Why Busy Doesn’t Mean Profitable in Auto Repair | Mike Allen and Jim Cokonis - Ep 12

0:00You're doing $100,000 a month. You don't need to be a stay-at-home business owner. No, it's over. You need to be at the shop working. Get your ass off of social media. Go to work. Like, you're complaining about not getting— Holy crap. There are some people that are on social media all the time. How do they get any work done? Like, go to work.

0:16Welcome to Downshift with my sis Taneka Haynes. We all know as shop owners, sometimes you got to slow down in order to speed up. And that's what this podcast is all about. It's time to downshift. So there's nothing that I like more when I'm trying to have a casual conversation to like kind of break the ice than making sure that I'm playing with balls.

0:46So we don't do that here, Mike. You don't, maybe, but you're on my podcast. We're gonna behave. No promises, no problems. It's not gonna happen. So we're at the Bursas. And, uh, you're my second live recording, and I walked outside and you two were going back and forth. What are we talking about today? Uh, attack, set, go! Well, it was the two of us and, uh, Mr.

1:11Perkins were just talking shit about everybody and everything. I mean, so the usual. It was standard, standard operating procedure, little SOPs. Let's just say it's just perspective of the difference between people's motivations on different things. And we were having a conversation about that. Like, he will deny this a million times, so don't even try to track him down on this. But I think you can back me up.

1:40He was saying that he understands and thinks that is not out of the realm of reasonableness to do free diag as a new customer acquisition tool. Bullshit. Excuse me. Was that right? Keith Perkins agrees with Free Diag. Yeah. Oh, go ahead and smolder at the camera a little bit more. No, there's one piece of information he's leaving out. At Mike's shop and anybody else that wants to do it because they'll get exactly the results they paid for.

2:11And eventually I'll have to call someone like Keith to come and, you know, unfuck the situation. It's a little bait and switch. No, it's not bait and switch. It's only bait and switch if I don't do what I told the customer I was going to do. I got nothing. You have nothing. Look, if Keith— if Keith comes and unfucks a situation that I got myself into and I don't charge the customer for it, it doesn't change the customer, you know, expectation.

2:34But it messes with your numbers. Like, why would you even put yourself in that situation? I'm already losing money hand over fist. I might as well just give some of it to Keith, you know. Well, give me some. I find this an interesting conversation. At an event that Benji's hosting, though, because what's— what was the event that we're here for? We're here for leadership.

2:56For leadership. And there's different styles of leadership, existent and nonexistent, right? I don't think we covered— maybe we'll cover that tomorrow. That's true. Oh, Mike is sitting in the back of the room. I'm a back row Baptist. I sit in the back of every class I go to. I just— I've always been that way, man. I sit in the very back row if at all possible.

3:20Why? Uh, I have, I have attention issues and I have, uh, I fidget. I have to, I have to fidget and this can be a distraction. And I also can't sit still for long, so it allows me to stand up and, and lean up against the wall or walk around to the back of the room without being a distraction to everybody else in front of me.

3:39How does that play out in your business? Because you're like a numbers guy. You— I think you're a good shop owner. Maybe you're just doing it for, for likes, but you're probably like really good at what you do. I think, I think that I would be an actually a pretty good teacher. I don't want to say coach because I think, I don't know, I think I understand the numbers really well and I think I understand what you should do and I think I have the capacity to give really good advice.

4:08But I don't take my own fucking advice. Why? I'm conflict averse. I'm a people pleaser. I don't like having accountability conversations. I care too much about whether or not people like me. I got all sorts of personality flaws that feed into— I really enjoy your coaching calls with, um, with Matt. He calls you out on that shit too. Matt, Matt is an awesome coach.

4:35Um, who's Matt? For those of us— Matt Lofton. Okay, Matt Lofton. Just for those of us who aren't in the, in the call, you know. Yeah, you should. So you're saying you don't watch my fucking podcast? Yeah, you know what, if you don't, you know, you should definitely watch those episodes when he's being coached by Matt because you'd see a different Mike.

4:50Okay, you see a different one. You'll see the real Mike that I know and respect. I mean, it's like all of you are real. There's way less dick jokes and shenanigans, and there's way more talking about the actual business. In the coaching calls. Because what I mean, what did you think of my comment today? Which one? Yeah, that's me. Yeah, that's me.

5:08All right. I'll admit it. In a classroom, in a class setting, I have been known from time to time, I have been known from time to time to ask questions and to— what is it Tanika says? Say the weird thing, Jim. Just say the weird thing. Just say the weird way. Get it over with. Get out. You engage. I engage because I'm curious.

5:25And I want to— I want perspectives and my brain is constantly linking topics. And Josh is talking about leadership and his coaching is not about the numbers and the business. He's about people and engagement. Mm-hmm. Right. So it's all about how you interact with your staff as a leader and how you create other leaders on the team. It's about empowerment. That's the message I'm taking out of Josh's training.

5:56And so he doesn't focus on the KPIs, right? That's the big deal. The KPIs, the numbers. And I said, so you're saying don't let the key performance indicators kill personal— how did I put it? Kill personal incentive or something along those lines. Like kill culture, effectively. Yeah, basically. So you can't let a number get in the way in the way of developing this person's individuality.

6:31We already know what to do. We've been to the trainings, paid for the coaching, learned the right way to inspect cars, build estimates, and talk to our customers. That's not the problem. The problem is consistency, because some days it only works when the right person is working, and when they're not, it's a whole different shop. So now you're stuck in that cycle.

6:50You need a strong team to run a great shop, but you need a great shop to attract a strong team. Make it make sense. That's why I rock with Detect Auto. Detect Auto streamlines your service processes with automations that save time, increase maintenance sales, and improve productivity without changing your whole system. It plugs in, guides your team through inspections, recommendations, and even customer communication.

7:15Now that's not just based on memory or mood. That's how shop runs. And let me tell you, I've been using it for over a year now. My ARO is up 63%. That's not new knowledge. That's just consistency. If you're tired of your shop depending on who showed up today, go check out Detect Auto. Book a demo. Right? Because if you develop the person right, the message is the byproduct of that is performance increases.

