Deeper Dive Into P & L and Budgeting

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0:30Are you really buying a car online on AutoTrader right now? Really? At a playground? Yeah, really. Look at these listings from dealers. Wow, your search can really get that specific. Really. And you just put in your info and boom, cars in your budget. Mom needs a second, honey. You can really have it delivered? Really. Or I can pick it up at the dealership.

0:49One sec, sweetie. Mommy's buying a car. Mommy's buying a car. Uh, I think your kid is walking up the slide. File again? Really? AutoTrader, buy your car online. Really? Welcome to Repair Shop Reckoning: From Chaos to Control. Because too many shops today are running on chaos. Phones ringing, technicians frustrated, front counters overwhelmed, owners buried in problems with nobody to call. Kevin Brown has spent over 30 years in the trenches learning how to take that chaos and turn it into control.

1:19Shop owner, operator, consultant, leader through industry shifts, insurance games, bad hires, great hires, and lessons learned the hard way. This isn't theory. This isn't corporate training fluff. This is real shop experience, unfiltered. On this show, Kevin breaks down what actually works— running profitable shops, front counter control, training technicians, negotiating with insurance companies, building systems that make your shop run. Instead of burn, and the mistakes that quietly bankrupt shop owners every single day.

1:52No corporate scripts, no sugarcoating. And yeah, somebody might get offended. That's okay. Disney's two doors down. But if you want the truth about this industry, buckle up. This is Repair Shop Reckoning: From Chaos to Control. Let's get started. All right, welcome back. Today I am going to engineer, reverse engineer the P&L sheet and make a budget sheet. Depending on what you're going to call it.

2:18We're going to use last year's numbers because it's a whole year. That way we kind of have a guideline of everything that happened last year. So keep in mind, guys, you can't control the future, so you're going off last year's numbers. So I got my P&L sheets here, um, I ran my numbers to see exactly where my percentages were. I got some, um, we're going to explain add-backs and stuff like that, owner add-backs.

2:40And one thing that I just want to start the show out to talk about is a lot of owners that are making money don't think they're making money because they're taking everything out the back door. What do I mean by that? They say, well, we're not making any money, you know, but their kids got company cars, they have a company car that's, you know, their kids don't even work in the companies, but they have company cards or gas cards, performance or insurance is paid for, everything, you know, cell phones, all that is profit if they're not, if it's not needed to run the business on a daily basis.

3:13The owner's just taking it out. So a lot of times when the private equities come in, they look and say, okay, what is all the add-backs? Add-backs is what the owners take out of the company. If I got rid of the owner, say he takes out $500,000 a year and I could hire a manager for $150,000, I could take the excess money and that's straight money we could put in our pocket.

3:35So I'll just talk broad numbers 'cause everybody gets their calculator out and says, oh, he made a mistake in the comments and stuff like that. And you notice something that I've noticed lately. A lot of these other influencers are little sissy boys. They're fricking shutting off the comments, shutting off the comments on their posts. Did you see that? You point that out to me and I was like, why are you even creating content if you don't— if you're so afraid of the blowback or whatever comments you're getting?

3:57Yeah, I actually had a guy the other day on our YouTube. I just finally blocked him because he's such a pain in my ass that said that maybe I should do an episode on stealing Mr. Garrett's business from him. When you said that to me, I was like, was he there? Like, I don't know, does he know inside information that— yeah, he pretty much signed the papers when, uh, I paid him for the business.

4:17So I don't know how I definitely stole it, but all good. I guess everybody's got their own perspective. I stole it 10% at a time and then paid for it. Yeah, yeah, look at me go. So, you know, I wanted to kind of start this out. Like, last week we talked about it. We talked about, you know, we get a $100 bill in I did $100, we could do $100, we could do it in percent, in dollars, whatever, it's the same, right?

4:38So we pull in $100, it costs us $40 to do the actual work, right? With the cost of goods sold, we talked about all that. We have 60% profit out of that. We take $40 out of the $100, we have $60 left, right? $60 is our gross profit. This is just a recap. So then we say, okay, out of our gross profit, we have $35 that go pay for all of our costs, which are, you know, all your overhead stuff, you know, your fuel, your license plates, repairs, shop tools, uniform expense, advertising, vehicle expense, marketing, just the list goes on and on, right?

5:13And at the very end of it, you have your net. That's what we talked about. That's what people— that's the money we get to keep. As a business owner, you know, Management Success used to say the business owner should take 20% Um, the problem is a lot of guys don't even make 20% net take-home. Um, ideally it'd be a good idea if you could say, okay, I can make 26, 27, 28, 30, leave 10 in the company, pull 10, 20% out.

5:45You know, it's not necessarily 20% per se, the net. There's a lot that goes into that, and I can explain that later. But, you know, I wanted— so now What I wanted to explain this week is a budget. Okay. How right now we basically said, um, a budget, we're going to give every dollar a name and every dollar a job, right? We're going to say, okay, you're going to do this, but you're not going to go over this.

6:11And it's basically, we're going to use the P&L as a blueprint. That'd be an easy word for a blueprint, right? And then we're going to use the budget to kind of control everything. We're going to know where our percentages should be of our income to keep control of our P&L. Okay, now I'm going to get into it. Then I'm going to go into it.

6:33I think then I said somewhere in here, I spent all morning working on this because I want it to make sense because there's a lot of stuff. I think this will end up being part 1 and part 2. There's bubbles in your numbers, so you can't panic. What do I mean by that? And I'm just kind of giving like a little bit of a preface so people understand.

6:51If you're in January and you buy a bunch of high-dollar parts in January and you don't get the work done, but you buy the parts in January and you finish the jobs in, say, February, your numbers are going to look screwy. Then all of a sudden you're going to like, oh my God, what happened in my month? You know, this month was so good.

7:09This month is so bad. What am I doing? You kind of got to look at like an average of a couple of months. I say 3 months usually. That way you can get a kind of a guideline. Then we're kind of just looking at the the trends, you know what I mean? That the numbers aren't going to lie, right? Yeah. So we're going to get through that.

7:24So without further ado, let me get started on my piece of paper because once again, we always keep me on task when I have papers in front of me, right? So we broke it down. It's simple, it's real clear. But here's the biggest problem. Most shop owners stop right there at their P&L sheet. They're like, okay, they think that's, that's just God's gift.

7:44That's what they need to do. But it's better if you have a budget to control the P&L sheet. So you kind of know where everything should be. So, you know, they look at their numbers like it's a scoreboard. Something is already— that already happened. Something they react to. They say margins were tight, you know, expenses got away from us. We got to do better next month.

8:04And this kind of goes back to the thing where there's bubbles in your numbers and stuff like that. So the P&L sheet could be very deceiving if you don't know what you're looking at. So we got to— I can't explain that enough, and I'll get into it a little bit deeper later on in the podcast. So today I want to flip this completely.

8:19I want you to stop treating the P&L sheet like history and start treating it like it's a blueprint is basically what it came up with. And I was sitting there going, what was a word for it? You know, like, is it a plan? And then ChatGPT is like, what about a blueprint? I'm like, oh, that's a pretty good thing, right? Yeah. So, you know, because, you know, what I'm going to show you, I'm just read this to it that way I can just do it.

8:41Like, I hate reading, you know that. I'm going to show you. I'm going to take last year's numbers, the whole year. I took 2025 numbers, my numbers actually, and broke them all down. So that's the easiest way to do a budget. You can't do a budget off of 1 month or 2 months, a whole year. It's already happened. It's history. We kind of have a guideline is the way I look at it.

8:59Right. So 2025 and why the— why, and sometimes why the numbers lie to you in this year. So that way we go a full year. It's already happened. We already have a trend, right? Everything's kind of happened. And only thing that really changed in my opinion, this year coming up is our costs went up. So we had to adjust for that with the budget.

9:20Yeah. Okay. Because we did have increases in a lot of stuff and I was like shocked at, you know, medical insurance. Like I talked about some of these, everything starts creeping up and that number starts going down at the bottom. So you kind of got to adjust your pricing and, you know, your production and stuff like that. So what this is, it's a projection.

9:37It's a forecast, you know what I mean? And if you really want to get into like my accountant calls it a pro forma, pro forma. So I don't really, I don't know what to call it. Like I said, so we'll just say we're building a budget off of reality, not guessing, not hoping. This is exactly what happened. Now here's how we're going to control it from last year.

9:58Right. So most people build budgets like this. I think we'll grow 10% this year based on what? Hope. You can't just say, I'm going to grow. I want to grow 10%. And then you're like, okay, how are we going to do that? Fuck, I don't know. So you kind of have to get the voodoo out. You have to have QuickBooks and have to have it set up so you can actually start looking at all this stuff.

10:20And the big problem we have is a lot of these guys don't have QuickBooks. Yeah. Yeah. The number one thing I see in all these shops, and this is outside of a P&L sheet and anything, I can't, I cannot stress this enough. A good shop management program and making your people bill correctly is where it all starts. This is all the back.

10:40If you're not doing the front, okay, I was sitting there thinking about this today. It's like, okay, you know, if you don't know what to bill as a service advisor, 'cause you're not trained and your boss comes to you and says, hey, you know, I need you to make sure you do a really good job billing, doing these estimates and selling the jobs.

11:01And he's like, okay. Well, how much of a markup, China? I don't fucking know. Let's, let's look, like I said, on a Facebook group. Let's listen to all the fucking pros out there. Okay. It changes company to company. They don't know your situation. They don't know your situation. So you got to figure all these numbers out yourself. So you know what your costs are.

11:22Cause my costs at Garrett Auto and Truck are wildly different than Motor City Truck Collision. So it's not a one size fits all. I have to sit down and figure out budgets at the start of the year for both of them. And they're completely different. Dish has been connecting communities like yours for the last 45 years, providing the TV you love at a price you can trust.

