Ep 97 - Tektonic 2026 Coaches Panel | Flat Rate, Technician Shortage, Performance Based Pay

0:00We are an undervalued, undercharging industry because there are no standards. Anybody can open their garage and bring cars to their house and charge $60 an hour, and there's no enforcement, there's no rules, there's no nothing. So Cecil, what I'm hearing you say is we need government regulation. Oh, bull— That is the last thing we need. The following recording contains scenes and commentary that some viewers may find unsettling.

0:30Specifically images, opinions, and unnecessarily long-winded responses from industry professionals who were given a microphone. Also, Mike Allen is in this video. Viewer discretion is advised. All right, guys, I, uh, I'm going to jump right into it. So we're in a room with mostly owners. We've got some technicians, we've got some service advisors, we've got other personnel that support our industry, but it's mostly owners.

0:57And the conversation that will make us roll our eyes the most quickly is complaining about flat rate, right? But here's the reality of the situation. As we face this technician shortage that we've been talking about for 3 or 4 years, it is the number one conversation in all the technician forums, in all the technician discussions. So I wanna know, is flat rate a cornerstone of our industry and the perfect incentive?

1:25Or is it the primary cause of the problem that we have with a technician shortage in the industry? Well, it's one of those things that, uh, you take a really good technician, one that loves to produce, one that's good and effective at his job, and you put him into something where he's gonna be pigeonholed and can't make more money. I think you're gonna hurt the industry in that way too.

1:46Think about a good high-performing tech. Once again, they want to go be able to go and produce and be good at what they do. I think that, uh, first of all, we don't have a technician shortage, we have a productivity shortage. We might have a technician quality shortage. And I think flat rate is an old-fashioned way that we've paid, and we have to make some changes with more modern pay systems that not only combine hourly, a good solid hourly, but also a flat rate component to it so they can earn bonuses for performance, higher performance.

2:20I think if we do one or the other, flat rate has got an issue where the tech is the one who takes all the accountability and responsibility. There's not enough cars. If the parts don't get here on time, if there are other issues, then the tech suffers. And if you pay hourly, then there's no motivation to do, to do more, to earn more because you can't.

2:44And so I think we have to do blended systems, which is what we've been doing for a very long time at our company. I'm going to skip down to the end. Charlie, I want to hear what you think about it. I've run it any way possible. The right answer is flat rate, and that is the only way to do it so you get productivity, you get quality of work, because they're responsible.

3:06See, if it comes back, now they're responsible to fix it proper. So now They're responsible to fix it proper to begin with, right? And then why would you cap your technicians if you put them on salary or something? Now they're capped. We're on a very high performance business. As you know, you've been in our shops, you've been in our training, right? Very, very high performance shops.

3:24We have beautiful, beautiful shops, so they want to work there. We have high performance service advisors, so they sell jobs all day with high integrity. And then why would I cap the technician? Unlimited hours is what we have. Anyone else? So my input on this is, why do we have to be binary? Why is it flat rate? Why is it salary? Also think about it, the only person in the shop, if we have a salary shop, that's on commission is the owner.

3:58So shouldn't everybody participate in some type of performance performance-based pay plan because a rising tide lifts all boats. I don't disagree. So I'm a firm believer in performance-based compensation in some capacity, right? Because you need high performers to be rewarded for that performance. And you do remove the incentive for high performance if it's just a flat regular income. So to that point, and I tease this a little bit on the internet, All you guys get paid a flat fee every month.

4:31Mm-hmm. Why is it not performance-based pay for you? It is performance-based pay for us. It's performance-based pay for the shop owner, and, and we own the shop, so we are performance-based pay. If my company doesn't do well, I don't get paid. If my company needs an extra $100 grand because we're gonna do something like this, then it comes out of my pocket, often.

4:54Okay, so in, in essence, everyone in the shop has some form of performance, because if the shop's not succeeding financially, there's no bonuses, there's no Christmas bonus, there's no extras that come out. If the shop is doing well, then it's much more likely that there'll be higher pay for people, there'll be bonuses and other things. I would tell you right now, being a small business owner, which is what I am, at least that's what I think I'm classified am.

5:24I am the perfect high, you know, performance. So to your point, I think you asked us to clarify the question is why are we as coaches not performance-based with, with our clients, on par with our clients? So if you want another barrier to coaching, tell a potential client, oh, by the way, the better you'll do, We're going to get paid more. We sell a service, so I don't want to put one more roadblock for a potential client to come into a coaching program.

5:59But don't you think that if you have skin in the game in their business, let's say you get a percentage of the net, okay, now you really care for their business and you're going to do the best you can to help them perform. That means every employee of that business performs well, that means their families do well, and then you do well and your company does well.

6:19Yeah, but our services are, I'll say, limited. We have an hour a week, every other week. We sell additional services. We sell a product. Well, I'm accessible all the time for my clients. True, but then you, but then you sell that hour or whatever the time is. I don't— and We'll just get paid off the bottom. Again, it's the same, it's performance on everything, right?

6:46All right, you still open this up with the fact of a technician shortage. Yeah, I'm just a big believer that our industry is phenomenal about a lot of things, but a couple of things we don't do well. Hey guys, Carrie Lynn with Turnkey Marketing. If you are looking to increase cars and you're looking for the right demographic to go after, you want to get the right people who need auto repair right now.

7:07Then 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 want to go after, have raised their hand and opted in saying, I need auto repair help right now. We 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.

7:35And then we also get their physical address and we start sending banner ads and display ads to every single device in that house. It 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 DirectTrack Marketing.

8:04Look, when I first opened my shop, I thought my old systems would keep up. The software that I had would continue to evolve. But as we grew, the slow estimates, scattered workflow, increasing downtime, it really just, it was becoming a real problem. That's why I switched to TechMetric. It's not just software, it's a complete shop management system that makes my life easier.

8:26Smart jobs, instant estimates, integrated payments, integrated financing options. I mean, It allows me to focus on the work that actually makes me money and not get bogged down in the other details. My shop's repair orders have jumped over 300% since switching to Tekmetric, and when I need help, their support team responds in real time. I actually was online with them asking questions just this week, and I got answers in minutes rather than having to wait for callbacks and emails days later.

