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Confessions of a Shop Owner is hosted by Mike Allen, a third-generation shop owner, perpetual pot-stirrer, and brutally honest opinion sharer. In this weekly podcast, Mike shares his missteps so you don’t have to repeat them. Along the way, he chats with other industry personalities who’ve messed up, too, pulling back the curtain on the realities of running an independent auto repair shop. But this podcast isn’t just about Mike’s journey. It’s about confronting the divisive and questionable tactics many shop owners and managers use. Mike is here to stir the pot and address the painful truths while offering a way forward. Together, we’ll tackle the frustrations, shake things up, and help create a better future for the auto repair industry.
Hunt Demarest [00:00:00]:
You went from making 5% to 10%. Don't beat yourself up listening to this that you're not at 36%. Most of the shops that end up failing are the ones that go from 5% to 50%. Because it ends up going down to 5%. You don't need to kill it. You probably don't want to grow. 80% consistent improvement. Right.
Hunt Demarest [00:00:17]:
3% better every single quarter, every single month is like the kind of stuff you're shooting for.
Mike Allen [00:00:24]:
The following program features a bunch of
Hunt Demarest [00:00:26]:
doofuses talking about the automotive aftermarket. The stuff we or our guests may
Mike Allen [00:00:31]:
say do not necessarily reflect the beliefs of our peers, our sponsors, or any other associations we may have. There may be some spicy language in this show, so if you get your feelings hurt easily, you should probably just move along. So without further ado, here's your host, Mike Allen, with Confessions of a Shop Owner presented by techmetric. Simply the best software ever made. Okay, dude, it's day three of Vision 2026 here in Kansas City. You taught on Thursday, is that right?
Hunt Demarest [00:01:09]:
Thursday morning, yeah.
Mike Allen [00:01:10]:
Okay. We were laughing about it earlier when we're talking because you taught a class on personal finance and investment strategy.
Hunt Demarest [00:01:17]:
Yeah.
Mike Allen [00:01:17]:
Which is absolutely not what you do.
Hunt Demarest [00:01:21]:
I kind of laugh about it because I think it happens a lot of like, anything numbers related. Someone's like, well, your accountant.
Mike Allen [00:01:27]:
Right.
Hunt Demarest [00:01:27]:
You do that. So, like, can you look at my Social Security statements? Like, we don't do that whatsoever. No, but like I was telling you before, it's pretty cool because I truly just get to teach people stuff. It's my opinion. Right. So I'm like, you can't argue with me. This is just what I think. But we don't really do that stuff at all for our clients.
Hunt Demarest [00:01:44]:
But just kind of cool to teach people some, hopefully tips and tricks.
Mike Allen [00:01:48]:
Okay, random question totally unrelated to anything that we talked about already. Where does Parmella stand on like, the R and D tax credits and all those kind of things? Well, we're all getting calls from these. I can get you $40,000 and that kind of thing. And then when I talk to my cpa, they're like,
Hunt Demarest [00:02:07]:
so I'll get you the same. I mean, it's one of those things where it is based in 100% legal tax law. Are you going to get in trouble for firing R and D credit? No. I mean, these guys are professionals. The reason that you guys are seeing it more now is that for a while they changed the rules where it wasn't really beneficial for your industry. And they extended that stuff. And you guys probably receive how many calls a day? We do not prepare any R and D credits for our clients. Just for a liability thing.
Hunt Demarest [00:02:37]:
Right. If we are filing a return with the credit on it, is that going to look good? If we did the research to justify the credit on it. So for our clients, we have a couple partners that we use, or some of them have their own R and D, they go out, get the study done, we file the returns, get the credits back.
Mike Allen [00:02:54]:
Okay. So also I think there's probably the concern of what if tax law changes and they go back and start doing audits. You don't have to defend 500 different RD tax credits.
Hunt Demarest [00:03:04]:
Yeah. So like I tell people of everything is a write off until you get audited. Right. And so I think my position for a lot of my clients is educating them on where they stand. Right. So like if someone comes to me with an R and D credit and says, hey, this is a slam dunk, no one's ever going to question it, it's 100 grand back, I don't have to look in the mirror. I'm like, hey, it's legal, we're legit here. But like we're on probably this side of the spectrum.
Hunt Demarest [00:03:27]:
Like you could get a notice, you could have to talk to an auditor. But this is why, you know, people do this stuff, right? It's going to get hundreds of pages. Lawyers have went through this, the IRS might not like it, they might disagree, but you're most likely going to win that audit and move on.
Mike Allen [00:03:44]:
So like the audit word is intimidating and frightening. Right. So if there's a listener who is thinking about seeking one of these credit programs that you've discussed, what types of questions should they be asking that firm that's cold calling them effectively or cold emailing them about how they defend audits and how they support or do they leave you hanging?
Hunt Demarest [00:04:07]:
Yeah, I mean, I wouldn't really trust most of these guys for standing up if you were truly to get audited. I'm trying to think if I've actually ever seen an R and D audit in person. Generally when they do the RD credit, they give you a massive packet where it's like, hey, if you get audited, here's everything on our position, where we justified and things like that, that R and D credit is out there for businesses like the ones that you and I work with. Also massive, massive, massive organizations. Right. So you gotta look at this. It's kind of like the ERTC stuff. I'm gonna guarantee you that if you got 40 grand of ERTC, no one's ever gonna call you.
