Your Shop Isn't Scaling Past $1M For These 5 Reasons...

0:00Do you know the average in our country is less than $600,000 a year? Did you know the average in ShopFix is $2.4 million? Can a million-dollar manager manage a $2 million store? You gonna sell that work? You gonna sell it? You want me to make that call for you? The sarcasm comes out. Technicians are sarcastic? No. The people that got you to a million are not the people that are gonna get you to $2 million.

0:23Welcome to the ShopFix Academy Podcast. My name is Guy Roberts. And this is Michael Rosenberger, also known as the Berg. Good morning. Good morning, sir. And today we're going to talk about the 5 ways to get your shop past that million-dollar mark. And this last one, you're, you're going to call me crazy. Crazy nuts. A lot of shops get stuck at that $1 million mark.

0:44Yeah. What's your opinions on that? You think it's the front of the house, back of the house? Like, where do they get stuck? Why can't they get past that? The leader sets the pace. Right? Or the manager, the owner. And oftentimes when you're doing less than a million, the manager is the owner, right? Yeah. I mean, your, your staff is, is pretty small.

1:02So I feel like a lot of shops that I talk to, they just couldn't see themselves doing any more than that, right? They can't visualize that. Yeah, that was the pinnacle. Yeah, we reached it. We reached it. Cool. All right, there's no way we can do— like, the belief system's not there. Sure. Oh, we can't do more than that. Yeah, right. There's so many more, uh, things that they now have to do.

1:24If I'm going to get beyond that, I've got to hire more people, right? And better people. And better people. Because the people that got you to a million are not the people that are going to get you to $2 million. Correct. Sadly. Yeah. Some will get trained, some will be coachable, and some will ride, ride the wave with you. Yeah. But a lot will fall off.

1:42Yeah, yeah. Because they're there for the J-O-B, right? 100%. Clock in, I clock out. And, and I feel like people get caught in the, in the trap of Oh, I just need more bodies. I need more hands to do the things. Right. I mean, that's not true, right? It's not. You just need a higher qualified person or somebody that's hungrier than the person before.

2:01Okay. When you keep having to add bodies, we'll draw this out. There's a front of the step and back of the step lesson I wanna draw out in just a second. Okay. But let's walk through this. The million-dollar shop model is 1 advisor. Yep. 3 technicians. Yeah. You can do it with 2. Maybe 2 technicians if you're in a European or higher ARO, you can maybe get by with 2.

2:20Yeah. A $2 million model is 2 advisors, 5 to 6 technicians. Yes. What happens when you double the size of your employee count, Guy? You double your overhead, right? Overhead goes up. Yeah. What about the manager? Yeah. Can a million-dollar manager manage a $2 million store? Sometimes, but oftentimes, no. It's just a lot more to manage. Yeah. All of it. It's a lot.

2:48There's a lot more. Okay, are all my systems being followed? Are, you know, the accountability in line? Like, when you have that many people, your accountability is paramount. The million-dollar shop, you said one advisor, 3 technicians. Oftentimes the owner is the manager. Sure, right, 100%. So now you've— you're trying to hit that $2 million mark. You've hired another body up front. Sure.

3:11You're— you've hired more bodies in the back, uh, and you feel like you're still the manager. Sure. As the owner. Sure. Or you feel like, uh, if I'm on my way, I've got— I'm on my way to $2 million, I should have a manager. Yeah. So you designate one of those advisors the manager who may not be qualified to be that. Sure.

3:32And that's not going to take you to— yeah, to $2 million. Absolutely. Yeah. So talk about this front a step, back a step concept. Absolutely. And I'm going to bring in a little tool, a little magic tool, a little magic tool. So, Guy, there's a big step when people go from $1 million to $2, $3, $4 million. And we have this lesson that Aaron used to teach us, front of the step versus back of the step.

3:54I want to kind of draw this out because it's going to make more sense visually. So on this quadrant, this is your revenue. So your dollars, right? On this quadrant, this is your overhead. And as a shop scales, it's going to go like this. Obviously what you would love for the shop to do is go just like this and have a flat skim the front of the step.

