Stop Guessing & Start Controlling: Budget vs P & L

0:00This is the story of the one. As a maintenance engineer at a beverage manufacturing plant, he starts his day knowing every line is ready to run because Grainger delivers the industrial-grade products he needs to keep mixers, conveyors, and packaging equipment moving. With Grainger's vast selection of bearings, belts, and motors, he keeps operations running smoothly so nothing grinds to a halt. Call 1-800-GRANGER, click grainger.com, or just stop by.

0:25Granger, for the ones who get it done. 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. Shop owner, operator, consultant, leader through industry shifts, insurance games, bad hires, great hires, and lessons learned the hard way.

0:58This 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. No corporate scripts, no sugarcoating. And yeah, somebody might get offended.

1:27That'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. Welcome back, part 2 of our P&L slash budget. You know, I did P&Ls last week, this one yesterday. We kind of went a little bit deeper into the P&L. We talked about add-backs private equity and stuff like that.

1:51So now I want to get to the budget part, which is part 2 of this podcast, right? Did I say that or I fucked that up? It's good. All right, cool. So the core difference between a budget and a P&L is really, really simple. The budget is what's going to happen in the future, right? That's— we're going to watch our costs going in.

2:11The P&L, it's already happened because we're using last year's. It's a report card of last year, right? That's what we did. And if we followed our budget, You know, last year, obviously our P&L would match, and P&Ls and budgets look the same, and it's on purpose. You can go line by line. So you should have your budget lined up with your P&L so you can look, right?

2:32And a budget needs to be controlled once a week. You should look at stuff, or when you get your mail in, or you know how much your insurance bills— make sure that stuff doesn't start creeping up. That's where you start running into problems with your budget and your net starting to go down, your net profit starting to go down, because either you're your parts start to creep up and your people aren't watching and they're not marking them up enough, so you start losing money, your cost, or your guys are taking longer on jobs than you're getting paid for, so your labor creeps up.

3:01So all of a sudden the top, the cost of goods sold, your profit starts going down. And that, if that profit starts going down, remember the net is gonna start going down 'cause your costs, your 35%, we talk about $35 in the middle, that stays the same, but if you're making less profit, there's, it's not going to follow the bottom line. Okay.

3:21I can't like say that enough to people. Cause we were talking on the way here when we, you know, it was like, you have to keep repeating that. So people kind of get it, you know? So I got the budgets right here. Um, and I also have some different things that I wanted to talk about, about the whole profit and the budget.

3:40So I did a good budget and a bad budget, a budget where I have it, but all of a sudden everything kind of gets out of whack. And then I have, you know, I did some stuff about understanding where stuff goes up and down. So once again, our budget, we start out with a $100 bill on our budget, just like our P&L sheet.

3:58Our cost is $40. We take $40 from $100, that leaves us $60, right? It could be 60% or $60, whatever you guys feel that you want in your mind, right? At that point we say, okay, our expenses are $35. $1,000,000. Here's what happens. We're going to go— now we're not talking about P&L, we're talking about a budget. We're talking about trying to live control this because the P&L is going to be the report card of how we did with the budget, right?

4:25So we have to start watching the budget. And how do we do that? Well, we start watching our payroll. We talked about overtime. If overtime in your budget, you have overtime set for, say, 10 hours a week, and all of a sudden these guys are doing 20 hours a week. There goes your profit. Cause you gotta remember a big killer of, um, net profit is overtime because overtime you make less money.

4:50There's what we talked about, the cost of goods costing you more money cause you're paying time and a half, but your labor rates already considered your margins on your labor rate is at a normal hourly rate. It's not time and a half. If it's, I mean, if the guy makes $20, all of a sudden he makes $30. 'Cause he's, you know, the extra $10, you cut the $20 in half, you put $10 on it, there's $30.

5:12So now all of a sudden your profit margin on your labor just dropped down, not to mention your taxes and everything else. Now I will say you could take into consideration some, in some fields, not all, it just depends how your company bills it. You know, tax on overtime with a big beautiful bill is, was taking care of tax on overtime. So you gotta kind of, depending on what field you're in.

5:35Like I know nurses and some other fields, they have it a little bit trickier so they don't have to pay, they don't call it overtime. Okay. Which is pretty interesting. One of my guys was telling me that. That's interesting. 'Cause his wife's a nurse. I was like, oh, that's pretty interesting. So you gotta watch that cost of goods. You start to get overtime, your guys start taking longer to do jobs, so you're not getting paid 'cause your effective labor rate, you know, if you pay, get paid for an hour job for an hour and he's an hourly guy and takes 3 hours, well, there's a problem.