Hunt Demarest [00:04:44]:
Right. If you got 2 million bucks, we've had a couple people get some notices and letters and stuff like that.
Mike Allen [00:04:49]:
All right, we should back up here. We just started talking. Cause that's what I do. Introduce yourself real quick. Your firm and I wanted to learn a little bit about how you got to where you are in life right now from a business perspective.
Hunt Demarest [00:05:02]:
Cool. Yeah. So my name is Hunt Demarest. I'm a CPA and partner at Parmellis and Associates. I don't know how to look at you or the camera. Right.
Mike Allen [00:05:09]:
Either way, it's fine.
Hunt Demarest [00:05:10]:
It's all good. So Parmelis and Associates is an accounting firm, and we specialize in auto repair shops. So we've been around 34 years now. I have not been there for 34 years, but I've been there almost 20 years now working with shops and. Yeah. Loving every day.
Mike Allen [00:05:29]:
Did you, like, you went to school? You get your license or certificate or what is the appropriate word?
Hunt Demarest [00:05:36]:
Yeah, well, CPA license. Yeah.
Mike Allen [00:05:38]:
Okay. And you're like, I need a gig. Did you know the Parmellis team prior to that? Okay.
Hunt Demarest [00:05:43]:
And so, I mean, in some aspects, you're like, hey, was this a deliberate of, like, how you ended up here? Like, Hunt saw himself in Kansas City? Like, not at all. Right. But some aspects I think I did because I always knew that I wanted to work for myself. I always kind of had an entrepreneurial spirit. My mom is a college professor. She is actually a CPA that doesn't do taxes. But from an early age, zero interest in any of this stuff. Right.
Hunt Demarest [00:06:07]:
Like, people are always like, oh, you've always been a numbers guy. I'm like, that's kind of an insult. Like, what do you think I was doing as a kid? Like, do you think I was, like,
Mike Allen [00:06:14]:
an early adopter of Excel, asking for extra math homework?
Hunt Demarest [00:06:18]:
Like, just taxing friends on stuff? But no. When I went to college, I thought I wanted to be an engineer. My uncle has an engineering firm and invent stuff and does really cool stuff. And then I went to do engineering stuff, and I was like, yeah, I'm not that much of a numbers guy. Right. Like, that is really hard math. Yeah. That's like, real college.
Hunt Demarest [00:06:36]:
So kind of tried to figure out what I wanted to do naturally. I've always had an interest in, like, kind of finance, the money side of it. So ended up getting an economics degree from Penn State. And then while I was working there, a family friend That I knew he had an accounting firm. And he was like, hey, you should come work with me. And I was like, okay, cool. You know, it's kind of interesting. And the rest is history.
Mike Allen [00:06:59]:
And you spent the last 20 years learning about what a broken, hot mess the automotive repair industry is.
Hunt Demarest [00:07:05]:
I mean, yes and no, right? I mean, one of the cool things of, like, what I talk about. Oh, where's it?
Mike Allen [00:07:11]:
It's inside your shirt. Oh, yeah. Let's get up there. Good, Braxton. Have fun with that shit, buddy.
Hunt Demarest [00:07:19]:
Should I try clip it on the outside?
Mike Allen [00:07:20]:
Yeah, clip it on the outside just to be safe.
Hunt Demarest [00:07:26]:
Good, good. Perfect. Could it be any smaller?
Mike Allen [00:07:31]:
Blame Lucas if it doesn't work.
Hunt Demarest [00:07:33]:
Yeah, that works.
Mike Allen [00:07:35]:
Perfect.
Hunt Demarest [00:07:35]:
Does that look ridiculous?
Mike Allen [00:07:36]:
Yeah, it looks totally stupid.
Hunt Demarest [00:07:40]:
Perfect.
Mike Allen [00:07:42]:
So, you know, I had a recording yesterday with Seth Thorson and Keith Perkins, and they're both on the NASDAQ board of directors.
Hunt Demarest [00:07:53]:
And so two guys, way smarter than
Mike Allen [00:07:55]:
me, way smarter than most everyone in the room at any given room. And I assumed that we were going to talk about. Right. To repair and information access, because nasdaq. Right. And we ended up talking about AI the whole time.
Hunt Demarest [00:08:07]:
Yeah.
Mike Allen [00:08:08]:
And so how does Parmellis flex to maintain efficiencies and viability as a business model? Because everywhere you go, like, oh, AI is going to replace your cpa. AI is going to replace your bookkeeper. AI is going to.
Hunt Demarest [00:08:23]:
And they're selling to us, right? And so, like, those same companies are selling to us of like, hey, you can replace your bookkeepers. Hey, you can replace your tax preparers. So just like you guys probably see this in the industry, AI is a very good marketing tool. And a lot of people stick that on stuff that has nothing to do with artificial Intellig. Right. So I had a company, I won't say the name of it, it had AI in the name. And they almost tried to act like they weren't talking about AI. So general idea was this stuff came in, you scanned it, right? You sent me all your tax documents.
Hunt Demarest [00:08:52]:
It's going to go down through super smart. I don't have to have my team do it. It's going to automatically say it's this that, you know, like, it works on 80% of stuff. And then, you know, 20% goes and whatever. So, long story short, it turns out it was just text recognition. And the stuff that it didn't automatically figure out. Some person overseas was just manually reviewing this. And so this was two months ago with a pretty popular AI thing in the accounting and tax world that has really no sort of smart learning features at all.