8:52If your system is holding you back, it's time for a change. Tap the link in the show notes and see how Tekmetric can help you move your shop forward. We don't make our industry look attractive to young players, and we are in competition with every other blue-collar trade out there. So young ones have choices, and I'm not sure how much anybody's dug into what those offer, but they are— starting wages are pretty tall.

9:14Now, I am a big believer in a couple things. A hybrid comp plan, definitely. I do a floating clock hour based on production. The production needs to be part of that motivation because We need that. But I'm also a believer that flat rate or any good comp plan should align technicians' focus with business goals. I don't think flat rate really does that other than the production, 'cause there's way too many important KPIs being ignored.

9:41Effective labor rate, margin, part labor ratio, pricing efficiency, and all that. So flat rate had its day, and for good veteran techs, they still appreciate it and dig it, but for a younger generation of workforce, I do not think that's the best. Or exiting generation of workforce, that's not the best for them. I started out as a young tech, but I can promise you this, today I couldn't roll 40 hours down a hill.

10:05So I just think that from both sides, it's probably not best. So to the greater conversation about the tech shortage, because it's become a thing for coaches now to say, there's not a tech shortage. There's a whatever, fill in the blank of the point I'm trying to make, right? When do we stop calling it a tech shortage and call it a leadership failure?

10:30It's— We are failing to create a good culture. We're failing to create career paths. We want them to work in the Bay for 50 years and break their body for us, right? We're not giving them a pathway out. So what are you guys doing with your clients to break that mold and create a different pathway so that it is a desirable career path?

10:55One of the, one of the first questions I ask a prospective client who tells me I need to hire somebody, I ask them this. I said, why should I come work for you if I'm an ASE Certified Master Tech L1? Give me reasons other than productivity, other than the money. Tell me what your culture is. Tell me why. Give me the KPIs.

11:15Give me the USPs. Why should I work for you? And they're like, I have no idea a lot of times. And then our job as coaches is to then pull that out of them. You talk about you're a great leader, let's develop that, but you're— it could be a better communicator. And so as a coach, we get them to look at the leader first.

11:35Why should that technician go to work for him? Give me 5 reasons. I agree with Vic 100% on this. Why would they work for you? And you need to answer that question. Why would a customer come in your shop? Why would an employee come and work for you? I have a guy flying in tonight from Boston, he's one of my master technicians, been with me for 14 years, to come and do tomorrow's private equity class.

11:57We're actually teaching him generational wealth. That goes way beyond a paycheck. Right. I have a guy from Woodlands that wanted to come in tomorrow, he's about to have a baby in a week. We're teaching them generational wealth. It's not just about the hours. Again, it's the environment. It's the potential they have. We also take junior technicians. I have Peter sitting right there.

12:15Peter has created a program who can take a junior technician and make him a C-level, B-level, A-tech at some point. So there is a path for them to grow. And I think that goes a long way. Bill, what do you think on this? Well, I think culture is a big part of it. So in our hiring program, we learn all the time from people that are applying for jobs and looking to change that They're not looking to leave where they're at because they believe they can earn more money somewhere else.

12:40They're looking to leave because they want a better place to work and a better group of people to spend their day with. And they want to know that their work and their contribution's gonna be appreciated. And that's at the top of the list, right? So when we go through, what are the 3 things that you must have in your next job? You know what's not in those top 3 things?

13:02Money. They're wanting the opportunity to learn and grow. So we as employers have to provide that. We have to make sure that's, you know, front and center for them and a great environment. Nobody wants to work in, in a crappy shop, right? I had somebody the other day tell me, I can't work there anymore because the guy in the stall next to me never sweeps the floor.

13:27And never takes out the empty cardboard boxes from his parts. And it's like, so we're gonna lose a really good technician because of— oh, and by the way, guess what one of the issues was with the technician that never swept the floor or took out the cardboard boxes? He was paid flat rate. He didn't get paid for that. Mm-hmm. No teamwork. Cecil.

13:49I— everything It takes money to make it happen. If you want to have a great culture in your company, you don't do it if you're broke. Okay? If you want to provide benefits, you don't do it if you're broke. If you want to provide a pathway, you don't do it if you're broke. And we don't address the core issue here. I know most of the shop owners I've dealt with in the 25 years that I've been doing this are wonderful people who would love to give their employees everything.

14:21Frankly, they just don't have much to give in many cases. And so we have to solve the financial problem. We are an undervalued, undercharging industry which passes on and on and on. And in part that happens because there are no standards. Anybody can open their garage and bring cars to their house and charge $60 an hour. And there's no enforcement, there's no rules, there's no nothing.

14:53Imagine a doctor saying, oh, I'm just going to work out of my house. I haven't got a degree or anything, but now I'm going to be a doctor and I'll just charge less and have people come to me. And that happening. But it happens in this industry. And then we go, oh, we can't provide a path for technicians. That's why we can't attract people until we make it attractive.

15:14And unfortunately, that's money. We're not going to attract people. So, Cecil, what I'm hearing you say is we need government regulation. Oh, boy. That is the last thing we need. Unfortunately, we need to regulate ourselves. Unfortunately, if we don't regulate ourselves, as sophisticated as the vehicles are becoming, AI technology, etc., there is going to be a point coming where the government is going to step in and regulate us whether we like it or not.

15:45I would rather do it now as an industry rather than let the government control who we are and what we do. Michael, you had your hand up. I did. Everybody, if you're taking notes, which you should be taking notes, draw a triangle. On that triangle, you have leadership at the top. You have systems at the bottom and you have motivation in the third quadrant.

16:12People don't quit companies, they quit bosses. Yep. And at the top of that triangle is leadership. And we all have to look each other in the mirror and say, we have not led well in the last 20 years. And for all rights, we got into this because we wanted to, to fix cars. We wanted to fix things with our hands. We wanted to do things with our hands.