6:02If it's a flat rate guy, it won't be a problem. Yep. Yep. You know what I mean? So what happens if, uh, you know, your guys aren't hitting their marks in the front office, like your parts are going up. And this one, it just popped in my head just now. One thing that you could lose money on real quick and cost yourself real profit is having stuff in inventory and reinventorying it and not adjusting your pricing when it comes in.

6:29Meaning if your inventory is there and you paid $40 for something, it's $40 you paid for it, right? But what if you sell it and blindly just reorder to put it back in inventory and never look at the price? And the thing that people, most people are probably going to understand in the shop world that keep filters and stuff, filters been climbing and climbing and climbing like $2, $3, $4 at a time.

6:49You start doing a bunch of LOFs or fuel filters or stuff like that and you don't adjust your pricing back up. Yeah. You start losing money right there. Here comes the cost of goods. Your profit is going down because your parts prices went up, but you didn't adjust. So you think you're selling, you know, oil filter, you paid a dollar for it.

7:07We'll just say you're selling it for $5. All of a sudden that oil filter costs you $4. You're selling for $5 because it's in your computer by that part number. You never adjusted it. And I think this would be a separator too. Like if you're just relying off in your shop software, you're never going to notice that because you're just not, if you're not paying attention to a P&L, that's not going to be there.

7:25It's going to show normal in your system. Right. So how we got off of that is we do live pricing. When anything we order or reorder, we always live price everything. Like one, at the body shop, when we get a stock order, we go through into the computer and punch in the part numbers and make sure the price is right because it keeps creeping up.

7:44Everything's creeping up. Your bulk oils, stuff like that, you have to adjust it. You know, as a commodity, so it goes up and down. Right now it's going to be high because of what's going on with when gas prices and oil and everything and futures, you know, the stock market, everybody's hedging, you know, the, you know, Wall Street's fricking driving the price of everything way up because they're hedging.

8:02Okay. So that comes right down to us in our cost of goods. If we got oil and we paid $1.99 for it and we just got refilled, we didn't pay attention. All of a sudden it's $3.99 or $4.99 and you don't go into your shop management program and adjust it. That's coming right off your bottom line because your cost of goods is creeping up.

8:19That's a problem. Yeah, right. So we talked about insurance, we talked about marketing, utilities. Utilities, another one we talked about. Software subscriptions, tools and equipment, phones, supplies, small stuff that all adds up. So you have to start really paying attention to all this stuff. Well, I can't even freaking hardly send my customers a bill because I'm so busy. How can I? How can I do a budget?

8:43You need to figure out where you fit in your business and you need to stay there. If you can't do this, you hire somebody to do it for you. If you wanna fix cars, then go fix cars, but you better have somebody at the front that you can trust to do this. Now, your service advisors, obviously they're the part of it that are gonna control the cost of goods sold, your shop management program, right?

9:03And how do I make sure that these guys are doing live pricing, is what, which I call it my shop. What I would do is I'd put policies and procedures in place once a week. We need to have a piece of paper that says, okay, what were the price increases this week on the front end? Then they can give me the sheet.

9:19I can go to the budget and say, okay, we need to adjust. Okay. Oh, shit. All of a sudden, my 35% of my expenses, it went up $4 or 4% this week. Okay. I have to figure out how I'm going to get my numbers up 4%. Do I have to raise my labor rate? Do I have to do X? Do I have to raise my markup on parts to offset that, to protect my bottom line?

9:41Because if you don't do that, it's just gonna keep going and keep going and keep going. You know, you got uniform companies, you know, they, a lot of times you'll sign, uh, you'll sign a 1-year contract in 2 years at the 2-year mark, they could raise the prices at a set amount. Okay. This is all stuff that's gonna kind of add up on you.

9:58So you have to kind of watch it. And as a shop owner, you know, the stuff up front, like I said, I would do a sheet. Um, we have a sheet and, We've any, any increases and stuff like that. When we change them, we fill out the sheet, we make a copy, we staple it. That way me or Marilyn, my wife, can catch it and say, okay, we need to adjust, adjust this or not adjust it or however we do it.

10:20You know, we aim a little bit high to kind of come in a little bit where we need to be with your budget. I don't think if you're trying to hit 25% net, you should probably try to get your prices set up till you're in the 30 range. That way you have a little bit of absorption, right? Not to mention at the start of the year, if you're doing it like we talked about budgeting, we are going to give Jason Tracy a raise of, you know, $4 or whatever, 4%.