7:43So the performance indicators are a result of the coaching and the culture. And I'm liking the message because, you know, and it's not new, um, Zig Ziglar, you can get anything you want if you help enough other people get what they want, right? And if you want to have to do it all yourself, dictate. If you want to create other leaders, you delegate, right?

8:08And so we've all worked for micromanagers who are the type that You got to do it this way. You got to do it that way. You have to put it in a format that I can look at, that I'm comfortable with. And there's no opportunity to create, maybe it's better, right? So I guess the message that I'm starting to take out of this, you want a hot mic moment?

8:28I'll give you one. Uh-oh. I'll give you one. Let me make sure everything's working. We wrote the policies and procedures and we have an employee manual. You know how to do it. And what you're forgetting is, If you've got a good empowered employee, they may actually come up with an improvement, but you're not allowing it to happen because you're so driven by your KPIs.

8:46That is true. I found it, you know, drinking the Kool-Aid the last couple of months, that leadership, top-down leadership, it works. It trickles down. Like, I just allow them to make the decisions. You know how I want this Kool-Aid to taste at the end of the day, like, but I'm not going to tell you exactly how to make it. I gave you an idea.

9:05You got a recipe on the back of the box or whatever. Aren't you supposed to cut open the bag of sugar and dump it in? That's how you make it. Yeah. And what flavor? Red? Red? But no, grape is the only way to go. Come on now, you're a Black person, it's grape. It's red. Oh, come on now. Oh boy, maybe I'm the wrong lady.

9:23I just— red, red Kool-Aid. Do not bring no grape Kool-Aid in my daggone house. No, but no, I think it's working. And John was asking me, how long have you been not micromanaging? For me, it's been like a solid 6 months. Go in there, this is the game plan, this is what we need to hit, this is the reason why we need to hit this number.

9:42Ready, set, go. Find a problem in the processes and say, okay, this is not working. You know, the way we're taking these appointments, that's not working. What do you guys think? Instead of just barking out orders, because heck, they have ideas that I don't have. And if I don't like their idea, I'm not going to knock it. I was like, okay, I can see where you thought this might work, but that's not going to work.

10:02Let's try it a different way. So like that micromanaging, my dad did that. I mean, older shop owners do that because that's the way it was said. But I think it's working for me. I think you got to be careful because there's a lot of benefit to be gained from learning to not micromanage and to back away to a degree. But don't let it go too far.

10:21Keep your finger on the pulse of the shop. Yes. Because, I mean, you're driving down the road. When you're driving down the road, there's constant adjustments and there's constant course corrections, even though you're driving on a straight road. Yeah. And if you just take your hand off the wheel, you're driving a vehicle prior to 2020, probably it's eventually going to hit the guardrail or go in the ditch, right?

10:40But even if made in 2026, if it's not calibrated right, it's going to hit the guardrail. So yes, it's good to not micromanage. Yes, it's good to just set the goals and the vision and then equip your people to be able to execute effectively and get out of the way and let them do it. And sometimes they might do it in a way that is different than the way that you would have done it.

11:02But as long as they are doing it ethically, treating their people and treating the community right, and they hit the goal. Fucking great, right? The problem comes all too often, and I'm speaking from experience, when you get things going good enough that you can step away and do that and you step too far away, right? And you get too engaged in other things.

11:26Maybe comfortable. Maybe you start a podcast. Maybe that's a lot of fun. Stop paying attention to your business. Right. Start traveling to all kinds of conferences and you start believing all the shit that people tell you about how awesome you are, you know? So are you talking to me or you? I'm talking to you. Obviously, I would never do something like that.

11:43So just a word of caution. The idea is that you build a team that you can step back and give them the goals and equip them for success and then not micromanage. But that doesn't mean not manage. That doesn't mean not manage. But can you equate this to automotive technology, though, Mike? What's automotive technology? We'll let you do that. You're the techie dude.

12:02So I was listening to you and here's what I heard. If you look at every current driver assist system, right? Toyota has Lane Keep Assist, but you're required to keep your hand on the wheel. Yeah, to show what— actually, if you get a half full water bottle and wedge it in the wheel. Yeah, I know all about that. Mine is different from yours.

12:21Then you end up with some of the exact dynamics that you're talking about because you're trying to be an absentee driver. You know, and, and I don't want to knock anything about— yeah, it's, it's my— I never intend to call out this whole thing about, you know, you got to work on your business, not in your business. And I come from a training that says, you know, the Gemba walk, manage by walking around, right?

12:50And you go see and you talk to the people that are doing the things. Because you can't set policy from an office somewhere. You've got to have an understanding of what's going on, or you have to have people that you have delegated the responsibility to who can give you the data that you use to coach them in a direction to come up with the updated policy.

13:16But if you just try and do it from a distance, you may be completely out of touch of what the reality is. And so there's some businesses and some management styles that say, You want a solution, you go to the people who do the process and you ask them, what would you change? And a lot of times, guess what? They've got the perfect answer because they know what the mission is.

13:42And so when you look at a, quote, kaizen event, right? I know I'm talking Toyota Way, I'm talking Edwards Deming, I'm talking a lot of this type of stuff, but a kaizen event would have everybody from the CEO to people from parts to people from repair to people from sales, and they would come in and they do an event focused on coming up with an improvement to a process.

14:07And all stakeholders were involved in that. It's not top-down because you're empowering a team and you're coaching them. And so when you walk up and you see something that's not being done according to the process, You don't go, you're doing that wrong. Why are you doing it? You say, help me understand why you are doing something different. Because if you don't do that, you are eliminating the chance that they may have actually come up with an improvement that would make you more money.

14:35Exactly. Wait a minute. We're not allowed to say that money is good. Oh, no, don't say that. We're not allowed to say that we do this for profit. Profit is evil. If you— if you're driven by profit, then you're clearly the problem in this industry. Oh, there's— Is this sarcasm again, Mike? Is this— yeah, is this— yeah, he's got both eyebrows up.