4:28Absolutely. Because what's the front of the step represent? As you are growing your store, you're at the $1 million mark, so you have one advisor, you have 3 technicians. What is the biggest bottleneck in that store at that time? It's your front of house, right? The only way you can get more work in the door is to open up that bottleneck, right?

4:48Front of house. So I have to hire an advisor. Yeah, well, that automatically increases my overhead, right? So now I'm at the back of the step. So it doesn't— so you're— let's say, let's just use arbitrary numbers here. $60,000, and you've got one advisor, and you've got 3 technicians. Sure. Um, or, or let's say it's $80,000, right? Uh, and you're at your leanest and most profitable at that point.

5:13Sure. So when you add another advisor, more bodies, you're adding overhead. Sure. But you, you don't right out of the gate when you hire that person increase your revenue. There has— there's work that has to be done, right? Absolutely. And when you hire an advisor, it's not that the production just goes up automatically, right? Sure, you can get more cars in the door, but you can't necessarily get them out of the door.

5:35Correct. So in tandem, you have to hire a technician at the same time, or 2 technicians. Yes. Again, that ratio of 1 advisor, 3 technicians holds true. Yeah. So that's where you would want to hire an advisor and 2 technicians. This is where most owners, the leadership capabilities, the subconscious starts getting them. They, they fall into that trap of, yeah, Oh well, it used to be like this in the old days.

6:04You start referring back to the good old days and like, oh, I like things when it was simpler, it was easier because you had less people. Yeah, of course when you add more people it's going to get more complicated. Yeah, your leadership has to double to make this happen. Yeah, a lot of owners don't make the jump. Yeah, and that's the something that when Aaron was teaching this, he always would push us, he would push all his teams, all the shops to get to that next front of step, we have to make sure this team can be as efficient as possible.

6:37Um, you know, we, with that, uh, number of employees, we can handle a little bit more cars. Sure. You know, technicians, you know, pushing out a little bit more production. We're pushing the limits of the production and the sales abilities and our systems. We're stretching our systems. We're using that's why it's so important to have systems. That's the whole point of this.

6:59Absolutely. If you've got systems that actually make the work easier to manage and flow, you can jump from the front of step to the next front of step, 100%. Then you hire those next people and you jump to, uh, you know, your profitability jumps up, but you've got more of a buffer, more of a bandwidth to actually take on that additional load of employees, right?

7:24Yeah. And then they can do the same. So the trap I feel like when I'm coaching a lot of shop owners, and even in our own shops, was I hired people and then everybody relaxes. Yeah. And they chill out. And now my advisor who is selling, you know, $100,000, $120,000 is only selling $80,000. 100%. You're getting the same volume output out of 2 people that you had out of 1.

7:47Yep. And that's the back of the step. Absolutely. Same volume output with more— a lot more overhead. So you have all of this overhead. Now the only way to ratchet that up is to add more technicians. What happens when you have the same amount of sales and double the technicians? What are technicians doing? Oh, they're, they're standing around twiddling their thumbs. They are not happy.

8:10They are not. They're on your— you find me— they're standing behind the advisor just You're gonna sell the work? You're gonna sell that work? You're gonna sell it? You want me to make that call for you? The sarcasm comes out just a little bit. Technicians are sarcastic. No, I, I lied. I had a technician who would come behind— I mean, if he didn't have enough work to do, he was, he was there to work.

8:31He was not there to, to waste time. And if he wasn't busy, he was in that front office. And if the phone's ringing and we're busy He's picking up the phone. He was answering the phone. He was terrible at answering the phone, but at least he was doing it, right? It was great. It was great for a manager to see, okay, I need— that is a clue that I need some kind of help in the front, or I need to jump in, or whatever.

8:57You know, we need to, we need to be getting these sales happening, selling more work so that this guy doesn't get antsy. Because once they get antsy, where do they go? Out the door, the next shop. Yeah, they roll the toolbox out. They roll the toolbox out. Yeah, yeah. And a lot of, a lot of leadership won't absorb that frustration, guide that frustration, and correct it because you have to make very fast decisions.