10:44We're going to give someone a 4% raise. They used to say the cost of living, the unions and everything was 3%. Well, that shit's blown. That's gone. Yeah. So, you know, you could give somebody a 5% raise or 4%, whatever. Okay, we'll just throw it out there. But you could put that in your numbers at the start of the year and that would dictate you raising your labor rate and everything else to offset your increases that are coming down the line.

11:06'Cause remember, the budget is future, the P&L is past. You know what I mean? So the budget, you always have to kind of adjust it a little bit. Now, if you're really good at it, like I said, you aim a little bit high, you know you have a little bit of room to work with, right? The problem we have with budgets, like I talked about yesterday, a lot of the increases that come about are usually at the start of the year, the first 3 months of the year.

11:28So it's kind of like you're kind of messing with your numbers or you're adjusting, trying to, figure everything out, your budget, you're looking at it. Okay. Uh, here's all the stuff, you know, after the first month, cause you know, a lot of times like the, uh, the health insurance people call me, hey, you know, just so you know, there's going to be X amount increase this year.

11:46Like, holy shit. You know, and ideally it goes up and up and up, you know, like I said, you know, it could go up. I kind of know it goes up 1 or 2% from where it was last year. So I'm like, okay, that's 15% last year. Now it's 16% more this year. Okay. When you start talking about these numbers, you're talking about $16.

12:03Yeah. Now got to remember, we're doing budget, we're doing a budget here. We're not doing a percentage of our income because our income is not $100. It could be $2 million, $1 million. So there's a little bit of a difference there, you know what I mean? When you're doing— when you adjust your P&L sheet, when you say, okay, I want to do a percentage of income per line, that's a lot different than what we're talking about here.

12:25Do you know what I'm saying? But this is just like we're trying to make sure we looked at the P&L. Okay, this is what happened last year. This is the budget we need to say. This is a future. This is what we need to aim for. Here's how we're going to adjust this all out to maybe have that P&L sheet look a little bit better next year or get a little bit more on the bottom line.

12:42And that's what we kind of have to— we kind of do with the budget. I know this gets confusing to a lot of people, but if you really stop and think about it, it's not that hard when you think about it. The P&L is what's already happened. It's the picture of what's already happened, right? The wedding already happened, you're married, you have the picture of them walking down the aisle, it's done, okay?

13:03The future is the marriage, staying together, having kids and all that stuff, you know? Paint a different type of picture. So we always look at the budget and say, okay, this is what we have to do to kind of get the new P&L sheet, which is next year's P&L sheet, to behave like we want it to behave. It's kind of crazy, but I mean, the shit's kind of— I kind of think it's cool.

13:24I really do. Running a business is fun if you know what you're doing and you're not torturing yourself. Like I told you on the way here, it's like, um, my whole thing is today I didn't really do shit. I went and I met with Marilyn, went over the bills, we paid some bills. Um, I did some other stuff. I haven't really did anything all day.

13:43And I walked out the shop, it's completely calm. The guys are happy. And you know, I'm like, hey, what's up? Nothing much. I walked out here to the collision shop when I came back. I picked up parts for the guys and I'm like, hey, what's up? Everything's calm. Everybody's doing their job. Customers are picking stuff up, smiling, paying us. It's like everybody's doing their job.

13:59I don't have anything to do. That wasn't by me just getting lucky. That's me putting these systems in place and my people know what's expected of them. And I know what's expected of me. I should pay them on Friday. They get paid every week and they get, you know what I'm saying? It's like there's no, what if this happens? What should we do?

14:16We have everything laid out as best as I can. Obviously something's happening, happened that I just never seen coming. You deal with them at that point, right? Um, if somebody goes, you know, somebody slips and falls in your parking lot, all of a sudden you have a lawyer bill that could blow your fucking budget out of the water. What do you do?

14:31What do you do? Yeah, yeah. Sometimes you got to sit there and figure out how much is it going to cost me? Do I need to raise this? Do I need to lower this? Do I need to cancel something? You know, um, marketing— this is the story of the one. As a maintenance engineer at a beverage manufacturing plant, he starts his day knowing every line is ready to run because Granger delivers the industrial-grade products he needs to keep mixers, conveyors, and packaging equipment moving.

14:55With Granger's vast selection of bearings, belts, and motors, he keeps operations running smoothly so nothing grinds to a halt. Call 1-800-GRANGER, click granger.com, or just stop by. Granger, for the ones who get it done. In my opinion, that's one of the ones that's overlooked. That and insurance, if you guys think about it. Insurance almost seems to be on autopilot. Well, you know, I've been buying my insurance from Bob, you know, the insurance guy for 5 years.