16:31But we didn't spend any time pouring into ourselves in personal development leadership. And that's why we're in the state that we're in. And I don't think that flat rate is necessarily one thing to hang your hat on. I think it's a cause. It's a symptom of the cause. Josh, the question we want to ask ourselves, all of us should be asking, is does my team feel the weight of my title or the influence of my leadership?

16:59When you think about the opportunity that we have, we— if we're not, if we're not providing resources for our greatest assets, who are our people, to be successful, they're going to start looking elsewhere. Are we effectively onboarding? Are we properly training? Are we consistently coaching? This is a great training environment, a great training space, but we can't treat this event like a once a year training opportunity.

17:22So what does training look like back in our shops on Monday and on Tuesday? Every day, are we pouring into our people? And if we are pouring into our people and investing in our people each and every day, when they leave, it's not a matter of if it is when, because we're growing and developing them as leaders. When they leave, we're going to applaud their departure.

17:41We're actually going to applaud their departure because we're creating an environment for them to be a better person, a better human being, a better contribution to society. So when they leave, we don't need to panic. We're investing in everyone, so we're not having to rebuild. We're simply having to reload. Good leaders, good managers are constantly asking themselves, how do I help my people succeed?

18:03And what are the targets that mean that we're successful? And if you're not asking yourself that every single day about the people that work for you in your company, then you're not doing your job correctly. So it's important. We keep talking about the leadership part of this, but it's also— we have to think longer and further down the road of how are we going to get these kids to know that the automotive industry is really cool.

18:28Where we— every day we get to go in and we get to make people's lives better. We get to go in and we actually get to help these customers that are broken down and get them fixed and get them back to their lives. And we need to be able to show this younger generation that this is a great industry to be in.

18:42It's something that in our shop we have in our youth group, we actually take these young men and we teach them how to weld. And we've— my brother actually showed them how to weld a hand out of bolts. And it's cool because some of them are actually going into technical college and they're going out to WyoTech and they're doing these things because of the fact that they came and they saw what they could do.

18:58And they can make a difference instead of going out and just chasing a liberal arts degree or whatever it is and doing these things. It's like they can actually come in and do something with their hands and make a difference. It's cool to be able, because I've been doing it for years, and it's just neat to be able to watch these kids grow up and continue on the path of, I want to be a shop owner someday, I want to be a technician.

19:16It's like, yeah, it's really a cool industry to be in. You can make a difference. I want to come back to that in a little bit, but first, can I jump on something Cecil said? And how you doing, brother? Cecil mentioned the word about undervaluing ourselves, which is so true. And I do this little exercise when I work with members, and I'm going to ask you all to do this when you get yourself some time.

19:36Grab your phone, Google party clown in your market, as in party clown in Houston, Texas. I want to see your face when you realize party clowns are charging $300 and $400 an hour. And I am not knocking the credibility of a party clown or the skill, but I do want to raise the level of the skills of technicians in our industry, because the guys and gals that can fix cars today truly are rocket scientists.

20:02Scientists and they are worth a whole lot more than what we're charging. So glad you brought that up, Cecil. Um, okay, Cecil, we have a marketing challenge also. Hey everybody, I'm going to take just a quick minute out of our show to talk to you about one of the favorite tools that we have in my company to help streamline and make our guys as efficient as possible.

20:23And that's Detect Auto. I've been talking about Detect Auto for almost a year at this point and my team still loves it. And if you listen to the show, you know that I love the idea of bringing in skilled individuals from outside of the industry to add to our shortage within our trade, right? But one of the problems that you run into sometimes with that is that these guys and gals might not have a full automotive knowledge just yet.

20:47And as a technician, if you've ever gotten a repair order that says check noise, you know how infuriating that can be. Well, this tool, the customer concern tool, is designed specifically for that. The advisor can put in 1 or 2 or 3 words about what the complaint is, and then it's gonna prompt them all the questions that they need to ask that customer, and then it puts that into a paragraph form that's easy to understand for the technician.

21:13So that technician's not getting check noise, check vibration. They're getting all the information that they would like to have from the customer. It just makes things more efficient. It makes guys in the back happier, and it just makes the business run more smoothly. If you want to find out more about this and the other tools available on Detect Auto, Just reach out to us through the link in the show notes.

21:41And that is, as an industry, you know, my dad didn't want me in the industry. I see parents today, they don't want their kids in the industry because they don't understand the opportunities that are within the industry. It's one thing for us inside the industry to say, Oh, well, yeah, I, uh, you can become this and you can do that. But if they out there don't understand, then their kids are not coming into our programs.

22:04And that's, again, it, it's going to take us as an industry getting together because any individual one of us, we cannot make enough impact. But together as an industry, we can make a hell of an impact. And it's a marketing challenge. So, Marketing our trade. One of my children has decided that a 4-year university is not for him, and he wants to investigate trades.

22:32And so we did a tour of all the trades programs at the community colleges and programs of that nature in our area, and obviously I was pressing for a specific trade. Maybe that's why he said no. But I'm here to tell you, after we looked at HVAC and plumbing and electrical and welding and automotive, automotive wasn't in the top 3. And he went around to the programs and talked to the students in the programs about what they were doing.

23:01And so he's starting at 15 years old, he's starting a program where he's half of his day is a welding apprentice to get his welding apprenticeship, his welding certificate to then he wants to be an underwater welder on the rigs, right? So you've got smart young men and women who want to work in the trades, who don't have a desire to sit in front of a computer all day, and they're choosing other trades every day.

23:28So what can we do from a marketing standpoint to overcome that? We have to get together, number one, so that we have the dollars to make that happen. We have the clout and we have to take the parts of our industry that are interesting. And there's an awful lot of it. I mean, it's not what it was when I started, you know, working on carburetors and points and condensers and stuff like that.

23:53This is a completely different business. And we— I think we understand it within the business because we do this every day. But again, the rest of the public doesn't. And so we need a marketing plan. We need a got milk. For all, you know, remember the old Got Milk commercials? We need a Got Milk that the industry does that says, look, this is a great industry.

