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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.
Matt Lofton [00:00:00]:
The analogy that I try to give my team is this. We're kind of like farmers. So farmers make money twice a year. There's usually two harvests and two planting seasons. When you're farming, what I'm saying is, theoretically, there is typically some ebbs and flows to it. Right. And just by. Just based off the fact that there are some months that have more capacity than other months, those are your harvest months.
Matt Lofton [00:00:19]:
Right. You can't have a bad October and a bad August and have a good year. It just can't happen.
Mike Allen [00:00:27]:
The following program features a bunch of doofuses talking about the automotive. The stuff we or our guests may 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, it's time for Confessions of a Shop Owner with your host, Mike Allen.
Mike Allen [00:01:00]:
Just doing health insurance elections for next year today and getting all the forms.
Matt Lofton [00:01:06]:
Gathered up and scanned in and everything.
Mike Allen [00:01:08]:
What a pain in the ass. But it's one of those things, right? We offered three plans to choose from this year. We've done two in the past, so we did a low deductible. A high deductible is what we've always done. We did one in the middle this year, and it turns out almost everyone has picked the one in the middle. So. Good.
Matt Lofton [00:01:29]:
You go through a private agent on that.
Mike Allen [00:01:32]:
Yeah, yeah, we. We quoted. We've been with BCBS for a while, but we're switching to Aetna because BCBS was going up a pretty significant amount and all the major hospital groups in our area except Aetna, so, you know.
Matt Lofton [00:01:48]:
We flip flop back and forth between BCBS and.
Mike Allen [00:01:54]:
United.
Matt Lofton [00:01:54]:
United. Yeah, I'm back to BCBS now.
Mike Allen [00:01:59]:
It's just that game you got to.
Matt Lofton [00:02:00]:
Play every year, right?
Mike Allen [00:02:01]:
It's that time of year. What do you do as far as how much do you cover for your team?
Matt Lofton [00:02:08]:
Well, yeah.
Mike Allen [00:02:11]:
Or not.
Matt Lofton [00:02:12]:
No, no, no, we do. I cover 100 is the answer. Yeah, that was a mistake that was made in payroll a while back because we set it up. We never set it up for the deductions.
Mike Allen [00:02:30]:
So you unintentionally decided to cover 100? Yeah.
Matt Lofton [00:02:34]:
What happened? Set up the deductions. She did a deduction and then it also went back to them as a secondary payment some kind of way. So, like, it took $50 out. So, like, I would see it come out. So I was like, okay, cool, but some kind of way, it also sent 50 back. And the way that it did it, I just always assumed that was part of, like, the payroll fees kind of deal. It's like the way that it broke out in. In the withdrawals.
Mike Allen [00:03:03]:
How long did it take before you caught it?
Matt Lofton [00:03:05]:
Over a year.
Mike Allen [00:03:07]:
And then you're like, well, I guess everybody gets free health insurance at that point.
Matt Lofton [00:03:09]:
Yeah. Yeah, because I. I caught it. Here's how I caught it. I caught that. And I. When I. I was like.
Matt Lofton [00:03:21]:
I was doing payroll one day myself, and I fixed. I was like, okay, this is weird. So I fixed one of the guys, right? And he came to me like a week or two later, and he was like, hey, man, you know, it's kind of strange, but, you know, I don't get that bonus anymore. I'm like, what. What bonus are you talking about? And he's like, yeah, you know, that 50 bonus that I used to get every week? And I was like. So then I started digging into it and I found out what it was. I was like, oh, God.
Mike Allen [00:03:56]:
Give your wife a hard time about that.
Matt Lofton [00:03:58]:
No.
Mike Allen [00:04:03]:
It's a good way to have to go hire a new office manager because you gave your wife a hard time at the wrong point. Yeah, well, you don't like the way I did it, then find somebody else to do it.
Matt Lofton [00:04:14]:
I've made that offer before.
Mike Allen [00:04:20]:
This is the Christmas episode. This is not the inciting divorce episode. She's. It is. It's early December when we're recording this. This is going to come out right before Christmas, I think. This is scheduled to be released on the 23rd. Hence the cheery attire and my little baby Christmas tree, which you can't really see.
Mike Allen [00:04:41]:
I need to get the lighting better, but I thought it would be a good time to talk about goal setting for 2026, because I think a lot of shop owners just kind of live month to month, week to week, day to day. And so goal setting and budget setting and planning is an important thing. And frankly, you don't need to be doing it on December 9th. You probably need to be doing it in late October, early November, I would think. But for those that have never had a coach, it might be good to sit down and go through that process with you so that they can see what maybe they should be looking for. This seems. Seem good. Yeah.
Matt Lofton [00:05:19]:
Yeah, that sounds awesome. So I'll give you. I'll give you my philosophy that I've kind of warmed up to over the last two years, and I will give. I'll give the people at Pro Service here at Elite, the majority of the credit for the process that we're getting ready to go over. You've been a long time Pro Service member. I'm sure that you're going to be familiar with the process and the spreadsheet that we're gonna, that I'm gonna be referring to, we're gonna do it the analog way, just, just to kind of COVID it. But two years ago, when I joined Pro Service, this time of year, every year we have a goal setting meeting, usually as a group. And there was two days shared with.
Mike Allen [00:06:02]:
Me that in two days I've got mine in two days.
Matt Lofton [00:06:06]:
So, so they share a spreadsheet and it, it's a, it's a really awesome spreadsheet and it kind of changed my thought process of how I set goals for the following year for, for the, for the next year. Because I used to just take a look at it and go, okay, what did I make last year? How do I put a percentage on top of it? And which is fine. The problem with it is, is it's really difficult to tell if that's a realistic goal or not. Right. Because it's not really, it's not really grounded in anything other than hope. I hope I'm going to do 30% more. And obviously we can back into all of those numbers and figure out what we would have to do to do 30% more. But it's still the original number was grounded in hope and not, not anything that was mathematically firm.