9:22Yeah, technicians are only going to be there a couple of weeks if it's slow like that. Yeah. Or if, you know, you added all this overhead and now Your cash flow is bad, the shop is frustrated. Yeah, especially if you just— employees are frustrated. You just hired those techs. Sure. Techs are like, they hired me, they said they were busy, but we're not busy.

9:43We're not busy. What's going on? Very dangerous. Yeah. To overhire and not have those systems in place and try to ramp up your profitability with the team you have. Yes. The, the next step that's hard is that $2 million step. So that we kind of talked about the, the $1.5 million being the step. I kind of drew that out here. You need to add 2 technicians and an advisor like very fast.

10:08Yeah. Every— you're gonna blow up all your systems, you're gonna blow up everything in the store. That leadership has to prevail through all that. Yeah. The next step is the $2 million mark, and you have to jump to that as fast as possible. That usually doesn't happen without some sort of marketing. Yes. Because you relied on, oh, we're so busy, we're so busy, we're so busy.

10:28Reputation carries you to that mark, but at some point you have to add marketing, which adds what? Overhead. Overhead. Yep. So your overhead increases and you're now at the back of the step. Yeah. So every time your overhead increases, you're at the back of the step. Yeah. You have to somehow translate that overhead into revenue, into profitability rapidly. Yep. Yep. Profits going front of step to front of step.

10:51The whole key to that is making sure your team is dialed, your systems are dialed, and then when that jump happens as your manager's dialed, or you as the owner, if you're managing your team, you're dialed as a manager to make sure everybody's okay. You got this, we just made this jump, we're gonna keep pushing. One of my favorite lessons that Mike DeFatto, one of our coaches, one of our great coaches for our pro program does, he does this wheel, this balance wheel.

11:22Yes. And it's so crucial to get this right, 'cause you have to manage your front of house, your back of house, and your marketing. Those 3 things have to balance. Imagine if one of those points is not, uh, in equilibrium with the others. What happens to this circle? It's wobbly. It gets real wobbly about 80 miles an hour. Your flywheel gets— and all of a sudden your back of the house is way over capacity, or your front of the house is way under capacity.

11:57And now you have this like wheel that's going to give you the death wobble on the interstate. Yep, yep, for sure. All of those have to balance and create equilibrium in your store. Yeah. And, and the leadership is what you have to have. Leadership and strategy. Marketing is a lot of strategy. Leadership is front of house and back of house, balancing those and pushing that up.

12:20How often did you see where pay plans limited at a store? Oh, all the time, because everybody manipulates their pay plan. Sure. And you see, you think about it, if you're paid— let's, let's take a service advisor. They're paid hourly, right? Not on commission. You're paid hourly. And I, when I first became a service advisor, I was— I never got paid commission before, before I started working in this industry, and I was nervous.

12:45Sure, right? Uh, but how do you manipulate your pay plan if You get paid the same thing for being there. Let's say you're there 8, 10 hours. I get paid the same thing no matter what kind of output I do, no matter how hard I work or how well I do, I get paid the same thing for being in the building. Sure.

13:03So how am I gonna manipulate that? In under $1 million, right? That's okay because your leadership is strong enough to push you. For sure. But now you have, you've doubled the size of your people. That is crucial to have, to have the right people with the right mindset. Yes. And because like I said, everyone manipulates. So if you manipulate, the only way you can manipulate your pay plan if you're paid hourly is how much less can I do to make the same amount of money?

13:31That's the only way you can do it. That's the only way you can manipulate. Yeah. Commission is the sky's the limit. I can make as much as I want. I have to— all I have to do is X, Y, and Z. Right? Same with technicians, flat rate. I am in control of my paycheck when I'm flat rate. If you don't know what flat rate is, and I know you do, but those of you out there don't, uh, it is getting paid a book time for a job.