Mike Allen [00:09:21]:
Wow.
Hunt Demarest [00:09:22]:
I was just talking to someone yesterday about this of like, hey, let's be real. Like, my job is not rocket science. Like, I'm not going to sit there and be like, how could a computer ever replace me? Typing into a computer, like, it's the silliest thing. But we still don't have AI that can automatically download and reconcile a credit card in QuickBooks. Like, that's the lowest. It should be able to do that right now, all the data's in there
Mike Allen [00:09:44]:
is QuickBooks new AI assistant. The worst thing that has ever happened, because it seems like it's freaking terrible.
Hunt Demarest [00:09:51]:
I mean, unless Intuit wants to sponsor my podcast, I would say that most things that they have pushed out are the worst thing in the world. They keep on pushing out updates that no one asked for. They're pushing out AI that doesn't actually work. And so this is kind of a nerdy one, but I have to test this stuff out. So I'm on my client's books, and every client I get into also looks different, right? So you complain that you don't like QuickBooks, does that the shop that's a mile down the road has a completely different QuickBooks file for some reason. But I just typed in there. I said, what is their current ratio? And it calculated. It took like three and a half minutes.
Hunt Demarest [00:10:22]:
Like, it gave me the answer and it gave me a whole paragraph on it. But I'm like, yeah, we had long since moved on, but that's a good
Mike Allen [00:10:30]:
question to lead into one of the other things I wanted to talk about. I want to talk about why it's important for shop owners to understand kind of the three basic tenant financial statements, but explain quick and current ratio, what they are, and why we should know what they are.
Hunt Demarest [00:10:43]:
Quick and current ratio, you really put me on the spot here. So the general idea on it is, I think you're talking about is your money tied up or do you actually have your cash right? And so a lot of people look at current assets on it and they say, hey, I'm doing really well. Especially my Big Tire guys. And my big Fleet guys get really, really burned on this, right? If you look at this, they have a million dollars in current assets, right? And even some of these guys have a very good ratio. They don't have a ton of liabilities, but they are having cash flow nightmares because that million dollars in current assets is all tied up in AR inventory. So AR is a thing that we either have a massive problem with on A client or they don't even know what I'm talking about. Right. Like, that's where this is.
Mike Allen [00:11:23]:
Like, why would I ever let somebody carry credit with me? Or they've got people that are 90 days.
Hunt Demarest [00:11:27]:
A lot of the fleet guys are even going that way. I have fleet guys that just say, hey, I'm not a finance company. They are. And they're just selling off their fleet work or their fleet financing to someone else.
Mike Allen [00:11:36]:
Yeah. I mean, I think I'm relatively good at operating an automotive repair shop. I'm not good at being a bank.
Hunt Demarest [00:11:43]:
Yeah. When you look at it this way, especially someone like, you see this a lot, where people are negotiable on their terms as they're trying to grow their business. Right. Because if you really had enough work, you're going to be like, buy here, pay here, charge a premium. Everyone is a cash buyer, right?
Mike Allen [00:12:00]:
Yeah.
Hunt Demarest [00:12:00]:
But when you're growing your business, you're like, hey, this guy's gonna, you know, maybe straighten me out, whatever, but he's good for it. Those people are probably operating, like a 5 to 10% margin. And the scary part is, is you have a probably 5 to 10% chance that person doesn't pay you. So you do 10 jobs. The one guy burns, you. You just lost a profit on all that stuff.
Mike Allen [00:12:18]:
Yeah, for sure. All right, so the. From my perspective, and one of my mentors was pointing out to me that I've got a big gap in my regular business management practices. I always look at my P and L closely every month. And I've always felt like that was the most important document to look at every month. And I checked the balance sheet in passing, and I've never looked at my cash flow statement to speak of. And I'm in a huge cash flow crunch right now for a lot of reasons that are all ultimately my responsibility and my fault. But he's like, mike, you need to take your January 1st or whatever your date ranges.
Mike Allen [00:13:04]:
It's early March now. So we're gonna say your February 1st balance sheet and your February 28th balance sheet. Put them here and here, and the cash flow statements in the middle. And you look and see where the cash flows from one to the other. What's the benefit of digging into your cash flow statement on a regular basis?
Hunt Demarest [00:13:19]:
Because that's really what you guys understand, right? So, like, when I send a client financials and they say, hunt, you're a moron. There's no way I made $30,000. What they're saying is, I don't have $30,000 in my bank account, right. And so, yes, we need to understand the profit and loss because in the long run, on it, right? The numbers work out, the AR gets collected, the inventory goes up, the inventory goes down. But the cash flow is what you guys live and die off of. One of the biggest things that shocked me about this industry and still one that I see to this day, is the volatility of cash flow. Most other industries are not like this. Most other industries, if they had this much volatility, everyone would be out of business.
Hunt Demarest [00:13:58]:
If you look at contractors, they're similar on this. And those guys are always broke, right? And you look at a repair shop, you're paying your Napa bill one time a month. You're paying your sales tax one time a month. Some of these guys are paying payroll two times a month. Some of them that have fleet are getting paid once a month from them really, really tricky businesses. But even a really, really good business that says, like, hey, I made $120,000 a year last year. It's not like they're profitable every single month. Right.
Hunt Demarest [00:14:26]:
Most of my clients are probably profitable 8 out of the 12 months out of the year. The good ones are profitable 12 months out of 12 months.