Matt Lofton [00:06:53]:
So to summarize, the spreadsheet that was shared with us, the, the way that I started doing it based off of that sheet is we take a look at technician available hours and what we're, what we feel like we're going to be able to accomplish with each one of those technicians inside of their available hours. So independently, how product, how productive is each member of our tech staff? Because different roles produce different amounts of productivity. Right. If you have a shop foreman that's doing mainly diag, the likelihood that he's going to be 100 productive is less than 100%. Yep. If you have a GS that's doing mainly oil changes and state inspections, the likelihood that he's going to be 100 productive is less than 100%. So. And then things that I never factored in before when I started off doing my early math was, you know, time off, days of the month.
Matt Lofton [00:07:54]:
Because again, you're what I used to do and I'm sure most of us do it. You said, I want to Do a million dollars a year. A million dollars a year divided by 12 and you back into that. And that's your monthly goal, is that. But February has 19 days, July has 23 days.
Mike Allen [00:08:13]:
Yeah. Makes a big difference.
Matt Lofton [00:08:15]:
So there's a lot more available inventory there to be able to sell off of in those months than there is in other months. So that's the process that we're going to work through today. We're not going to go month to month on that. We won't go quite that in depth. But what I would like to do is just take a look at your available hours for, for what we're going to have for next year and then kind of compare that to what we've done this year a little bit to see if there's some availability to, to scale up and grow. And then based off the revelation that you shared in our last episode, we also need to factor in that this is kind of a satellite location for you and you do have the ability to, to share production technician capacity at one of your other locations. And so we need to kind of factor in what that means. So your, your ceiling is not based 100% off of your staff at that location.
Matt Lofton [00:09:12]:
From a technician standpoint, it's going to be more based on what you feel like how much throughput you can push through the front counter and how much inspections you can push through the back more so than it is going to be straight one to one productivity because you're outsourcing some of that productivity to another store.
Mike Allen [00:09:34]:
Good. Makes sense.
Matt Lofton [00:09:36]:
Okay. All right, so let's talk staffing really quick.
Mike Allen [00:09:41]:
So three currently. Well, I've got two technicians and a GS.
Matt Lofton [00:09:47]:
Okay.
Mike Allen [00:09:48]:
And two advisors. So one advisor is the selling advisor. One is kind of helps with the rack attack process and overflow phones and parts and estimating that kind of stuff.
Matt Lofton [00:10:02]:
Okay, so from a, the two technician standpoint, are we classifying them as close to ATEC or ATEC quality?
Mike Allen [00:10:11]:
I'd say an A tech and a B tech. So A tech is good for 50 to 60 hours a week, pretty consistently plugging right along, sometimes higher than that, very rarely under 40. The B tech is a consistent 40 hours a week guy, you know, 35 to 45. The GS is just doing oil changes, tires and state inspections, and helping with the rack attack and the Dvis. So he's probably doing 15 hours a week, maybe call it 10 to be safe. With the overflow of the, the capacity, the technical capacity from the other shop that's next door.
Matt Lofton [00:10:55]:
Right.
Mike Allen [00:10:55]:
That's a mile down the road, we could almost say that there's an extra technician or a half of an extra tech, you know, So I would. I would say it's reasonable to expect that secondary location to add 30 hours a week to their capacity.
Matt Lofton [00:11:14]:
Okay. All right, so we've got 145 hours a week of potential.
Mike Allen [00:11:26]:
I think that's. I think that's legit.
Matt Lofton [00:11:31]:
All right, and those three technicians, how many hours are they working? They're working 40 hours a week, right?
Mike Allen [00:11:38]:
Yeah, it's. They're eight to five Monday through Friday with an hour lunch. So 40 hours.
Matt Lofton [00:11:43]:
Okay. All right, so we have 120 available hours, and then.
Mike Allen [00:12:10]:
We want to add some available hours for. To consider the production from the other facility, like half a tech, you know, make it 140 available hours.
Matt Lofton [00:12:18]:
Not at the moment, because at 120 there's. You have 120 available hours. We're averaging about 105 hours a week in store. Yep. And so obviously that gives us a touch of room for improvement there.
Mike Allen [00:12:35]:
Yeah. You know, most of that loss. Is the GS not being highly productive?
Matt Lofton [00:12:41]:
Sure, sure. And so I guess the question there is, A, is, is there room for the. Is the B tech capped by his experience at the moment, or is he capped by the level of distribution of work that we have to be able to give him?
Mike Allen [00:13:01]:
I think, yeah, I think it's just experience at this point. He's like four years into his career.
Matt Lofton [00:13:09]:
And I mean, 40 hours a week is great. I'm not knocking that.
Mike Allen [00:13:12]:
Anyway, yeah, he does good quality work. He doesn't have comebacks.
Matt Lofton [00:13:16]:
Sure.
Mike Allen [00:13:17]:
Sometimes he gets hung up and. And loses on more advanced jobs, and he crushes it on the easier jobs, and it kind of averages out.
Matt Lofton [00:13:23]:
Okay, and so the GS, what level of work do we feel? I mean, is he capped out at tires? Is he. What is. What is his. Where is he at in the stage of his career? See a career loop tech.
Mike Allen [00:13:37]:
Yeah. I mean, he's such a good dude. He's very young. Oil changes, tires, and state inspections are probably the cap right now unless he gets some mentorship from the A tech. And the environment at that shop makes it kind of hard because they're busy. And so it's hard for him to slow down and teach to the degree that would be necessary, I think.
Matt Lofton [00:14:04]:
Okay.
Mike Allen [00:14:08]:
So if he comes to me in 26 is like, you know, hey, boss, I want to learn more. I want to do more than what I'm doing. I'll probably have to transfer him to a different store. So that there's a pace where he can go be side by side with another technician and, and kind of be hands and feet for that guy as he learns. I just don't think that the environment at this shop is appropriate for that.
Matt Lofton [00:14:32]:
So. Next question there. And this is just. I'm just asking to spitball ideas here because obviously your biggest room for improvement is getting the GS to 15 or 20, because that's doable. I think he should learn Fluid Services.