24:16You can become anything you want here. Look at me. I came in with no education as a, as a tech only because my father had a shop. And I'm sitting on a panel of coaches, you know, 40 years later. Who and what In what world does someone with no education, you know, be able to come somewhere and, and earn $150,000, $250,000, $350,000, $400,000 and build an unbelievable business and affect the lives of hundreds, maybe thousands of people?

24:52You know, we don't talk about this. We all— we do is, is— I'm sorry, but all we do on the podcast 90% is bitch and complain, right? And so stop bitching and complaining. Jesus, we keep putting that out there to the public, they're never gonna want their kids to come here. Oh my God, flat rate sucks. Oh, hourly sucks. Everything sucks. The industry, they treat us like shit.

25:20We don't this, we don't that. That has not been my experience in in this industry. Okay, we talk about the problems, we don't talk about the solutions. In our shops, they avoid doing team meetings because technicians are great problem finders and they're going to complain. But turn that into, great, you found the problem, now how about the solution? So if we're going to complain on a podcast, we're going to talk about it on here as an industry, we've got a ton of solutions.

25:50We're problem fixers. We fix things. Our technician shortage, quote, is really not a shortage. It's a marketing— it's an involvement. Do you think the dealerships have a shortage in their bays? Yes, they do. Well, I'm seeing they don't in my market because in my market, in our trade schools, you know who occupies the seats on the advisory council? All the dealerships. This industry needs to get involved, and part of that is confidence in what we do, knowing how to communicate.

26:23Why can we as an industry elevate so many people? Because one, we're a great industry. Two, we got really smart people in this industry. But three, we've got a path forward with the right message that this industry can be very profitable. It's done properly. We have to get involved. We can't wait for somebody to come and do this for us. Nobody's coming, nobody's riding in on a white horse to take care of all these problems for us.

26:51So as an industry, at a local level, everybody has to get involved and do their part. So it's reaching students at a very young age. It's not reaching people when they're already thinking about their career path and they're in high school. You need to start reaching people in 4th grade and 5th grade where you're really able to reach them when they're starting to formulate ideas about what the future could look like.

27:15You've got to have an outreach that you can reach other businesses and an outreach that you can reach people in the communities that are the parents and the teachers and people that students would go to for resources, for information. And that, that's on every one of us. Every one of us have to accept the responsibility to do that in our own local markets.

27:39Because I like the Got Milk idea. It's kind of like the raisin thing, right? But where does the money, where does the funding come from for all of that? That's like— and I'm not saying you can't do it. I'm saying it's a little bit harder. But we can start locally and make some inroads. Agree with every bit of that, but probably one step a little bit higher than that.

28:02We got to get to the moms and dads. The moms and dads. Because the moms and dads are the ones telling these kids, "You don't want to play with that. It's a grease monkey kind of job." And we need to preach the fact that they're into technology. There it is. You guys know how many lines of code are in a car today and the computers and stuff like that.

28:17That really turns some people on. Get to the moms and dads as well as the young because moms and dads are pushing them away. Cecil. I wrote a white paper 4 years ago, put it out amongst the people in the industry, and the white paper basically said that every shop in the United States needs to raise their labor rate by $20 an hour tomorrow.

28:37And if we did that, $10 would go straight to paychecks of our technicians, people that work for us. So Master Techs would maybe get close to getting paid what they deserve. All right, and, uh, $5 would go to benefits because we can't be a business that doesn't have a good benefit package if we want to attract people. And then they're at least $5.

29:00So $5 an hour would go into a pool to market the industry out in the world. And imagine if you could do that. What if, what if, what if 20%? What if 10% did that and we could take that money and market and really let the world know that there is opportunity in this industry? For anybody. Well, almost anybody. I'm, I'm not sure everybody should be a tech, but, but for almost anybody that— and we had interest.

29:32People said, oh, that's really great. But it didn't go anywhere. It's just another coach saying raise your labor rate. Again, if we don't get together, we're going to be in trouble. All right. We're already in trouble. We're going to be in more trouble. And one more. I got 15 seconds left. The, the whole idea that we're going to keep doing the same thing.

29:56We've been talking to us for 20 years. You need to get to the colleges. You need to get to the this. You need to get to the that. We're either not doing it or it's not working. Okay. And if we keep doing the same thing that doesn't work over and over, we're going to be in the same boat 10 years from now when the government steps in and tells us what we're going to have to do.

30:15So raise your rates. That's been the mantra. We beat that drum forever, it feels like, and we beat the drum to the point that it's broken for some of us. A lot of us have raised our rates enormously in the last decade, as we should, right? But some of us have gone too far, and we felt the backlash from the community because we haven't raised our value and our quality, and there are other— Well, anyone that's telling you raise your rates and not helping you understand doesn't understand how to raise your value is not the person you want to be listening to.

30:48Right. Well, I, you know, I just get all my advice from the forums on the internet, so. But, so the question is, we all know that what you should be charging is a factor of your expense structure, of your desired net profit, and of, and other factors, but your market has to be one of the considerations in that. What you can charge and you know, the San Francisco Valley is not the same thing that you can charge in the middle of Oklahoma.

31:14It still literally goes back to if I have options to go to a guy's garage for $60 an hour where he has no insurance, no workers' comp, no anything, because we have no standards in this industry, then I will have those options wherever. And so some part of our population is going to be able to take their car there. And if that's the option that we want to have, which is, I guess, okay, because I don't want to work on that guy's car, not in my shop.

31:44But it's still up to us to build our value no matter what. We can't say that, oh, the, the, the world won't pay what we need. We have to change our product so the world understands what our product costs and is willing to pay for it. And I will tell you that service is gonna be the difference. In the future. It's not that you can put a different water pump on my car than he can put on my car.

32:08It's how I feel when I'm at your shop, how I feel when I look at your shop, how I feel when I think about your shop, and how I feel when I leave your shop that is going to create value and additional value. And if we cannot learn how to do that, then labor rate and dollar amounts are going to be the, the thing Period.

32:30Charlie, come to me. Uh, I mean, you can't just raise your price without raising value. I think we all agree on that. There is no disagreement there, right? Now, what do you provide to the customer? How transparent you are? I'll bring you an example. You've been in Adams Automotive. The minute you pull up, you know it's not going to be cheap. Would you disagree with that statement?

