

30:02I'm not gonna do your tax return, but happy to go down through it, do tax planning with them, you know, reviews, succession planning and stuff like that. Very cool. Very cool. Okay, let's call it what it is. If you're gonna step away from the shop, it better be worth it, period. Tectonic 2026 is designed for that reality. Role-based sessions, hands-on workshops, and conversations with people who actually understand what it takes to keep a shop profitable and a team sane.

30:27And I like that it doesn't pretend we all need the same thing. Owners, advisors, and technicians don't have the same headaches, so you're not wasting time sitting through sessions that don't apply to your day-to-day life. You should leave with a clearer idea of what to fix first, what to tighten up, and importantly, what you should stop wasting time on. Presented by TechMetric, Tectonic is happening April 9th through 11th in Houston, Texas.

30:49Tickets are on sale now, and my listeners get $500 off standard pricing. With code Confessions500. Go to techmetric.com/tektonic. That's T-E-K-T-O-N-I-C. Or tap the link in the show notes for more. All right. So the whole concept of this podcast is talking about disasters or mistakes or that kind of stuff. Yeah. And, you know, learning from those mistakes and sharing them with other people so that they don't make that mistake and they can make their own new interesting mistakes.

31:18What are some of the most common mistakes that you're seeing from an accounting perspective. Common mistakes? I thought you were going to make me throw myself under the bus and say, all right, what is your biggest mistake you've made on a shop? What is your biggest mistake that you've made on a shop? And who is the shop? Name the shop, right? Look in the camera and tell them what you did.

31:36I thought this was like one of those hidden camera, and here he is to talk about that. Most common mistake is that people are overthinking this stuff, right? Like, oh my God, I can't do this. Speaking of Keith Perkins, I was just over there at their booth yesterday. I'm like, it's so funny that what I do is put on a pedestal, right?

31:54And they're over there with the lab scope and all stuff like this. I'm like, I could teach every single one of your technicians to do their own tax return by the end of the day. You could train my team for a year and most of them would never be able to balance a set of tires. So like, it's not that hard. Look at this stuff and also like be reasonable with your expectations.

32:13Right? Like, you're struggling, you're just starting to get into business, right? You went from making 5% to 10%. Don't beat yourself up listening to this that you're not at 36%. Most of the shops that end up failing are the ones that go from 5% to 50% because it ends up going down to 5%, right? You don't need to kill it. You probably don't want to grow 80%.

32:33Consistent improvement, right? 3% better every single quarter, every single month is like the kind of stuff you're shooting for. That's definitely not what the gurus are in there. We're gonna double— we're gonna double your business in 3 months. Hey, we've all had those years, right? We've had years where we've grown a ton. We have a certain amount of clients that we get on a monthly basis.

32:51We won't go above it, um, because I think a lot of shops have seen that if you take in a ton of people, if you take in everyone on it, then you're going to kill your client base and you're going to deliver a product that is not really what you're meant to do. Quality collapses for sure. Absolutely. Well, cool. So your biggest mistake?

33:09My biggest mistake? Well, maybe right now I like always joke about this, but currently we have two audits. One of them is mine with the state of Maryland and another one is one of my clients, but we're going to win, right? Warning, don't audit a CPA, but it's fine. Biggest mistake audit, I actually am in a bad investment that the SEC and FBI is involved in.

33:29So I will share this one. I've shared it on the podcast before, but I think it's a word of caution. We were joking about crypto before, right? But it goes back to, if you don't understand it, probably don't invest in it. And if it seems good— too good to be true, it probably is. Um, my client— shout out to my clients— you guys always bring me creative investments because, again, he's a numbers guy, right?

33:49Yeah. Um, across the board I've seen it, right? Geothermal stuff and foreign countries that we're invested in— nuts. But my client came to me with one. It was a 10% quarterly return, right? Supposedly was a bridge loan on real estate down south. It was in the Georgia area. You're from that area. So like all of the boxes kind of checked it. Like, I'm not an idiot.

34:09I did some research, but I also realized like, hey, if they're paying 40%, right, like we're flying really close to the sun, but it's 40%. Um, so I put $25,000 into it, right? Was in it for about 18 months. So almost had doubled my money, right, based on the statements and stuff like that. And then I got an email from the FBI, and then all this stuff came out.

34:30So long story short, I had clients— my clients were in this for a lot more. I don't even know if I want to say how much they were in it, but they had some serious exposure on this. The guy got around $390 million from people. Um, yeah, massive. Pretty impressive. Like, when you see stuff like that, you're like, if you would have just put that to good, like, you could have done some really awesome things.

34:52Um, but as a word of caution, like, look at this, guys. Like, I'm a CPA, I'm looking at this, it tricked me. Be careful. Most things are paying, like you said, what, 6, 8, 10%? If someone is paying you triple of what they need to to get you to invest money on, it's probably too good to be true. So there's a reason that there's not— it happens to all of us, right?

35:10But don't be embarrassed. Like, share this, right? If stuff like this happens, you get embezzled, fraud, like, it happens. But hopefully sharing it, like, avoids it from happening to someone else. Okay, super. Yeah. Um, what else, man? What else? I mean, I think that the biggest thing right now that shifted in the last couple years is private equity. Um, they're here, they're buying, they're buying most of our shops that sell right now.

35:37Um, in the last multiples, more than the locals can pay, for sure. Yeah, I mean, it's crazy. I think that there is probably some markets where there is no market other than private equity because they set the standard. There's a lot of use cases where it's like, hey, me as an individual can never justify the price that you're paying based on what you guys are going to do, or the back-end rebates, or the tire volume and stuff like that.