11:43Watch live sports, news, and the latest movies, plus your favorite streaming apps all in one place. Switch to Dish today and lock in the lowest price in satellite TV starting at $89.99 a month with our 2-year price guarantee. Call 888-ADD-DISH or visit dish.com today. This episode is sponsored by Garden. Groceries are getting more expensive and somehow less fresh. If you're tired of throwing away wilted greens and overpaying for produce that doesn't last, it's time to grow your own.

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12:49Harvest happiness. It's crazy how different they are. Like the costs in this business. Are way cheaper than they are in the other business, except for the property taxes. Huh. It's really weird. Like, there's not so much overhead as the other shop. Brighton property taxes. Yeah, I was like, oh yeah, okay. Well, you really stop to think about it, I mean, scan tools alone, the subscriptions on scan tools alone at the other shop, you know, a lot of the shop tools, you know, a lot of the stuff we buy.

13:17I mean, our biggest expense here out in the shop is paint and supplies and stuff like that. Yeah. You know what I mean? It's not, we're not putting filters in stock, yada, yada. It's just, it's just so wildly different. So one size doesn't fit all, you know, you know, your neighbor's cost per to run his shop one day can be way different than yours by what you pay your people.

13:39Just a lot of different things, guys. So this is why it's important to write this all down and figure it all out and get with somebody who can help you. Adjust all these numbers. Cause I'm going to tell you right now, you know, I said this last time is if guys always call me, I'm glad I did $2 million. My first question to them is, what did you net?

14:00What did you keep? If you do $2 million in sales, but it costs you $2.2 to run your business, you lost $200,000. So you went to work every day last year and worked your ass off to lose money. You know, that, that's the problem with a lot of these guys that do these jobs that don't know their costs. I learned this a long time ago that some of these jobs, if you don't know what it actually costs you, you might be better off sitting there not doing the job.

14:25Think about having $500 in your bank account and the job costs you $525. Yeah. Yeah. It's like going to the store and trying to buy something and you don't even have enough money to buy it. I think we've all been to those businesses, like a restaurant, for example, you walk in and they're always busy and then you drive to it and they're closed one day.

14:46And it's like, how did they close? They were always busy. Yeah, that's a good point. That's a really good point. It's 'cause they weren't watching their budgeting and then they were spending more than they were making. Right, and that's why you have to have all these budgets and that's why they have to, you have to stay on point with your budgets. And you need to look at your numbers weekly, okay?

15:03Daily's tough. You could kind of get an idea, but you might be in transitions and jobs half done. So I always do it weekly. My guys do weekly numbers. Lincoln and Jason sit down every week and they run a report and they set it on my desk and they go, I come in and I look at it and they're like, That was screwed up last week.

15:19This is what happened. We sold tires. The reason the parts margins are down, we did 3 engines last week, da da da da da. They have it down to a science. They know. And I've been teaching them. They put it all in and it spits the report out. So they already know their numbers and they're knowing what's happening. So when I'm gone, they already know what's happening.

15:36They know where the trends are. A lot of guys just think, well, I just need to work harder. Do you realize if you're losing money, on a job and you do 10 jobs, you're losing money on it. You're going out of business faster. Okay. That people have, have the misunderstanding. They always want to talk about Sam Walton when he's talking about his book where he bought all them flip-flops.

15:59I don't remember the numbers. Maybe he paid them for, bought them for 5 cents. You remember that whole story and sold them for 10 cents, but he sold 3 million sets of them. Yeah. In a matter of X amount of months. Yeah. This is not auto repair. Yeah. If we're doing brake jobs and we're making 10 cents on them, we're doing 100,000 brake jobs, we're going out of business because we're losing money because we have overhead built into it and stuff like that.

16:23They're buying a pair of sandals versus you've got to put hour and time and labor into it. Right. And that's where guys are missing, misunderstanding how this all works. So they don't really understand that at the top of the P&L sheet, their cost of goods sold number really matters because that's what we made out of everything. That's what we get to keep out of the jobs.

16:42And then we got to spend to pay everybody, all the support, support staff, you know what I mean? And that's what people just don't understand. And I will tell you, this stuff gets confusing because I have to sit down and write it all down because you start talking all this stuff, you can get yourself mumbled jumbled really quick. I'm not fucking Einstein.

16:58Yeah. Yeah. Okay. So I'm not going to actually say, oh yeah, I know. I mean, I know what my numbers are. I can frickin recite them to you. No doubt about it. But I always do this and write it all down so I don't make a mistake. Because you get fucking crucified online. There's— I've never met a bunch of guys that are just literally waiting to fuck with you.

17:16Not all of them. It's the first time they've done random numbers in their life, but they're doing it on your terms to prove you wrong, right? And they're technicians and they're this and they're that. But they, you know, my suggestion to you, if you're that good at numbers and you're a technician, open your own shop. Yeah. And there's guys on their repair order or on the TikToks and on Facebook going, yeah, you really want to know how much this shit costs?

17:36Open your own fucking shop. You will be astonished how this shit keeps coming and keeps coming. And, and, you know, if you're not making money and you're broke, it only magnifies everything. It, it, it's kind of crazy how, how much shit just keeps coming in, in the mail. You're just like, oh my God, you know, then audit of this, you know, insurance company.

17:54We had that, uh, workman's comp audit for our insurance. My wife's really good at it. We got $260 back. That's awesome. So we were like, yeah, by the way, you owe us, you know. So, but you know, you have to know all this stuff. And let me tell you something, guys, and I, and I'm not sitting here acting like I'm better than everybody else.

18:10It took me a long time beating myself up over this shit and thinking about it to get this all dialed in to the point where I could understand it. And I think the problem we're running into, and I see it in a lot of shops that, um, I'm doing consulting for, they don't take this shit seriously. The back, the backend numbers or the numbers of the repair orders.

18:30When they do finally get it, they're like, oh my God, I can pay my bills. Oh my God. Like, holy shit. I have money in my bank at the end of the year or end of the month, I should say, or at the end of the week. But a couple of them say, well, I just gotta keep fixing cars. I just gotta keep fixing cars.

18:46I gotta keep fixing trucks. Okay. When do you plan on sending, giving the guy a fucking bill? They literally, I have two of them that I get on the phone and I bitch at. I'm like, so how'd you do? I see this X amount. No, well, I'm a little bit behind on writing my bills, sir. Well, what do you mean? Well, I didn't have time to write my bills or go over the bills, but I gave them the vehicle.

19:07So let me get this straight. You did all the work, you paid to fix their car, and you didn't give them a bill? I just didn't have time. You better make fucking time. That's the most important part at this point. Yeah. And it's happened. It's still happening. And I'm going to have a meeting with one of them tonight. Like, what in the fuck?

19:25Like, you gotta charge people for what you do. Oh man. Okay. I talked to a guy this week and he was talking about estimating. I said, well, how do you know what to write your estimate at? What, what, how do you mark your stuff up? Where's your margins? Yeah. I, you know, I, I go with what I think it should be and I go a little bit higher.

19:48I go, what? I go, you don't even know what it costs you to do the jobs. No, not really. You better fucking figure it out, guys. You have to know how much this shit costs you. You know what I mean? It's kind of like selling something you don't know how much it costs you. Like, you can't be on the plus side all the time.

20:07No, no. Yeah, it's crazy. It's crazy. It's just that I keep going back and forth. So that's why I like went with the P&L, because I see a lot of guys talking to us online and I'm like, okay, I go at the P&L, let's go backwards, let's do a Budget now. Let's budget. I mean, the big dogs do it. You hear about, you know, budget analysis, or I got money left in my budget at the end of the year, we need to do this.

20:31So we hear all the big companies do it. Yeah. So obviously they're onto something. I've done a budget, you know, for probably the last 3 years. And then, you know, I do a budget, I spend a bunch of time on it. And I'm like, okay, the end of the year, it's all pretty and it's got a bow and it's sitting on my desk.

20:46Then here comes the start of the year when all the increases come. My medical insurance increased, this increased, this increased. So then I have to redo the budget, but at least I have it done. So I just have to tweak some numbers. I was going to say you have to redo it, but you're, it's like, uh, it's like cleaning your house. If you do it regularly, it doesn't take as long to do it.

21:04Right. You know, that's exactly what it is. So, you know, um, so back to the thing, you know, I think we'll grow 10% this year. What's the plan? How are you going to grow 10% this year? Your medical insurance went up 17%. So think about that. You just pull this number out of the— out of your ass, basically. Go, hey, I'm gonna— yeah, we're gonna grow 10% this year.

21:27I'm gonna big dog it over here. 10%, the number is. You never even sat down and figured out what your medical insurance increase alone was. Yeah, that eats into that 10% right away. Yeah, you know, not a tit for tat, but starts eating into it, right? Like it starts, your costs are going up, your bottom number. I can't, I keep doing this.

21:47Like the middle part goes bigger. What happens to the little part that you get to keep? It goes smaller. It's reactive. Your costs are reactive. So you better raise your prices, make sure the production's up. What? You know what I mean? So, you know, you need to know how everything's working and how it all behaves before you fricking start just throwing numbers out there because you might be surprised how hard it is to get 10% out of everything, especially if you're in an area where there's not a lot of money and all of a sudden you're going to go and freaking raise your labor rate $30 an hour.

22:19Yeah, people are going to shit themselves. So you better figure it out. So how do you do that? Or how do you keep— well, you'd have to— if you can't raise your labor rate, right, you'd have to shrink your middle, your 35%. All of a sudden it's 32%, right, instead of 35. And then you raise your your, uh, profit up 3%. There's 5% right there.

22:38That hits that 25, now it's 30, and you only raised up one 2 and one 3. That 5% goes to the bottom, now you're at 30. So you can move the scale 1 or 2%, you know, raise your pricing 1 or 2%, you know, your profit 1 or 2%, and then lower your costs, and then take it and put it together and raise that bottom number up.

22:58But, you know, a lot of things, a lot of guys don't think like that. 'Cause they don't even know what's going on. And I'm not saying all of it, 'cause there's a lot of operators out there that make a lot of money. And let me tell you something here. I've never once said I don't make fucking money. We make a shit ton of fucking money at my companies, and I pay my guys a shit ton of money.