13:55So a technician can work, let's say, a 10-hour day or an 8-hour day, and but turn 16 hours worth of work. Sure. So it's not all the time. All the time. Most, most technicians who are you know, good to great can do well beyond book time on most jobs. Sure. Right. So, you know, a, a brake job that pays an hour and a half, they can probably do it in 30 minutes.

14:22Yep. 30 to 40 minutes. And so thereby they've given themselves a raise, right? It's because of their skill level. They've done this long enough. They are worth it. They're— and they can do it without messing up, you know, without having comebacks. Sure. So They, they've earned that. I can do this 4-hour job in 2 hours, right? It's one of the few trades where a technician can better themselves with training.

14:47Mm-hmm. The key to it. Tools. Yep. Like I can buy, you know, the cordless, the latest, greatest cordless something. Yep. Or this super thin ratchet that gets into, you know, spots I couldn't normally get. Like, you, you know your shortcuts and then that experience starts to multiply every single year. Yeah. It's the only trade where you can work the same amount of time, but your paycheck can escalate dramatically, dramatically because of how skilled you are.

15:18Yep. Like, we pay for what you're worth. Yeah. Both on your physical skills, but then also your mental skills and your talent. Yep. I love— that's why I love this industry. And your tools, right? Yeah. This industry is one that always— it surprises people outside the industry that they buy their own tools. Yeah. Yes, all of that is theirs. And it's, gosh, tens of thousands— oh, over hundreds of thousands of dollars worth of tools.

15:44Yep. That's part of, if I buy this tool, it's better than this wrench, I buy this super wrench or whatever because it allows me to do this job quicker, faster, more effectively, more efficiently. I've given myself a raise. I've actually, you know, paid money to give myself a raise. So if you're not a flat rate technician, you're not doing that. You're paid, you're getting paid for the time you're there.

16:08Yeah. And if I'm hourly, I do control my paycheck. I can make more by doing less. For me, my, my general rule of thumb, if you're making a pay plan, please consult with your labor attorney in your state. Yes. The states are so different, just different laws, different regulations. Absolutely. But my personal opinion on this is minimum 50% commission, 50% base. Yep.

16:31In any position you have. Yeah. Uh, outside of a GS or, or somebody, you know, just doing QC, things like that. And the right employees will understand that that is the best path for them. Yeah. Because they can earn more money. So much. The harder I work, the more money I make. Money I make, right? Yeah. The smarter I am, absolutely. The more effective I am, the more efficient I am, I make more money.

16:53I've got technicians well over $200,000. Okay. Uh, a year. Okay. On flat rate, they produce twice what a lot of technicians produce. Yeah. They're just really good and quality work. Yeah. Fast at diagnosing, fast at testing, fast at getting the work done. They're just super talented. Front of step employees, right? Yes, front of step employees. Yeah. If you build your shop on back of step employees, we're just consuming overhead, It's so hard to get out of that trap.

17:27Totally. So a technician that's earning $200,000 a year. Yeah. Is going to earn the shop at least $80,000 to $100,000 a month. Okay. Just the one technician. Yeah. Just one technician. Yeah. So I can hear the shouting. I can't find those technicians. They're not easy to find. They're not. Everybody's made the same. Shops get stuck at the million-dollar mark. Yep. Because again, the bottleneck is the front of the house.

17:52Yes. What's the first thing they can do to decrease that bottleneck? Well, if your technicians are not doing the quoting, that is a huge bottleneck. So think about it. Service advisor, let's say we just have 3 techs and 1 service advisor. Those, the, the technicians just kind of writing up what the car needs. Now the service advisor has to spend time looking up labor times and parts numbers and things like that.

18:16And I've always been, and this is what I was taught, um, if the technician builds the quote, not shops the parts, but builds the quote, because that is what they're— they're the experts. They know, I know exactly what the car needs, I know how much time it takes to fix the car, and what parts are needed on this. Sure. So if they're just looking at X amount of time for this brake job, here are the parts that I need, and they're visually seeing all the things, it saves so much time.