32:49Okay. Yesterday I valet my car here, it was $65 for the day. I'm like, did you guys include the car wash? I mean, it's a beautiful place, right? So you expect to pay more, and there's a perceived value. It's beautiful, it's clean, it's phenomenal, right? So if you do provide that level of service, if you're able to say yes on the phone immediately, right now, bring your car in, because they basically, when they call you, they're waving the white flag.

33:13They have a problem with their car. So all they're saying, help me, how fast can you help me? Can you go pick up that car right now, take care of him, drop off a loaner vehicle, Take care of them today. Fix their problem today. Don't forget the customer is like vulnerable position right now. Most of our customers, probably 50% women, you have to feel like they feel vulnerable and you have to go on their side and see how they look at it.

33:35You bring them in, give them a beautiful shop tour of a beautiful shop. The shop has to be clean, it has to be organized, the equipment has to be working perfectly. You can charge for that. Now also, it goes back to the employee we're talking Friday. Now I can pay him a good hourly rate, he can provide for his family. They can go on vacation, he can have a 401, will have health insurance, they can have a retirement plan, they can go on vacations, whatever they need to do with their family.

34:01I have no problem charging as long as I provide value. I want to jump in on something he said about a clean shop. I was first. Everybody wants in on this one. We're just gonna walk down the line. You don't have to raise your labor rates to start taking care of your shop. Look, when I first opened my shop, I thought my old systems would keep up.

34:22The software that I had would continue to evolve. But as we grew, the slow estimates, scattered workflow, increasing downtime, it really just— it was becoming a real problem. That's why I switched to TechMetric. It's not just software, it's a complete shop management system that makes my life easier. SmartJobs, instant estimates, integrated payments, integrated financing options. I mean, it allows me to focus on the work that actually makes me money and not get bogged down in the other details.

34:50My shop's repair orders have jumped over 300% since switching to TechMetric, and when I need help, their support team responds in real time. I actually was online with them asking questions just this week, and I got answers in minutes rather than having to wait for callbacks and emails days later. If your system is holding you back, it's time for a change. Tap the link in the show notes and see how TechMetric can help you move your shop forward.

35:13If you start taking care of your shop, you clean the clutter, you take pictures, you look at it from the consumer side and see what do they see, then maybe it'll be a little easier to raise your labor rates. And then as you raise your labor rates, maybe you can make some improvements. You have— yeah, Adam's is a gorgeous shop. I remember Perry when he was in a dump, right?

35:34He didn't start— his price was different than what it is today. He had a vision, he just walked it little by little. Yeah, that's how it goes. Value and price kind of have to go to— if you raise your price, by the way, be very careful. If you raise your price without raising value, now you're just an overpriced shop. Yeah, right. Something that else goes right along with that labor rate, labor margin, and still be able to fatten the bottom line without having to raise more.

36:00Are we looking at production loss? Yeah. Course, we're looking for 100% production. You pick whatever number you are, and if it's 75, what could a 10% increase in production do for your business? Now here I'm just gonna use bingo numbers 'cause it's easy for Stosh. Let's say in a year you produce 10,000 hours. 10% of that, 10% more is 1,000 hours over the course of a year, so we're talking 20 more hours a week, whatever that number really is.

36:28And if you do that math, if you got a door rate of $1.50 and an apartment labor ratio, that's 300 times 1,000 hours, that's $300,000. And if you could put 50 points of that as GP, that goes right to the bottom line. And how many of you could use an extra $150 grand? The rate and focus and driving to production is really where that balance has got to be these days, because I think we've all really pushed that envelope.

36:54Look pretty hard with labor rates. Michael, I know you got something to say. Customers vote with their feet and with their mouths. And I think there's an intersection that meets with price, value, and relationship. And for all the service advisors in the room, you guys are constantly battling that intersection every single day. Yep. And whether we like it or not as shop owners, it's one of those things that you guys are gonna negotiate, you are going to manipulate the pricing that is put in front of you to maintain the relationship, to maintain that customer and get 'em back in the door.

37:40And so I, I'm a big volume-based person. I want all of the customers in my town. And whatever it takes to get them in the door, across the threshold today and fix their problem. And I'm a big relationship person. I still have customers from 20 years ago when I was on the counter that still call me. I was in my shop 3 days last year.

38:00They still call me. Relationship is 100% key. And then everything else underneath that. Yeah. Michael, I'm not gonna speak to the labor rate increase 'cause that's for these guys. That's not my lane, but what I will say I would say is what is rooted in this topic is two of the most important things that we all need in order to provide two other things.

38:20These two things that we need to create is safety and trust. At the root of any relationship that you're in, the most important thing, if you really think about it, is safety. If I don't have safety, I can't trust you. And in an industry that severely lacks trust, we need to create safety and trust for our guests and for our team members in order to provide Clarity and direction.

38:40So moving from guests to team members now, clarity and direction. For any job that you've either left or lost, it's very likely that you didn't have both clarity and direction. So how are we providing clarity and direction for both our guests and our team members? There's a mindset component to this I think that you can't overlook. You can't expect your people to ask for the appropriate amount of money if they don't believe they deserve it.

39:08Good point. Yeah, I also think there's a challenge for a lot of people in terms of getting what they deserve to get paid and respecting what you're paying someone else for their services. Goes both ways. So you can't be in the business of always looking for the low buck, best deal and then expect people to pay you the most because you're always the better choice.

39:38You can't have it both ways. You better get your mind straight that if you believe you're great value, then you respect the great value that others provide you and pay them appropriately as well. That's right. I made this statement that we don't have a technician crisis because we have 72% productivity, 74% productivity depending on who you're talking about. And we talked about labor rates and, and profits.

40:08It's really more about profits. And if we were to capture that extra 26% productivity out of our businesses, because we could be good leaders, good managers, uh, guide our people, help our people understand the value of what they do, make them feel good about themselves, good coaches. And their job, maybe even good coaches, who knows. Y'all know what I mean. If we could do that, for many shops, you know, I do the math in my head, there's probably $100,000 to $150,000 in additional profit for most of the shops in the United States from that one thing alone, just getting your productivity where it needs to be.

