Helping a Car Shop Losing $150K a Year

0:00Unternehmer/Gast I own a car repair business. We do custom custom car builds, so high-end long-term projects as well as just daily maintenance and repairs. >> Okay. >> A million in revenue and negative $150,000 in profit last year. Heavy capital asset business. >> Mhm. >> Uh >> Do you have a shop? >> We do. And that was the big thing. This has been in business 3 years. I joined 6 months ago. I bought out two partners.

0:25I've got a 50/50 partner now who is the mechanic and I'm >> the business guy. >> the business guy. >> Okay. >> Uh our linchpin and our bottleneck has been our front office manager. She is our She handles our payroll, marketing, hiring, everything. >> Um she's exceptional in certain areas, very knowledgeable in knowing parts and car stuff, and being able to look stuff up and take care of stuff. Mediocre in a lot of other areas, even if we give have given her very specific direction on step-by-step, this is what we want you to do.

1:00>> Yeah. >> We've recently moved her from a strictly base salary to a base salary plus a commission on literally any gross revenue that comes in, like 1%, but the problem has been she won't won't call, won't put pressure on people to collect payments. Um and so that's been our biggest challenge in the last year is one step forward, two steps back when we're doing a lot of work, buying a lot of parts, and having a hard time actually collecting payments from customers on projects that are not even completed.

1:32So, biggest uh challenge, what's I think stopping me is hard to let go of of one rock to grab the next. Letting her go to find a new person. Do I find a new person? >> her? >> Do what? >> You mean firing her? >> Mean firing her. >> Mhm. >> When she does good good work in certain areas, not so good in other areas. Uh versus we don't have the money to hire a second person that be more exceptional in the areas that she's lacking.

2:00>> So, I'll I'll say this. So, big picture, what we have to figure out is do you have a cash flow issue or a model issue? So, you lost 150,000 on on 1 million, right? We're not even break even. And so, if you'd collected all of the And is that on cash or like revenue? Like Like you know what I'm asking there? >> Yeah. >> Okay. If you had collected 100% of the cash that you should have collected, would you have made money? >> Yes. >> How much? >> 150,000. >> So, it's a $300,000 swing. >> Yeah.

2:26Alex >> Yeah, so I think you need to hire somebody to do collections. >> Yeah. >> And that costs like 60. And you make 240. >> Yeah. >> So, I don't think you should fire your key employee who's uh clearly like has tons of tribal knowledge, knows a ton about the business. I would She She clearly is good at some stuff. I would just have her not do the stuff she's not good at. And she probably can't do both of them well, and so she just allocates her resources towards this. Now, she might also have a proclivity of not wanting to do that, whatever. >> Right. >> But, yeah, I think you just need to So, one would be a collections process that probably

2:55Alex >> needs to be improved. >> Okay. >> Like can we demand it up front? Can we like Those are just easy things to do. >> Right. >> Um and the second one is I just think you need a dedicated person to do it. And as much as that feels, you know, might feel terrible in the moment, if you get let let go of her and you hire a collections person, you're not making sales cuz she's not selling. So, like >> Right. >> So, I think that's that's probably the investment that I'd make as number one. But, if you were to tell me that you're doing 1. Uh that's 1.25, right? If it was a $250,000 or $300,000 swing, right? Um and and making the margins that you are, I would still probably The second thing I would do is I'd be looking at the model and saying there's probably some work we shouldn't be doing and some work we should do more of.

3:33Alex >> Right. >> And that is where I would probably either orient the sales process or the marketing so that we attract the types of products or that you know the the people who want the types of products and services that we have the highest margins on. >> That's one thing we're doing is we're adding a second brand that focuses more at work. Our name and our brand is known for performance, and so that's who we typically attract, and those tend to be long-term, 6-month, year-long projects. We're now adding a second brand that we'll just >> Could you raise prices? >> And that's yes, that's something else we're going to do.

3:59Alex >> know if I would start the second brand. >> Well, a second brand being just daily maintenance and repairs cuz people don't even know us for that. >> Okay. >> And so we feel like we're we're going >> to start a brand for that or is it just like a service line? >> It's it's really just the name a new name and a new >> Okay. >> a second channel of marketing for people that get that go, "Oh, they do" Like people don't even want to bring their car to us because they think we're expensive cuz we're a performance shop. >> maybe you should be expensive.

4:25Alex >> We should. I'm The performance shop should be expensive. >> well, I Well, here's here's what I'm here's where I'm going with this is that I think that like I I I wouldn't like start a Jiffy Lube. I'm not saying this I'm being I'm being pejorative on purpose, right? Um I fix the cash flow issue by hiring the girl, right? The collections girl or guy. Uh The next thing that I would do is fix the and I would do these concurrently, fix the fix the actual setup process. Make sure that we're we're billing properly and that we're collecting at the right times before we even get into this mess.

4:55Alex The next thing I would do is I'd probably raise prices. Um cuz if you're performance and you're in this niche, then you probably have a lot more probably more inelastic than you think it is. And like I would probably across the board start with 15 to 20% raise in prices and I'll bet you probably won't change anything. But that would on its own take you to profitable. >> Right. >> And then the next thing that I would do um is I would not market the generic uh maintenance work. I would cross-sell that from existing customers coming in on the more profitable performance side and then I would be able to charge a premium on the maintenance.

5:27>> Yeah. >> And make that also a much more profitable center than just generic people coming in the door. I don't want the reputation if I'm you. I wouldn't want the reputation of being like well, they think we're expensive. I'm like I like that. >> Yeah. >> [laughter] >> They should know we're expensive cuz we're great. >> Right. >> Make sense? >> Yeah. >> Does that help? >> It does. >> If you are a business owner and you are not growing as fast as you'd like, I'd like to give you a free gift. So, my team and I put together the $100 million scaling roadmap, which is basically 200 hours of us looking over all the portfolio companies we've had and what stages of growth they went through and more importantly, where they got stuck and how they got past it. And so, we broke it into these 10 stages and we made this little kind of quiz thing where if you put in your business information, it'll tell you where you're at and the most important part for you, what to do for each of functions of the business across product, marketing, sales, customer success, recruiting, IT, human resources, and finance. And so, no matter what you're struggling with, someone else has already struggled with it and solved it. And so, I'd like to give you this thing absolutely free. You can go to acquisition.com/roadmap, plug in your business information, and if you want us to actually help you deconstruct the business and you're trying to scale, we'd love to help you out. On the thank you page, you can just book a call with my team and we will look at the business, see if we can help, and if we can, we'll invite you out to Vegas and we'll do this in person live.