Mike Allen [00:14:36]:
Do you think that there's a case to be made for paying vendors weekly? I mean, I know guys that pay vendors daily. Right. They don't carry any balances just to manage cash flow like that.
Hunt Demarest [00:14:47]:
Yeah, we got to be a little bit careful on it, Right. Because if you got them on the auto swipe, they will auto swipe and you have to be overseeing that. Right. Like, I don't know how much we want to go into that, but. Right. Inspect what you expect on this. Make sure you're getting charged for your parts at your prices. I think everyone has enough situations where they've seen that.
Hunt Demarest [00:15:05]:
But yeah, for a lot of people, right. Don't let them do an end of month statement. You know, say, hey, give me a weekly. Maybe you chip away at it. Even a lot of guys I have that, they just put it all on a credit card and they just are constantly paying money at that credit card. So yeah, you can kind of change that cash flow. But sometimes people get spoiled with it and try to push stuff ahead and then they end up getting burned.
Mike Allen [00:15:27]:
So you've had 20 years of looking at the train wreck that is automotive financials.
Hunt Demarest [00:15:32]:
The good, the bad, everything.
Mike Allen [00:15:34]:
Are you seeing new or new trends or new patterns that you haven't seen before? And if so, what are you noticing?
Hunt Demarest [00:15:43]:
Yeah, So I started. I graduated high school in 2006. So I started working part time Parmellis in 2007 or so. Some stuff is exactly the same. Right. If you look at the financials, like a little bit farther back, these are the exact same thing. Right. Parts labor mix is very similar shop supply stuff.
Hunt Demarest [00:16:02]:
So in that aspect of it, you sell parts and labor, you do it well, you're going to make a lot of money. That has not changed whatsoever. The scale has. Right. Like the magnitude of like how much I had people selling for the size of what kind of a normal person can have in a shop. The kind of margins that some people are making. Yeah, absolutely. Like the extremes have really become extreme.
Hunt Demarest [00:16:26]:
Where in the past, most people were really right here. Right. They all sold for a similar multiple. There was kind of a max potential of what you could make. There was kind of a max potential of what people are doing. Per Bay, if you would have told me back in 2007 that some of my clients were doing $3 million out of like one and a half or two bays, you're like, it's just not possible. Right. Like, it's physically not possible.
Hunt Demarest [00:16:48]:
But I think the highest labor rate we have right now is 386 for one of our shops, which, like you said, is just absolutely absurd.
Mike Allen [00:16:56]:
That's crazy.
Hunt Demarest [00:16:57]:
Yeah.
Mike Allen [00:16:58]:
Are they on the island? In Long Island? I mean, where are they?
Hunt Demarest [00:17:02]:
California.
Mike Allen [00:17:03]:
Wow.
Hunt Demarest [00:17:03]:
You could have guessed that.
Mike Allen [00:17:04]:
I'm gonna go Silicon Valley, San Francisco.
Hunt Demarest [00:17:07]:
Somewhere around there. Yeah.
Mike Allen [00:17:08]:
Yeah.
Hunt Demarest [00:17:08]:
Second highest is somewhere in Texas, though. I will butcher it. If I say I know it's in Texas, but you're like, oh, isn't that by there? But yeah, he's like mid-300s, general repair.
Mike Allen [00:17:18]:
General repair. Mid 300. Holy shit balls.
Hunt Demarest [00:17:21]:
Just to make everyone feel better, though, I think you've seen a benchmark report that we do on this. So we take all of our clients data. Benchmark. All right. How much these clients making, who's profitable, who's productive, what's your labor rate? Where are you? There's zero relationship between our clients labor rate and profit.
Mike Allen [00:17:37]:
Yeah.
Hunt Demarest [00:17:38]:
Like there was like, you would think. I was like, there has to be something of, like, if you're selling this thing for 350 bucks, like, it has to be profitable. But those places are at super high cost of living expenses. Yeah. Right. Really hard to find guys. You can find guys, but you got to pay them a lot of money. So it's like all economies of scale.
Mike Allen [00:17:55]:
Yeah.
Hunt Demarest [00:17:56]:
Yeah.
Mike Allen [00:17:59]:
I've always been told that the gold standard Target for net profit is 20 points. Why is it 20 points?
Hunt Demarest [00:18:06]:
I mean, that's what I use too. Right. So I'll agree with that one. So the 20 points, where it comes from, from me is the general target is overhead should be 30% of your sales gross profit at 50%. 20% is just a difference between your gross profit and overhead.
Mike Allen [00:18:20]:
Yeah.
Hunt Demarest [00:18:21]:
And so a lot of people come back and they like, say, well, hey, I want my GP to be this. A service advisor is not a cost of goods sold, it's an expense. It all comes down to that 20 though, right? Of like, well, hey, your GP just has to be 20% higher or 20 points higher than your overhead percentage on it.
Mike Allen [00:18:36]:
So you think that GP at 50 points is the right target?
Hunt Demarest [00:18:40]:
Well, it's all relative. Right. Because it depends on what's that GP number. Right. If that's GP at 50% with, you know, just parts or something like that, it's probably a different story than that's all of your labor, including, you know, five relatives that don't actually work there.
Mike Allen [00:18:54]:
Yeah, well, you see some of that, right?
Hunt Demarest [00:18:55]:
Well, and that's. I think that the biggest thing on it is like, hey, if you're beating yourself up and you're like, I'm not making 20% net income, the last five guys that did that, they were making it and they're just running their personal life down through there.