15:22He wouldn't fuck me. You might want— you might be surprised what Bob will do. Bob is just like everybody else. Bob needs to make a living, right? Yeah. Yeah. You know, so his partner's name's Neil. So he kneels and bobs. That's just what he does. They charge money just like everybody else. They have a commission schedule. They want to make money. They have an increasing budget, right?

15:47Insurance companies. Yep. Yeah. So not only are they fucking everybody at the collision shops, you know, not paying the collision shops, but these guys that are writing insurance policies and stuff, they're there to make money. Don't kid yourself. When they call you buddy and friend and old friend of mine and old pal and all that, you know you're in trouble. So once a year we sit down, we go over all the insurance for all the companies with our insurance agent.

16:08Like I said, okay, well, what about this? Why do we have that coverage? Well, that was for old this or that. That thing's worn out. I don't care if it's full coverage, drop it down. If it gets 'cause you know, you could save money that way and keep chiseling that down. Always be, you know, changing. The problem with that is Jason, is a lot of these guys can't even get out of the back out from underneath the hood of a car.

16:27And then they spend all these hours working and they never adjusted anything. They don't even have a budget. They don't even know what the fuck is going on. Them are the guys I talk about. Well, let's see where we end up at the end of the year. Like, have you ever heard business owners that really don't know what they're doing? Well, I'll let you know what kind of year I had.

16:43Or I need to really run lean. You don't even know what the fuck you're talking about. Yep. Okay. They, they, they just say, okay, well, what I make is what I make. We do it on purpose. We aim for X and we might be hitting here. But like Grant Cardone says, if you do a budget, do one for $50 million and you aim for $50 million all year.

17:02What happens if you hit $10 million? You're still fucking doing great. Yep. So you aim high and maybe come in a little bit lower. You're okay. You know what I mean? And that's where guys just think, well, you know, I'm just going to see where, where everything lands. Well, how are you gonna see where everything lands when you don't even know how much it costs you to run your business?

17:20Then the guy walks in and says, I need a raise. You're like, yeah, I'll give you a raise. And then, you know, the, you know, the, the Little League comes in and they're like, hey, can you sponsor some teams? You're like, well, fuck, I wanna look like Billy Badass. So yeah, I'll sponsor 5 teams and you give them $500 and this and that.

17:34You don't, you're already underwater. You're already losing money. You're not even making any money. And you now you're just giving more away. Yep. Yeah, I mean, you have to use a budget of some sort, guys. You have to get the P&L. If it, you know, that you have to use a P&L and you have to use a budget and you have to use a lot of these reports in your shop management program.

17:52They're there for a reason. They're called metrics, you know, key performance indicators on the front end, you know. And I, I, the budgets are great. And, and I will tell you this, the P&L, there's a past, what happened. The budgets are, you know, the future, what's going to happen, how we're going to control everything. But Here's the fucking reality of it. If you do not take advantage of your shop management program and use the profit calculator and have a program with a good profit calculator, you're in trouble.

18:21You have to have your people hit the numbers. They have to know what's expected of them. And I cannot stress it enough. I've said it all through this podcast and I'm gonna say it again. The shop management program can make you and break you. Now, the shop management program by itself is a piece of shit. You have to have a service advisor putting the information in correctly.

18:39Marking stuff up correctly. Okay. If a lot of these guys don't do that, that's a whole nother problem. And a lot of the times these service advisors aren't trained. They don't even know what the numbers are. But the beauty of the new shop management programs, you don't have to. You can put a price in and you can have it set up with your, the AI, uh, the AI matrix in Shopware is great.

19:01I don't know if the other companies do it, but I know some of these, programs, what was it? Shop Monkey. When I was looking at the other day, it was really kind of hard to figure out where your profit was per box, per job. Like when you're building a job, it was kind of hard to see what the profit was. You kind of had to go look for it.

19:18It was kind of like you had to hunt it a little bit unless, I don't know, I can't— from what you're seeing, from what I'm seeing, that was what I was saying. It wasn't easy and intuitive, right? Shopware puts it right at the bottom of the box. So you kind of look at it and then you can get the ultimate extension, which makes it even better.

19:33It blurs it till you mouse over it. So if a customer's standing there, you just don't go to the blurry area. They don't see what you're making. That's awesome. But ShopWiz, you build each job in a box. What does that mean? Like, your front brakes will be one box, your rear brakes would be another box. If you're doing a water pump, it'd be another box.