14:53So yes, yes, that's what that means. I'm just— so like, I said, there was a point today we did, um, we did an exercise today about, um, creating a mission statement for your business or core values or, uh, company promise or whatever else it might be. And like, I get it. At a certain level, there is a value to doing things like that, creating that, you know, as Braxton will say, a North Star to make sure that we're always— make sure we don't lose direction, right?

15:28Something that we filter our choices through to make sure that they pass the sniff test. Right. But part of me is a little bit jaded, and I think that going to classes or conventions or events to learn how to do a, like, kumbaya around the drum circle event with my team, to learn how to do a fucking mission statement, was created by corporate consultants to justify their corporate consultancy.

16:01I like that. So you don't, you don't believe that there's any reason to have a why. You heard that here first. Mike doesn't believe it's important for a business to know why it does something. Well, so every time we have— every second Tuesday night of the month, we have an open invite meeting for everybody in my company from all the locations to combine at one location.

16:27We have a second floor lounge at one of the shops that used to be a second floor machine shop, and I don't do machine work, so we've turned it into like a lounge, right? And we just talk about process, procedure, what's working, what's not working, uh, what are some new things that we should do, you know, stop, start, change, that kind of stuff.

16:45Um, and that's going away, it doesn't matter. We, we start the meeting with our, our mission statement and our core values, right? And our core values are be nice, tell the truth, have fun, and be thankful, right? Love it. Do unto others as you would have them do unto you. Be nice, tell the truth, you know, absolute integrity, have fun. You know, we should laugh every day with each other, not at each other.

17:11Or maybe both. Or both. Yeah, maybe a little bit of both. Be thankful. Understand that you didn't get to where you are today by yourself. Someone helped you, so you should help someone. Right, right. I believe those things. Yeah. And so I'm happy to— a little kumbaya. Yeah, that is kumbaya. Yeah. But also, I can get in touch with my inner Dutch and be like, bro, You got a fucking job.

17:33You should want to be excellent at your job, because why wouldn't you want to be really good at what you have chosen to do for a living? So give your best fucking effort every day and expect to be compensated appropriately and well every day, because you should take pride in what you do. And I don't need fucking kumbaya to make me want to do good.

17:54It makes it easier to do good. Does it? Yeah. Why are you going to be at work and just be an asshole the whole day when you focus on not talking to the guy that's right next to you? You got to be an asshole every day, no matter what, girl. You know that about me. You're not. But so I say that, and at the same time, I realize the hypocrisy because when you ask your question and I made my silly joke about, okay, boomer, right?

18:16And then, and then I said that we have to understand that what worked in the '80s and '90s and what the workforce's communication style and methodology and motivations were then versus today's workforce are different. It didn't work in the '80s and '90s. I disagree with you. Well, I mean, it was more accepted because there was less communication. It never really worked. And the social construct was different because a lot of those jobs from that point in time and the older employees that were there, many of them were working toward pensions and retirements and guaranteed things.

18:52And so they stuck with it. Because they had a long-term view. That's all gone now. I think there was absolutely a cultural difference in the way we thought about our job and working as an identity. Then how did Sun Tzu— how did the Chinese philosophers come up with these concepts thousands of years ago that, you know, find something you love and you'll never work a day in your life?

19:17So do you not think if we're talking about cyclical patterns of behavior and motivation, it's possible that that cycle existed thousands of years ago and it has come back in? Right, or it never really left. So you think people haven't changed at all? No, I think there aren't cycles of motivation and thought processes. I think the advent of the corporate structure where score is strictly kept on money, and then the fact that so many of the people who teach business in this country come from a certain group of schools and they're all taught the same thing and they hopscotch around to different organizations, and that becomes normative than some of the other things, like the

19:58Deming school of thought from the '40s, which was prior to the '80s. Wait, wait, wait, the '40s were before the '80s? Yeah. Which '40s? Which '80s? Within, within our— if we're going to be fucking obtuse, let's go full obtuse. If, if we're, if we're 19 in front of it, we're gonna— if we're gonna talk in our realm of knowledge and current history, right?

20:25We weren't alive in the '40s. I don't know about you, dog. I wasn't alive in the '40s, but we're child of people who went through that. Okay. And when, when, when these concepts were put out about creating a business to produce long-term ethical profit, and that was counter to the, the job of a corporation is to generate profit for the shareholders, and that was number one.

20:57And this, we need short-term profit versus long-term profit, there was a split. And so what happens? That mindset got taken overseas, matched with another culture, and we've seen a track record of some companies that went 50 years and never had a layoff because they treated their employees differently and they coached differently. Okay, and so this, this is just an ongoing dichotomy in philosophy of how you run a business and what works.

21:30And if you're looking for short-term profit and, oh, I'm going to be an absentee owner in X period of time because that's the set expectation, and then you struggle to get there because you don't lay the foundation that's required for you to walk off and do that. Right. And so it takes work to get there. And if your goal is to get there, but you can't put in the work because you don't have the skills and the methodology to get there, then it all comes falling apart.

21:58Now, whose fault is it? I like that, Jim, because I see that a lot in the shop. I think because I think people are tripping. You sit there and you got the coach telling you work on the business, not in the business. And they take it literal because they don't have enough business sense and they haven't been doing the business long enough.

22:14And they sit there and they were like, well, why can't I be like Mike? Because they think that you have like $5 billion in the bank. I don't fucking know. Yeah, but think about it. When you're sitting there telling somebody that's had a shop for 6 months or a year, like, how long have you had your shop? 21 years. 21 years. All right.

22:29So rookie. You got these people looking at you thinking they can do the same thing that you're doing in year number 2, and they're taking their posts off to the shop and they're working on the business all the time, and then they're forgetting about working in the business. And then they never get to where that's one of Brian Pollock's big things right now is like, motherfucker, well, he doesn't curse like me, but bro, you need to go work in your damn business.