Mike Allen [00:19:06]:
Yeah. Right.
Hunt Demarest [00:19:07]:
Which is good and bad. Right. If you don't have a good understanding your financials, it's tricky because you're adding variables to this and you're, like I said, beating yourself up for being a bad business owner. And you're probably being a decent tax planner here by leveraging some of these benefits. But we measured a little bit differently, owner compensation plus net income, because that's a big variable. If I have a shop that the owner takes ten grand in wages. Right. And another one that takes 200 grand in wages, same bottom line.
Hunt Demarest [00:19:34]:
I can't look at those the same. So the highest percentage that we had last year is a shop he's going to do probably $2.4 million. 36% ended up in his pocket.
Mike Allen [00:19:45]:
That's awesome. That's amazing.
Hunt Demarest [00:19:46]:
And so, like, that's the big number I look at, like, for my top shop.
Mike Allen [00:19:50]:
Does homie give benefits to his employees?
Hunt Demarest [00:19:52]:
Yes. Really good. Yeah. So like, of my top shops, of the guys printing money, most all of those guys are working pretty hard for it. Not they're not working 3,000 hours, but they're in there with the Guys, and they're treating these guys really well. They're almost all at, like, 115 to 120% productivity. Only one thing was ever directly related to profit that we've been able to actually analyze in productivity. If you're productive, you're making money.
Hunt Demarest [00:20:17]:
If you're not productive, how do you define productivity? So productivity way we do it is we have some of the numbers from the shop management system. Not all of our clients are on something that have it. And so generally, we'll back into it. We'll say, all right, how many technicians do you have? What's your labor rate on it? And be able to divide it out based on their labor sales. So we're just going, hey, what was your labor sales? How many hours did you sell? Over 40 hours. We're even giving you guys some benefit of the doubt, because some guys are there for 50, 60 hours, but generally, we're taking it on. How many hours did you sell at the street rate that you want divided by 40?
Mike Allen [00:20:54]:
Okay, I had to ask that question because every guru.
Hunt Demarest [00:20:58]:
I think you were going for that one. Right. It's like, how many hours did you sell? So mine's a little bit different because I will, in this example, will ignore effective. Right. And so if you come to me and you're like, hunt, I sold 40 hours for a total of 200 bucks. I said, Mike, you sold one hour for this exercise. Like, you cannot ignore effective labor rate. You are going to end up at the absolute wrong decision.
Hunt Demarest [00:21:20]:
But from a benchmarking perspective, it's the easiest way to do it. I gotcha.
Mike Allen [00:21:26]:
Across your clients, what's the average net profit?
Hunt Demarest [00:21:29]:
Average net profit. So I think when we did it last year, again, net profit plus owner income was like 19.2 or something like that.
Mike Allen [00:21:38]:
What percentage of. I mean, this is anecdotal because you don't have the numbers in front of you.
Hunt Demarest [00:21:44]:
What percentage just sit here and calculate.
Mike Allen [00:21:46]:
Do you think would be over 10 points net?
Hunt Demarest [00:21:50]:
So, again, we got to be careful.
Mike Allen [00:21:52]:
You have outliers that drag it down. You have outliers that drag it up.
Hunt Demarest [00:21:54]:
And especially, I think that if we're saying strip these things down of what they're really doing, over 10% net income, that's probably pretty low threshold. I would say 95%.
Mike Allen [00:22:05]:
It's awesome.
Hunt Demarest [00:22:06]:
Yeah.
Mike Allen [00:22:06]:
Good. Because, you know, the number that always sticks in my mind that I've heard Lucas Parrot over the years is like, the average across the industry is like 6%.
Hunt Demarest [00:22:14]:
It's really low. Yeah.
Mike Allen [00:22:15]:
Yeah.
Hunt Demarest [00:22:15]:
But they're Going off of tax returns, right? Your net income from. You know, I always tell this guys, right? Like, look, September, October, November. All of a sudden after December, it's like, been a horrific month, right. And not always due to Christmas bonuses or whatever it is. So, yeah, you got to be careful on some of these public surveys because they're going off of public data, which is just a tax return, which when you sell your business, you're not saying, hey, just look at my tax return, right? Yeah, I'm selling it for exactly what I said on here. There's usually a slight difference.
Mike Allen [00:22:43]:
Good point.
Hunt Demarest [00:22:44]:
Good point.
Mike Allen [00:22:45]:
Cool. So if one of our listeners is considering going away from doing their own books or looking for a new cpa, what is it about Parmellis that makes it the go to option in your mind?
Hunt Demarest [00:23:01]:
I think we just have the unique luxury of we've seen this. Like, a lot of the stuff I talk about, like, I can't even really take credit for because I've learned from other shop owners in seeing this. And so, like, when someone comes and says, well, hey, can you help me with my financials? If you don't know what a good shop's financials look like, then how can you get in beyond, like, the very basic of, like, hey, I heard online that the ratio should be this. So being able to kind of get beyond just the surface on, hey, let's make sure you have accurate financials, but let's make sure that this is set up in a way that you can compare this to your shop management system. When you start talking stuff like that, most people are like, my account's not looking at TechMetric, doesn't even know what it is or why I need to bridge the gap between the two. Because I think for most people, they don't have a very good financial understanding because they see TechMetric, they see Shopware, whatever, and then their financials, and they don't really get it. And a lot of times if you're not doing this stuff correctly, if you're not accruing it, if you're not, you know, putting in the receivables, then it is two different stories. And so kind of painting a picture of like, hey, this is what you're doing in real life, or, this is a good month.