19:48And you can look at the profit on each one of them boxes. And what I like about that is if you're doing tires, you know where the tires box is because tires are not a lot of profit, right? But you go to the top ones, you're fine. And then you go to the very top of the screen, it shows you a cumulative of all of them., then you have your area where you need to hit the top of it, which is pretty fricking cool.

20:11So profit calculators are a must. I know I talked to a guy, I think Fullbay is probably the biggest piece of shit program ever known to man. When we looked at that and there was no profit calculator, and then I had another guy call me and says, we switched to Fullbay last year and it almost put us out of business. He's like, they built— I said, there's no profit calculator.

20:29He said, well, they charge us a lot of money and they built one for us in there. I'm like, oh my God. He's like, yeah, we're done with them. It almost put us out of business. That was such a shitty program. Wow. Yeah, I was like kind of astonished by that. But after we seen it at TJ's, we're like, what a piece of shit this program is.

20:47It took a day and a half for us to be like, nope. Right. And not to mention, back in the day, we all of us older guys used Mitchell 'cause Mitchell was the badass program. You know, I went from MR7000 to MR, Master Repair 7000 to Master Repair 8000. I went to Mitchell. In Mitchell, I think it was F12 you used to hit and it would bring up a profit calculator.

21:08So you do your whole repair, you hit F12 and it would, would show you a profit calculator. Yeah. That was really nice. Cause it was Master Repair and all them, the earlier ones we had to use a calculator still. Then the MR8000 came out with a profit calculator. So guys, you need to have a profit calculator in your shop management program that is readily available for your people to see and use.

21:29And that needs to be the fricking guideline. They don't need to go by how they feel. They don't need to give discounts. I shut off discounts. Nobody's allowed to give a discount. Okay. How generous are you if it's not your fucking money? Pretty generous, right? Yeah. A lot of people, it's not their money. So what do they care? They'll give you $200 off for this or, or the owner's a bleeding fucking heart and he just can't believe that we would charge that kind of money.

21:53And I'm not going to lie, some of these prices are pretty expensive nowadays, but that's what has to happen to stay in business. And you know, the funny thing is, I was talking to Jim Gray today. And when we talk about raising prices in our business, everybody freaks out, right? Walmart changes their prices every fucking day. We just don't know it. Every day.

22:10Yep. Right. They also slash them with the little Zorro guy, but we don't even see them commercials anymore. Do we see that? I haven't seen that in a while. We haven't even seen them slashing prices anymore because everything's just still going up. You know what I mean? So you have to watch all that stuff with the expenses to keep that profit, you know, in check.

22:26And that's where the, You know, the, uh, budget comes in place. So here's the bad shop. So let's go with the, with the good shop. The good shop is we're, we're controlled. We are on purpose. We're purposeful. We're on it. We try to control it the best we possibly can. Some of the things that happen, if somebody slips and falls in the parking lot, here we go, we're getting sued, whatever.

22:46The insurance company has to handle that, whatever, right? Yeah. So, you know, ideally we have a $100 bill. Our cost is $40 to do the jobs. We get to keep 60% profit. Here comes our expenses of $35. We end up with $25 at the end of the month, year, whatever we're aiming for, right? The bad shop happens. You know, the sales are $100, but the parts got higher.

23:11We talked about the parts were creeping up and our service advisors weren't paying attention. They weren't raising the fricking, their, their markups, right? To offset the higher prices. So, That starts to creep up to $45. Then we start using sublet because it's just easier to have, you know, Joe Blow do this for us, right? Then we talk about lost labor, comebacks, regardless of what happens in our business.

23:33I don't care how good you are, right? Guys taking too long in jobs or efficiency being low. So all of a sudden that cost starts creeping up, your cost per hour, right? Now all of a sudden you're at $45 and your cost of goods sold, right? So all of a sudden your gross profit is $55. Right. Ooh, it's not 60. We just lost 5%.

23:51The expenses creeped up all of a sudden to the 40 because, you know, the payroll efficiency, the overtime, the guys had a bunch of shit happen. So they started doing overtime to try to make it right because it came back. So they had other stuff to do. So they stayed over 3 nights in a row to make this problem go away. They're already costing you money.

24:08And all of a sudden that creeped up, you know. So now all of a sudden your expenses are— your costs are $45, your profit's $55. And your expenses just went from $35 to $40, right? Guess what your profit is? $15. Do you know what I'm saying? So for every $100 we bring in, now $45 goes out to do the jobs instead of $40, right?

