I don’t believe in New Years resolutions. Don’t wait until January 1 until to make changes you think you need. However, a new year does provide an opportunity for you to reset your goals and metrics. A year is a good representation of a full consumer cycle. We have annual salaries, seasonality, annual or semi-annual insurance premiums, rent contracts, and so on that fit nicely into a 12-month period.
Your shop goals should reflect that. Reset them for the year as soon as you have a good understanding of your prior year’s performance. That might be at the end of December, or early in January at the latest.
The goals that we advise shops to set and track on an annual basis are:
- Team growth
- Profit margin
- Customer satisfaction
There are plenty of other metrics that you may be considering. Here is why these four are the only goals you need to set for your shop performance.
Measuring year over year sales growth and setting a single big number goal for the year pushes you to be consistent. The only way you should be able to achieve your goal is with consistent, significant growth in customer volume, job value, and team size.
I’ve met some shop owners who are content as a one-man operation. To those owners: the sales goal applies to you too. Pricing and volume will drive your sales growth differently and your focus should be on delivering high quality customer experiences for higher prices.
Without getting too detailed in methods, given the variety of car customization shops out there, you can calculate your sales as a function of customer volume and job value, and base other yearly goals off those numbers.
Take your total sales for 2020 and divide by the number of individual invoices you wrote. You now have your average invoice value and your total number of invoices.
If your sales goals involve substantially higher invoice values and/or volumes, you must plan your team’s growth accordingly. You can only grow your shop in line with your team – shops are a service business, and you need people to perform those services.
Growing your team takes effort, persistence, and diligence. Team growth makes sense as a yearly goal because you have to commit time to the growth. If you’re committing time to growing sales, you need to commit time to growing the team as well.
If you sold $750,000 in parts and labor in 2020, your 2021 goal could be $1,250,000. To keep up with the additional 70% in sales, you’ll need to hire another 4 people. Your goal for the year, then, is:
- Hire one sales staff
- Hire two vinyl installers
- Hire one technician.
Setting team growth goals at the beginning of the year helps you predict growth and prepare to hire. You’ll avoid being short-staffed and desperate for new people, and you can make sure you find the right new hire.
Your profit margin is the percentage of take-home income you create from your total sales. If you sold $1,000,000 in parts and labor during the year and took home $100,000, your profit margin is 10%. Next year, your goal could be 15%. The higher your profit margin, the more money you make. If you adopted the profit sharing compensation plan we described in an earlier edition of DPA Weekly, your team will share in that success.
There is one key to align the goals of the shop and its customers on profit margin: offer a generous warranty. No questions asked. Lifetime. Immediate service.
Yes, you have to protect your shop against people who take advantage of the warranty – Driven Performance Advisors helps write customer contracts that do this – but its main purpose is to create happy customers by delivering the highest level of quality.
Happy customers = paying customers. High quality = high prices.
In addition, striving for a profit margin goal helps your shop focus on cost control. It’s easy to spend lots of money in pursuit of sales growth, so simultaneously working for lower costs (without compromising quality for your customers) keeps you focused on the bigger, long term picture of your shop’s legacy.
This goal is simple. Check out your current ratings on Google and Yelp, and set a goal for a new aggregate rating on the 5-star scale. If you’re at 4.4 with 66 reviews right now, your goal is to get to 4.6 with 100 reviews. That means you need a new 5-star review every week and a half, with no reviews less than 5 stars.
Deliver quality, create happy customers, let them do your marketing for you. It’s that simple. This feeds your sales growth, which feeds your team growth, and feeds your profit margin.
New year, new goals. Never look at January 1 as the day you finally make all the changes you’ve been putting off. Use January 1 as a reset to your metrics. Take stock of your 2020 performance – total dollars of sales, team size, profit margin, and customer ratings, and use them to set goals for 2021 that will push you, refine your focus, and help you continue to rely on your shop to perform.
Driven Performance Advisors
Driven Performance Advisors helps shop owners increase efficiency and improve profitability through our ShOptimizer services. Our ShOptimizer 12-Point Shop Business Inspection includes goal setting and a strategy review to set up your shop for future success. Schedule a consultation at drivenperformanceadvisors.com.