22:53Go to work. Do the work. Yeah. You're doing $100,000 a month. You don't need to be a stay-at-home business owner. No, you need to be at the shop working. Get your ass off of social media. Go to work. Like you're complaining about not getting— Holy crap. There are some people that are on social media all the time. How do they get any work done?

23:09Like, go to work. I don't understand it. I don't understand it. But no, because they're listening to what they want to hear. They listen to what they want to hear. They are. Well, so we all seek out our own echo chamber that reinforces our pre— pre-human tendency. Yeah, right. Yeah. And, and I will seek out ways to validate it. Yeah. And that's what I was saying earlier today.

23:32Like, maybe tell me what I want to hear. Tell me what I want to hear. Tell me, tell me what I want to hear and help me feel self-entitled rage towards the people I disagree with. Right. I mean, that's, that's MSNBC and Fox News, man. All shop owners and service advisors suck, right? Yeah. Yeah. Yeah. The dealerships are stealing from you and the independents are hacks and service advisors are useless.

23:54It's one extreme or the other. The stereotypes. Yeah. Well, then if you don't worry, people don't worry about themselves. What did I tell you? Tell me what I eat does not make you fat. I love that. You worried about what I'm doing at Brown's Automotive? That does not apply to you. My labor rate doesn't apply to you. My hours don't apply to you.

24:10Why are you only open 4 days a week? Because that's all I need. But I used to be open 5 days and I used to work 7 days a week. But you don't know about that, Tanika. But you're seeing Tanika now. But you ain't worried about your own shop. Sweep your floor. Sweep your floor. Fucking A. Put that, print that out and frame that shit and put it on her wall.

24:29Like Becky Whit says, use some soap, some light. And a broom. Like, really, take care of yourself. Do the coaching, listen to the podcast, take what you need from that, and work on yourself first. Like I said today, if you figure out for like, okay, I'm gonna give it 6 months that I am the problem, I am the drama in my shop, and you really look in the mirror, you're like, dang, that is jacked up.

24:52That's jacked up. But no, like you said, everybody wants to be right and everybody wants to feel fuzzy inside. No, do the hard stuff and look at yourself and like, dang, I am the problem. Yeah, I did tell him I was going to do that. I never did that. And that's why that technician doesn't respect me, because he still hasn't got that piece of equipment yet.

25:06Technicians questioning shop owners and they've never owned a business or never been. Well, they just don't understand. If they don't, they get mad at their paycheck. They don't understand which side of the paycheck are you being on? Yeah. Okay. So, yes, your paycheck said $1,000 and the government gave you $750. I didn't take the $250. Do you not know how much more money I had to pay to pay you?

25:27You didn't make $1,000. You paid $1,150 and they gave you $750. Yeah. Like shop owner technicians not understanding the business side. That's unloaded because you haven't even put in any benefits, vacation time. We're not thinking about, you know, unemployment insurance and all of that stuff. And yet here's one. Why has so much profit been moved over to the parts side of the business?

25:51Can you explain that to me? I think the parts matrix— parts profit is going away right now because the downward pressure, the market forces are pressing part profit down more than they ever have. I think more and more of the profit strain in the industry is being moved to labor every day. You believe that? Yeah, totally. I think, I think there is a model coming in the future for here's what I paid for the parts, here's the copy of the invoice where I bought your parts, and all of your GPH comes from, comes from labor.

26:24Is there— I've wanted to ask this. I'm on, I'm on a podcast with two people I respect. Thank you. One more than the other. Did I just say that? Which one? No, I didn't say one more than the other. He said that. That's Rage Boy over here. Okay, get straight. Have you ever heard a number talked about as an overall look at your shop?

26:50Not currently a shop owner, right? Have you ever heard a number talked about as an overall view on the dashboard that says number of hours you're open and how many gross profit dollars per hour does the shop generate? Have you ever heard anybody give that overall number as a benchmark target? Yeah, if they do, they're full of shit because it's a factor of your expense structure.

27:20What your target should be and what my target should be are totally different. No, gross profit per hour is what the shop generates. So that's gross labor dollars, gross parts profit, and any fees you have on top of whatever your expenses are. That's gross profit. All of that's gross, not net, not anything else, not loaded, whatever. I'm talking about just pure gross.

27:54If a shop is healthy, you're getting some from labor, some from parts, and maybe some from a couple other smaller revenue sources that are all going to be used to pay your expenses. And I realize the number a shop needs to be viable may be higher or you may need more hours by having more people, more bays. But what would a healthy target number be?

28:23So if I'm— let's say I'm $180 an hour for labor. Okay, let's throw that number out there. It's fair. And if I am targeting a dollar of parts sales for a dollar of labor sales. 1-to-1 parts-to-labor ratio, pretty standard. Because I've heard this a lot. Okay, then all I have to do is take my dollars per hour for labor and take my whatever my gross profit is on parts and add those two together.

28:55And that's putting me a long way toward what my gross profit per hour is. Efficiency would be how many of those hour units do you generate versus how many you're open. I think you got to put together your effective labor rate and your parts-to-labor ratio. What is an effective labor rate? Okay, so your labor rate is $180, but you've got different things like you— everything is not charged.

29:18You give away diag and all that. Cabin air filter, you're not charging $180 an hour to do a cabin air filter. So that's your effective labor rate is how close you can stay to your door labor rate. So your effective labor rate is labor dollars collected divided by billed or billable hours paid out to your staff. So like my labor rate is $210 right now.

29:39My effective labor rate is probably like $158. And was it 10%? Yeah, you want to be like 90% of your door rate. Yeah, but I'm— I've never been anywhere close to that. And I also— I'm an oil change whore. I do free tire rotation, I do free flat repairs, I do free diag for the first hour. So I got all these things that eat into my effective labor rate.