Mike Allen [00:14:47]:
And he probably learn breaks if we push him through some training modules and, and kind of hold his hand and let him do some, you know, tell show, do type stuff.
Matt Lofton [00:15:00]:
Yep. So things, you know, some of the easier stuff like that. And, and again, everything comes with risk. Right. Even the Fluid Services comes with risk. Yeah.
Mike Allen [00:15:12]:
So I could send him to Hunter class and let him start doing the alignments, that kind of stuff.
Matt Lofton [00:15:24]:
So the only thing that I want to make sure here is that again, the goal is not to transfer hours from one to the other. Right. Yeah, we're trying to add hours. So just something else to think about there. I don't want to just give him the alignments just because. So he can do the alignments because that might take five hours away from your B tech. Right.
Mike Allen [00:15:43]:
Well, and then you fall into that trope of, you know, the low skill techs get all the easy work and the high school texts get nothing but hard work and that makes everybody angry. And. Yeah, that's not the goal.
Matt Lofton [00:15:53]:
So the question is, do we feel like if his skill level. Let's just for a second, let's put him on a shelf and let's act like he was an A tech. If you had another A tech there, do you have capacity to be able to give 25 hours a week without taking away from the other two?
Mike Allen [00:16:09]:
Yes. Okay, and what, what would happen then is we just wouldn't be shipping work down the street to the other shop. We would just be doing it all in house.
Matt Lofton [00:16:18]:
Right. And then if you did that, do you have capacity to be able to increase car count on top of it? Because you kind of say you have an in. You have a endless amount of car count at that location.
Mike Allen [00:16:32]:
The. The only time that it gets a little bit slow is when the students aren't in town.
Matt Lofton [00:16:37]:
Yeah.
Mike Allen [00:16:38]:
And that's even only for a couple weeks in the summer because then summer schools and there's students in town. So car count is not really a struggle there. We don't hardly do any marketing there. So if we wanted to add cars, we could turn on some Direct mail and probably add some cars pretty quickly.
Matt Lofton [00:16:55]:
Okay. So I'm just looking at that and saying, you know, we have some room for capacity improvement internally without ex. You know, without outsourcing. And then we also have the ability to continue to outsource up to that 30 hours even if we increased internal capacity at the store. So your growth option really is how do we get an extra 5 to 10 hours a week out of the GS? What lower level services would we be able to train him to do to be able to increase his capacity, to be able to add to that? That gets us to 115 hours a week of internal capacity and still 30 hours. Your lab, your effective labor rate at that store this year is what?
Mike Allen [00:17:39]:
I don't want to misspeak. Hold please. I'm gonna guess it's like $165. Be helpful if I was logged into the correct year to date. No. $134.20. Well. Would tell you that that has come up significantly in the last 90 days.
Matt Lofton [00:18:14]:
I was going to say give me, give me a. Give me a 90 day or 6 month run rate on it.
Mike Allen [00:18:24]:
It's 148 in the last 90 days. So it's moving in the right direction.
Matt Lofton [00:18:28]:
Okay.
Mike Allen [00:18:29]:
I think 165 is a reasonable target for. Given my free diag and everything else. All right.
Matt Lofton [00:18:45]:
So if we were able to average what is. Can you take a look real quick? Your year to date labor percentage. In other words, what percentage of your parts.
Mike Allen [00:19:02]:
You want? Partial labor ratio.
Matt Lofton [00:19:04]:
Yeah, but give it to me in a percentage. All right. I failed fractions, Mike.
Mike Allen [00:19:18]:
Year to date that store is at 1.3 million and it's done. 650 in labor. So that's 50.
Matt Lofton [00:19:25]:
50. Yeah. Okay. Yeah, perfect. That makes our math super easy. So just to explain what we're going to do, like I said, I know you're familiar with the process. We're going to figure out what our store capacity is like. Realistically, individual by individual, what we're capable of doing.
Matt Lofton [00:19:44]:
We've got 55 hour A tech, we've got a 40 hour B tech. Currently we have a 10 hour GS. So that gives us the 105 hours a week that we, that we have of internal capacity. We're going to multiply that times our current effective labor rate. All right. Then what we're going to do is we're going to take our parts to labor ratio, which is what you just did for us there to get that parts to labor ratio. We're going to figure out what our total sales is and what our total labor sales is. And we're going to divide total labor sales by the total sales.
Matt Lofton [00:20:19]:
We had a great example here. If you guys don't have the. If you want to make it easy math, I will tell you, typically speaking, we see somewhere around 55% of total sales is in labor. That's on average. If you want to make the math easy, do 5050 and you'll be damn close. And so in this scenario, we were 50, 50. So what we know there is that for every dollar of labor that we sell, we're generating a dollar of parts. So that's going to make it really easy for us to come up with what our, our sales totals are going to be.
Mike Allen [00:20:51]:
And if I get my effective labor rate up some, that's going to skew that number more towards that 55% too.
Matt Lofton [00:20:58]:
It will. And, and just, just to put that in perspective for the listeners, the reason that Mike's at 50 50, and I'm not knocking your strategy here, but the, the labor sales that we're missing off of diag and testing is probably that 5%. If we had charged labor on all that, we probably would be 5% heavy on, on labor. And that is pretty typical because there are shops out there that don't have that as a strategy necessarily. It's just, it's just what they do. And from on the coaching side of things, when we do take on clients and they're undercharging for, for testing, we typically see that parts to labor ratio a lot closer to one to one usually after the first year. And we put some sort of pricing strategy together for no part tickets. By the end of that first year, we're looking somewhere around 55% heavy on the labor.
Matt Lofton [00:21:47]:
It's kind of what we'll see.
Mike Allen [00:21:49]:
Makes sense. But for the math, 105. I just did 105 hours of capacity times $145 of labor, times 2 for the parts to labor ratio gives me $30,450 a week in revenue as a target. Times 52 is 1.58 million.