40:46And so do we spend our time with our people going, What's in your way? How do I get it out of your way? You know, what, what, what is a company problem that you're dealing with that's keeping you from being successful? How do we identify that company problem, remove that company problem? And then if you're a good manager and you build that trust, then what are some personal things that are in your way?

41:10And how do we help you get those personal things out of your way so that you can be successful in our businesses? Because if we increase that productivity, I wouldn't need to raise my labor rate. You could also take that increase in productivity and add to your benefit portfolio. Yep. Um, marketing, add to your training. Look at the investment people made to be here this weekend.

41:38You had to be able to afford to do that. Think about all the people that should be here that aren't here because they couldn't afford to be here. What if they just made that little bump in their productivity? They're here. Aaron, I want to let you get a word in on this, and then I have a question for you also. So I'm good.

42:01We've, we've heard a lot of awesome people talk, so I'm good. What's the next one? So I want to talk about kind of the elephant that's rolling across the industry right now, and that is private money, private equity. It is gathering steam every day, and it is allowing successful shop owners to sell their business and have an exit strategy at a multiple that was unheard of a decade ago.

42:31But what's also happening is we are seeing what were once elite operations in the community community backslide to mediocrity after acquisition a lot of times, or worse. Um, and we can look at that as an opportunity for us that are still active in the industry to acquire those, those star players in those organizations, right? But I guess my question is, is this private equity a really smart exit strategy for shop owners who are looking for that?

43:00Or is it a disservice to the team that we've built that we leave behind in the community that we've supported that we leave behind to allow that backsliding to happen? Okay, so that's a very loaded question. It really depends on what that individual wants. Exactly right, because I was talking with one of my friends yesterday, was telling me he just closed on his 5th shop and he signed the papers yesterday.

43:21He was so excited. He's not private equity, he's— I mean, it's him, right? And he's building this awesome thing that he's so passionate about. I love being around him because he's got these great ideas and he's just excited and he's constantly pushing to be be the best that he can be. And for him to take that money and get out, it's not where his soul's at.

43:37His soul is watching things grow and improve, right? But yet you've got other people that are done and they're tired. I was talking with somebody else yesterday and it's like, yeah, I was approached and I'm just not sure what to do. And it's like, I worry about my team, but I'm so done. My wife's having some health issues and I'm like, I'm just done.

43:52And it's like, so at that point, it's like, really what's best for the individual? What's best for them? That shop owner because I can't make that call. Right. Just like you. Right. You want to keep going and doing what you're doing and you've got all these stores and you're doing these great things. And it's like, but yet you've got your podcast, you're growing, you're doing really good stuff there too.

44:10It's a horrible distraction from what I should be focused on. Is it though? Look at the impact you're making. Right. But that's the thing is it's like I don't ever want to encourage somebody to do something and stand up here and tell everybody, yeah, go private equity. They were— they approached me and Elite, and they're like, we want to, we want to get in with you.

44:25And I'm like, uh-uh, no way. I want to be my own. I want to do what I'm doing. I don't want to get in with that. That's just me personally. But it's like, I want to be able to enjoy what I'm doing right now. I really love helping people. So it gets me out of bed every morning. It's like, I don't want to lose that.

44:38I don't want somebody to come in and tell me you can't do that anymore, you know? And that's the thing is there's so much that money in here right now. It doesn't matter what industry you're in. I know I'm over, but I got to finish this. It's like, there's like I have so many of my friends that are in the tree trimming business and they're in all this stuff and they've all sold and they're all going, I hate my life.

44:56Hmm. I got a friend of mine literally sold his country, his concrete business for $15 million. And they said, if you finish your 3-year stitch out that, you know, you'll get your 15. He got $5 million upfront. And then anyway, I don't wanna go into details, but he had some stuff happened where he lost $10 million because of the fact that he couldn't obey their rules.

45:15Of taking care of his people. He lost $10 million because of that. So, but that's that, that, that you got— you sell your soul, right? So, sorry, that's all right. Cool. And I love the fact that someone mentioned that for a business owner, what do you want to be when you grow up? That needs to be decided even before you start thinking about growth plans.

45:34And they need to think themselves, am I looking to build a business to sell, or am I looking for long-term cash flow and build a legacy? Now what a lot of people don't think about, maybe I'm wrong here, but when it comes to selling a business, the sale price is one thing, walkaway money's another, and walkaway money's typically, at least in my experience, it's about a two-thirds kind of gig, and then you need to think about will that money, trying to maintain the same lifestyle you had as a business owner, how many years into the future is that really gonna carry you?

46:06That magic number for most has been about 5 or 6 years, let alone everything you said they regret selling and the negativity and the— Building a business for long-term type cash flow, those types of things, and building a business, I'm just a believer that a business owner, the best way to get their return on inequity, return on equity, do the same thing it takes to get attention and attractive to private equity, leadership outside the owner, systematize processes and things of that nature, Step back and develop people to run that business for you for the long-term equity, 'cause here, I don't know about you guys, 10 years from now, who knows?

46:47But for my younger friends out here in this crowd, if you're looking to keep a lifestyle, 15, 20, 25, build it for long-term cash flow, build your people to run it. And again, we talked about career pathing. I'm a— love this industry for the fact that we have opportunity to develop future business leaders and allow them to take on yours, develop them people, let them run it with you and for you.

47:12And okay, I want to hear from Charlie and then come back to Cecil. Uh, I can talk about this all day. Uh, private equity, I've been studying it the last couple years extremely heavy, probably more than most people in here. Um, I think people are uneducated., and we need to educate ourselves in it. Okay, just like, because that question sounds almost like saying, oh, all mechanics are bad or thieves, you know what I mean?

47:37That really, that's what it sounds like, which we know it's not the truth. These are all hardworking, honest people in here, right? So that's, uh, when you say about private equity and the bad stories, there is such a loaded question that we need to educate ourselves. There is a pyramid in the private equity. There's a lot of small business. The bigger your business gets, you get in the top of the pyramid, the companies get better and better.

