Increasing Profits — Right Dysfunctions in Your Business
Automotive detailing attracts many entrepreneurs because it is relatively simple and inexpensive to begin such a business. However, there is a high level of turnover in the industry because many who enter it do not understand or cannot implement principles that create a profitable operation. Those reading this column may have experienced one or more of the following thoughts at one time or another during their detailing career:
- “I work my tail off all day and I’m still not making very much money.”
- “I’m tired of living week-to-week without being able to pay my bills on time.”
- “I thought that when you own your own business, you can become rich.”
- “The earning capacity of my business has reached a plateau — I don’t know how I can get more money out of it.”
- “I seem to be in a rut — I work all day long and just scrape by.”
THERE IS A WAY
If you can identify with any of these thoughts, then perhaps it is time to take a serious look at your operation. There are several ways to increase profit, and in this article we will touch on some of them, including the following:
- Increasing or changing the pricing structure
- Changing the target market
- Increasing the efficiency of the operation
- Adding new profit centers Traditional Methods
- Duplicating labor
- Lowering monetary expenses
- Decreasing non-monetary expenses
Let’s take a brief look at these ideas:
Increase or Change Pricing Structure
One of the most common problems in the detailing industry today is inappropriate pricing. Many technicians simply are not charging enough for their service. Or they are providing only marginal service in order to justify keeping the prices low.
To make a quick determination of the amount of money you are actually pocketing for personal use, divide
the price of your most popular detailing package by the average number of hours it takes to complete that job. Take away half of that dollars-per-hour figure to account for taxes and business expenses and you have a rough idea of how much money you are making per hour (i.e., net income). In my opinion, if you are netting less than $25 per hour, something needs to be changed. My observations of professional detailing operations around the country indicate that the range of professional detailing rates is $50 to $100 per hour.
You can make more money per hour by charging more, increasing efficiency, duplicating yourself (with employees), or adding high-profit services. The easiest of these is charging more, but you must also add extra value for the customer instead of simply raising prices. Think about simple tasks that you can add to your existing packages that will make an increased price more palatable to your existing customers. For example, you could add a “free” interior vacuum and window cleaning to your exterior detail package. Also, as you raise prices, make sure that you spend a little extra time making sure that the job is done well — that is, that you are providing excellent service for the higher price.
Change Target Market
If your customers are not willing to pay more for your service, perhaps you are working in the wrong market. For retail detailing, I recommend targeting the vehicle owners who have the disposable income and the desire for automotive appearance perfection. This usually means approaching the population that is in the upper 10 percent of the income group in your area. These people are already accustomed to paying others, like housekeepers and landscapers, to provide service. So it will make sense to them to pay for quality vehicle care as well. Plus, they typically have the money to pay for the service.
Increase Operational Efficiency
Maybe it’s simply taking you too long to get the work done. If you look at the detailing survey results in the January issue of this publication, you will see the average number of labor hours to complete popular detailing packages. A complete detail is typically about five labor hours in length. If your complete detail takes significantly longer than five labor hours, perhaps you need to examine your working efficiency. Efficiency can be improved by standardizing procedures, using the appropriate chemical for the surface at hand, and by using tools, machines, techniques, and rules of motion that reduce the time that it typically takes to do a job by hand.
Add New Profit Centers
Every professional detailer reaches a plateau at which the price for the job is as high as the market will bear and the efficiency is at its highest level. At this point, the profitability of the operation has “max’ed out.” So, to make more money, the operator must do something different, like adding more shops, adding more employees, or adding new ways to profit from each vehicle that comes in.
There are several services that can be provided that will bring in a much larger gross per-hour rate than standard detailing. A simple and low-cost way to do this is to add premium protection to your package options. For example, selling the customer on application of a polymer paint sealant instead of standard wax is fairly easy, since sealants provide better protection and last longer than waxes. Thus you can mark up the price significantly without spending any more time on the vehicle than you normally would.
Another great premium protection idea is liquid repellent (i.e., fabric protection) for the carpeting and fabric seats. This 10-minute service can fetch a much higher per-hour charge than your standard detailing packages.
Beyond detailing, there are a number of services that can be added with a relatively small investment, like windshield repair, paintless dent removal, paint touch-up, spot blending, and interior surface repairs. Many of these services can bring in as much as three times the per-hour profit that a detailer is used to getting.
We now turn to each of the traditional methods we listed:
If you are working solo, you are somewhat limited as to the amount of work you can actually perform in a day. To increase your revenue in this case, you must “duplicate yourself” by starting a second operation or adding employees to your current operation. The idea is to increase the number of vehicles that can be processed in a day. If you train and motivate your employees correctly, you can increase the number of vehicles completed by your operation per day, thus increasing revenue.
Decrease Monetary Expenses
My experience is that detailers generally are not investing enough into their businesses. So over-expenditure is probably a non-issue. Nonetheless, it never hurts to take a look at your expenses every once in a while, for example, at least every six months. If you are keeping good books, you should be able to balance your books once a month and see exactly what your expenditures are and where they are going. Some examples of wasteful spending: buying small quantities at a time instead of bulk purchase of commodity chemicals, spending too much on the wrong kind of insurance, and spending money on ineffective advertising.
Decrease Non-Monetary Expenses
The best example of this one is inefficient use of time. First, there is downtime due to injury or illness. In our
profession, our bodies are our most important tool. So invest in your “equipment” by taking good care of yourself — exercising, eating right, and seeking regular “body maintenance” provided by health practitioners like massage therapists and chiropractors.
Next, let’s take a lesson from that upper 10 percent that I mentioned earlier: pay someone to do the jobs that take you away from your business. There are professionals like bookkeepers, lawyers, accountants, and others who can perform necessary business tasks much more efficiently and effectively than you for a relatively small fee, freeing you up to make more money.
Finally, think about some of the things that distract you from your work — like broken tools, or stopping work to answer the phone, or providing warranty work to dissatisfied customers instead of getting it right the first time. If you can take an objective look at your day-to-day activities, you will probably find some things that are eating up your time, yet have simple solutions.
This has certainly not been a complete discourse on all the possible dysfunctions of an automotive reconditioning business, just some common examples. You may find other examples within your own business. My recommendation is to make a list of the issues that you know can be improved within your business, prioritize it, and then create an achievable schedule for attacking each of the items one-by-one. For example, you may want to handle one issue per month. Write some action steps for each issue and start with the first few action steps during the first week of the month. Then watch your profits grow.
Prentice St. Clair is president of Detail in Progress, a San Diego-based automotive reconditioning consulting firm. To contact him, e-mail Prentice@DetailinProgress.com or call (619) 701-1100.