29:58Or let's say We sell a $2,000 job and manifold bolt breaks off and my service advisor is a pussy and he doesn't call back and sell additional labor. That eats into your effective labor rate because we pay the technician the extra half hour to drill it out, but we don't charge for it. So those are the things that erode your effective labor rate.

30:17So your effective labor rate is the dollars of labor, labor dollars and parts dollars collected per hour, sales per hour, right? And then your margin is going to give you your gross profit per hour. That's how I would go about that. Because if you just say that it's purely your labor rate, you're not taking into account all of those things that erode labor.

30:40Payroll erodes labor dollars. Oh, sweet Jesus. Okay. Whatever. Yeah. But no, you see where I'm saying? That seems like a term that's made up to become a KPI. Your labor rate's your labor rate. If you decide to give away hours or pay tax extra, or things like that, that didn't change your gross labor dollars per hour. You just chose to give some money away, and that's an expense.

31:07Okay, so now you're not— now you're right, now you're not gross. I'm trying to understand it because I'm not stupid with numbers, right? You're not— that's not gross. You're getting closer to, um, unloaded net or some other term you want to throw in there. So he's making up terms. Let's back up. All right, let's— so when I'm talking to a team member or a new team member and we're talking, I'm trying to be more transparent than ever with my team about like how we build a business plan and how we run the numbers and everything.

31:39So everybody knows revenue is revenue, that's what— that's sales, right? So revenue minus cost of goods equals gross profit. Cost of goods is how much we pay for parts and how much we pay for technicians unloaded, not counting benefits, holidays, vacations, that kind of stuff. And that gives you gross profit. Gross profit minus overhead, which is expenses, which is rent, which is utilities, which is how much we pay for the best software in the country.

32:08This is really going off the rails, which is fun. You can edit it all out. So that— so gross profit minus overhead is net profit. Right? Net profit minus debt service— how much I pay for the mortgage or the credit card bill or the car loans or whatever else— equals cash flow. So we got to have cash flow. So in a month, let's say that my expenses, my average expenses per month are $50,000, and I want to net $20,000.

32:37So I need $70,000 a month of gross profit to cover expenses and make $20,000 $70,000. Does that track? Yeah, that's fine. So what's— I actually had a point, but it's getting lost. But go ahead. What's our target gross profit? Mhm. 20%? No, gross profit. What do you want for gross? Just call it 60 points. Call it 50 points for ease of math because I don't have a calculator with me.

33:01So $70,000 divided by 50 points is $140,000. I need $140,000 in revenue. To hit my nut, right? Divided by the number of hours of labor I have available. How many hours can my guys turn? 20, 20 days a month. I need $7,000 of sales and I need $3,500 of gross profit per day to make $20,000 a month. Can my team do that?

33:29Well, what's my sales per hour? That's where we get to parts and labor per hour, effective labor rate plus part sales per hour. So if I need $7,000, let's say that I'm for ease of math at— what's an easy number to divide in $7,000? $350 of parts and labor per hour. I need 20. I need 20 hours a day. So can I do 20 hours a day?

33:52That's how you manage by the numbers as an evil shop owner. Okay. And lead by KPIs. So where I was going with this— oh, that was a tangent. I apologize for going off. No, you— Now, here's what I was trying to get to. We have a business structure that gets profit from labor and profit from parts, and there's nothing wrong with that.

34:14You can run your business any way you want. But like little old me, who's never a big ESO, right? But I'm talking 25 years ago. How did I set my diagnostic labor rate? I'll tell you exactly how I did it. Never had a coach, never had anything, but I was charging X number of dollars an hour. And I will tell you, in, you know, 1999, 2000, I was in a shop and I was doing $80 an hour.

34:4225 years ago. Okay. There's shops now that aren't doing $80 an hour. But anyway, 1990 was way more than 25 years ago, dog. I said 1999. Okay. Okay. You missed the 9. Okay. I said 25 years ago, which was right at the turn. 27 years. 27 years. Now, typical KPI guy, right? Math is tricky. Math is tricky. Math be mathin'. I see math.

35:03You calculate math. So I also knew that average, I sell so many dollars worth of parts at— for each hour of labor sold, I could give you that number and I could split my business with my shop management system into business units of where the revenue is coming from. I actually had a business unit for Mobile Diag 25 years ago, so I knew exactly how much money I was making from programming and diagnostics with the factory scan tools.

35:36And I could tell you what my ROI on those tools was just from that business unit. Right. But I would look at those parts sales and the gross profit on parts sales, and I knew— nobody ever taught me. That those dollars per hour in parts sales I added to my labor rate and that was my diagnostic rate because I was not going to make less money per hour doing diag work than I was doing normal gravy work.

36:12This is the same time that Coachess came along and said you should double your labor rate for diag Or they said you should charge an hour and stop at 30 minutes for diag. See, I, I can't do that because that just doesn't seem— but what they were doing is saying you have to replace the lost gross profit because you're not selling parts.

36:31And I get where they're coming from. I mean, that makes sense. Just, I mean, you could— what I advocate for obviously is just don't charge at all. And So when I hear both of you sighing and looking away at the same time, so, so, so, hey, and he bought it all the way back around to Free Day. So we're a shop and we're a shop.

36:58And why don't we charge $300 an hour? Because the other shops won't let us. And then the customer's going to have a fit and nobody respects the industry. And because you can only charge what the market will bear, you can only charge together. If you didn't have any parts to sell, okay, if you only sold your service, could you be profitable? That's my question.

37:21We are— I completely understand what you're saying. Well, and so if you can't do that, why not? And it's because, have we just chosen a business model and we can't see a way to do it differently? I think we're tilting at one mills because it's a free market economy, and ultimately the consumer will decide what works. So if I only charge— if I charge $300 an hour in labor but I choose to go street price on parts, and at the end of the day our tickets are the same, who says my way is wrong?

37:51Because they're going to look at the estimate from the shop down the street and they want to know why. They're not going to see the math that you do. They're not going to see your reason. They see the bottom line. It's just going to say $300 an hour for labor. It's just going to be the bottom line. It's how much is it to put this alternator on.