18:42Yeah, right. I see a rusted bolt that may take a little extra time. Sure. Or I see Um, we're actually going to have to replace this caliper too on this brake job. Yeah, you know, the service advisor doesn't see that. They just say brakes, so we're just going to do pads and a rotor, right? You no longer have the constant battle up front.

19:00You ordered the wrong parts again. Yep, back and forth. Yeah, is this right? The wrong time again. Yep, absolutely. All those are eliminated because they put all the stuff on the ticket. So I mean, think about it, everyone's focusing on what they're the expert at. Yes. The technician is the expert on parts and labor. This is what it needs. The service advisor is the expert on sales.

19:19They're a sales department communicating with the customer. Communicating with the customer. They can source the parts. They don't need to hunt down, do I have all the right parts for this timing belt job? It's, here's all the parts. I can build this quote based on these part numbers. I can source the parts. However, you know, that load is no longer all on the service advisor.

19:40It's split and it's split the right way. Yeah. And I've, I mean, our technicians in our shops do not want to go back. Yes, there was pushback on the front end. I got to do, I got to do his job too. Again, leadership struggle. Yes. That's a leadership conversation. That's all that is. It's perception, right? The technicians that say, I got to do his job too.

19:59Yeah. You're not doing his job. You do not want to do his job. That's right. You are the expert, are you not? Yes, I am. Great. Tell me what the car needs, how much time you need for it. You know, all the parts, we'll handle the rest. And if you lighten that load on the service advisor and let them focus on getting their brain wrapped around what they're going to present to the customer to do it more effectively and faster— sure, now money loves speed, right?

20:24Yeah. Now I don't— I'm not getting that quote to Mr. Jones who dropped off at 8 o'clock at 1 o'clock in the afternoon. I'm getting it at 10, right? And I have more statistically more apt to sell more of that ticket. Yeah, if I'm calling that customer quicker, 100%. And so now technician's not behind me twiddling his thumbs saying, have you sold that yet?

20:46They've got plenty to do. They've got great sellable tickets in the hands of the advisors who can sell those tickets. It's just this cycle that keeps you on the front of the step. Guys, there's a lot more than 5 ways to get your store from $1 million to $2 million, $3 million, $4 million. There's so many things, so many levers, and every shop is different.

21:06Yes. And that's what I love about our pro one-on-one coaching program for auto repair shop owners. Yeah, we walk alongside you. We don't have a cookie-cutter system. It's— we literally, we have real shop owners, current shop owners who actually own a shop, coaching you how to improve yours, how to grow yours from $1 million to $3 million to $4 million. Based on your situation, your demographics, your location of your store, the pay plans that you can do, like all the different ways.

21:36But there's way more than 5 ways. Like, it would take us a year to go through all of the things. Yeah, I think those 5 ways are some pretty big ones that we encounter often. Yes. But yeah, there's so many just nuances, that little things that you can do. And again, ShopFix Academy, we want to give away more for free than others charge for.

21:57And that's why we're doing this podcast and that's why we're giving these 5 things. There's a lot more to it, but if you can just do these 5 things well and really capture those, I guarantee you'll double your store. Huge, huge increases that you'll see for sure. Absolutely. A good service advisor— and we talked about this a little bit earlier— but a service advisor that was doing $150,000 or $120,000, all of a sudden you hire a second advisor and now both are doing $60,000 or $80,000 because they just kind of Oh, I've got help now.

22:27Yeah, I can, I can exhale. I can, I can ease off on the gas pedal. Yeah, a great service advisor, what numbers should they run every month in revenue? We've seen advisors do some fantastic numbers, crazy numbers. Sure. $200,000. Over $200,000. Yeah. Is that, uh, the benchmark? I'd say those might be the unicorns. Those are above $200,000 for sure. And a lot of things go into that.

22:51Is it a Euro shop? You know, less tickets, the higher ARO is at a diesel shop, whatever. Sure. But just to put normal averages, you know, I would say between that 80 to 120, and 80 is the very low end. Very low end. It used to be where the million-dollar advisor, sure, you know, selling 85,000 a month was your target. But we all know not every month is exactly identical, right?