Matt Lofton [00:22:11]:
Yep. So I want you to do it.
Mike Allen [00:22:13]:
Times 50 because of vacations.
Matt Lofton [00:22:15]:
Yeah, yeah. And you're gonna have vacations, you're gonna have holidays, you're gonna have missed days of work, all that good stuff. You're gonna have slow periods.
Mike Allen [00:22:25]:
I mean if you've got six paid holidays and everybody gets two weeks of vacation, then it should be times 49.
Matt Lofton [00:22:30]:
I would, I would agree with that. I do it by 48. Just because I know that I have some seasonality that I, I have yet been able to overcome historically. And I have some people that got. That have three weeks of vacation. And I know we're gonna have weeks like we're having right now in December where there's. We have weather and we've been shut down for a day or two.
Mike Allen [00:22:53]:
Stupid weather.
Matt Lofton [00:22:54]:
Yeah.
Mike Allen [00:22:55]:
No, I think that's probably wise. Same like we have, you know, spring break is dead for us, you know, at the store. So I think 48 is a reasonable number if you consider vacation time, holiday paid holiday time, and then, you know, hurricane days.
Matt Lofton [00:23:11]:
And if you were doing it based off the, if you were doing it based off the months of the year, like, you know, the available days in each month, like, like the spreadsheet does. And I would, I would challenge everybody to take a look at doing that. So if we broke that, let's just do this. Let's just break that down. So, just so we can show the show, the listeners and the viewers that 30,000. Let's just call it 30,500. And we're going to divide it by five.
Mike Allen [00:23:38]:
6,100 a day.
Matt Lofton [00:23:39]:
Okay, so that's $6,100 a day of our revenue target. Now let's take a month that has 23 days.
Mike Allen [00:23:47]:
August.
Matt Lofton [00:23:48]:
Yep. Okay. And so multiply that times 23.
Mike Allen [00:23:52]:
We need 140,000.
Matt Lofton [00:23:54]:
So you have capacity for 140,000 that month. Now let's go to February, where we have 19 days, or November and December, when we have time off for holidays, we probably have 19 to 20 days, right?
Mike Allen [00:24:05]:
Yeah. So that's 116,000. So.
Matt Lofton [00:24:07]:
So your capacity can't be the same from month to month because you have a different number of days in each month. So if you, you can either do the math and you can do it that way and then figure out why, on average, if I do it by 48 weeks, it usually works out pretty well, or I do it by 49 weeks and it works out pretty well. A lot of that's going to be determined by how much vacation time you give your team, what your normal days off are and how many days of the month you're working. Because some people are working six days, six days a week, some people are working seven days a week, some people are working four days a week. Your, your capacity is. Your capacity to. For revenue is generated by how many available hours you have to be able to sell. And that's really what the crux of this whole exercise is, is how many available Hours do you have to sell, you know, in a given time period? And then what is your average cost of that labor that you're selling out? Because the only two ways that you can grow is to increase your labor capacity or increase the cost of that.
Mike Allen [00:25:09]:
Labor or increase how much time you're open.
Matt Lofton [00:25:13]:
That's labor capacity.
Mike Allen [00:25:14]:
Yeah, you're right.
Matt Lofton [00:25:15]:
Fair. You know what I mean? So I can increase labor capacity by adding staff. I can increase labor capacity by adding hours that they're open, that they're there. I can increase labor capacity. That's really the only two ways.
Mike Allen [00:25:29]:
Well, you know, there are more efficient employees and less efficient employees.
Matt Lofton [00:25:33]:
Yeah, that's right. I mean. Yeah, by adding skill. That's exactly right. I can, I can change the skill set there. I can go from a GS that does 10 to an A tech that can do 50. And you know, now my labor capacity is higher. But so, I mean, those are, those are really the three ways.
Matt Lofton [00:25:51]:
I will tell you that my goal setting became significantly more accurate when I started looking at it that way and, and thinking about it and planning about it that way. And also it starts making, making you a lot more actionable about the things that are going to make more money and change. Good.
Mike Allen [00:26:10]:
Like if I just did it times 48 or 49 weeks and then divided that by 12 and said, oh, we need 122,000 every month. It's going to make those short months really hard. And it's going to make you wonder like it. You're going to. There's the human potential to rest on your laurels with four days left in the month when you get there in August, and you really should be pushing for 145.
Matt Lofton [00:26:36]:
Yeah, you're gonna, you're gonna feel you're gonna fall short in the months that you should. So I tell my team, the, the analogy that I try to give my team is this. We're kind of like farmers, right? So farmers make money twice a year, right. There's usually, there's usually two harvests and two planting seasons when you're farming. And I'm not saying that you can't. I'm not saying in our industry that you shouldn't be busy all year long. What I'm saying is theoretically there is typically some ebbs and flows to it. Right.
Matt Lofton [00:27:07]:
And just by. Just based off the fact that there are some months that have more capacity than other months, those are your harvest months, right. You can't have a bad October and a bad August and have a good year. It just can't happen. Right. We can outrun a bad February because we've probably planned on having a bad February because it is what it is, but the months that are supposed to be good. So if you look at it that way, if you go, well, we fell short. If you do the $120,000 a month across all months.
Matt Lofton [00:27:35]:
Right. And you fall short in February, you. You automatically justify it because it's February, and then you celebrate the $130,000 a month in October because it's better than.
Mike Allen [00:27:47]:
You should have been 145.
Matt Lofton [00:27:49]:
But you really should have been 145. Right. Which means you had a bad harvest season.
Mike Allen [00:27:55]:
So you need to set your goals based on capacity and then break it down month to month based on number of operating days.
Matt Lofton [00:28:02]:
Yes.
Mike Allen [00:28:03]:
And your goal setting should be adjusted to recognize and consider vacation, paid holidays, sick days, all that kind of stuff.