38:05They want to know What's your labor rate? What's your labor rate? You do— you, you, you combine that all on the ticket because some people think that that's legal to do in every state. I know it is. Yeah, I would work— I worked in them. Yeah, I know it's illegal. So you have to provide a— you have to provide a line number.

38:23So I think that, um, I'm just asking, that's one of the— that's the glory of the independent aftermarket is that we are small business owners, we are entrepreneurs, we get to do it however the fuck we want to do it within certain bounds of reality and legality, right? Sometimes outside of the bounds of legality because there are a lot of people out there that are doing shit wrong, right?

38:47Um, but ultimately the consumer will decide. And I think that's one of the reasons— not to beat the same drum all the time because that's not what I'm trying to do here— but one of the reasons that so many people get all up in their feels about me being a ragebaiter and talking about Free diag. You do it well. I mean, it's fun.

39:08It gets reactions, right? But what it is, is it is— it represents a competitive advantage in the marketplace to consumers who don't know anything different. And they're like, fuck, I don't want to battle against that. Fuck that guy. He needs to go out of business because I don't want to justify that I charge $200 just to look at it. We know that's not what you're doing.

39:29But the consumer who pays the bill for everything in my life doesn't. Another guy who I know very well, and so do you, had a conversation with a client and gave him an estimate higher than another shop. Right now, I'm not going to drop names. It's his story to tell, but it's a great story. And he knew what it was, what it would take to do a job right.

39:51He knew all the extra things that weren't put into that other guy's estimate. And he said, well, are they doing this? Are they doing that? Are they doing that? And they weren't. They weren't. And he's like, why wouldn't I? I'm right here. Why wouldn't I replace this? Why wouldn't I replace that? You'd have to go back in here and spend the same money on labor.

40:09And this will fail because we have the experience to know that. It sounds like somebody's taking a shower and putting their old underwear back on. He educated the customer. He educated a customer and he took the time to do that. It's great. And it's great. Super. And I mean, so he saw Sims where an educated consumer is his best customer. And so, and so he, he put forth the effort and he had the ability to articulate, communicate effectively for that.

40:33So if you can't communicate, give it away. If you can do it, great. Can your employees do it? And can your employees do it when you have 2 shops or 10 shops? If you coach them right and they sing Kumbaya in the morning, they will. So how many, how many organizations with 20+ locations have a front counter full of people who can have that conversation every day?

41:01It depends on if they took the time to grow deliberately. The answer to that question is fucking zero. Mm, I disagree because I know a couple. Name drop them because it's a huge compliment. It's a huge compliment to say you've got 20 stores that can articulate that situation effectively every day. Or that can stand up to the customer that thinks they know everything and just have the mindset to deal with that every day.

41:29Like, I like to— because if they can, they are a true badass mofo to build an organization, to train that many people at that high level, to execute that well. Because what you just described is a very high-level conversation with a customer. It requires an incredible level of knowledge and confidence and communication skills. I had it sitting in the waiting room in your shop.

41:53That's another story. Yeah, sorry, that's a whole nother podcast. Oh yeah, tell me about it. Tell me about that later. So I mean, I guess that's what— so because I'm an evil shop owner, it can be done, Mike, but it takes somebody who understands the role of a leader and actually doesn't just talk about extreme ownership they actually live it. And extreme ownership isn't being the ultimate authority on everything.

42:24It's delegating it and developing people. So when you, when you look at the military, I was never in the military, but the highest orders of, of performance in the military, and I've studied this, it's fascinating because when they come back in and they do a debrief like the Blue Angels and organizations like that, Rank and insignia go in the middle of the table.

42:47Nobody is over anybody. We're going to do a debrief. And when you have an organization that can look at, you know, the leader and say, you didn't do this, and they own it and they go, you're right, right? Those are the organizations that are developing people that can perform when the pressure is on, because you cannot be there to select every target and to make every shot.

43:17You have to trust your people to do it. So you have to train them and empower them to feel like they can do that. And you will have their back because you own what decisions they make within reason. One of the things that takes time, that is the hard work. But if you build that, I know of a shop owner who has an amazing organization, and I, and I know about it through connections, and I've met the man once, and I know how he works with his team, and he calls them not his employees, they're his teammates.

43:53That's what we were hearing about today. Okay, we can talk later. I, I just, I I don't want to throw— I don't want to throw people out, but I'm just trying to tell you that there are these organizations and I've worked with organizations with— one of them had 120 locations around the country. Okay. And they, they incorporated the processes and the handbooks and all those things.

44:25But the handbook was not a replacement for proper training. And for understanding the whys and refusing to pass on a defect. And they had teams with the right leadership in place that could replicate this across the country. And their performance through the times when they were doing this on all 8 cylinders was amazing and amazing growth. Okay. When they back away from those concepts, the performance suffers.

44:57Yeah. And you can, you can take Toyota, who will admit it. Toyota had amazing growth because what they would do when they're going to go in and open a new location, they would send in 400 people who were steeped in how the Toyota production thing works. Right. They called them black belts. They'd send in 400 people to set the culture and train the people and get the processes all stabilized.

45:23So they were empowering the next person, and their job was to work themselves out of a job. Okay? And that's how they were able to replicate their production process. And it worked great for a long time. And then somebody got in charge and they changed their focus. They could smell being the number one auto manufacturer. And so they went for the growth and gave up their process, their coaching, and their training, and it came apart on them and they started to have quality issues.

45:59They're still the number one, but they, you know, they slipped back at one point. I know for a fact they did slip back behind VAGS for a little while, right? But no, but, but what I'm saying is that they lost that focus on coaching and process Yeah, to build the people who could do that and replicate it. And they learned from that.

46:23And fortunately, they had a big enough war chest to be able to handle it and they just took care of it. It's been a fascinating company to watch. It's been a fascinating process to watch. So I love it because as a mechanic, you want to perform at a high level. You've got to have a repeatable process. You want to teach somebody else to do diag.

