Greg Lobsiger knows many shop owners that are living lives of near chaos! They are overleveraged, overworked, struggle with cashflow and unfortunately, many have a very limited understanding of how to read their Profit & Loss statement. Greg watched his grandpa and uncles; all retire from body shop ownership with limited incomes while working and during their retirements. All three invested their entire careers of 45 years each, with little legacy to leave behind to their families. After struggling himself for a few years as an owner, he finally hired some coaches much smarter than he, to teach him how to have high profitability. Some 20 groups and good business books have helped him along on this journey, for sure. After a few years and with this knowledge, Greg now understands what it takes to make very good money in this business. Greg was willing to donate some of his time, to share some of what he has learned. You could just be a shop owner that is doing well, but always wanting to learn and improve from others. Greg is not a CPA or anything like that, but he is a body shop owner who can nearly hear his P&L speak to him and he is debt free.
PROFIT SERIES – Part 1
Let’s say every one of us wanted to drive from the state of Maine to San Diego, Ca. across the entire US, but all we had was a road map for each one of us and no phones or GPS. Just like the old days, right? Would we all go the exact same route? Answer: It’s a resounding, ‘NO’. I am going to show you my way, it’s not the ONLY way, but a way that I was taught and works for me. You may have a way that works for you, then great! Here is where the trouble lies, opinions are like rear ends, everyone has one. I am just donating my time to share my way.
Question Are you the type of owner that makes sure no cash is ever deposited at your bank?? If so, these types are crooks and thieves that are stealing from their techs and their P&L is just plain toilet paper. They may think they’re being very smart, unfortunately it is extremely dumb!! By doing this, they have absolutely no way of knowing what direction they’re ship needs steered, to make a much larger profit!! Oh yeah, its ILLEGAL too. Hopefully this represents a very small % of those reading this.
For THIS discussion, where is San Diego or what does that mean?? San Diego = 20% net profit per year. Don’t run down the tax write off bunny trails going off in your head right now to lower your net profit, please stay on the road. My current estimated taxes per quarter, are higher than my yearly income was years back. Otherwise, with my income I pay lots of taxes. Best part is, the $ left over after taxes is all mine and not the IRS’s! A select few on here are scoffing and saying, “20%, that’s nothing as my shop is making me 25% net or even above that.” Well, 25% is a very strong #, but if you are only doing $1 -1.5million per year in gross sales, that’s $250-375k per year net profit. Not too shabby, but wouldn’t you rather have a shop doing $4,000,000 per year, that can run without you and can produce a 15% net or $600k or how about a $6,000,000 shop that can produce $900k?? So, now back to the 20% net. Why that # you ask?
This is the WHY for a 20% net profit goal!! Well, many of us have at least seven figures of our own $ invested in our businesses.
Every morning when a body shop owner wakes up, a little monkey jumps on their back, and we call him the Shop Owner Monkey!! That means, if the owner isn’t confirming that the marketing is being done, we won’t have any cars to fix. If we don’t have any cars to fix, it becomes very hard to pay our people, along with all our other expenses. So, not only is the owner responsible for their employees, but the owner also has a responsibility for their families too! The buck stops with the owner to make sure every vehicle has had a safe and proper repair. Then if one of our techs gets hurt on the floor, that lands on the owner’s shoulders also. The list of responsibilities and commitments on the shoulders of an owner, could go on for hours.
Here are some more reasons why we must not only TRY for a high net profit, but it MUST be made paramount.
1. The last industry average net profit % I saw was around 10% and we do too much work for only 10%!
2. Any well-run small business (under $25mil) should strive for a 20% net.
3. When a business is very profitable, only then can it be very charitable or only then do you have the means to help others and organizations financially.
4. If we are very profitable, we can pay our employees more than anyone else in our market, along with benefits like 4 weeks’ vacation after 10 years. My lowest paid employee in my business grossed $75k last year and we live in the grain fields of Indiana where we have a very low cost of living. Knock on wood, but we haven’t had anyone quit my shop in five years and the one who quit then, has since returned.
5. The worst of Covid for collision repair shops, was say April -June 2020. My question to you is: During that time, did you have to lay anyone off or would your business still survived, if the government PPP loan would have never been offered?? If you answered yes to either one or both of those questions, here is your answer: You MUST start saving 6 months of expenses! You can split this savings up between banks due to the $250k FDIC insurance limit and you can even put some of $ in cash accounts at brokerage firms. This type of savings can only be done, with a high net profit.
6. Maybe you want to leave a legacy after your time on this earth is up to your children, your church, or some other charity. I had a wonderful body shop owner/friend that passed away from cancer a couple years ago. He and his wife had gone to Africa for several years prior to his illness and installed water wells. Kris has left a legacy from the wells he helped pay for and dig, that are still blessing folks in Africa even today with clean drinking water. Kris’s widow and son are now running their shop, they are going to new heights of profitability and growth to even put in more wells. Kris’s legacy is living on!! These acts of generosity and giving to others, are very hard to do when we are just barely surviving and not thriving!
7. I suggest you pay down your debts! We are at the height of a business cycle right now. Otherwise, the tide is in, and shops are packed to the gills. Now is the time to save and pay off debts, I suggest NOT to spend or borrow anymore $$. Prices are so over inflated for everything right now.
That is all for now. For the next part we will start with an easy visual aid, to help us see some of the components of our P&L’s.