Hunt Demarest [00:24:06]:
This is what it looks like. And here are the financials set up on it. I think it gives them a ton of clarity. Okay.
Mike Allen [00:24:12]:
You do a lot of tax advice also, right? Yep, tax planning advice. So I think in terms of, like, my inner circle of advisors that I should have that should know each other and have the ability to communicate. There's a financial advisor. Right. There's the business attorney. There's CPA and tax advice. There's probably an estate planning attorney. Right.
Mike Allen [00:24:34]:
Who else do you think needs to be in that?
Hunt Demarest [00:24:37]:
I mean I think that's business coach. If you got a business coach. Yeah. I mean I would say 90% of our shops have a business coach on it. Right. There's different areas. Like you could go try to figure out how to do this all yourself. Like I say time and time again, my job is not that hard.
Hunt Demarest [00:24:51]:
You could do your own taxes, you could do your own books, you could do your own everything. Right. But you're going to choose to do other things that are more profitable use of your time.
Mike Allen [00:24:58]:
You're buying time.
Hunt Demarest [00:24:59]:
Yeah, exactly. So. But rely on those professionals. The worst thing that I have is people that have that circle, they have those people to go to and they end up asking Chad GPT for this. Right. Or I always get the. Well, my brother in law said I could do this. Like if you have a question, if you think that's the right idea, if you think it's not the right idea, call your lawyer, call your accountant and get the answer before you do it.
Mike Allen [00:25:21]:
Yeah, my guy sometimes fusses at me because I call him to tell him that I did something right.
Hunt Demarest [00:25:26]:
Exactly. That's all a phone call. Well, Hunt, you're either going to be really happy with me or really mad with me. I'm like, let's hear it. Right.
Mike Allen [00:25:35]:
As the business has grown and evolved and from the outside looking in, it feels like it's grown a lot in the last several years. How many clients are you personally working with on a day to day basis versus are you managing the team?
Hunt Demarest [00:25:45]:
Yeah, I'm managing the team. So I have a handful of clients that I still work with. Most of my clients that are like kind of my pet projects I've been working with for 15 or 20 years. So like if you sign up with me now or am I going to be doing your bookkeeping? No. Do I still do bookkeeping for a couple shops and used car dealers? Like yeah, don't get me started. I probably shouldn't be doing it begrudgingly.
Mike Allen [00:26:06]:
You need to pass them off.
Hunt Demarest [00:26:07]:
Yes and no. Right. Because I think it's super important that if you want to like guide your business, if you want to be able to guide shop owners, you can't get too far removed from it. Right. I think that we've all seen people trying to give Advice that get too far away from what they're actually doing. And you're like, well, how can you help people if you don't really know what people are struggling with and stuff like that. So am I out here working 100 hours a week? Like, believe me, no, I'm absolutely not. Right.
Hunt Demarest [00:26:31]:
I always joke that I'm a podcaster and like a telemarketer because I just talk on the phone all day, but really? Yeah, all my clients have access to me. Right. My email is really easy to guess. It's HuntParmelis.com right. I have 100% reply ratio, but mostly that. Right. I'm not going to do your tax return, but happy to go down through it, do tax planning with them, you know, review succession planning and stuff like that. Very cool, Very cool.
Mike Allen [00:26:55]:
Okay. Let's call it what it is. If you're going to step away from the shop, it better be worth it, period. Tectonic 2026 is designed for that reality. Role based sessions, hands on workshops and conversations with people who actually understand what it takes to keep a shop profitable and a team sane. And I like that it doesn't pretend we all need the same thing. Owners, advisors and technicians don't have the same headaches. So you're not wasting time sitting through sessions that don't apply to your day to day life.
Mike Allen [00:27:21]:
You should leave with a clearer idea of what to fix first, what to tighten up, and importantly, what you should stop wasting time on. Presented by TechMetric, Tectonic is happening April 9th through 11th in Houston, Texas. Tickets are on sale now and my listeners get $500 off standard pricing with code CONFESSIONS. 500. Go to techmetric.com techtonic that's T E K T O N I C or tap the link in the show notes for more. All right, so the whole concept of this podcast is talking about disasters or mistakes or that kind of stuff and learning from those mistakes and sharing them with other people so that they don't make that mistake and they can make their own new, interesting mistakes. What are some of the most common mistakes that you're seeing from a accounting perspective?
Hunt Demarest [00:28:08]:
Common mistakes? I thought you were gonna make me throw myself under the bus and say, all right, what is your biggest mistake you've made on a shop?
Mike Allen [00:28:13]:
What is your biggest mistake that you've made on a shop? And who is name the shop? Right? Look in the camera and tell them what you did.
Hunt Demarest [00:28:20]:
I thought this was like one of those hidden camera. And here he is to talk about that most common mistake is that People are overthinking this stuff, right? Like, oh, my God, I can't do this. Speaking of Keith Perkins, I was just over there at their booth yesterday. I'm like, it's so funny that what I do is put on a pedestal, right? And they're over there with the lab, scope and all stuff like this. I'm like, I could teach every single one of your technicians to do their own tax return by the end of the day. You could train my team for a year and most of them would never be able to balance a set of tires. So, like, it's not that hard. Look at this stuff.