Matt Lofton [00:28:13]:
Yeah. Because that life is going to happen. Right. And. And then the other thing, you know, the other thing to think about inside of that is, is again, if we talked about, we've identified that we have higher capacity and higher opportunity in different times of the year. So strategically speaking, it's a good thing to start having a conversation with the team now about those months. And I'm not telling you to black them out necessarily, but they're in this boat with you, right. Your service advisors, your technicians, they're in a production based industry as well.
Matt Lofton [00:28:45]:
Meaning that their pay is based off how much they produce and how well the store does in a lot of cases. And therefore, if they're taking time off in October and August, that's lowering the capacity of the store in the times of the month when capacity is there. Right.
Mike Allen [00:29:02]:
So I found that as owners, we focus on month to month or year to date. Right. Compared to previous year, I think team members focus on pay period to pay period. And so like for us, we pay weekly. So they focus Monday to Friday, Monday to Friday.
Matt Lofton [00:29:20]:
Right.
Mike Allen [00:29:20]:
And they don't think about the month. So if the end of the month is on Wednesday, getting them to have the same sense of urgency to get stuff done on Wednesday, their sense of urgency is to get it done by Friday. And so I agree that I should communicate with them about our goal setting process and how we're laying it out and how it varies from week to week. Merry Christmas. But getting them to have the same sense of urgency can be a challenge for me.
Matt Lofton [00:30:00]:
So you're a college basketball guy. I know our listeners, we've already talked about, they're not big sports people. So we Won't bore them to death with everything. But I'm going to give you a good analogy. I don't agree with you 100. I agree with what you're saying. I disagree that that's bad coaching.
Mike Allen [00:30:14]:
Ah, that's certainly fair.
Matt Lofton [00:30:16]:
Okay. And so in, in basketball, the whole game matters, right? But from a. If you ever listen to anybody, if you ever listen to LeBron James talk about the last two minutes of each quarter is what Matt, how you end quarters is how it matters. What matters the most? Right.
Mike Allen [00:30:36]:
Well, I think in college, while they talk about the four minute segments too, right? That's TV timeout every four minutes. And they.
Matt Lofton [00:30:42]:
Yeah, yep. And so it's how you finish, right? It's how you finish those quarters because the last two minutes are where.
Mike Allen [00:30:50]:
Hey, it's me, Mike's kid. Want to tell us your wild shop stories? Or maybe you just think my dad's totally wrong. Call us at 704 confess and leave a message. You can tell us we're awesome or you can tell us we're idiots, we're cool either way. That 704 confess. Just don't make it too weird.
Matt Lofton [00:31:08]:
You know, there's runs that happen and if you're on the wrong side of that run, then you've killed the momentum going into the next quarter or the next half and you know, the spread changes, right? And so those players don't know that inherently. If you're seven years old, you think either a, every play matters or only the end of the game matters. One of the two, right? The only thing, the only time, the score matters. So the younger you are, you're only looking at the scoreboard at the end of the game. And that's when it mattered. Oh, you know, we lost by 20, we won by two, whatever, right? The through coaching, as you grow through and, and you progress, you start understanding the different times that matter and when to ramp up your energy and when you know when to come back, when your focus needs to be 100%. So I mean, I think that just comes back down to, you know, we're looking at saying, well, that's pay plan driven. And there's a, there's an element of that, right.
Matt Lofton [00:32:01]:
The natural instinct of it is, know the end of my game is Friday. I get paid on Friday. It's really all I care about. But I think at that point in time, we're not setting the right focus for them, which is where I think the month to month goals really help. Right? So we do the month to month goals so they Understand that our goal for, our goal for February may not be the 120. It may only be 98, because that's all we have capacity for. Right. And we're having that conversation of, you know, on a consistent basis of what is our goal to, you know, what is our, our goal to average right now, go to actual, you know, each week, are we on pace for our 98? All right.
Mike Allen [00:32:43]:
On the technicians, have you found, like. So we did the math and it came out to 6,100 a day. And so let's say that, you know, we've got a goal, 30,500 a week, trying to get the mindset to 6100 a day, 6100 a day, 6100 A day versus 4, 500 1500, you know, 2717,000.
Matt Lofton [00:33:13]:
Yeah, and I know exactly where you're going with this. And so at Elite, we have our three day course that we teach, which is Eagles, and it's a owner manager boot camp. And one of the things we've been changing and updating a lot of the content over the last year. One of the things that we just updated is I took a client slide of the Tech metric report. So if you go to Jobs posted on the Shop dashboard in techmetric and you look at it over the course of a year, it shows you this big, beautiful graph, right? Yep. And I did it by, I did it by day. I'm sorry, not by day, but I did it by a week. And you would have it.
Matt Lofton [00:33:51]:
It literally looked like shark's teeth, right? It looked like this right here. So you would have a big week, and then right after the big week, you would have a slow week. Big week, slow week, right. So when I was working with that client, what I realized was on the big weeks, we're ramping up. The service advisor saying, yes, yes, yes, yes, yes, yes, yes, yes, yes. All of a sudden the parking lot's full, the technicians are busy, the tech hook is full. And then they start saying as. But, but the, the, that feeling comes before the work is out the door, right before you get paid for it.
Matt Lofton [00:34:24]:
So once they start feeling busy, they start saying, no, no, no, no, no, no, no, no, no. The closer they get to the top of that week, right? And then the next week, there's no work in the funnel because we've sold it out. So when I really started paying attention to that and I really went back and took a look at my store after I was looking at theirs and I was like, damn, mine's almost identical. Right. So I started paying attention to it in both of their stores. And what I realized is, is that throughput of car count and sales matters more. And actually I'll give, I'll give Harrison Rusk a lot of credit for this. So he has a.
Matt Lofton [00:35:02]:
When we were talking at one of the meetings, I heard him telling somebody that they have a, they have a daily sales goal that's not based on the daily goal, like the, the cashed out goal. Right. So jobs created. And so I started really looking at that between car count and, and approved sales for each day and at my store and our, our throughput time is slower because of parts acquisition and some other things. Our approval times take longer. All that. Some stores might, this might be faster, but if I have a goal of 60 cars a week, then I need to, I need to create about 100 invoices a week because 40 of them are going to roll into next week. The approval time between the parts acquisition and between the job getting completed, it's going to roll into the next pay period.