23:16They got new Harleys, they got fucking new trucks. Two of my main guys, my two guys that are 10% owners, both have new trucks they drive, okay? Here's something most people don't realize. Great sleep doesn't happen by accident. It starts with what you're sleeping on. That's why I switched to SHEIKS. Their bedding is made from the same performance fabrics you'd find in elite athletic wear, but designed to help you sleep better.

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25:03Anybody who says, oh, you're acting like you don't make money. Fuck no, I make, I've never said I don't make money. We talk about that. That's the reason why you're even doing this. Yeah. Okay. I'm taking a lot of risk. Okay. Now that we have nobody on flat rate, they're hourly. I'm taking all the risk, but I want these guys to produce and they are.

25:17Yep. Okay. So I don't have them problems, but it just blows my mind. Don't use the guys in the comments. So you act like you make no money. What the fuck? No, you obviously are not watching the show or watching most of the clips, right? Yeah, you know what the funny thing is? The whole parts thing. For some reason or another, people on social media think auto and truck repair shops and collision shops shouldn't make money on parts.

25:43They think if you should go to AutoZone and buy it for $20, you should sell it from your shop for $20. If not, you're fucking people. It hurts my fucking head. Like, I don't even know. And I'm talking about this is all numbers just to kind of put some perspective to everything. This, let me show— I kept this one, um, that I responded back to a guy because he was so retarded.

26:14Just let's fucking say it. He's a fucking retard. Don't want to show you pictures of my bank account. People like, they really flame out. Okay, he says, but he still makes 100% markup. 100% markup. If I buy an alternator for $50 and I double it, I sell it for $100. Do I keep $100? I have to pay the guy for the $50 for the alternator, so I made $50.

26:52They think that's 100% markup. It's not the same as profit. I just— it just hurts my head, you know? It's just like the math not math thing. I'm like, if I buy an alternator And I have to, if I buy an Altair for $50, I have to pay somebody, right? Yeah. So my response back, you're right. It's 100% markup. No doubt about it.

27:18We doubled the price of it. Right. But profit isn't measured off selling price. It's so it's okay. Not the cost. It's measured off the selling price, not the cost. $50 profit on a $100 sale is 50% margin. Pretty easy math actually. That's why we're using the $100 example. Yeah. The mark— the people, I think they honestly, they have, uh, you know, the markup in the margin backwards.

27:42Yeah, because, yeah, you know what I'm saying? When you get the markup, it's got the cost of the part in there, but they don't get that. And that's the number one thing, guys. Shops have to make money on parts. I literally show you on the P&L sheet last week, I talk about it. If you took the parts— parts and labor are pretty freaking close for last year in my shop.

28:05Uh, let's see here. My income, parts and labor were pretty much almost identical, 45% and 48% of the income. Okay. Well, obviously my labor I sell and my parts I sell, right? They're pretty fricking close, right?. So if you didn't have the parts, man, that 25% to stay in business would be tough. Now that net profit is after everything's paid for and you gotta keep that center section once again in check.

28:45Right. So let's keep going. Cause I just, you know, I just like, I just want to put so much context to this shit because it seems like every time we turn the corner, we have to fricking talk to some jackwad that just wants to run his mouth. But exactly. This whole series of the numbers and stuff like that are for the guys who just don't know.

29:05Because there's all kinds of guys that fucking know just fine. Yeah. And them are the guys you meet. Yeah. Okay. Dave from Dave's Auto. Okay. Royalty Auto. You don't think them guys know their numbers? You watch them talk about them. They fricking know. They know. They didn't get the operations the size they did by being dipshits. They know what's going on. Okay.

29:22But they can't even say something without everybody flaming them. You know what I mean? Yeah. Yeah. It's just gotten to the point where we live in such a miserable-ass world that you get a bunch of trolls that hate their life and they just think everybody's screwing them because they're a mechanic that are not, maybe not even a good mechanic or technician. They think that the shop owner should give them, you know, 85% of the fricking hourly rate because they don't even know about the net.

29:45And I bet you a lot that these, a lot of these guys that are on there don't sit and listen to this podcast about P&L because they would understand what's going on. Yeah, because one of my guys said to me today, he's like, hey, I listened to the podcast about the P&L sheet. That was eye-opening. He's like, I didn't even think of all the stuff that you have to deal with in paying and this going up and that going up and stuff like that.

30:09That's awesome. And I'm like, yeah, you're always a bitch wanting a raise. And he started laughing. But yeah, but if you think about it, the shit is always constantly going up. And it's not just even this industry, it's probably every industry out there that people are working for somebody. They're like, oh, I could do this for, you know, I could do this and make all the money.

30:27They see the $100 and they think that's the whole pie. They're not seeing all these things that are making that, that middle section bigger and shrinking down your profit, net profit. Right. And I had a guy on one of my posts say to me, uh, yeah, asshole, do you don't think everything else has gone up for us at home too? I'm not in charge of your home budget.

30:49Okay. You know, my son and my daughter-in-law, their insurance went up. They fucking shopped it. They shopped it around till they got a lower rate with the same coverage. And next year they'll do the same thing. They controlled their budget at their house. Instinctively. Yup. The ass wipes who don't do it and sit there and cry online, they get what they deserve.

31:12And I'm not saying that, you know, you're going to weather every storm at home, but I have a home budget. Thank God I'm fucking rich. Just ask everybody on TikTok and, and Facebook, right? So all the money we make, it just, it's a non-issue for us. Bullshit. We have the same problems. Okay. My wife's had to have medical procedures. It was like $1,900 a time for, you know, our copay and all that bullshit.

31:35You know, 80% of deductible and all that horseshit, the family. I mean, it was $1,980 a few weeks ago. Now it's going to be another $900 next Monday. Okay. I have the same problems as everybody else. But I just happen to have some of the money because I've been smart. Okay, let's face it. I know people that have made $40,000 their whole career or $50,000 their whole career and have money because they were smart with it.

32:00They didn't frickin live above their means. They didn't go and do this. They didn't go do that. When me and Marilyn were coming up, we were very careful about what we spent after we got on a budget. We went fucking broke. They were like, yeah, the whole thing is not working for us. Let's get on Dave Ramsey. And ever since then it was uphill, but it took us to hit to that point where we couldn't pay for Christmas.

32:20I tell that story. Okay. But we learned there's some people that, you know, I know you know them and I know different people in our lives that they just never fucking stop. And then they're like, oh, I'm going to claim bankruptcy. That's because you fucking went on 9 vacations last year and you spend every fucking thing you get. But you ever notice the people that are going to go bankrupt, they always have the money for the bankruptcy attorney.

32:41I always find it— there's people that are like, will complain about not having money, and then you see them on another vacation. They're like on a cruise or something. You're like, I thought I just, I just heard you say you didn't have any money. Like, how'd that happen? How are you pulling this together? Yeah, we lived in the same house, uh, me and my wife did first 22 years we married.

33:00We bought our house right now, it's new, in 2018. We've lived there since 2018. Now we're moving again here at the end of the month. So But we've stayed longevity and we just keep building equity and keep buying bigger and better with our equity. And we got lucky when we moved into Howell because, you know, Howell-Brighton area just fricking quadrupled. So you get out of getting good money.

33:21So my point is, guys, you can't always look at the business owner to be your fucking savior. If you work for a company and you go do something stupid on the weekend and buy something you can't afford, it's— you shouldn't go to work and say, I need a fucking raise. Because I'm a dipshit. Businesses have costs too, and people don't realize how fragile businesses are.

33:40You can raise your costs and it might take a little bit to catch up with you, but it's going to catch up with you. It's no different than going to spend $10,000 on your credit card knowing you can't make that X amount of payment next month. It's coming. It's going to knock on the door sooner or later. And that's how it is with business too.

33:55You can't just keep spending, spending, spending, and then— or taking, you know what I mean? It's kind of like maintenance on a car. You keep running the car, never do maintenance on it. I look at a car as a savings account, right? You're driving and it needs this maintenance pass, this maintenance pass. Pretty soon the bank account's empty, which would be the car.

34:13It breaks because it's never been maintained. And that's no different than a business. So I'm trying to pitch several different pictures here so guys can understand it because not everybody learns the same. So, you know, well, and what you're saying, and you talked about it being personal, people could turn this around and do their own P&L sheet for their own individuals. They could do their own budget for their individuals.

34:31Yeah. It's not that hard. You say, okay, I take home X amount of dollars per month. $2,000 hits my bank account. Yep. Here's my bills. Yep. Take my bills and minus some of what I bring home. Groceries, obviously put groceries, gas, stuff like that to get back and forth to work. And then say, okay, I take home $2,000 a month and all my bills, including everything is $1,500.

34:54Now I have $500 left over. Yep. Let's go ahead and put $250 in the savings account or $500 savings account. Act like we don't have it. That's what smart people do. Dumbasses go buy stuff for $500, then have no emergency fund whatsoever. Yeah. So then their hot water heater breaks or something like that. Guess what? They go and finance it at Home Depot because Home Depot's like, we'll give you $200 off that right now if you open a Home Depot charge.

35:17Yeah, because they're banking on you never freaking paying it off in whatever time they give you. They're just going to freaking hit you with interest. So they're doing a hedge on your ass. They're gamblers, right? Because 9 times out of 10, people don't pay it off. Ah, fuck it, I'll just pay the $12. But that are the same fucking people that call me and go, hey, I see there's a credit card charge on here for $40.

35:38Can you take that off? You have a problem paying me $40 fucking on a credit card fee to keep a small business in business, but you have no problem giving fucking Visa 28% a fucking month. You'll pay them pricks 28% or whatever your interest rate is and won't even complain. But you'll try to dick the guy who fucking takes care of your camper that you take your kids camping in for $40 fucking because he's trying to stay in business.