23:15You got your slow months, you got your heavy months. Uh, but yeah, that $120,000, $150,000, it's the ideal target range. Ideal, realistic. That's a good advisor. I love it. Yeah, I love it. Yeah. What about— here's a hot question for you, put you on a hot seat. Oh gosh. ARO. What's the lowest you should do an ARO? Oh man. American Asian. American Asian store.

23:38Gosh, I think 5 is the lowest. I agree, $500,000. If you're doing below $500,000 something's wrong. Something's wrong. Something's off. Doesn't even matter. Your pay plan could be accountability, could be systems, could be leadership. Could be because you're a domestication shop in, yeah, in Denton. And what is the, what is the median income there? It's $32,000. $32,000. Yeah. So you can't use median income as an excuse.

23:59No. You're— what are you guys doing? We're over $650,000. Yeah. ARO. Realistic. Yeah. There's people out there doing more than that, but a lot of things go into, you know, how many cars are you handling a month? Uh, what is, you know, here in Williamson County, it's— sure, gosh, back when I started it was $115,000 was the median income, and I'm sure it's higher than that now.

24:17It's the 17th richest county in the United States. I just learned that yesterday. So last one. Yeah, I, I said they're going to call us crazy for this one. They will. What is it? Revenue is for vanity, net profit is for sanity. Oh, I love it. So many shops chase that revenue number. Yeah. And that's great. Revenue is awesome. It's a good benchmark.

24:42It's a good way to compare. But net profit, isn't that what it's all about? Net profit is one that you can pay your people more with. Yep. You can pay higher bonuses. You can feed your community. There's just so many ways your lifestyle as an owner, like, that's what it's all about. And so many people compare the revenue number. Stop chasing that.

25:03Yeah. And make sure that you are chasing that net profit number, or at least making sure that it aligns with your core values. Yes. And where you stand, because the net profit's what changes your family's life as an owner, and it's right, your employees' families' lives. If you're just hitting this crazy high number just to hit a goal number, yeah, and there's very little profit in that, nobody wins.

25:26We talked about Thomas Andrews back in one of the early podcasts, and he was doing over $300,000 a month Zero net profit. Yeah, yeah, yeah, that hurts. Net profit, that's what it's all about. I think a lot of shop owners are afraid of that number. They're afraid of making that profit, 'cause like, how, ooh, how are people gonna look? And I firmly believe money just makes you more of who you were originally.

25:54If you're generous, you're gonna be more generous. For sure. If, you know, if you're a jerk, you're gonna be more of a bigger jerk. More of a jerk, right? Yeah, all you jerks out there, don't make money. Yeah, that's right. If you wanna affect families, affect your community. Absolutely. Look at it that way as a shop owner. Like, look at it as like, don't look at, don't be ashamed of being profitable.

26:15The people who are profitable in this world are the people who can change the trajectory of other people's lives, their community. Absolutely. Right? Absolutely. Most of my employees are making triple what they were making before they started. That's awesome. And that's what it's all about. And that's why they're still at your shop. Yes, right. That's why your team is dialed. You've got a great culture.

26:37Yes, you've got eagles. Yeah, and it attracts more eagles, more eagles, more— not turkeys, not turkeys. It keeps— and, and those eagles protect the nest, right? That's right. The turkey tries to get in, you hire somebody, you make a mistake, they find it. You don't have to wait months and lose money. They'll, they'll tell you. They'll tell you all about it. And so those of you out there that are struggling with their culture Yeah, uh, you know, profitability is something that will help with that for sure.

27:05Absolutely. Right now, if you're stuck at $300,000, $600,000, $1 million, even $2 million, you don't have to be stuck. You don't have to stay there. There are ways to get out of that. Reach out, ask for help. We believe in you. We believe in this industry, and we are bound and determined to transform this industry and transform the shop owners, the managers, the foremen, the technicians, and advisors.

27:33We are going to transform this industry.