Matt Lofton [00:35:59]:
All right? And then I need to be able to generate that same average amount of sales. So if I take the. Let's just say my target is 650 for an ARO and you know, I know that I have a target of 60 cars a week. That gives me a $40,000 a week sales goal. Right. So I want to close out. $40,000 a week was my target for this year. What that meant was I needed to.
Mike Allen [00:36:31]:
Have.
Matt Lofton [00:36:33]:
$65,000 in approvals each week. So I set an approval sales goal. So we took that as 65,000 and divided it by five. And I said, I need $13,000 a day of approvals. And then what we looked at was I was like, okay, well if today was 10,000, then tomorrow's goal is not 13. It's 16,000.
Mike Allen [00:37:03]:
Yeah. When does that reset?
Matt Lofton [00:37:06]:
And then it resets. It resets every day.
Mike Allen [00:37:10]:
I think I have that in my head because we have, we use slack to communicate in the company and we post sales as they happen amongst the advisors, kind of as like a hype thing, you know, atta boys and that kind of thing. I like to see $3,000 of approvals per day per technician in the company. And so, but that's in my mind, that's not publicly communicated to the team. So maybe that should be set out there so they know. Because if I hire three guys, the, the numbers from before aren't good enough anymore. And if three guys leave, then the numbers that I needed before are probably not attainable, not easily. So that that number moves a little bit. So it's kind of tied to the number of technicians we have.
Matt Lofton [00:38:09]:
Yep.
Mike Allen [00:38:11]:
And I think I'm getting like a head cold or something, man. I'm coughing, I'm sneezing.
Matt Lofton [00:38:15]:
Tis the season, Mike.
Mike Allen [00:38:19]:
Ho, ho, ho.
Matt Lofton [00:38:20]:
You know, I, I think that there's. And I think I find this. I've. I've had struggle with this problem for years too, which is how do we communicate the things that make sense to us, to other people? Right. And I think every shop owner has a different way that the math makes sense to us. You know, you're looking at it as $3,000 of approvals per technician. The math's probably the same, right? It doesn't matter. But the question is, is, is that, does that analogy, does that comparison make sense to the team? And if it doesn't, how do we pick a number that makes sense to them? It's like technicians.
Matt Lofton [00:38:54]:
I can't talk $3,000 of approval to technicians. They don't know anything about that. Hours. Right. And so if I'm breaking down my discovery goal for technicians, I'm not having a discovery goal based off hours. I'm having a discovery based off of how many tech finds. So quantity of tech finds and then estimated their version of estimated hours. Right? Because they're smart enough to look at it and go, control arms is probably three and a half hours per side.
Matt Lofton [00:39:19]:
Rear shocks is probably one hour. You know what I mean? They can add those things up and get an idea about where they're at with their tech fines. Right.
Mike Allen [00:39:26]:
I mean, if you back into that Math, you know, $3,000 per tech is essentially 10 hours a day per tech.
Matt Lofton [00:39:35]:
Right?
Mike Allen [00:39:36]:
Because if we talk about what my effective labor rate is and my partial labor ratio that comes out to 290. So, you know, it's 10.1 hours a day. So I think that math. Maths, Yeah.
Matt Lofton [00:39:49]:
I mean, the math is good. The question is, though, how do we transfer that information down to the team on a daily basis? Because to combat what you're talking about, about the week to week problem, they shouldn't be looking at it week to week. They need to be looking at it every day needs to be a win or a loss, and a loss doesn't mean you can lose a play and still win the game. Right? It's fine. It's just, okay, what do we have to do next to be able to overcome that? And, you know, they have to know that if there's a, If There's a, an ebb down somewhere. There's got to be a flow up to overcome it, right? Yeah.
Mike Allen [00:40:26]:
Makes sense. Cool. So do you think we have time to talk about setting a marketing budget and a plan?
Matt Lofton [00:40:36]:
Yes.
Mike Allen [00:40:37]:
Okay.
Matt Lofton [00:40:38]:
So marketing budget is going to be one of those things that obviously is going to vary drastically between location to location. We're going to talk in some generalities for a little bit here. Typically speaking, if you're an established shop and you're close to meeting capacity already with what your team is, your maintenance budget is going to be somewhere around 3% of your total expected revenue. Not. Not what last year's revenue was. If we're going to grow, we have to, we're going to grow again. We've already determined that the only way to grow is to increase capacity of hours or to increase the labor, the cost of those hours. One of the ways that we increase capacity of hours is through car count.
Matt Lofton [00:41:26]:
Right. Maybe we can get more cars for the GS to do. Right. So we get car count through our marketing budget. So if we are planning on, if we're somewhere between a 5 to 15% growth rate, you know, just to try to stay above inflation, try to stay above the market area, I consider that somewhere in that 3 to 5% of marketing budget of what that target of 15% growth, 10 to 15% growth would be. If we're in growth mode, I'm looking somewhere between 5 to 10% of target, depending on a. The aggressiveness of the growth and be some of the logistics locations of where you're at. Some places are always going to have a higher marketing budget just based off of their location.
Matt Lofton [00:42:18]:
Right. We talked about this in the, in the property example there. If you have poor egress, it is what it is. If your location sucks, I gotta scream and yell at people a lot more to get them to come to where we're at. If you're in a great location and people are already driving by you all the time, like the one you're in, that marketing budget's a little bit lower, but you're probably paying for it in your rent, right? Yeah. And so if you're still paying for it, you're just paying for it in proximity versus ad spend. So as far as marketing budget goes, I like to get, I like to sit down and say let's take the total number first and let's think about what our strategy is going to be for marketing as far as what are we planning on doing with that money? Because there's different options that we have for marketing. There's also those options.