36:03That's some fucked up logic. It is. So, okay, most shop owners let the profit be whatever is left over. Okay. Yeah, let's see what's left over. Let's not. Let's make sure instead of just accepting it, we're going to go ahead and do the profit first. We're going to friggin set what we want the profit to be. Then we're going to friggin aim our budget to protect that with last year's numbers.

36:26I can't say that enough because people are like, you can't do a budget off this year's numbers. You're right, we're using last year's numbers. We have the whole year, the whole picture, and we're doing an average, right? This is a guideline. This isn't 100% absolute because COVID could happen. Shit could go down, shit can go up. You can't control everything, but you could be ready for it, right?

36:44You could have a plan. Yep. So you just got to adjust the variables that you can't control. Right. So once again, you're going to go, okay, you decide profit first. Instead of accepting $25 this year, you're going to say, I want $30 in profit. How do we achieve that? If nothing changes, you'll get the same $25 profit, right? So we have to change.

37:04Something has to be adjusted. Let's think about this. Let's think about our P&L sheet, guys. What will we have to adjust to get that bottom number to fricking go up? We'd have to either raise our prices, right? Our billing efficiency could fix that if our guys aren't marking stuff up, right? Or we control our costs, which are in the middle, which is our $35, right?

37:30So, you know, so then we have to start looking. Another one that people don't take into consideration, give them their good old buddy that stops by there once a year, give them a fucking $250, $300 discount. You not know how many buddies you have till you fricking own your business. Yeah. And they want a discount. Another side note, guys, I have not brought this up.

37:48The Elements, the, um, Auto Integrate clients, Holman, which used to be ARI, them people all take a percentage of your estimate, of your bill. Okay. So if they take 3%, instead of your bill being 58%, it needs to be 62, 63. So when they take theirs, you still hit your number. You cannot go underwater on some of them people. They're 13%. You cannot take a 13% discount because they send you work.

38:16Yeah, you have to mark it up 13%. Then they say, well, they won't pay for it. They'll fucking pay for it. Just submit it again and submit it again. Eventually you'll get to the right guy. He'll fricking approve it. You cannot give 13 or 14% discounts on some of these bills now. This shit has changed now. It's too expensive to give that big of discounts.

38:36Last year, $21,000 discounts, $20,155.66 at my shop for the whole year. That was the fleets. Wow. That was the fleet accounts. But you know what? That was already built into my numbers. So guess what? With all them discounts, my numbers are still exactly where they should be. Huh? Wonder how that happened. I frickin actually did a budget last year and said my numbers have to be here because last year we did X amount with these discounts and everything.

39:05So we have to stay the status quo or grow a little bit, we have to, we have to build that in. And we did. That's awesome. Yeah. And, you know, they do complain your way. How? Well, we don't sell at dealer list, guys. You could get more than dealer list. Anybody who tells you dealer list is the way to go is full of fucking shit.

39:24At the very minimum, you can make $40 on or 40%. Okay. And that's on the low end of what our industry is. 40% on the low end. Just so everybody knows, here comes the fricking guys. Here comes a guy, oh, 40%, you're ripping off, you're a scam. No, you're uneducated when it comes to numbers. You cannot sit there and tell somebody they're a scam because they mark up something in their business.

39:45We talked about it before, jewelry, 900% markup. Yep. Medical, I mean, oh Jesus Christ, Tylenol costs you what, 3 cents if you buy a bottle and take them all out and do it, but they'll sell you for $45 fucking at the hospital. Yeah. Yep. I think it's just $500 to get loaded on the ambulance, right? Yeah. That's a pretty big markup. And then if you use, like, they bandage you, it's not the $2 that you'd get, go buy a pack of bandages for at Meijer's.

40:16No, it's shop supplies, medical style, I'm sure. Right. So just keep that in mind. So, you know, I keep, I keep saying this is for shop owners. This isn't for Joe Blow that goes and works on his car on the weekends. Okay. That's going to chime in here. Nobody gives a fuck. Nobody cares, buddy. Nobody cares. Go to AutoZone, buy your own parts, fix your own parts, lifetime warranty, get them warrantied.

40:38Nobody gives a fuck. Yeah, okay. If you come to our shop, we're going to mark up the parts that way we could provide value. If the truck breaks down, we're going to get it towed back. It's not going to cost you. We're going to redo the labor. We're going to redo all this stuff. We take care of our customers. We give a written warranty, okay?

40:52AutoZone says lifetime. What good is it if you buy a fuel pump and the car breaks down every other fucking week and you're towing it back to the shop? That was dumb enough to put the fuel pump in. Sooner or later, the shop's going to get blamed for the fuel pump failing. Yeah, and it wasn't even the shop's fault. So it's just better off not even doing any of that shit.

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41:58If you want to get more value from your points without becoming a points nerd, visit point.me and see what your points are really worth. So let's break into the controllable parts, the cost of goods sold, okay? To adjust it, to adjust, start adjusting stuff, you know, cost of goods sold. We got parts, we got sublets, we got bill— Billing efficiency. Are we marking up?

42:20Are we marking everything up correctly? Once again, let's go back to our service advisors being trained to know what to mark this stuff up to. Yeah, right. Are we discounting? Okay. Are we overusing sublets? Overusing sublets can drive your numbers down too. So because you don't make— you can't make a ton of money on sublets, 25%. So you got to remember that, you know, you try to do as much stuff in-house as possible.

42:43You know, glass and stuff like that. It's easy. You call the glass place, you make $250. Just put a line on there, you know, so you know what glass or categorize it. That's what we do as far as on our front end. So we know, you know, even the small improvements matter. Just moving everything just a little bit can end up at a lot at the bottom.

43:01You move 2 or 3 things. Okay, let's say we move 10 things, 1% each. Okay. To the good. We move the middle down. Yep. Also, what happens to lower the bottom number? It goes up. So that's the little things that we need to pay attention to. Even the cost of goods sold, our gross profit goes up 2%. It's not hard to move it up 2%.

43:22You know, that hits the bottom line. Yeah. Also, that 25, 27, just 2%. Then you save something in the middle because you recorded your insurance and stuff that saves you, you know, 3%. So also that 25 now is 30%. It's all adding up. It's all adding up. And that's what people need to understand. That's where budget comes in very handy. And if you look I do percentage of income.

43:46Okay. All see all these numbers right here. That's a percentage of my income. So I know exactly where the stuff should be. You know what I mean? You got like, you know, your work, your liability insurance, 0.95, not even a percent, 0.36 workers' comp, fleet insurance. You know, your biggest ones are going to be your liability insurance is usually pretty big in our business.

44:08I think ours is 80 $8,500 for the year. $8,700 for workers' compensation. Liability is $23,000 for the year. Yeah. So you kind of got to, what do you do? You got to have insurance. Yeah. Geez, especially nowadays. Oh my God. We haven't even got into a liability fricking episode yet. I fricking can tell people about that shit. Oh, that's a good one to do.

44:37Yeah. Because everybody's like, "I just write this up." Now you're a fucking lawyer. Yeah, you do not just write stuff up. You fricking have a lawyer write stuff up. You do not write it up. Different states need different verbiages and all kinds of shit. You know, you might actually write some up and incriminate yourself nowadays. You know, all this have ChatGPT. ChatGPT's a lawyer, not a lawyer.

44:56Not a lawyer. Fucking call a lawyer. It will literally tell you that it's not a lawyer. Yeah. Yeah. Yeah. This is just basically a guideline or whatever, you know? So, you know, this is where shops bleed. Payroll, overtime. I cannot circle overtime enough. You guys that think that your guys— I've had several shop owners go, fuck, my guys love overtime. Why the fuck wouldn't they?

45:21Why the fuck would they not love overtime if they're hourly and you're getting time and a half? What happened to your profit on that hour when all of a sudden it's time and a half? Your profit went down., but it's costing you more money, right? You're paying them— Michigan is time, and I think it's federal time and a half, anything over 40.

45:40Yep. Okay. So think about that. Uh, but your labor rate is still the same. You don't have an over-40 labor rate to offset that. So you get this huge overtime number and it just keeps growing and it just kills people. Yep. So, you know, poor scheduling. You get cars and wasted time. You get waste. You get unused subscriptions. Here's a big one.

46:04I'm sure my house, motherfucker, every time we turn around, there's a streaming subscription. Oh my God. Yeah. Fucking drives me nuts. We have a list in my office of what the subscriptions are and when they're due and stuff like that. And I've gotten rid of a couple of the scan tools because they just become pieces of shit. So, you know, you know, sometimes it's nothing.

46:23It's just the pricing. Sometimes everything else is good. Your pricing's not right because your service advisors don't know where to price this stuff. So you have everything set up right and the front end's not pricing the shit right to conform to the back numbers. So your cost of goods is going up, your profit's going down, your middle of your P&L sheet— I keep talking about that— $35 keeps freaking going up.

46:49What happens to the number there? You're not making enough cheese. You're not making enough cheese at the top. So it's going right to the bottom. It's gotta come from somewhere, guys. If you're not selling the shit for enough, you're not making enough profit. That $25 is coming outta your savings account. Yep. $25 at the bottom. We'll just say it's a savings account and we don't build the stuff right at the very top.

47:09It's $25 right now. We're 5% off of the top. Now it's $20. I can't keep talking about how we need to protect that bottom number, and a budget's going to help you do that. Now, a budget's a guideline. Once again, we're talking about all that, but you kind of get the whole— oh, this is working together. I'm sure somebody's gonna fuck, you know.

47:31So now we rebuild the model. Let's go back to the $100. That's the sales. Our cost of goods sold is $38, okay, instead of the $40. Then the expenses are $32. See what happened here? We moved the cost of goods from $40 to $38. Yeah. We've got our expenses are $32. Now our profit is what? $30. We moved it 5%. We moved it 2 and 3.