Hunt Demarest [00:28:53]:
And also, like, be reasonable with your expectations. Like, you're struggling. You're just starting to get into business, right? You went from making 5% to 10%. Don't beat yourself up listening to this. That you're not at 36%. Most of the shops that end up failing are the ones that go from 5% to 50% because it ends up going down to 5%. Alright? You don't need to kill it. You probably don't want to grow.
Hunt Demarest [00:29:16]:
80% consistent improvement, right? 3% better every single quarter, every single month is like the kind of stuff you're shooting for.
Mike Allen [00:29:24]:
That's definitely not what the gurus are. We're going to double your business in three months.
Hunt Demarest [00:29:29]:
Hey, we've all had those years, right? We've had years where we've grown a ton. We have a certain amount of clients that we get on a monthly basis. We won't go above it because I think a lot of shops have seen that if you take in a ton of people, if you take in everyone on it, then you're going to kill your client base and you're going to deliver a product that is not really what you're meant to do.
Mike Allen [00:29:46]:
Quality collapses for sure. Absolutely. Well, cool. So your biggest mistake.
Hunt Demarest [00:29:53]:
My biggest mistake? Well, maybe right now. I always joke about this, but currently we have two audits. One of them is mine with the State of Maryland, and another one is one of my clients. But we're gonna win, right? Warning, don't audit a cpa. But it's fine. Biggest mistake on it. I actually am in a bad investment that the SEC and FBI is involved in, so I will share this one. I've shared it on the podcast before, but I think it's a word of caution.
Hunt Demarest [00:30:17]:
We were joking about crypto before. Right. But it goes back to if you don't understand it, probably don't invest in it. And if it seems too good to be True. It probably is. My clients shout out to my clients, you guys always bring me creative investments. Because, again, he's a numbers guy, right? Across the board. I've seen it.
Hunt Demarest [00:30:35]:
Geothermal stuff and foreign countries that were invested in nuts. But my client came to me with one. It was a 10% quarterly return, right. Supposedly was a bridge loan on real estate down south. It was in the Georgia area. You're from that area. So, like, all of the boxes kind of checked it. Like, I'm not an idiot.
Hunt Demarest [00:30:53]:
I did some research, but I also realized, like, hey, if they're paying 40%, right? Like, we're flying really close to the sun, but it's 40%. So I put 25 grand into it, right? Was in it for about 18 months, so almost had doubled my money, right, Based on the statements and stuff like that. And then I got an email from the FBI and then all this stuff came out. So, long story short, I had clients. My clients were in this for a lot more. I don't even know if I want to say how much they were in it, but they had some serious exposure on this. The guy got around $390 million from people. Yeah, massive.
Hunt Demarest [00:31:28]:
Pretty impressive. Like, when you see stuff like that, you're like, if you would have just put that too good, like, you could have been done some really awesome things. But as a word of caution, like, look at this, guys. Like, I'm a cpa. I'm looking at this. It tricked me. Be careful. Most things are paying, like you said, what, 6, 8, 10%? If someone is paying you triple of what they need to.
Hunt Demarest [00:31:49]:
To get you to invest money on, it's probably too good to be true.
Mike Allen [00:31:51]:
So there's a reason that there's not.
Hunt Demarest [00:31:53]:
It happens to all of us, right? But don't be embarrassed. Like, share this, right? If stuff like this happens, you get embezzled, fraud. Like, it happens, but hopefully sharing it, like, avoids it from happening to someone else.
Mike Allen [00:32:03]:
Okay, super.
Hunt Demarest [00:32:04]:
Yeah.
Mike Allen [00:32:07]:
What else, man?
Hunt Demarest [00:32:10]:
What else? I mean, I think that the biggest thing right now that shifted in the last couple years is private equity. They're here, they're buying. They're buying most of our shops that sell right now and the last multiples
Mike Allen [00:32:22]:
more than the locals can pay for.
Hunt Demarest [00:32:24]:
Sure. Yeah. I mean, it's crazy. I think that there is probably some markets where there is no market other than private equity because they've set the standard. There's a lot of use cases where it's like, hey, me as an individual can never justify the price that you're paying. Based on what you guys are going to do or the back end rebates or the tire volume and stuff like that. So in one aspect, you know, I think probably pretty bad, right? We've all seen private equity in other spaces. They generally don't come in and improve the experience for customers and things like that.
Hunt Demarest [00:32:54]:
But from the percentage of 40 year old people that I have retiring, like that's up infinite. Because like that didn't exist. Yeah, average shop owner retiring for me when I first started doing this was I don't know, 98. Right. Like sadly, like a lot of people were in this for a long time. It's hard to exit even to sell. Like there wasn't that many buyers. Average age in the last two weeks is probably like 48.
Hunt Demarest [00:33:20]:
Like just really crazy stuff and getting really good money. Where does this end? Where does it go from here? I have no idea.
Mike Allen [00:33:27]:
You think there'll be a tipping point where the private money has saturated enough of the major markets that they no longer want more shops in the markets. They just say we're just going to grind you down.
Hunt Demarest [00:33:39]:
There was like a time there when interest rates got really high that they had got a good bid on it and that was the only thing that really slowed these things down. From the most part for like the last six to eight months, they've been almost hotter than they ever have been. Personally, I think that there is a couple that are close to, to probably exiting. Right. Most of these guys want to stay it in five years. They're not here to operate shops, they're here to buy it and then flip that investment. But I just don't get what the math is on there. Right.