Matt Lofton [00:43:12]:
They're not one size fits all. There are areas that Google Ads might work better than direct mail, and there are places that direct mail might work better. I would say, by and large, from what I have seen in other shops and what I have experienced on my own, the two places you should probably put most of your money is Google Ads and direct mail. But I know places that spend almost all of it in community events, and that works for them.
Mike Allen [00:43:45]:
So if it's a, if one of our listeners is a newer shop or a smaller shop, maybe they're just adding their first employee or something to that effect. They've got maybe a tighter budget. Is it safe to say that they should start with Google AdWords just because of the cost barrier versus direct mail?
Matt Lofton [00:44:08]:
So I think that yes and no. I think that depends on how much initial capital they have. My personal opinion is, is that there's no real way to answer that question and be accurate. So I don't want to give an, I don't want to give advice on that. What I, I'll give you my experience with it. And, and I'll tell you why I say that. Because the effectiveness of marketing depends on so much more than the marketing itself. All right? And usually new shop owners.
Matt Lofton [00:44:42]:
And I was a big, you know, I was a, I failed at this when I started, which was marketing doesn't make revenue. Marketing makes opportunity. And so regardless. And it also depends on who your partner is and the quality and skill of the marketing that's being done. So if you do AdWords and whether you pay a friend down the street and he does a bad job of it, you may spend $500, which is not a lot of money, but you may get nothing for it, and therefore there was no value in it. Or you may spend $500 and get a whole bunch of phone calls. And for whatever reason, you're not good at converting those phone calls into, you.
Mike Allen [00:45:23]:
Know, if your service advisor sucks or if you suck on the phone, then no, no amount of marketing will help.
Matt Lofton [00:45:28]:
Yeah. And so I knew, you know, my transition into the industry, I, you know, was heavy in sales and marketing. Right. I knew nothing about cars. I knew absolutely nothing about fixing cars, and I knew nothing about monetizing it from an experience standpoint. So I, I knew how to sell widgets on a website. All right? And based off my experience of selling widgets, if I need widgets, I need more customers. And if I need more customers, if I ramp up marketing, and that marketing is more Efficient.
Matt Lofton [00:45:55]:
And I drive more eyeballs to my website. I drive more phone calls. I sell more widgets every single time. Right. So when I started, I literally did direct mail to every person in my entire county. I did 30,000 mailers. And so, I mean, we're a small town, right? So, I mean, 30,000 mailers is a lot of mailers, but it's not unheard of.
Mike Allen [00:46:18]:
Yeah.
Matt Lofton [00:46:18]:
And I said, I'm gonna ramp this thing up really quick. So very quickly, I started. I was doing 110 cars a week. All right. And. Which sounds great. Sounds wonderful. I went to.
Matt Lofton [00:46:34]:
I signed up with Elite in 2017, and I went to my very first Eagles class, and there was actually a. They were a pro service member at the time. You remember Bork in Arizona? They had their general manager there, and. And me and him had hit it off a little bit and sat beside each other in class, and we went out to dinner that night. We were comparing shop size and talking and the things that you do at these events. And he was, you know, so he's asking me the general questions, right? Hey, what's your. You know, what's your car count?
Mike Allen [00:47:04]:
Yeah.
Matt Lofton [00:47:05]:
I was like, 115 cars a week. He's like, good God. He goes, you guys got to be doing what, like, 2, 3, 4 million a year?
Mike Allen [00:47:13]:
What's your aro? $170. That's.
Matt Lofton [00:47:16]:
It was $165 is what it was. Exactly what it was. So. And I just didn't know. You know, you hear the term all the time. You don't know what you don't know. And that was a point in the time that I didn't know. And so my marketing.
Matt Lofton [00:47:30]:
I thought my marketing was not working right, but it was working because obviously we were driving car count. My people were telling me it was driving the wrong customers in the wrong cars. We just didn't have an experience that was good enough to buy. Right. We weren't doing good inspections. We weren't doing a good sales process. So that's why I say, you know, marketing is about consistency on the front end and understanding what that marketing is supposed to do for you. And by and large, most of what it's supposed to do is just make the phone ring and give you opportunities.
Matt Lofton [00:48:02]:
And if you can create enough opportunities and convert off those opportunities to get them in the store, then it's. What does that experience look like to be able to convert off of it once it's in the store? Because if I convert on the phone to get them in for a 1999 oil change and we can't convert them from a 1999 oil change to something else. Then the whole marketing, the marketing worked because it got, we got me a car but there was no real opportunity to sell. So I think a, we have to take a look at, you know again we talked about improving capacity here. Let's just say that your B tech was at 25, 30 hours, right? But he had the skill set to be able to get to that 40, 40 to 45 that he's at right now, right. And we were looking at it and saying well, car count is the, the driving factor. I just, he just needs more at bats, he needs more opportunities. So then I would be looking at well, how many, how many opportunities do I need to drive for him? And that's where I would be looking at my marketing budget and saying okay, we need to, you know, we need to grow car count opportunity.
Matt Lofton [00:49:06]:
So I would be in growth mode of car count, right. I'd be in that 5 to 8 to 10% mode there. And then we need to understand the different aspects of the funnel to understand the different types of customers we're going to get and the different experience that needs to happen with that. So Google, I'm catching somebody that's searching for a problem that they have right now, right? So it's less, they're actively looking. But I got breaks, I'm searching breaks near me. I'm calling you about breaks, right? And then where direct mail is, we're going to give them some sort of a common use offer that's a loss leader and it is what it is, right.
Mike Allen [00:49:51]:
You know anyone who's doing high level direct mail that is not doing a loss leader, it's wasteful. Is there a point in doing value based direct mail? I know that our friend Dave Becker.
Matt Lofton [00:50:03]:
Used to do that and, and I did it, I did it for a while because I was told that you know, you should, you need to be more brand oriented and you know, the, the, the 1999 oil change offers off brand for what you want to be as a high quality auto repair shop. Right. And I think a lot of us maybe heard that. And what I will tell you is, is when I did those branding mailers and I, I didn't just do one or two of them, I did hundreds of thousands of them over.