47:55That's what I was talking about earlier. Right now, this is, now there's, this is no longer, this is a plan. This, we just moved them 2 little numbers a little bit and we just bumped it up 5%. $5. $5, 5%. Doesn't matter. We're dealing with $100, right? The reality check. This doesn't just happen because you made a spreadsheet. Let's talk about it.

48:18That was easy. We saved 2% here, 3% here. We made 2% here. Yeah. Saved it. Okay. Here's the reality check. You need to be disciplined. You need to have leadership. There has to be a guy looking at these numbers every week. I got Jason and Lincoln looking at the numbers every week, cause they're learning how to run a business. Okay, then I look at them too.

48:43Okay, a lot of guys are like, yeah, this— I didn't have time. How do you fucking don't have time to look at your numbers to know what you're doing in your business? You're fixing cars and trucks, buying parts for people, putting them on their trucks. Thank you, Mr. Smith, I'll bill you whenever I get time. And then you're worried about the customer being mad at you.

49:05Who the fuck's gonna be mad if you're fixing their truck for free? Shit. That's what I tell these people on these fucking podcasts. They don't— I don't like your video. I said, would you like a refund? I love that. Oh, I didn't pay anything. Exactly, it's free. Shut the fuck up. What the— the first time you put that, I was dying. But really, like, people bitch about anything.

49:31They won't fucking bitch about anything. Podcast, you have a choice whether you're gonna tune in or not. Yeah, and you're just gonna listen to the whole podcast and say I didn't like this part? I've had a couple people that I'm like— a couple of people, it skips. We got some kind of glitch going on since we had an update on the computer, everybody.

49:45Every once in a while, the thing just glitches. It— when it's— I'm talking about something, people like, I don't even know what he said. Yeah, I can't control technology, okay? Windows fucked me. How many of you people woke up on a Monday morning, went to work, turn on your computer, and it's just sitting there spinning because Windows decided to fuck you on the weekend?

50:02It waited till midnight to fuck you so Monday morning could really say, hey, over here, Monday, everything's fucked right now because Bill Gates decided to freaking update it. He's incompetent, you know what I mean? So we have to be disciplined. We have to have purpose. Every dollar has a name and has a job. Dave Ramsey says that, right? Home budgets or whatever, we named every dollar.

50:27This is your job. Okay, we're not going to say we're going to spend a dollar on insurance and spend 2 and say, oh, fucking well, okay, because that comes off that bottom number. Okay. When you start talking about dollars, you talk about that 25 or that 30, you start taking a dollar here, a dollar here. It doesn't take long before that bottom is gone.

50:45So we have to protect that, you know. So, you know, if your advisors, if your advisors don't sell property, I kept repeating this because I wanted to make sure that people understand the advisors are very important for the front of the business. They're the guys that meet the customers that walk in, the guys or the girls. They're the ones that fricking sell the jobs correctly.

51:06They're the ones that kind of control tech efficiency. Oh, I'm a fucking technician, bro. I don't need a goddamn service advisor. You kind of do because you kind of need them to get your parts, call around for you and stuff like that. You're a flat rate technician, not my guys, but some of these shops, you're a flat rate technician. You're not getting paid to call around and find parts.

51:25So you need that service advisor to do your support staff to do that for you. Right. So a good service advisor can make or break a mechanic's money. I could do a service advisor's job and work on cars too. You're getting paid by what you do when you're turning wrenches, you're making money. If you're not turning wrench, you're flat rate. Yeah. So, you know, you know, and if you don't track this weekly, it gets tough.

51:50Like I said, at the end of the week, you should look and see what kind of week you had, you know, You know, a budget without behavior is just a wish. I'm just wishing this shit all falls into place. Right. So, you know, don't wait until the end of the month. Now I do, but I will say that I kind of have it under control.

52:09I kind of know what's going on at the end of the month. I can look. Um, but this leads into my next thing. If you don't close everything in the, in one month, here's where the problem comes in. So are you hitting your cost of goods sold targets? You can look at the week. That would be your front end. That'd be your shop management program.

52:27That's going to get you real close, right? It's only thing going to be different is it's going to be a little bit better because you have everything built in your loaded costs where the top of my P&L sheet for the technicians does not have all their vacation stuff. I said that 100 times. That's the way Management Success set it up and I've always liked it that way.

52:43So I left it. If your goal is 30% and you're at 22%, What's going on? You have to fix it. You have to start the trend, but here's what happens. Okay. And I wanted to put this in here and I talked to you before the bubble in your numbers. Yeah. This is not chat talking. This is me, the bubbles. I call it the bubbles.

53:01Okay. What is the bubbles? I want to put something on your radar, guys. If you stop and think about it, I don't know any shops that start on the 1st of the month, we'll just say October and the 31st of the month, they close every job for every and put every part and bill for every part. If that was the world we live in, guys, it would be a lot easier to do these P&L sheets because we could open on the 1st, we can close on the 31st.

53:26Everything would be billed, paid for. We would have everything that happened in October in October, closed, locked down, boom, it's done. We would know. The problem is we have a job come in the 30th, all the parts show up the 31st. We, we have that booked, and then we start putting it together the following month. So we bought a bunch of parts in October, in November we put them on.

53:54So that caused a little bit of a hiccup on our numbers, just depending on if we're doing two rotors and brakes, it's not going to move anything. But what if we bought an engine or a transmission? Some of these engines are $20 grand, $15 grand. Yep, that's negative $20 grand. You could swing your numbers with one way or the other. Yeah. So what I always say we do, I always say, uh, I always go 3 months that way I can kind of get a guideline and I wrote it all out that way I can kind of talk about it slow.

54:22And, uh, you know, I want to put something on my radar. I always said that, you know, before you do everything right and the numbers still look wrong. So you're brand new at this. You finally got your brand new QuickBooks all in there and your accountant got everything figured out. Then you start looking at going, Holy fuck, I need to panic. Everything looks— this month looks terrible, but not this month.

54:43Last month looks terrible because I, I bought all these parts. And remember, you're new at this. You're not me that sits there and goes, okay, I bought Allied's engine. Yeah. Um, I talked about that in my one podcast. I bought an engine that was $100 grand, okay? And it was a sublet from my body shop to the other shop, and I only could make 10% on it.

55:02So it screwed my numbers. So every month I'd have to back that number out to get my true numbers. So the whole year it fucking haunted me. It happened in January. Oh my God. So every month it haunted me. I'm like, oh my God, it just killed me, my numbers every month. But I just kept backing that out, backing that out and readjusting it.

55:21But think about it. If you weren't versed in numbers and on the P&L and what happened with that part and how you only made 10% on it and it was such a big number, It screwed your numbers for the whole year. It just followed you month to month. That one month it happened in, it just looked like, oh my God. Yeah. Yeah.

55:39And then you don't really know where your guideline is. You kind of where your static is. So when you move that, you're like, everything kind of hit back where it should go. So, I mean, I know we're talking about a lot of different things and I'm trying to keep it. It's all aligned though. It's all following the same path. Okay. I just want to make sure.

55:56Yeah. Oh, absolutely. You know, so You know, here's what happens. You get a bunch of parts this month, like I said, but you don't install them and bill until the next month. So what happens? This month looks terrible. Next month, you're here now, it's amazing, right? Nothing actually is changing your business. It's a timing problem. I don't even have to change. It's a timing problem.

56:17The money's not exactly where you want it to be at that particular time. It's kind of like, okay, one thing earlier on, early on, that I had a problem. I had my daughter and another lady working for me and my daughter got it, but the other lady didn't do it. She's like, we have no money. I'm like, we have plenty of fucking money.

56:38The problem is it's all in our accounts receivable. We have the money. It's just not where we want it to be. So if we take that money and say, okay, take it off AR because it's going to come in the mail, we put it here. Do we have money? Well, yeah, we have money. So don't say we're fucking broke. We don't have money.

56:53We just don't have money. We have a cash flow problem right now. We just don't have the money where we want it. It's not where we want it to be. We want it to be in the bank account instead of sitting over here in AR. Right. And I have a customer that is, he's coming a long way, but he said, uh, I don't have no money, sir.

57:11I said, you're right. You don't. Everybody else has your fucking money in their bank accounts because you didn't write them fucking bills. Oh, never thought about that. You got to write the bills, people. You know, so that's what I call a bubble in your numbers. So in reality, it's not huge. It's just a timing issue. The parts and stuff are not flowing back and forth in the months you want them to be.

57:36You know, it's not a profit problem. It's not a sales problem. It's not a timing problem. It's just the parts, you know. So if you move them, back and you kind of go back and forth, but just don't do that. Just, you know, um, do a 3-month window and that'll kind of give you, you know, encapsulate everything you want, you know. So, you know, I'll just give you a couple examples.

57:58Month 1, you buy $10,000 of parts. The costs look high, profit looks low. Month 2, you sell those jobs. Now the profit looks high, profit looks great, right? So if you put them 2 months on your P&L sheet, what happens? It all goes together and you're going to get, you're going to get a better picture. You're not going to get an absolute because no matter what, it's going to be hard to mend everything together.

58:21You could sit there— the— I used to sit there when I really cared that much and I would sit there and figure out who I owed what and what month, and I would do all this shit with spreadsheets and all that. And I had a pivot table set up from Microsoft and all that. What was that program? Microsoft Access back in the day.

58:37I got that Book for Dummies, and I set up a spreadsheet. My wife's really good, and we put pivot tables in there so it hit, it would pivot, it would just— I was always like a running total of how much money, uh, in credit card fees we were ongoing for the year. Like, I had this badass spreadsheet that gave me all the percentages.

58:53Well, all that shit's gone now with AI. And then with the— once you get your QuickBooks set up right, you don't have to worry about doing all that. Yep, yep. But I could tell you what happened weekly back then with that spreadsheet, and we had tabs, and we would build tabs and You know, that's when I was first starting to get into numbers and how I started getting into the numbers.