36:00So in one aspect, you know, I think probably pretty bad, right? We've all seen private equity in other spaces. They generally don't come in and improve the experience for customers and things like that. But from the percentage of 40-year-old people that I have retiring, like, that's up infinite because, like, that didn't exist. Yeah, average shop owner retiring for me when I first started doing this was, I don't know, 98, right?

36:25Like, sadly, like, a lot of people were in this for a long time. It's hard to exit, even to sell. Like, there wasn't that many buyers. Average age in the last 2 weeks is probably like 48. Like, just really crazy stuff. Wow. And getting really good money. Where does this end? Where does it go from here? I No idea. You think there will be a tipping point where the private money has saturated enough of the major markets that they no longer want more shops in the markets, they just say, "We're just going to grind you down."

36:55There was like a time there when interest rates got really high that they had got a good bid on it, and that was the only thing that really slowed these things down. For the most part, for like the last 6 to 8 months, they've been almost hotter than they ever have been. Personally, I think that there is a couple that are close to probably exiting, right?

37:13Most of these guys wanna stay in 5 years. They're not here to operate shops. They're here to buy it and then flip that investment. But I just don't get what the math is on there, right? And like I— Is it next level roll-up? Is it gonna be— And that's where I don't get it. And when you talk to some of these guys, these are brilliant guys, right?

37:30They understand a lot of it. So I'm like, hey, I'm sure that there's something that I'm missing. But they also don't really see the intricacies all the time. Right. A lot of times they'll have direct parallels between the collision industry and the repair, which in some aspects there is, right. Direct comparisons between a diesel shop and a high-volume tire shop. And again, like we're selling parts and labor.

37:51But so have they completely missed it and they've just squandered $300, $500 million? No, probably not. But we are absolutely in a tipping point. I would say in the next year to 18 months, some of these guys, one of these guys, a couple are going to exit. And if that goes well, we could see a gold rush on it for the near future.

38:09And if that goes poorly, it could be really weird, right? Well, I think so. What I'm hearing is if you're in that, you know, late 40s into 50s space and you're thinking about maybe it's time to exit— someone yelled at me about this the other day because they were like, I don't want my clients hearing this and fire me because you can't pay a subscription if you're retiring.

38:31So here's my spiel on private equity is if you have an intended use case for where your business is going to go, right, little Johnny's going to take it and you're dead set on doing that, do not answer the email, do not pick up the phone call. It will probably screw up that deal. They will pay you double, triple what little Johnny ever could justify on that.

38:50So like, hey, I respect it. I have a good bit of clients that are in the anti-PE world right now just to try and keep third, fourth generation multilocation businesses going on. The other flip side of it though is like, hey, if you're burnt out, if you're done, you want to get out on it, it's probably a pretty good time. When we first saw these guys come into the space, like kind of COVID right, right after that, right before that, I think they were only looking at multilocation on it.

39:16If you have $800 grand in a strip mall, are they going to buy you? Probably not, right? They like freestanding on it. But I think the smallest one we had sold was $1.5 million in sales, right? Really? Yeah. A lot of these guys are doing a hub and spoke model, right? So they're saying, hey, I will buy one big conglomerate. Once I get that one, I will buy a bunch of single ones around it.

39:37Some of these guys, there's another one that has like 100 locations, but it's like spread across 25 or 30 states. So it's like 3 here, 4 here, all independently branded. Yeah, they just maintain the brand that they bought. Some of these guys are looking because they just want to sell tires to your customers. Right. So like we're almost not even sending a profit and loss statement because they don't even care about the profitability.

39:58They say, how many cars, how many repair orders are you touching? Well, Michelin will give us, okay, we'll pay this much money because our back-end rebates will be this. Like from a numbers side, it's pretty cool for me because I do valuations, right? So I'm accredited in business valuation. And when my clients call and say, hey, I need a valuation. Cool, let's do it.

40:16Right. I got these private equity guys. I'm like, well, That is $0 sale for me because I'm like, we're not doing it, guys. Right? I'll negotiate. I'll help you set this up. I'll help you phrase this. They are going to set the market on it. We are never going to calculate this. Right? Why are you going to pay me $5,000 to put a number on paper that is 100% accurate and true and probably really good for a key employee and probably half or a third of what these guys are about to offer you in 10 minutes?

40:40Yeah. Well, sounds like, you know, something that people should be considering. I can see the wheels turning. Well, I mean, I— They've been calling you. If you have more than one shop, they are calling you. I get calls in the emails every day. And if they're not calling you, check your phone because that means customers can't get a hold of you. Yeah, you know, I think about it, but I don't know what I would do next, man.

41:02Yeah, that's a big thing, right? You're young. It's like, hey, you've created a business. You obviously have passion for this. It's like, okay, and then what are you going to do? Sit around and talk crap on the internet all day? I mean, some people would argue that's what I do already, right? So, uh, cool. Well, thanks for coming on, man. I really appreciate it.

41:17Yeah, appreciate you having me. Thanks for listening to Confessions of a Shop Owner, where we lay it all out, the good, the bad, and sometimes the super messed up. I'm your host, Mike Allen, here to remind you that even the pros screw it up sometimes. So why not laugh a little bit, learn a little bit, and maybe have another drink? You got a confession of your own or a topic you'd like me to cover, or do you just want to let me know what an idiot I am?

41:37Email mike@confessionsofashopowner.com or call and leave a message. The number is 704- or confess. That's 704-266-3377. If you enjoyed this episode, be sure to like, subscribe, or follow. Join us on this crazy journey that is shop ownership. I'll see you on the next episode. You know what I said? Just— you know what I said? All right guys, AI class! Learn how to use AI so that you can make it your bitch and you don't become its bitch.

42:38Saturday, June 13th, Seth Thorson's teaching a full-day class in Raleigh, North Carolina. Tap the link in the show notes or scan the QR code on your screen to learn more. It's going to be awesome.