Are you so insecure that you feel that you have to negotiate for the job?
I don't mean a little good will thrown in as a thank you for a large job, I mean negotiating away your profit just to get the job.
You're not alone.
Too many of you out there feel you have to barter in order to stay busy. You say if you don't do it the customer will leave and go to a shop that will do it.
Some customers will do just that but I totally disagree with the practice because of one main reason; If you keep cutting your price just to get a job you will be signing your business death warrant. Profit is the only thing that will keep you in business.
You may think you're building customer loyalty by being considered the shop with the best value but those same customers who were shopping for the best price really do not care about you and your shop. These customers will travel from shop to shop looking for the best price and they'll keep going until they find some poor sap that will do it for next to nothing. Also, do you notice that these same customers do most of the complaining?
You and I both know that just staying busy doesn't make money. The evidence is in your bank account at the end of every month. You know there's a problem when there's no money to pay the bills. So, how do you fix the problem if you feel that most of your customers walking in the door are price shopping?
So, how do you start making money without losing your customers?
You have to first take a step back and look at your business, your market and yourself. If you are losing money almost every month, plan on closing your shop and getting a job before your bankers or suppliers do it for you.
If you want to stay in business, then you are going to have to make enough profit to do it. Some would suggest that you have to reduce your inventory and staff, but you already have a minimal inventory and you cannot repair vehicles without qualified staff to do it.
Spending money to advertise a sale or give-a-way isn't the answer because you are already â€œgiving it awayâ€.
Now, take a look at yourself.
Have you convinced yourself that your business is located in the â€œghettoâ€ and that all your customers cannot afford the full cost of the repairs?
Give me a break!
Of course you will have low or fixed income customers, but so do all shops everywhere because this economy is affecting everyone, everywhere. I know that some days it's really tough to get people to spend money on their vehicles and it doesn't take many of those days to start feeling the pressure of having to get at least some money in the cash drawer. But, at some point, you have to draw the line.
I'm not saying you have to turn into a hard nosed jerk because that will certainly have you start losing customers.
You are a valuable part of your community and you offer an invaluable service to that community but you have really little control over the costs of tooling, parts or any other costs that it takes to keep your business open.
What you can do is recognize where your profit shortfalls are coming from and do some subtle changes to try and avoid the pitfalls of under quoting.
Here are some suggestions;
1) Never assume the customer will not be able to afford the job.
Present every customer with a complete and detailed estimate to do the job properly. If you pre-assume the customer can't afford the repair, it will affect the way you price out the estimate and if you do have to negotiate with the customer, it will be very difficult to discount an already discounted estimate.
2) Have a â€œcommon servicesâ€ pricing menu as well as your labor rate posted clearly for all to see.
If the prices are posted, it becomes less likely people will try to barter. Why? Well, there are a couple of reasons. One, if you just tell someone, it is only your opinion and possibly open for discussion. But, if it's in black and white, it becomes truth. Two, if it's posted for all to see, the customer assumes you have done the market research on the prices before posting them. So, they feel assured the prices are correct.
3) If you are supplying a complimentary service or discount, show the full value of it on the invoice along with the credit.
This achieves two things. One, it will have a value the customer can appreciate. If you don't show these priced items, it will be perceived that the discounted end price is your â€œnormalâ€ price and also, it will give you a record of your discounts and allowances. This alone will be an â€œeye openerâ€ when, at the end of the month, you see where your profits have gone.
Remember, nothing is free. It's costing you every minute of the day. You still have to pay for the technician, the equipment and the shop. Even if you want to do a â€œfreeâ€ inspection, you still have to pay to have it done for the customer. So, create a work order and record the transaction.
4) Never, under any circumstance, diagnose the problem just with the symptoms the customer describes to you and never say â€œIt should only take a few minutes to find the problemâ€.
You can get yourself into so much trouble very quickly. For example, if the customer says his headlamps keep cutting out and you say â€œ It's probably the headlamp switch and it should only take a few minutes to verify it. I've seen this before and it should be around $60.00 to fix it.â€ Two days later, after changing the switch and tearing the car apart and finding an intermittent break in the harness, you have egg on your face because the customer will only pay you the $60.00 you originally told him.
If the customer wants to know what could be causing the problem, be honest. Tell him that it could be a simple repair or the cause could lie deeper in the system. Only testing will reveal the cause.
4) Before finalizing an estimate, review the parts and labor with the technician who performed the inspection or diagnosis.
Once you have given the estimate to the customer, it is now written in stone. It is now too late to make any corrections.
The technician may point out that the labor charge is wrong for that particular model or parts that will be needed are missing from the estimate or, there are broken or rusted bolts that may take additional time, you can edit the estimate before you quote the customer.
Let's say that there's a possibility that an additional part may be required once it's taken apart and you have included it in the estimate and let the customer know of the possibilities. Then, you find that the part wasn't needed to complete the job. Let the customer know that the estimated cost is now lower than you quoted. That will go a long way in developing customer â€œtrustâ€.
5) Never assume the customer wants cheap parts.
If there is a choice of qualities and prices on a part that can be used, give the customer the option along with the differences of quality, performance and life expectancy and let them make the choice. If you do not know the differences, make a point to find out. For example; poor quality brake pads will squeal and have a short life expectancy. If the customers knew that ahead of time, they wouldn't have much to complain about if those cheap pads they bought did squeal.
6) Do the job right, the first time
Some of you will reuse gaskets or seals or will disregard machining drums and rotors in order to save money. You really like comebacks and doing the job over again for free. Don't you?
Maybe you forgot to include these items in your estimate. Better review step # 5.
How many times have you charged a customer for a temporary repair only to have him come back dissatisfied and you end up doing the permanent repair for free?
7) Work with the customer's budget, not yours.
If the customer cannot afford all the work that is needed, then do the work that requires immediate attention and reschedule the other work. Let them know that you really want to help and get their vehicle in good running order but there is little you can do about the cost.
Be prepared that most customers will have â€œsticker shockâ€ when you present them with an estimate or quote. For many, it has been quite some time since they spent money on vehicle repairs and have really no idea what it costs to maintain a vehicle. That's your job to help educate them and one more reason that makes you a valuable part of the community.
There are so many more ways to improve profits like controlling costs, buying better, improving productivity and efficiency. But, if you give it away before the job even gets in the shop, all these great ideas will be useless because there will not be any profit to manage.
But, then again, that's just my opinion.