59:09This is a little side story is I was in Puerto Rico, 2016, Christmas Eve. My phone rings. It's Steve. He still owned the shop. I was just a partner. He said, Vicky's in the hospital. That was his wife. She has a brain tumor. She doesn't know who she is. I don't know what to do. Well, Vicky was our bookkeeper, his wife. So keep in mind, I never did anything with the back of the house.

59:37I was only the billing guy in the front of the house. She was not a very nice lady. We did not get along. Um, so I didn't even, never even seen QuickBooks. I didn't even know the password to QuickBooks. We, I, I flew home. I left my family there 'cause it was a pretty bad time in his life and he was my best friend..

59:57And I went to the hospital and I talked to him and I said, payroll and all that stuff. I don't know how to do it. We didn't have a payroll company. She did the 941s and everything. I said, I don't know what the fuck to do. And he said, well, I can't do it. Cause I'm gonna be at the hospital. And I said, all right, well, what's the password to QuickBooks?

1:00:15He told me and I opened it up and obviously I, I had a Quicken back in the day at my house. So I kind of knew how to reconcile a bank account cause I would do my personal one every month. Me and my daughter Jordan sat down and she came to work with me and she was young, she was 16. And I'm like, okay, she's pretty smart cookie, good in advanced math and all that stuff.

1:00:37So we started going through it and when we realized is when we started reconciling the bank account that, and the line of credit was like 90 grand on it and we only had a $100,000 line of credit. And back then we had started Carry Deck Cranes, our crane company. And what we would do is we would just pay all the payroll. And then once a month she would give us a bill from Carry Deck Cranes to pay the payroll.

1:01:01Well, she didn't do that for a month or so, and then she put a deposit in like 4 times. So our bank account looked like it was here, but once we took it all out, it was only had like, if I remember correctly, it was like $40 grand. Once we took the extra 3 out, ended up being $10 grand. We had payroll.

1:01:19Bills due. We had $10 grand on a line of credit. I literally almost threw up. I didn't know what to do. Brand new at this. Like, I call him, I'm like, you know, I got to do payroll and stuff like that. We got people that owe us money and this is what he figured out. And he's like, I just have to do what you do.

1:01:35I'm like, yeah, but do what I do. I don't know how to do this. I can't fill the bank account. Yeah. So I ended up making it work and me and Jordan figured out for the next year, I fricking took our whole accounting system apart piece by piece. They were using ledger cards, all that. I hooked up Mitchell back office. It took us a year to the point where me and my daughter went through and we built a whole accounting system.

1:01:58So I am self-taught 100% on how to do all this shit. And I will tell you what, I would get up in the middle of the night and almost throw up. It fucking consumed me. There's a company I worked at, I was part owner in, I had guys that fricking counted on me. My best friend's wife's dying of cancer. Okay. What am I going to— so I was the guy.

1:02:25So I stepped up and it took me a year and I figured it all out. And that's kind of how I got into numbers. And I just kept going and I kept getting it better and better and better, you know, and to the point where I could understand what was going on, you know what I mean? And then I applied to, I got my management success books out and I applied Applied everything again, the backend stuff, and got with our accountant at the time and rearranged our quick or our P&L sheets and all that kind of shit.

1:02:51It was, it was a year of going through that shit to get to the point where I would kind of start to understand what was going on. It's really cool 'cause people, you, you're so good at it now and people probably think that it's just something that you always have been good at. So it's really cool to hear that story and I can imagine, knowing you, I can see how it, You had to take that system and build it all yourself and know that you're not, like, know, the power of knowing versus that ignorance is not bliss, like sitting out here and— They were using like 4 different programs.

1:03:21They would like take this one number out of like the management, it was Master Repair 8000 back then. They would take this number and they would add it to this number in QuickBooks, which would be our income. And then they would minus this and it would have to match this. I'm like, what the fuck? And this lady Marcia was working there and she lasted about 2 months with me because she didn't know.

1:03:43She made everything just worse. So I ended up letting her go. The final straw that broke her back was she was hiding some of the bills because I was so bent out of shape about keep getting bills in the mail. I couldn't pay them. And I'm like, what the fuck? What are we doing here? And I finally found the bills and it just ended up being— She was hiding them from you?

1:04:03Yeah, to try to help me. So Steve ended up coming and firing her because 'cause he hired her. She went to his church and everything like that. And it was like, whatever, you know? And then me and Jordan just kept going and kept going and kept building and just got to the point. I remember the credit card limit was $20 grand then.

1:04:20And I was thinking, oh my God, a credit card with a $20,000 limit. We spend $50,000 a month easy now on parts sometimes. Our credit card bill's $50,000 a month easy. Wow. Because most people don't take into consideration A lot of stuff is bought offsite now. Before, back when we were coming up in this business, we would buy from the locals. Well, now you go online, you buy it on Amazon.

1:04:42It's just, it is what it is. You buy it on Amazon, you mark it up 400%. You buy it for a dollar, you sell for $400. You buy a big house because you're a shop owner. You fucking pay your employees peanuts on flat rate. This is how you get ahead, guys. So, you know, neither month is telling the truth when you have two months that are fucked up.

1:05:04Yeah. So you kind of got to say, okay, how do I handle it? Once again, I already went ahead, but I'll just read it. You know, the best practice is, you know, you could either use your inventory parts, but you don't want to buy a bunch of parts and put them in inventory because nowadays inventory is, you know, considered profit and taxable.

1:05:23So we kind of buy it have the parts, people bring it to us. We just kind of deal with the bummer bubbles and the numbers, you know, you know, closing your months all together. But it's just too hard to start on the 1st and end on the 31st and have everything encapsulated in one month, you know what I mean? So I look at the trends like not in single months.

1:05:41I do 3-month averages. Like I say, we do rolling numbers. You can do year to date. Year to date is not a bad number because it kind of puts all the months together. The only thing I don't do if we're halfway through a month, I leave that month out when I do that report. So year to date. But if I'm like, okay, if I'm in July, I go year to date to the end of June because I know everything's done in June.

1:06:00Yeah. And there might be one in July or two, but it's close, you know what I mean? Gives you, gives you that average number because there's going to be a trend, right? Yeah. If you're billing low across all the months, you're going to have fricking low profit, period. You know what I mean? So, you know, one month can lie to you. There's— it just can lie.

1:06:18There's just like I already said it on that engine that month. Like, oh my God. Yeah, it looked great over at Motor City, but it looked really bad over at fricking Garrett's. You know, that job was a— they— it was a brand new truck. They rolled over a gravel train, they twisted the frame. We got all done with it, put it back together.

1:06:35We started the truck up, we heard clunk, big old bolt fell out from underneath with a piece of the engine block. Oh, the engine block on that Cummins, both of the two mounts in the front with the frame twisted, it broke the block. We didn't see it. The insurance adjuster didn't see it. So we started it, started rattling, clank, the motor, the engine block is broken.

1:06:54Yeah, that was interesting. You know, so here's the, here's the next part of it, guys. So if you had that one month and it screwed up, you don't react. You wait. Because once again, you could have bought that engine or your guys could have bought that engine. You're on vacation. Chances are you would know. Yeah. But if you didn't, you bought a $100,000 engine.

1:07:16Oh my God. What happened last one? We lost $100,000. Whatever. Yeah. I just threw that. You know what I mean? Yep. So when you panic, what happens? You become irrational. You make bad decisions. It's called knee jerk. So sometimes you have to take a deep breath and wait and see what's going on. There's nothing worse than scared, being scared because you do stupid shit.

1:07:35Yep. Okay. Yep. So, you know, so you make bad decisions if you're, if you're scared and stuff like that. So just take a deep breath, guys. So, so how to get from the 25 to the 30? There's only two ways to increase your net profit: increase your gross profit, which we talked about, or you lower your operating costs. Okay, number two, two simple levers to pull.

1:08:00Yep. Increase your gross profit. How could you do that? Mark your parts up a little bit more, raise your labor rate a little bit more. This is where commission is a little bit of a problem versus having hourly employees or flat rate employees. That's why they went from commission to flat rate. So when you raise that labor rate, these guys don't get a raise, but my payroll and everything stays static if I have people on salary and hourly, right?

1:08:25So it's a little bit more easier for me to control. Yep. But I'm taking all the risk too, because if I'm slow, I'm still paying all that stuff. So, you know, so to increase your gross profit, like we talked about, you know, only thing you have to do is take that $40, which is cost you to do the job and do a really good job and say if you made that $40, $35, all of a sudden your profit goes up.

1:08:53See what I'm saying? Now, if he goes all the way, that goes all the way to the bottom because everything in the middle stays the same. So it goes up or you make the bottom. I said this 100 times in the last 2 podcasts will say it again, you shrink your cost, that number goes up, you know. So that's what people need to understand.

1:09:12And my thought is it'd be really hard to do all this if you don't even know your numbers because you don't even have QuickBooks. So I was thinking when you ended that, having that budget, like, how do you control that number too? You have a budget. You have a budget. And that's the problem with these guys. You know, we're going to get into, you know, setting up the budget and how we're going to do it.

1:09:29But I'm just— I want to like keep over and over again to make people understand. Because sometimes people just don't get it, you know, on this whole thing, you know. So far as this goes, you know, basically the bottom line is we started at $25, we're now at $30. We talked about how we got to that $30. You didn't need a miracle.

1:09:49What did you need? Control. Control. You were deliberate. You had a fricking mission. You stayed on top of it. You followed through every frickin' week you checked your numbers, you did your year-to-dates on your P&L sheets if you have them. If you don't, the easy way to do this is make sure your front end's good and see how much money you're bringing in.

1:10:11And then at the end of it, I don't even want to go down that road because it's going to be too convoluted to even understand. If you don't have a QuickBooks or you don't have an accountant that's going to do it, and a lot of these people are like, I'll just call my accountant. Well, your accountant's 2 months behind or 3 months behind.

1:10:26You could already be in a problem. You know, a couple of the people that I have run across, they have QuickBooks and stuff, but it hasn't been reconciled. So I look, I'm like, okay, here's a problem. You don't even know how it's coming in and out of the bank. You know, then we talk about credit card fees coming out of the bank.