24:29Now all of a sudden it takes $40 to run the business instead of $35. Okay. And we're left with about $15 instead of $25 just because some little things happened. So, you know, now Cost went up to— if cost went up $5, expenses went up $5, profit dropped by $10. To put it simple, you know, it's not one big mistake, it's a bunch of small ones add up.

24:52That's my point. It's the insurance going up this much, this going up, this going up. It all adds up to one, you know, it goes through the whole thing. A bunch of little holes will sink a ship just like one big hole. Yep. Okay. You just maybe not notice the little holes, right? That's the kind of thing. Slowly, you're right. That's the crazy part about it.

25:13So the last part of it, you know, understanding your cost, your parts and your labor, you know, what cost really means, you know, and we just kind of breezed on it here, but we're going to kind of go into it a little bit. When I say what costs are going up, what I'm talking about, what it takes to produce the job parts and labor-wise.

25:31Okay. The cost of goods is labor. Yeah. There's that loaded labor, but it's the parts. You know, you have costs that go into a job. You know, if it costs you more to do the job, you have to mark it up more higher or it's gonna start what? Killing your profit, right? If parts are used, you used to come in at $40, now they're coming at $45 cuz you didn't adjust anything cuz your guys aren't paying attention up front.

25:53And that goes into the inventory, could go into the oil filters and all that stuff. And we, our guys are just being too lazy. 9 times outta 10 in a shop, what I find is people want to do a good job. Yeah. Yep. Number one, they don't have a set defined set of rules, what needs to happen in a certain situation, or the shop is so chaotic all the time, they don't have time to do it.

26:18And that goes hand in hand with the service advisor really wants to call the people back, but he says, I'll call you back. And he writes their number down, call so-and-so back on a little piece of paper and it gets shuffled out in his desk. He never calls that customer back. Yep. That you just paid $25 in marketing dollars to get that phone to ring for that customer.

26:35All you say, I'll call you back and you don't. And then you're on your way home and you're like, fuck, I didn't call that guy back. Yep. Well, I'm not going to say nothing to anybody else. I'll get in trouble. So you throw it away tomorrow. So you throw it away tomorrow. So, you know, that's the kind of thing we need to pay attention to.

26:51You know, if I'm not paying my techs more, if I'm paying my techs more and they're taking longer to do a job, labor costs goes where? Goes up. Where's cost of goods go? They go up, you know, and how it shows up. So instead of, you know, $40 going out, now it's $42 going out or it's $50 going out to do jobs or $45 or whatever it is.

27:10It does not take much, guys. This is why the budget, you have to kind of pay attention to your, your, your weekend numbers and say, okay, where are we at? Where's, you know, basically you could look at your sales for the week and look at your numbers and remember, that's going to be almost a carbon copy of the top of the P&L, on the top of the budget.

27:30Only difference is the way we have our P&L set up a little bit. Like I said, my loaded costs are up front because I can't really break them down, you know what I'm saying? I could make it match tit for tat, but I just build it all on the front end and that way we'll figure it out on the back end, which we do just fine.

27:45So that's confusing to people, but I'm basically saying if you pay a guy $45 an hour, we'll just say and we want to put a load of costs, we'd say, okay, taxes are $1.25. This is that. Okay. All in, I pay him $45. We could say another $10 on there. So now it's $55 is loaded cost, vacation, days off. We went through all that.

28:05Yeah, but now we got a load of costs on him. On our P&L, we just have his basic labor costs in, in that $35 where we put all the other stuff, the payrolls, you know, and all that stuff, the taxes and all that. So that's how it shows up. Why cross-rise? Cross-cost creep up because parts prices creep. We know that, and they're way worse because I remember when we would get a price increase, it would be a big deal.

28:29The auto parts store come in, hey, I just want to tell you, you know, we're gonna do our yearly filter increase, you know. We don't have that conversation anymore because they're always creeping, they're always creeping up, you know. And the big one that can kill your cost of goods sold right away is what? Discounts. Discounts are directly coming off them numbers. So every time you give a discount, you paid somebody to do the job, you bought the parts, but you're just saying, I'm going to give old boy, old friend, old pal of mine $250 off.

29:02I'm going to give this guy $2,000. What does that equate to on the bottom line? Depending on what you see, and what mine was, $20,500 and some dollars for fleet discounts for the ARIs, the Auto Integrates and stuff like that. These fleet companies bring you work, then they say, okay, we get 12% of your invoice or whatever. You better raise your invoices up that amount.