46:41You can't be there to do the diag for them. You have to teach them how to replicate this, and then you have to step back and let them roll. So you think you can do that with a service advisor, though, with all the different kind of personalities coming in the door? With the right service advisor. Different kind of cars and different kind of problems.

46:58Different cars, different kind of checkbooks and personalities. It's teaching complex skills. Well, I think you're born with a lot of those skills. I like to think that I'm really good at service advising because I can read a customer. I let them continue to talk, let them talk, let them talk, and then I know how to reach them. But then we've got KPIs to meet.

47:14You can't sit there and have a 30, 45-minute conversation with each. I've got a dude in my organization who, I mean, he just makes people happy, man. And he has a very relaxing way about him and puts everybody at ease. He's got a, I'm in a general repair shop, mostly domestic and Asian, $1,100 ARO. Right. Oh, it can definitely be done. They're outliers.

47:40He's writing 3 cars a day. But 3 cars a day, $3,000, or you can have somebody working 10,000 cars a day. Yeah, 3 cars a day. And that's it. That's— but yeah, but you let them get by with it though. I do. And that's part of the reason why I'm part of the problem in my business, right? Is because I'm not good at accountability.

47:59But anyway, so you do need to be at this leadership conference. How can you let— how can you coach him to provide that level of care without doing the Roy Rogers deal, slow down, partner, and still feel like he's giving them good service. That's a conversation to have with that person. Yeah, but sales is one of those things. You either have it or you don't.

48:27I once, I once got hired at a job in a radio-controlled hobby shop. This is a funny story. I'll share it with you. Oh, I, I got to be the judge of whether or not it's actually funny. I got, I got into the hobby in the '80s right after I came out of trade school and I built my first RC airplane and I was starting to upgrade.

48:47And so I was down in a hobby shop one day and I used to go down there on a regular basis after work because it was a short run down. It was beautiful hobby shop and I would be over looking at radio-controlled airplanes and engines and all kinds of stuff because it's just like, hey, I was a dork, right? You know me, Tanika, right?

49:04Nerd alert. People would come in here into that store and they would say, do you fly these things? And I'd be like, yeah, tell me about them. And I would talk to them and I would talk to them about selling product for them when you did. Oh my goodness. I was walking people. So I'm talking, I'm talking late '80s. I was walking people up to the front counter in a radio-controlled hobby shop out with $400 to $600 worth of product, and they were smiling and happy.

49:28Why? How was I doing it? I wasn't telling them what to buy. I wasn't pushing them to anything. I had no spiffs. I gave them information, judged the person for their personality type. Are you somebody that dives into things? You do want to just take a look? That's going to change which radio or which engine. But the airplane and some things, do you like to do your own?

49:48You want to build it? You want something more You know, you get in the air, just ask them questions and let them make choices. Right. And they would choose $400 to $600 worth of stuff and go check out. And I'd say, have fun, right? And I'm in this club and come see me. So then I'm in there and I'm buying in late '80s as a young technician.

50:07I was buying about $600 worth of stuff, right? And I brought it up to the counter and the store manager was there. And this is how we lose technicians. I'm telling the story for a reason. I walked up to the counter and I put all the stuff there. It was going to be about $600. And I said, he said, I said, "Whew, I'm going to need to get another job if I keep spending money here like this."

50:30And the store manager looked at me and said, "When do you want to start?" He said, "Sales and communicating with people is something that can be taught, but some people just have it, and you have it." And I said, you serious? He says, you got time to go to dinner? That man took me to dinner and offered me $5,000 more to work there as an assistant store manager than I was making as a technician, doing something I enjoyed.

51:01Uh-oh. And I was good at it. And we made $980,000 in sales out of an 1,800-square-foot store with 2 full-time people and a couple of part-timers. At a 33% gross profit margin because it was just talking with people. Some people have that. So, and I left the, I left the industry for a while. Part of that, I made good money. Part of that is that you are passionate about it.

51:31Mm-hmm. And I'm not passionate about anything. I don't know many people that are passionate about selling ball joints. It's not about selling ball joints. It's about helping the customer. Exactly. You can get anything you want if you help enough other people get what they want. I don't disagree with that. The customer doesn't want to buy ball joints. They're buying safety. My hobby, the thing that I choose to spend my free money and time on is RC airplanes.

51:57And so if I go into a store and there's somebody else that I can share that passion with, then I'm going to be able to communicate that effectively and with energy. Right? And, and the sale just happens naturally from that. So then I had an 80% return client base, and I had people that would wait 2 weeks for me to get back from being out on the road teaching because they wanted me to work on their car.

52:19There is a difference between selling RC airplanes, and I was selling repair and had people at 80% return client base, okay? And waiting 2 weeks for me to get back because I was the one who took care of their car. And when they bought a new car, who was the person who did the first oil change? And the majority of your listeners are going to be technicians turned shop owners who have the exact same story, booking out 2 weeks.

52:45People love them. They key tossers and they trust them implicitly. Right. And one of the most difficult things that they will do in their growth as a business person— they don't charge correctly— extricating themselves from being the one that has to talk to all the customers. Being the one that has to work on all— getting to a place where the customers don't have your cell phone number and call you and you answer the call or the text while you're at dinner.

53:09Because there are people that are going to listen to this episode who got a text message from a customer at dinner while they're listening to this episode and they answered it, right? You want to know why I didn't scale my shop? Because I didn't want to go through the pain of replicating myself at that time in my life. Well, and so I'm being honest.

53:28Yeah, yeah, I'm being honest. Today's Jim would have seen that and go, this is going to take some work, but I know how to make it happen. So therein lies the, the problem is like, look at this experience that I had and look at the passion that I had and the results that I had. I didn't take the next step, but I could now, right?

53:52And it is— it's fucking hard, man. You're right, it is. And so like, ever— like, everything that I talk about and do and view in this industry is through a filter of what my goals are for my business, because that's my— the filter I view life through, right? And everybody that's listening is listening and responding and telling me that I'm a dumbass through their filter and their view of their business right?