48:00So who you're dealing with is number one. What is that company? Is this a strategic partner or they want to buy the company, piece it out, and get rid of it? It depends. There is— now you have an owner that just got a bunch of money, okay, and now what's motivating that guy to wake up in the morning and get to work?

48:18He already has $10, $20, $30 million in the bank. Why is he motivated to get to work? That's number 2. That is probably the more— the worst thing that happens to them, and most of them end up getting fired from private equity. They lose their jobs, right? Now, again, I've been studying this so, so heavily. We have a private equity event tomorrow.

48:37I'm going to pitch this because for people that don't know, should sign up and learn from one of the best in the industry. His name is Adam Coffey. You can Google his name. He's teaching a class for us on this. On the exact side because people are uneducated, so there's a big misunderstanding of what happens. Now, it also opens the door for growth for all of my people because I can have a team of people that have been growing the last few years, right?

49:00We have about 200 people right now in our company. So all these people have been growing, I've been teaching them. That will open growth opportunity because now I can grow with OPM, other people's money. Yeah, time is almost up. Like I said, I can talk about this all day. Sorry, guys. Everybody, if you own a business, I don't care if it's automotive or otherwise, needs an exit strategy.

49:22If you are 25 and you just started your business, work on your exit strategy now. Yes. And the, and the core of that is running a good, solid business that's profitable. Okay. And any one of the coaches up here knows the numbers, knows how to help you get to that place. And can do a pretty dang good job of that. Okay. The— be careful of private equity.

49:48Do you need it? Okay. And it is about what do you really want? We've got some guys that have— they put it off. They put it off. They're in their late 60s, early 70s. They didn't get it right. And now they're going to be forced out and they're not going to get what they need. It's, it's, it's life. But Do it early, do it right.

50:07Be careful of private equity. I don't think I've seen a private equity deal that in the long run has gone well for the employees of the company that sold to them. But can I ask you again, I go back to what I said. Now I have an owner that has a bunch of money in the bank. What motivates him to keep being the same leader, to wake up in the morning and lead his team?

50:26And we have— or is he on vacation somewhere in Aruba? Yeah. And we have many, many shops that buying their 7th, 8th, 9th, you know, building their own platforms. And there's a lot of coaching companies that know how to do that. And I don't need private equity money for that. And just because some people got some stupid private equity money doesn't mean that that private equity money is going to be out there for you in 2 years or 3 years or 5 years.

50:52We've seen 16x. We're not going to see 16x. We're going to see 8x. 9x, maybe 10x, but only if you run your business right and you build it right. I will prove you wrong. Like I said, come to class tomorrow. You're my guest. Please come and learn from Adam Coffey. You will change your mind. I want to see— can I add something at the— before the end?

51:14Okay. Is it ties into it, no matter which direction you go, what's life look like after the shop? And I speak from this me personally, because I sold my shop for a lot of money. The worst day of my life was walking away, waking up the next morning going, where do I drive? Where do I go? Where's my office? I didn't have a plan.

51:38So all of us know how to plan to get through a repair, but what does your life look like after you sell the shop? You need to be prepared for that. Set a marker out there. I, I didn't do that, but I'm grateful that, that my experience led me into this. I just had to be my secretary. I understand that feeling. Yeah, like, I can understand it because Todd went through it actually when he first sold his first company.

52:04He used to live on the hill, he's coming down, his first shop was there. He ended up moving, he didn't want to see his shop. But that is only because you sold the whole company, right? So you don't have to, you can just de-risk your portfolio You save your family and now you have growing money to grow and like I say, give opportunity to your people to grow with you.

52:21Start with a vision though. When you start your shop, start with a vision. When do you want to sell and what does it look like? Give me a show of hands, how many of you currently own a shop or have owned a shop in the last decade? For those of you that did not raise your hand, the Marketplace has radically changed in the last decade.

52:44Yep. How do you maintain relevancy and connect with your clients and their day-to-day experience in an environment that doesn't look anything like it did when you owned a shop, or if you've not ever owned a shop? I own more than 430 shops. Okay. Because my clients, I take interest in their business and I understand. One of the— you got some groans. One of the— I didn't hear.

53:10Okay. You can groan all you want. Yes, the business has changed dramatically. One of the key tenets of my company is we have to remain relevant. You know what that means? It means that we study, that we pay attention. I work with clients every single day. I help clients overcome challenges every single day. And the principal challenges that are going on are the same challenges.

53:30They're leadership challenges, management challenges, building value for our people challenges. How do I sell this to my customer? Owners' challenges. How do I book appointments when my phone rings? Challenges. Those challenges are the same challenges that we've been dealing with for an awfully long time. And yes, the industry's changed. It's gotten more sophisticated. It's gotten— I don't want to be a tech today.

53:51I don't think I have the skill set, the brain set for that. But to say that, hey, you're not going to be a good coach because you haven't owned a shop in 10 years, so I'll just go out and buy a damn shop and get myself distracted instead of be a great coach. Start a podcast and get distracted. What's that? No, I'll start a podcast.

54:15Can I piggyback on that? No, you own a shop. You're excluded from this question. Well, Mike, I'll say these guys are shop coaches. We're leadership coaches for shops. And so our focus is on the people, helping this person understand that the 4 major opportunity areas that are holding teams back is mindset, it's engagement or lack thereof, it's communication, and accountability. And accountability is not calling you out, it's calling you up.

54:46And poor communication is costing shop owners 18% of total salaries paid out on an annual basis. So how can we help you grow and develop as people professionally and personally, in your communication, in your ability to cast vision, drive the mission towards the vision, delegation, time management. Ultimately, when the leader gets better, everyone gets better, and that's what we see across Limitless Leadership.

55:10Our clients' numbers improve as well, and we don't really touch numbers that often. We really don't. But connection creates engagement, and engagement increases performance. So when we help our clients learn how to connect through authenticity, humility, and vulnerability, that creates engagement, which I believe is the missing ingredient. 77% of team members are disengaged because they don't feel recognized. Recognition is the biggest ROI in leadership.