29:25It's not dirty. You're playing by their rules. They're double dipping their customers. Okay. Another one that can kill you, and I talked about it in the first section, is credit cards and bank fees, credit card fees, all these fees, fees, fees. They can kick your ass. Yep. They creep up. They creep up. So when we discount jobs, sublets, discounting jobs, parts creeping, paying the guys to do jobs and they're doing them 3 or 4 times, that costs you more in labor.

29:56Overtime, I would have to say is the number one that if guys are paying their guys hourly, that kills them. Now, a lot of companies do the old, hey, I see you work 60 hours a week. How would you like to be on salary? That way they can control their costs for payroll and overtime costs by putting somebody on salary. Yeah. And if you do the math and you pay a guy $2,000 a week, every week, all year, then you look at what he made in overtime.

30:26Them guys just didn't figure that out by accident. Yeah. And when somebody comes to you and says, we need to revisit your pay plan and don't worry, this is going to be better for you. You're about to get fucked. It's never better for you. It's never better for you. It's— you're about to get fucked. You know, I got guys now saying to me, how are you paying hourly?

30:48I have a good group of guys because I treat them with respect. I pay them well. I do not have to worry about these guys producing. Yeah, yeah. My guys are still producing like, uh, quite a bit of hours. They're over what they're— they're a week. You know, I think this week everybody was over, over 40. Jason was in the 50s. Jody, when you put what he did last week, he was in the 50s.

31:09Like, everybody was in the 50s and they worked 40. We work 7 AM to 4 PM Monday through Friday, no overtime ever. The only time they get overtime is we do an hour training every week. They get an hour overtime there. That's it. And they're happy. They make enough money in 40 hours where most guys say they're working 60, 70 hours and they're not making any money.

31:31Yep. A side note, the guy on my post yesterday when I talked about the difference between gross and net, this guy actually had the balls to say, I bet you your net as a business owner is way more or double or triple than what our gross is. I'm like, okay, so the business owner is not supposed to make any money. So now all of a sudden people's mindset is that it's 50/50.

31:58I open a business, I take all the risks, I put all this stuff in and everything. And you, the mechanic, should make exactly what the business owner should make because you're a mechanic. That's some fucked up logic. Yeah. Okay. There's a lot that goes into a business. Okay. And you know what? If you run your business good and you do everything right and you make a lot of money and you pay your people well, your people won't care that you make a lot of money, but they make a lot of money, right?

32:25It's all through your dicking your people over, right? And, you know, my guys, everybody who works for me right now, we don't have a problem. They know who leads the place. They knew who the boss is. I don't have to go around and say I'm the boss and beat my chest. When you have to tell your people you're the fucking boss, you're not the boss.

32:41When you have to tell people you're in charge, you're not in charge. Let me tell you that. When you talk about and go around telling people you're a successful business owner, you're probably not a successful business owner. Exactly. Okay. People look at me, I look— most of the time I look like a fucking bum. You know, I look a vagrant. You know, I don't walk around in a frickin' three-piece suit or some of the nice shirts I have and stuff like that.

33:00It's not what I do. I frickin' work in shops and shop environment, grease and dirty. You know, I buy a shirt, it gets grease on it. My wife throws it away. I'm like, where's that shirt? I really like it. She's like, they had a big blob of grease on the front of it. I'm like, I don't care. I liked it. She's like, yeah, I threw it away.

33:14You can afford another shirt. You know what I mean? You bum. Or, you know, when I don't shave, you really look like a respectful business owner. You don't even shave your hair. Your bozo hair is frickin' long and your shirt's got grease on it and you're walking around like So what? I don't— that like, that's not something I need to portray because I will tell you what, and most shop owners will agree with me on this.

33:34This is a guy that walks in, has got concrete dust all over him, his hands have calluses and stuff. He's the guy that could pull out the checkbook and write you a check. That's good. The guy that walks in with the little horn-rimmed glasses, hair slicked back, tells you he's the CFO of his company and he's the CEO. He's wearing a Rolex and all that stuff like that.

33:50He's the guy you got to watch out for because chances are he's leveraged to the fucking hill. He has no money. He's a fucking punk and he takes every dime out of his business and his boys hate him. He's a prick and his business usually lasts 1 or 2 years and he's gone. I've seen them guys over and over again. It's the old man that walks in, the cement guy.

34:07Hey, how you doing, Kevin? I haven't seen you. I need you to get my truck done this year, blah, blah, blah, blah, blah. Okay, it's going to be $12,000. Let's fucking get it done. I sign right here. I'll give you the deposit. You know, my wife drops off a check. Them the guys you could trust. Yeah. It's the other guys that fricking probably don't run a budget.