Mike Allen [00:34:07]:
What's the next level roll up? Is it going to be?
Hunt Demarest [00:34:09]:
And that's where I don't get it. And when you talk to some of these guys, these are brilliant guys, right. They understand a lot of it. So I'm like, hey, I'm sure that there's something that I'm missing. But they also don't really see the intricacies all the time. Right. A lot of times they'll have direct parallels between the collision industry and the repair, which in some aspects there is. Right.
Hunt Demarest [00:34:28]:
Direct comparisons between a diesel shop and a high volume tire shop. And again, like we're selling parts and labor. But so have they completely missed it and they've just squandered 300, $500 million? No, probably not. But we are absolutely in a tipping point. I would say in the next year to 18 months. Some of these guys One of these guys, a couple are going to exit. And if that goes well, we could see a gold rush on it for the near future. And if that goes poorly, it could be really weird, right?
Mike Allen [00:34:56]:
Well, I think so. What I'm hearing is if you're in that late 40s into 50s space and you're thinking about maybe it's time to exit.
Hunt Demarest [00:35:06]:
Someone yelled at me about this the other day because they were like, I don't want my clients hearing this and fire me. Because you can't pay a subscription if you're retiring. So here's my spiel on private equity is if you have an intended use case for where your business is going to go, right, Little Johnny's going to take it and you're dead set on doing that. Do not answer the email, do not pick up the phone call. It will probably screw up that deal. They will pay you double, triple what little Johnny ever could justify on that. So like, hey, I respect it. I have a good bit of clients.
Hunt Demarest [00:35:37]:
They're in the anti PE world right now just to try and keep third, fourth generation businesses going. On the other flip side of it though is like, hey, if you're burned out, if you're done, you want to get out on it, it's probably a pretty good time. When we first saw these guys come into the space like kind of COVID Right, right after that, right before that, I think they were only looking at multi location on it. If you have 800 grand in a strip mall, are they going to buy you? Probably not, right? They like freestanding on it, but I think the smallest one we had sold was one and a half million dollars in sales, Right?
Mike Allen [00:36:10]:
Really?
Hunt Demarest [00:36:11]:
Yeah. A lot of these guys are doing a hub and spoke model, right? So they're saying, hey, I will buy one big conglomerate once I get that one, I will buy a bunch of single ones around it. Some of these guys, there's another one that has like 100 locations, but it's like spread across 25 or 30 states. So it's like three here, four here. All independently branded.
Mike Allen [00:36:32]:
Yeah, they just maintain the brand that they bought.
Hunt Demarest [00:36:34]:
Some of these guys are looking because they just want to sell tires to your customers, right? So like we're almost not even sending a profit and loss statement because they don't even care about the profitability. They say, how many cars, how many repair orders are you touching? Well, Michelin will give us, okay, we'll pay this much money because our back end rebates will be this like from a number side. It's pretty cool for me because I do valuations, right? So I'm accredited in business valuation. And when my clients call and say, hey, I need a valuation, cool, let's do it. Right? I got these private equity guys. I'm like, well, that is zero dollar sale for me. Because I'm like, we're not doing it, guys. Right? I'll negotiate.
Hunt Demarest [00:37:06]:
I'll help you set this up. I'll help you phrase this. They are going to set the market on it. We are never going to calculate this, right? Why are you going to pay me five grand to put a number on paper that is 100% accurate and true and probably really good for a key employee and probably half or a third of what these guys are about to offer you in 10 minutes.
Mike Allen [00:37:24]:
Yeah, well, sounds like, you know, something that people should be considering.
Hunt Demarest [00:37:29]:
I can see the wheels turning.
Mike Allen [00:37:30]:
Well, I mean, they'll be calling you.
Hunt Demarest [00:37:33]:
If you have more than one shop, they are calling you.
Mike Allen [00:37:36]:
I get.
Hunt Demarest [00:37:36]:
And if they're not calling, emails every day. Check your phone because that means customers can't get a hold of you.
Mike Allen [00:37:42]:
You know, I think about it, but I don't know what I would do next, man.
Hunt Demarest [00:37:46]:
Yeah, that's a big thing, right? You're young. It's like, hey, you've created a business. You obviously have passion for this. It's like, okay, and then what are you gonna do? Sit around and talk crap on the Internet all day?
Mike Allen [00:37:55]:
I mean, some people would argue that's what I do already. Right, Cool. Well, thanks for coming on, man. I really appreciate it.
Hunt Demarest [00:38:01]:
Yeah, I appreciate you having me.
Mike Allen [00:38:02]:
Thanks for listening to Confessions of a Shop Owner where we lay it all out, the good, the bad, and sometimes the super messed up. I'm your host, Mike Allen, here to remind you that even the pros screw it up sometimes. So why not laugh a little bit, learn a little bit, and maybe have another drink? You got a confession of your own or a topic you'd like me to cover? Or do you just want to let me know what an idiot I am? Email mikeonfessionsofashopowner.com or call and leave a message. The number 704 Confess. That's 704266, 3377. If you enjoyed this episode, be sure to, like, subscribe or follow. Join us on this crazy journey that is shop ownership. I'll see you on the next episode.
Hunt Demarest [00:39:09]:
You know I said jesus,