55:34Bill touched on this earlier. We've got to recognize way more than we, than we currently are. And so when we create engagement, it increases performance. So I would say 90% of the clients, their numbers are increasing because we're helping them become better, better leaders. We're developing leaders who are developing other leaders. I think you have to be careful of adding a criteria of shop ownership to whether someone's going to be a good coach or not.

56:04Thanks. What? Thanks. Oh, that's a different world, man. You just explained all that. That was okay, right? Yeah, that's a different world. I agree with you. Okay, two coaches who agree. Yeah, I think you got a whole group of coaches up here that agree on probably everything we're talking about. All the ones who don't currently own a shop agree with you. Here, here, can I, can I jump in on this?

56:28Cuz I agree with everything these guys are saying. I want to take you back so bad. Here's, here's the thing, when it comes to coaching, it's, it's about personalities and it's about the connection and it's about, yeah, do we do a lot of things when it comes to the numbers and crunching all of that and holding you accountable, but you still have to be connected to the right person.

56:50Right. And if you believe in your own space that the only good coach is going to be somebody that owns a shop, there's a lot of people out there to serve you, and I'm okay with that. Yeah. But if you believe that there's people out there to serve you whether they owned a shop or not, find somebody that you will connect with because that's where you're going to get the most value.

57:11That's where the rubber meets the road. So just like we all need to be coming to events like this as shop owners and networking with other shop owners nationally, we need to be doing it locally with other shop owners. Look, there are more cars driving on the street in front of your shop than you can possibly repair, so you can afford to be friends and network with the shop down the road.

57:33Yeah. And so there are more shops that need help than any of you or your organizations can can possibly help. Agreed. Amen. So interview multiple coaches, find the one that suits your business and your methodology and your concept, and stick to it. We all need coaches. All the best athletes in the world have coaches. It's an abundance mentality versus scarcity mentality is what it is.

57:59Right. And I know all these gentlemen are going to agree with this, and I sold two shops 25 years But over my years of working with shop owners, I probably worked with close to 4,000 of them, a lot of us have worked with more. I can tell you, I've learned more about this industry working with other shop owners, a bunch of diversity, or diverse types of shops, than I ever did running shops.

58:21So I definitely feel that working with members, working with different ones, feeling their pain, helping them through solutions is what keeps us connected. I got, we're running outta time, but I've got one question I wanted to get to. And he won't let me answer this one. DVI a decade ago kind of revolutionized the customer experience and that we were able to provide pictures and video of them and rather than just trying to paint word pictures over the phone, right?

58:50We are in the midst of the next revolution in customer experience and that's AI supported and driven. Driven information sharing. Both of those things majorly impact the role of a service advisor in a business, and the service advisor is the driver of the customer experience to a large degree. So how do you see this current technology revolution affecting the day-to-day life, the functionality, the efficacy of a service advisor, and changing our customer experience?

59:22Experience moving forward? If AI can help them improve the administrative function of a service advisor and they can focus on what the most important thing to them is, the customer standing in front of them and that relationship they have, I'm all for it. Boom. Yep. If, if they can engage that, because there are a lot of mundane tasks that happen inside this business, but the relationship is the key component to that shop thriving and the service advisor giving them a great customer experience.

59:54I think the sooner you embrace it, adapt it, and make it fit your business model, you're gonna be— you're gonna have the advantage. And that's what everybody— every shop here today should be looking at. What is going to be their next advantage? Because just like DVI, if you think about the first shops that adapted DVI, were head and shoulders above the rest.

1:00:17Yeah. And then everybody else in that market had to catch up. Okay. And I'm just gonna add one thing to DVI that just is a real problem for me. We talked earlier about the, as an industry, we're undervalued. I don't understand why as an industry we have devalued one of the most valuable things we provide to consumers when we inspect that car.

1:00:40And somehow as an industry we think there's no value in that, that we don't deserve to get paid for it. Mm-hmm. Because it's done wrong. We need to start thinking about that. 100%. Yeah. It's a great question, Bill, by the way, but it's done wrong. DVIs are done wrong. Please raise your hands. Let's do a study right now. How many people have technicians perform DVIs?

1:01:01More than. It's more than half the room. It's done wrong. Mike, you know how we do it. I don't allow the technicians to do it. And that's why technicians are not happy to get to work, because now the technician waste a lot of time. They look at it as a waste of time. They don't look at it as value, as what you're describing.

1:01:17It should be value, right? Because now I don't have a qualified service advisor to sell the job proper. I love technology to make it more accurate, like you were saying, but I just watched an amazing interview from the guy that grew Rich Carlton, and this is what he said: AI will not replace hospitality. It's never gonna happen, it's impossible. The people, the relationship part is the most important thing.

1:01:39So we have our advisors do the DVIs. When they sell the job, they say, I personally inspected that vehicle. It's not Bob my technician said you need a radiator, I say you need a radiator, and I have this relationship. It is done wrong, it's not done the way it's supposed to be. That's why I said yesterday in my class, we love TechMetric because it makes it easy for for us.

1:01:59Everything is in there, but we do use it a little bit different than most people do. Cecil, you got 10 seconds. I want to have the most qualified person in my shop do the digital vehicle inspection on the customer's car, someone that knows and understands the vehicle and can see the things that need to be seen. Uh, as far as AI goes, used properly, AI is going to help us with our productivity issue, help us create, uh, uh, get rid of wasted time for service advisors and technicians, help us with our processes.

1:02:29If we use it properly, and whether you like it or not, you're going to be using it in your business in the future. That was way more than 10 seconds. I got— all right, last question, and it's for one person individually. Josh, how much time does it take you in the morning to get your beard just right? Thank you for the plug, Mike Allen.

1:02:51Anyone who has a Follow the Bearded Brotherhood. They've got great products. Oils, balms, waxes. Thank you so much, everybody. That was a wonderful conversation. I really appreciate it. Thank you. 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?

1:03:17Learn 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? Email mike@confessionsofashopowner.com or call and leave a message. The number is 704-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.

1:03:43I'll see you on the next episode.