34:25And you know, a lot of them guys, when you talk to 'em, cause I've known a lot of these guys over the years that, you know, that are self-made, that are worth lots and lots of money. They know exactly how much it costs 'em to do pretty much everything. They do it in their head. Cause business wasn't that complicated when they were coming up.

34:40Yeah. So they had a pretty good grasp on, you buy a 2x4, you buy nails, you pay the labor, you, A lot of them guys know exactly what's going on instinctively because they had to know. They started out young and they started making money, right? It's the guys that, you know, they make $3 in their business and they take $6 out, or they get a bunch of deposits on work.

35:00Builders are famous for that. They get a bunch of deposits, they look at their bank account, go, I'm fucking rich. Yeah, they go out, buy, buy, buy, buy, buy, buy. And guess what? The bank account's empty. Yeah. And they got to buy the materials and Right. And I'm telling you guys, I've seen this over and over again, you know. Um, so having a budget is the future.

35:22It's what's going to happen in the future. How are you going to control the money that's coming in in the future? Right now, things can change. You can get slow months, you get busy months, things can change. The P&L is a picture of the past. Okay. It's what happened last year, but we know what happened last year so we can control it with the budget this year.

35:40We start to adjust this budget up and down as best we can, our prices. Okay, I'm not saying torture yourself, but you kind of understand what's going on here. Yeah, and these numbers I'm using, guys, everybody's shop's going to be different. We're using $100 bills. It's easy to break it up. We can use a percentage, we can use the dollars like we talked about last time.

35:57It's just easier for everybody to understand. But you know, I want you guys to understand that you have to do this if you want to be successful. If you need help doing it, Yours truly here can help you do it. Give me a call, hit the website. The new website is live. We're still got some bugs in it 'cause it's just got up, but it's, uh, repairshopreckoning, uh, llc.com.

36:18And that's where you can go sign up for the first service advisor course that's coming out. We're hoping to launch it, uh, Saturday is what the plan is, right? Yep. What's that date? Today is the 8th, so it'll be the 9th to 10th of the 11th. So, well, by the time this Launches, uh, would've been out for a week ago. Oh, this is the second episode.

36:37Yeah. There you go. So hear what he's saying. It'll be a week, a week ago at launch. So I hope right now it's overloaded. We crashed the server. We don't know what to do. We're gonna try to get the server rebooted. But you know, I think a lot of guys that call me think I'm gonna be too expensive. They, so they get scared, don't, and talk to me for a minute and they say, well, I tell 'em a price to go through their stuff.

36:56They're like, wow, I thought it was gonna be way more. And I'd say the same thing. I'm not here to kill you. I'm here to make money, but I'm not here to kill you. Yeah. Okay. So get me all these paperwork together and I'll go through your numbers and go from there. Now, this program that launched a week ago, this is the first phase of it.

37:14There's going to be module after module after module. This one is going to be for phone front counter control of answering the phone, how to answer the phone, how to be calm, how to control the conversation, how to stop Mrs. McGillicuddy when she talk about her cat. All that type of stuff is all laid out in there exactly how to do it.

37:32And if you do it, you're going to start to take control of your front office. You're going to start to have your people be consistent on the phone. They're not going to be all over the place. And that's what you have to start doing. You have to have consistency in a business to look professional. It's no different when you go get a— there's Marv's Bakery down the street.

37:50My mom and dad go there all the time. Like every day. My mom has immune problems, so she has a disease, immune disease. So it's the donuts there. Okay. They know the people there. Yep. They know it. She's like, when so-and-so is not there, it's just different. People like consistency in business. They like to see the same faces. They see the same faces.

38:11What does that tell you? The business is stable. The owner's not an asshole. If you have a different person in your front of your shop all the time, Yep. Either you're not hiring the right people or you're treating people so badly they're leaving or you're not paying. There's a lot of different reasons, but you can never get a relationship with customers if the guy never stays.

38:28So it looks like chaos all the time. Yep. You don't think people sit down and think, man, that's like the 8th service advisor I've seen. We talk about it at the dealers, all the dealers. Like you never get any kind of relationship going with anybody. So you shop owners that don't know your numbers, you better learn your numbers. You're going to go out of business.

38:47Okay. You cannot wing it anymore. This is not 1970. You're not winging it anymore. So you have to fricking know your numbers to get, get by. All right guys, thanks for watching. Take care. All right. That's gonna 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.

39:09We'll see you back here next time on Repair Shop Reckoning.