1:10:41You might think you have $5,000 in the bank. Here comes frickin' Visa, MasterCard, American Express, and take $3,200 of that. Don't worry, bro, that's a write-off. It's only a write-off at your tax rate. Yes, you get 100% write-off, but you get your tax rate, it's taxed at your tax rate. So on $4,500 I was talking about last week, I don't think I said it clearly, like maybe what, $1,400, $1,500 you get to fricking actually save.

1:11:04It just goes on your tax rate, which that's a whole nother episode. Yeah, yeah, yeah. Going deeper. You know, so, you know, the final close on this before we get into the other pieces I want to talk about is both shops, the owners asked, how did I get How do I get more cars? That's the wrong question. Okay. What the right question is, how can I raise the— what I keep out of each one of these cars or raise up the price a little bit on everything so I can keep more out of each car?

1:11:31Do you realize that the people that— some of my consulting clients, they don't have any more cars. We did not do any more advertising for them or anything. We fixed their front-end billing problem. And that fixed all their problems in their bank account. That solidifies knowing your numbers, knowing how to bill on the front end so you have money on the back end to pay your people and pay your bills.

1:11:54Because if you're not paying up there, what happens to that top number, that profit margin? Is what if that profit margin is 10% and then you go through all this stuff and all of a sudden it goes negative? Yeah, because your costs in the middle eat that 10% up because it's supposed to be 60. So you lost 50%. So it goes through and all of a sudden you're negative.

1:12:16And that's what people don't understand. The front of the house has to build right. You have to know your cost, plain and simple. You know, so you were deliberate here. You got this up 5%. Now keep in mind, once again, we're gonna talk about the budget. We have to make sure We go through every line and an easy way to do it is pull up last year's P&L sheet like I do and say, okay, here's a pretty good budget right here.

1:12:49And then you could do the previous year and get it close. You can't use a COVID year because that just fucked everything up, but you can see where the trends are. Uh, it looks like my, and I know like my medical insurance was like 14, 15, and it was 17 this year. So I know the last 3 years has gone up 1 or 2%.

1:13:09I can't— don't quote me 100% on that, but I think it's 1 or 2%. That's my wife's deal. But so at that point, I kind of know the trend. You know what I mean? And so you start looking at that, but what happens if, uh, a big one for right now for everybody is insurance. Insurance is a real problem right now. So unfortunately there's only a few people that really do truck and auto repair shop.

1:13:32So you're kind of stuck. Um, but you could shop around. You got Fremont and I think you got Auto Owners and stuff like that. Them are the two big guys. I'm sure there's other ones out there. Uh, them are the ones I know, but you could always price shop them or sit down with your insurance agent every year and say, okay, what's going on?

1:13:49This went up X amount of dollars. I need to go through line by line on my coverages. And I do that once a year. And you know, my guy named Bill, Springer's pretty good, you know, like we had some insurances we didn't even freaking need. Like we need a sexual harassment. We had a sexual harassment rider on there and I'm like, we don't have any chicks working besides my wife.

1:14:09Get offended. And I, you know, she said, stop harassing me again yesterday. I don't know if she could sue me because I always walk by and like touch her. It's like, stop harassing me when I'm in the office working. But my point was, is like, I didn't need that rider. So I'm like, okay, take that off. Okay, well, why do I have this rider?

1:14:27You know, well, you needed that. Well, that thing's an old piece of shit. I don't really care. So kind of go year to year and look at your coverages and see what maybe you can go down a little bit on to kind of curtail the increases to keep— if you can't raise your labor rate. Yeah. Back in the day, I would have to say we used to raise our labor rate $1 or $2 a year.

1:14:47I mean, last time I think it was $8, $10. I know every guy talks about it. Like a lot of these guys will raise their labor rates $10 or $12 an hour and nobody will even say a word to them. When I raised them. TJ, we did. Yep. We called around. He was the lowest guy around. Lowest by far. Yeah. And he has not had any complaints about pricing.

1:15:02And I know my other clients have not had anything. And I had my one guy raise his price, his markup on his parts. He raised it 12%. I said, how much blowback you got? He said, none. Nobody even said a word. Isn't it funny they worry so much about that blowback or customers being upset about it and then nothing. Right. And you know, my thing is if you go broke, cause you don't know your numbers and don't have a budget and stuff like that to kind of blueprint your P&L where you should be and everything, you're going to go out of business anyway.

1:15:34It's just a matter of time. You cannot keep going and losing money. You can't take every dime out of your business and lose money. And we're going to get into that here in a minute, you know? So, you know, One thing I want to talk about before we go over to the P&L sheet all the way is add-backs. And we talked about this.

1:15:54Yeah. Okay. There's a couple of ways you look at add-backs here at the end of this. So after we talked about all this, I got my numbers right here, my percentages, the owner add-backs explained. Okay. And I had to go back and I did this two ways. Some of you guys that are wanting to sell to private equity, You have to have it figured out what you take out of your business.

1:16:18Well, private equity would look at and say, okay, Kevin takes $500,000 a year out of his business, right? He's done that for the last 4 years. Yeah. Kevin's not there. So the business runs without Kevin there. That means he has people in place. What would I have to do if we took Kevin out of the picture, because him and his wife do— I shouldn't say we're not there, but say the shops run theirself, right?

1:16:46We still do the books. What the owner does, say you could hire somebody for $100,000 to do what I do, but I take $500,000. You buy my shop, I leave, there's $500,000 sitting on the table because you gotta remember I'm not there running that shop every day. I just do the backend stuff. We could hire a guy for $100,000 to do the back end stuff, right?

1:17:13What's available? $400,000 of cash flow right away could be pulled out of that business and put right in the new owner's pocket. The new group's pocket. Yep. That's what private equity looks like. It looks for— okay, they want you to come in. They want you to say, yeah, well, no, I do the numbers in my business, but on a day-to-day basis, the operations of the business are handled by all my employees.

1:17:34So I walk in, we do payroll, we pay the bills, see you next week. We don't have to make day-to-day operational decisions. We have everything in place. So therefore we could hire a guy for $100 grand to do what he does and we can keep the $400,000. At that point, that business looks really good. He has no debt. He looks really fricking good.

1:17:54You're cash flowing right away. You're cash flowing right away. Or they look at a company that's a complete piece of shit. Not making any money and they walk in and you're ready to frickin' die because you're working. You're not making any money because you don't know your numbers. They say, we'll give you $150,000 for this business when they know goddamn well that the parking lot's full.

1:18:15They got more customers than they know what to do with. They just don't know how to build. They're not doing this. The private equity comes in there, puts a beautiful front on the building, redoes the waiting room, hires a bunch of pros, brings it in there, raises the prices through the roof, and all of a sudden the place is making money. And your dreams, your intuitions and everything, you were a fucking chump and they bought your shit for $150,000.

1:18:33And guess who that happened to? My grandpa. My grandpa who was 106 years old, gonna be 100, maybe 105. He's over 104. Holy shit. Yeah. He started Bill Brown Auto Clinic in Canton, Michigan. It was right off of Mettetal Airport on Lilly Road. Okay. He started in Detroit at a little gas station. A couple of those guys got jumped by some people.

1:18:59They moved out there. He built the building. They moved out there. He was out there for a long— since the '40s, I think. He ran a very successful business. He actually had an airplane hangar built on the back of his building. He used to fly his airplane and stuff like that. Great reputation, great technician, great business owner. Him and my grandpa worked for years.

1:19:18He ended up retiring. I think he retired, I don't remember, maybe his high 60s. He still went into the shop, but he sold it to one of his techs. This guy ran that motherfucker into the ground. I didn't know nothing about that till we were at my grandma's funeral. And I said, how's business? I sold that place. And I had heard through the grapevine.

1:19:37Yeah. And then I'm like, okay. Never thought nothing about it. Then I seen him at one of my grandpa's, maybe his 101st, 102nd birthday party, my aunt's. And he said, man, I didn't even know they had benefits and stuff like that because we owned that shop for so long, we didn't make no money, we had no benefits, da da da da da.

1:19:53And I'm like, wow. So then I talked to one of the guys around and said, what did you guys— they bought that place for a fire sale. Okay, wow. I don't know exact the price, I would not— I would even divulge that, but I know they got a good deal on it. And he said, I sold the building too. I'm like, oh my God, why would you sell the building too?

1:20:13You could have did a long-term lease. Like, Who did you get your advice from? Yeah, so, uh, that's kind of the roundabout story about the whole thing. And I'm just kind of like— and no, the worst part about it is if I would have known that shop would have been for sale, I would have bought it. Think about the legacy I could have freaking did.

1:20:30That's so cool. Oh man, but how long ago was that? It had to be 5 or 6 years ago or more. Yeah, well, I guess my grandpa's still alive, so I know he's— he's— it might have been 4 years, 5 years-ish. And maybe it was his 100th birthday party, I don't know, but it's not more than 5 years. Yeah. So, you know, and there's a perfect example where you get a technician that took over a shop that really didn't know the numbers.

1:20:58And we see this a lot. Yeah. Okay. And then I always talk to guys, I'm like, what about this? Well, I'm not a numbers guy. You better fucking be. Or you better make enough money. We could hire somebody you trust to tell you about your numbers. Yep. It's, it's, it's not that hard once you sit down and apply yourself to it. The problem is a lot of these guys don't want to apply theirself to it.

1:21:19They want to go out and fix cars because they're scared. They don't know what else to do. You know, hire somebody. It doesn't have to be my coach, me as a coach, or a consultant. Could be anybody. Anybody. Get some fucking help. It'll change your life. Yep. You know,. So let's talk about true profit in your shop. You know, most owners think, you know, you look at the P&L sheet, this is what I made.

1:21:39Now this is kind of an accounting of what happened. Okay. You know, it's not like, oh, look what I made. Where's the money at? You know, you spent it all, right? You know, I remember talking to, you know, what an own— when an add back is, let's go back to the paper. What an add back is, is what the owner, takes out of the business that does not make the business run, meaning the cars for his kids and stuff like that.