Mike Allen [00:50:34]:
Well, that's the thing with direct mail, right. It's not a one shot thing. You've got to stay in it for an extended period of time. You've got to, you're committing A large investment. If you quit, it's not going to work.
Matt Lofton [00:50:44]:
Yeah. And so you have to commit to a strategy and you have to understand the whole, you know, the whole aspect of what that strategy is. So what I will tell you is, is that in my experience, branding for direct mail itself for eddms did not work because there was no offer. Right now, if you want to do a branding message to your current customer base, completely different story. If you want to do a newsletter, if you want to send out a postcard to your current existing customer base, branding messages, they're great because they already know the brand and they're interested in what you have to say. But if you're trying to generate new customers, that's it. I did not have any experience with that and I do not personally know anybody that can prove to me that they had a lot of success with that either.
Mike Allen [00:51:24]:
I think there, there'll be people who will speak up and say that it does work. But they're specialty shops.
Matt Lofton [00:51:30]:
Sure.
Mike Allen [00:51:30]:
Or they're very small and it doesn't take an enormous volume of cars to fill the bays. Right. But if you're, if you're the only sprinter shop in 100 miles, you don't need to be doing loss leaders. You just need to say, hey, I work on sprinters.
Matt Lofton [00:51:44]:
Yeah, that's right. I would agree with that as well. And so. Or there are people that already have such a huge brand awareness already through other things that they do. I mean, we know lots of people in the industry, you know Lola and Eric.
Mike Allen [00:52:03]:
Yeah.
Matt Lofton [00:52:03]:
I mean they're, they've done such a great job of creating a brand that loss leader advertising is not something that is a necessity for them. And there's nothing wrong with that. It doesn't make it better or worse. It doesn't make me bad because I run loss leader advertising. It just means I put my effort in different places. You know, the results can be the same and I can provide a high level experience even off of a loss leader. But it takes a lot of intentionality. A lot of intentionality.
Matt Lofton [00:52:31]:
And if you don't. The same way that if you do a community event and think that just because you do a wine and women event that you're going to double your car count next week. You know, that's, you have to do intentionality all year long of community events.
Mike Allen [00:52:45]:
Yeah. And I think it needs to be said also that if you don't have a good sales process and a good customer experience in line, then any, any loss leader is wasted money.
Matt Lofton [00:52:56]:
Yeah. 100%.
Mike Allen [00:52:58]:
Like you said, you know, 110 cars a week. But $175 aro or whatever it was is just you weren't creating a buying experience.
Matt Lofton [00:53:05]:
Yep. And my service advisor at that point in time, his words for me, words. And it's not my job to sell them things, you know, and I was like, so when we took a look at that, you know, I bought into the same thing that a lot of other shop owners in general, especially new shop owners buy into, which was we had bad customers. These. It was driving bad cars.
Mike Allen [00:53:30]:
These are bottom feeders.
Matt Lofton [00:53:31]:
Yeah, these were bottom feeders and all that type of stuff. And, and what I can tell you is what I've learned over the last three years is none of that's accurate. It's just we didn't have an intentional process at the time and an intentional experience that mattered to that customer that we were bringing in the door and matched the type of advertising that we were doing. But again, you can change that by the type of branding and the type of advertising that you do. So, you know, if you want to do, you want to do community events, but yeah, you also have to match it to the, to the team that you have, to the culture that you have, to the strategy that you have. Because if you're not a community minded individual and community based advertising is not genuine and it will not work because people can see through that. Right. Servando Orozco is one of our clients at Elite for a long time.
Matt Lofton [00:54:21]:
He was a coach with us for a while. He owns seven shops in Huntington Beach, California area and he does almost zero call to action marketing. But he is everywhere in Huntington. I mean everywhere. He's on the Chamber of commerce. He is, he's on the board at the spca. He is every charity event in town, he is there. He is at every ribbon cutting.
Matt Lofton [00:54:46]:
I mean, he is everywhere all the time. Yeah.
Mike Allen [00:54:50]:
And that stuff works if you've got the energy and, and the personality for it.
Matt Lofton [00:54:54]:
That's exactly right. Yeah.
Mike Allen [00:54:57]:
Cool. Well, hey, man, I think this has been really valuable. I hope that our listeners appreciate it too. You know, reach out to Matt if you have any questions about what that would look like. And potentially getting linked up with Elite to have that spreadsheet that we alluded to working through, setting your goals, budget and plan for an entire year, month by month, I think makes a lot more sense rather than just a flat. Expecting a flat level performance across the course of the full year. So thanks for that, sir. Y Merry Christmas.
Matt Lofton [00:55:36]:
Merry Christmas to you.
Mike Allen [00:55:37]:
As well, were you. Were your kids well behaved? Is Santa bringing a bag full of coal or.
Matt Lofton [00:55:43]:
So we went to Elf on the Shelf. Brought us some tickets to the Polar Express last week. And so we, we load, packed the kids up and drove six hours to Cherokee and did the Polar Express. And I was. I was talking Tom Amaro at Elite yesterday, and he was asking me how our trip was. And I said, well, do you want me to be honest with you or do you want me to tell you the truth? He said, oh, no, I want you to be honest with me. And I said, well, I said, you know how sometimes you go places and your kids forget how to act because there's other people around? That was one of those trips for us. So it will not go down as a family trip to remember, remember.
Matt Lofton [00:56:26]:
So our elf on the shelf, his name is Elfie because we're not very creative when it comes to naming things, but so Elfie is. Elfie might be writing a letter to Santa telling him about what he found on our trip this week. So is Christmas is to be determined at this point in time?
Mike Allen [00:56:45]:
They're gonna need to get to work. Kids, start cleaning up preemptively. All right, dude, well, I'm sure that I will talk to you again before the new year, but if I don't. Merry Christmas. Happy New Year.
Matt Lofton [00:56:58]:
Absolutely. Same to you, Michael. Yep.
Mike Allen [00:57:00]:
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 704-266-3377. 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.
Matt Lofton [00:58:02]:
Lord.