54:19In my business, I want scalable because, you know, I'm fucking greedy evil shop owner, whatever you want to call it. Well, I want a big business that makes a lot of money and creates generational wealth for my family. And that's okay. Nothing wrong with that. As long as it's done ethically and I treat my people right and I treat my customers right.

54:37Right. And so every time we have these conversations, I think about, can I make that execution at that level? Work with 250 employees across 10 stores or across 15 stores or whatever it is. So you need to train 10 Mikes. I don't know that I've ever been good at it myself. I think you should do that. We don't need to. You understand what I'm saying?

55:03One of them needs to replicate himself to be able to build that. One of the things we talked about today, other leaders, and one of the things that Josh said was, uh, if I am training, equipping, and supporting my staff appropriately, then I think I am— what do you say? I'm— hang on, I'm just going to look at it because I took a note and I don't take a lot of notes.

55:28That's true. I'm not in charge of anything, but I'm responsible for everything because I've delegated appropriately and I have my 3 to 5, uh, you know, next level down managers or leaders within my organization, and they have their 3 to 5 each, and they have their 3 to 5 each, right? The Fabergé principle. Yeah. And, and we talked about like the military, you know, you have the rifleman and then a squad, and then there's a squad leader, and then there's the platoon, and then there's the platoon leader, and I don't know what the next level up was, battalion after that.

56:00I don't know, I don't know, wasn't in the military. No military people at the table. Yeah. Josh can tell us. But so I feel like that's one of the areas where you and I have— I'm not going to call it friction, but where you get on your soapbox and I hear you talking and I'm like, yeah, but— and then I get on my soapbox and you hear me talking like, yeah, but— and it's that I'm viewing everything through a filter of how do I make that scalable?

56:28Is that sustainable? At a, at a level where I can have a boat, you know, or whatever the joke is. Second boat. Second boat. Two boat money. Two boat money. Right. And do you think you can do it without building those key players? No, because I've tried and failed multiple times in the last 5 years. So you do need the company. I've built the organization up and it has fallen out from under me and I've built the organization up and it has fallen out from under me because of a failure of leadership.

57:04Um, leadership can be learned. Well, yeah, well, that's what we're here for this week, right? Right. Um, I have built— I believe in you. Well, I've promoted people out of their skill set. That's common, which happens all the time. First level of incompetence. But then I did not support them and train them into the new position that they've been promoted into, and then they burned out and fell apart, right?

57:25Watched it happen in lots of organizations I've been in. You can— you climb the ladder until you're one rung higher than your competence level, right? And then you— and then you stagnate or you get fired or you quit or whatever it might be. And whose fault was it that they were in that position? Me. Mike's fucking me. Yeah. No, I get it.

57:41I get it. I mean, you know, are we going to solve the world's problems? No. Is some of this philosophical? Sure. Are these the fierce conversations that I think everybody should not be afraid of having? Am I out of beer? Absolutely. Absolutely. I'm out of beer. You can leave flight. There you go. No longer out of beer. We can continue for another 20 minutes.

58:07No, we can't. We got food over there. Copy that. Yeah, it's time to eat. There's food, there's barbecue, there's beers, and there's— and there's lots of people to talk to. There's a lot of people to talk to. So you guys, look at you guys. You didn't even fight. You're so sweet. I think we got a little bit of an odd couple bromance.

58:25I think the bromance is beautiful. I'll tell you why I appreciated this conversation is because I've known both of you and worked with you somewhat closely for the past couple of years. And so it's easy to talk with you all. And then I'm sitting here in the back of my head having fears about, you know, there's a lot of people that don't know me like you guys do, and they're going to hear certain things I say and they're going to be like, do you hear Kokonas?

58:49And I'm just going to be like, okay, Kokonas is just a revolutionary socialist who wants to eat the rich. Yeah, you heard that wrong. What? You know, give me that beer back. I'll tell you another funny thing that Zig Ziglar used to say. He used to say— people used to say, Zig, how do you justify your Christian faith with all that talk about money?

59:13You ever hear this one? You ever hear him say it? He says, that's because He says, they'll straighten their halo and they'll ask me that question. And he says, that's because I believe that God made the diamonds for his group, not Satan's crowd. And I'm like, well, damn, that was kind of deep. I like that. But it can't be your God, right?

59:34Because if you're only chasing the prophet, then it can, it can blow up on you. You chase the prophet to do the good things. Oh, to build generational wealth. But if you do the good thing, you got to decide on what— I mean, nobody gets to decide on what your good thing is. And if you want to do your good thing and you do it in the closet and you do it, I mean, it's between you and the Lord.

59:56It's not— I'm not gonna do it in the closet, girl. I'm happily married. Take my beer back. Let your giving be in secret. Exactly. Don't go blowing your horn. You gotta blow the horn. I know people— I know people— you gotta go there. Yeah, you can't help yourself. He's just— yeah, he just can't. I'm two beers in, I can't be— two beers in.

1:00:14Here I thought we were having a moment. We were having a good moment. And then, and then, and then here comes— and then he threw an Allen wrench in it. I am emotionally stunted. You know that my brother's first call sign as a fighter pilot was Wrench because of Allen wrench. See, there it is. And we'll end on that. And he puts a hex on it.

1:00:30That was just— I don't know where it came from. That was bizarre. Allen wrench. He threw an Allen wrench in it. Yeah. Negative Ghost Rider. Negative Ghost Rider. Cody's here. It's time for shots. Sign it off. Time for shots. Signing off. Shot time. Downshift with Tanika is where we slow down long enough to have real conversations. Hosted by myself, second generation shop owner Tanika Haynes.

1:00:52This goes beyond your car count, your KPIs. We want to talk about leadership, legacy, mindset, and the messy, beautiful journey of building something that lasts. You will hear stories from shop owners, technicians, and other industry leaders who are figuring it all out by themselves in real time. This is a space for growth, tough love, laughter, and leveling up.