1:22:06That stuff, the meals, the travel that's personal, all that type of stuff, it does not need to be in the business for the business to run. Yep. And that's where, you know, a lot of guys are like, well, I don't make no money, but you know, he's been in Tahiti for 3 weeks, or, you know, I don't have no money, but he's going up to the company lake house.

1:22:25You know, the company pays for. I don't make no money. I got something to get in my company Corvette and go driving, you know. Okay, wait, everything the owner takes out that's not needed to run the business on a daily basis is profit. Yeah. You know, so, you know, personal or discretionary expenses are paid by the business are add backs. And that's one of the things that private equity look at to add backs.

1:22:48Say he takes $500,000 in, you know, a salary or whatever. Right. But also if he's a company car, a company plane. Yeah. Oh, that's adding up quick. It starts adding up, you know? So that's a big problem. You know, here's a common add backs in auto and truck shops that are profit, but guys don't consider it. Personal gas. The company shouldn't be paying.

1:23:14Now let's face it, we all do it. But when you're talking about, we're talking about add backs, right? When these guys are like, I don't make no money. Well, motherfucker, you spent $1,400 in gas last month. Yeah. On personal shit. Yeah. That comes right off the fricking, you know, the numbers. Personal meals. You fricking take everybody out and put it on the old company credit card.

1:23:34Okay. You know, personal travel, which I talked about, personal vehicle expenses, family benefits, not tied to operation. I already talked about that. Yeah. All the kids and everybody. Yup. You know, they take the company card and the company gas card on spring break. Their insurance on their cars, da da da da da da, clothes, whatever, you know, lifestyle expenses is through the business.

1:23:57Any lifestyle expense, you know, they used to let you do home offices and stuff like that. They're really, IRS is really hard on that now. The home office thing, you can't write a lot of that off. This is profit taken early. All that's profit taken out on a daily, monthly, weekly, whatever basis. So you gotta stop and think, guys, you know, there's a way you could do this if you really wanted to.

1:24:18If you had a P&L sheet, you could put a line in it. You know, you got your 3s, your 4 accounts, your 5 accounts. You can make like a 9-account or 7-account. And anything that you take out as an owner out of the business, you could put right above the net. So it'll give you a net, a net, and a net. You know what I'm saying?

1:24:37So you could say, okay, here's my cost of goods sold. Here's all my costs. We hit this number. Then here's the owner. We hit this number. Then if you took the owner and added them back in, here's your real number. Mm-hmm. You follow that? Yep. The IRS would be like, fucking thank you very much. So you really don't want to leave it like that.

1:24:57If you get audited. Yeah. They'd be like, oh, thank you. You just put a bow on it for me. But that'd be a lot of guys do that. A lot of the older guys do that. That way they know exactly what they're taking out of their business. Because you think about it, you're like, okay, I take wages, I take draws, I take gas.

1:25:11I pay for food. I pay for like, there's a lot of fringe benefits of being an owner if the company can afford it. Yep. And the other thing these guys don't understand is when you're talking about net profit, if you're paying your people off a net profit, you can be dicking your people. So you kind of got to be careful that maybe not do it off a net, do it off a gross, make sure it's a little bit higher than it should be.

1:25:34Your cost of goods sold, that way when you give them their bone, you know what I mean? That's the way I do it. It's a lot easier that way, a lot cleaner. You know, so that's really expense, you know, so business use, keep it as an expense, you know, driving around shop errands, you know, that's an expense for your company vehicle, picking up parts, deliveries, business-related travel.

1:25:53You know, this, this stays as a true business expense, right? Here's one where people are going to get themselves in trouble. PUCC, personal use of a company car. Oh, You should be paying taxes on your personal mileage. We do. It comes out of our— we figured out our average for all the guys, me, Jason, Jim, and out of our paycheck every week we pay personal use of company car.

1:26:16Okay. Every week. Because they literally want you to carry a black book. Yeah. And you went to the supermarket 2 miles. They want you to freaking do that at the end of the year. They want a freaking accounting of all this. Yeah. So we did our average of what we did and we pay for it every week out of our paychecks. That's just the right thing to do so you don't get yourself in trouble, guys.

1:26:35Guarantee you, everybody's gonna be like, fuck. Uh, yo, yo, I mean, I'm sure there's a few of these guys, you know. Okay, you drive your vehicle home on the weekends, that's personal. You use it on the weekends, personal, unless you're obviously going to get parts, right? Uh, personal trips, going on family vacations, right? Whatever. Yeah, how could you have an auto and truck repair shop And you're driving to fucking Florida and they say, oh, you went to Orlando.

1:27:02Where'd you go to Orlando? So you better write that down and say, okay, I'll pay tax on that personal use of company car. Are they going to catch you? Chances are no. But what if you get caught? That opens several years back. So you kind of got to be careful and do it the right way, you know, as an owner. So that's an add back, you know, guys, you know, the simple way to think about it, if 70% of the vehicle is business and 30% is personal, That's what we do.

1:27:26Yeah. We figured out, I don't know, I'm not even going to tell you because my wife did it. Yeah. But that's what we do. Yep. That's just this clean way to do it. That way the accountant knows, everybody knows it's all, you know, on our tax returns, you know. So, you know, the vehicle costs $12,000 a year, personal use is 30%, add back $3,600 back to the profit.

1:27:45If you want to go back to, you know, add it back to your profit. So you kind of know what's going on with that, you know. Owner paid, owner pays a different rule. You know, you can do owner salary, normalize, replace with market pay, personal expenses. You can add them back 100% if you really wanted to figure out your net, like what I did on mine.

1:28:05And I told you, um, I know what I net, but then I said, okay, I need to figure out exactly what I take. Yeah. So I put what I take with what I netted, what was left on the net with my numbers taken out of there. And put it on top of this right here, it gives me the real number. Yep. So if a company was looking at buying my shop, I would say, here's the add-backs.

1:28:29Yep. And then they, oh, okay. Then all of a sudden I go from being a mediocre business to being elite, you know, by standards. That little bit of language and pointing out and leading them to it. Yeah. You know, the putting the add-backs in. So, you know, this is, you know, kind of budgeting. So we're going to get to that here in a minute, you know, Um, so that's kind of with that, you know.

1:28:50Oh, so let me make sure I got everything because I talked so far I had them already way ahead of everything. So people are gonna say his paper's completely blank. Well, I just, I already memorized this, but I want to make sure I hit all the points. So, you know, I already know, not memorized it. Yeah, yeah, I didn't memorize all this paper, you know.

1:29:08Personal expenses, like we talked about, you know, the profit. So I mean, if you had your personal expenses, let's just say $25,000, right? Then your vehicle use is another $5,000. You'd add $30,000 back to your true profit. So all of a sudden it looked like you made $200,000, but really you made $230,000 because you took it out early. So that's stuff you have to keep track of and say, okay, this is what I need to add back.

1:29:33Because once again, you're like, man, I did all this and I made nothing. Let's talk about the vehicles, the vacations, the this, the that, that the company— you spent it all. And most guys don't think that. They're like, well, fuck, I'm broke, you know? Well, no, you spent it all. The company did just fine. You're just an asshole. You say you can't afford to pay your guys more because you took it all.

1:29:52Yep. You know, so you could budget for people's raises. You could budget for all that stuff coming up. So you can say, okay, I want to raise the budget. I want to raise payroll X amount. I'm going to give, you know, Jason Tracy a raise, Kevin Brown a raise, X amount of dollars. So we raise our budget up. So we're already budgeted for that raise.

1:30:10So it doesn't eat into your bottom number. So, you know, and the one thing is, I will tell you, let me just keep going. Maintenance, maintenance, blah, blah, blah. Final thing. Yeah. Personal, add it back in. Business, leave it in. Mix like vehicles, split it. Okay. So my numbers, just real quick before we get to the budget part of it, where, how far along are we?

1:30:34So we got— still got time for you to split this, right? Yep. Yep. Okay. You know, real structure. Here's my owner adjusted. My cost of goods is $38,000. My gross profit is $62,000. My expenses are $35,000 and my net profit is $26,700. It's $26,000, but I knew it was $26,700. So I'm right at the target of 25% or above. That's what management success used to say, 20%.

1:31:03Yep. Okay. Then they would say the owner takes 20%. So if I took, you know, 20%, I'd leave 6% into the company. So the company wouldn't be broke. From broke. Yep. We're broke. You know, now it's all over what people in our business make net. Okay. If you're GM and you're making 3% net, that's fucking awesome. Billions and billions of dollars, right?

1:31:28Yep. But if you're Joe Blow and you're making $100,000 a year, you're keeping 2%, you're fucking going out of business. Yeah. Yep. You know what I mean? You have no room for error in that. 2% could be a mistake in your numbers. You really could be losing money. You know what I mean? So, you know, we're running about 38%, like I said, 62% gross office, 35% in expenses, and roughly 26% net.

1:31:51It's over that, like I told you. I actually have the real numbers right here. I don't really want to get into my numbers, but I just basically gave you all that. And if you add back in what I take, it ends up at 26.7%. Yep. So our budgeting, when we do a budget, we would say, okay, we would take $100 and we'd say, What is our payroll?

1:32:19It's a percentage of the income. It's not cut and dry because if you look at the P&L sheet, you got percentages next to it, right? Yeah. And I should have wrote a budget out, but I kind of knew the numbers you got. You have a range if you look it up. Let's just look it up for auto repair because I didn't— I forgot to print it.

1:32:34I'm not going to lie to you. Like, I got to the budget. Yeah, yeah. Fucking budget. All right. That's going to do it for this episode of Repair Shop Reckoning. If this helped you, please make sure to subscribe so you don't miss what's coming next. We drop real conversations, real systems, and real solutions every week. We'll see you back here next time on Repair Shop Reckoning.