shop owner, july-august 2014

July/August 2014

Recasting Shop Financials Resolving Employee Conflict Boosting Tech Productivity

Providing Friendly, HonestAuto Repair Since 1975

3A AutomotiveService

It’s more than just fixing cars

c1 shopownerjuly 7/17/14 11:21 AM Page C1

Human Resources: Resolving Conflict; Boosting Morale

Shop Profile: 3A Automotive Service

Shop Profile: Rischbieter’sAutomotive

Features

22 Rischbieter’s Automotive,St. Louis, MO

36 3A Automotive ServicePhoenix, AZ

4 Technology: Electronic Shop Communications

32 Human Resources:Resolving Conflict;Boosting Morale

44 Buying/Selling: Recasting Shop Financials

Sponsored by:

Shop Profile

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July/August 2014

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Departments

10 Shop Management: What Every Service Adviser Should Know About Selling

14 Executive Interview: Roy Kent, Federated Auto Parts

18 Shop Operations: Boosting Tech Productivity& Shop Profitability

28 Customer Service: A Case For Consistency

Shop Owner Staff

Publisher Jim Merle330.670.1234, ext. [email protected]

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In Memoriam

Founder of Edward S. BabcoxBabcox Publications (1885-1970)

Chairman Tom B. Babcox (1919-1995)

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● The presentation of inspec-tion findings and other informa-tion to the motorist on paper atthe counter has been replacedby emails containing the inspection results enriched withimages and educational videos.● Technicians no longer have

to clock in with punch cards or

other archaic methods.● The worksheet on paper

has been replaced by its equiv-alent on the tablet.● Progress reports flowing

from technicians to the serviceadviser have been replaced bytablets with built-in monitoringthat provide automated updates

|Technology|

Roger That...Paperless Workflow Boosts Technician ProductivityAnd Shop Communications

The paperless shop operation, including eliminating the paper rackof repair orders and other paperwork, has come a long way. Touchscreens or big screen TVs have replaced the paper rack so thateveryone can see the status of each vehicle in the workflow.

by Uwe Kleinschmidt, CEO, AutoVitals


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that appear right on the service adviser’s computer screen.

All of these enhancements havebeen made possible thanks to the Internet-based IT infrastructure wherethe Shop Management Software (SMS)and its database is made available inthe cloud, so that mobile devices andthe service advisers’ screens are updated in real-time.

But what about the communicationbetween the technician and service adviser about specific problems thatneed a fast answer, or when a responseis needed for the customer waiting onthe phone?

Doesn’t the computerization ofcommunication hit its limit for instances when the technician needsto go back to the front office? Are

technicians now forced to use thekeyboards on tablets to finger type,making it take 10 times longer than aquick haul to the service adviser?

Not really. There is no limit to digital communication and the follow-ing text introduces the “(almost) type-free chat” for the technician to communicate.

Speeding It Up With ‘SmartChat’“It takes only a few taps to get themessage to the front counter.”

After analyzing the communicationbetween the service adviser and tech-nician, we found that more than 70%of the back and forth messages arerepetitive and can be addressed bysending canned responses. That

6 |Shop Owner|July|August 2014 www.ShopOwnerMag.com6 |Shop Owner|July|August 2014 www.ShopOwnerMag.com

Fig. 1

Fig. 2


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applies especially to the technicianworking on any given vehicle. In addition, important information likethe year, make, model, repair ordernumber and the timestamp can begenerated automatically. See Fig. 1 onpage 6.

Technician Jamie W. is using thetablet (on the left in Fig. 1) to quicklychat with ‘Motsen’ R. Motsenbocker,the service adviser, about a status up-date on the 2006 GMC Yukon Denali.Motsen uses the chat software on hisPC, shown on the right in Fig. 1. Itpops up automatically and catcheshis attention every time a message is

sent to him. Nothing you see in Jamie’s

messages has been typed out. SinceJamie started the chat by tapping thechat icon while having the inspectionfor the Denali open, the tablet knowsthe communication is about this vehi-cle and adds the YMM and RO number, as well as the timestamp.

Using the canned responses drop-down menu, Jamie selected the appropriate message and hit submit.Only four simple taps were necessaryto respond to Motsen’s question. Easy,don’t you think?

How does Jamie know when

8 |Shop Owner|July|August 2014

Fig. 3

Fig. 4


Motsen has a message for him? No matter what page Jamie has

open on the tablet, the chat icon startsflashing with the number of openmessages. Jamie then taps the chaticon and the already viewed, automo-tive-specific chat window opens. SeeFig. 2 on page 6 for details.

“Clicking on the link from thetablet puts everything about the jobright in front of me.”

Now, let’s take a look at speedingup the service adviser’s work througha smart-communication leveragingchat. Oftentimes, technicians discover“things” while working on a particularjob. They leave a note, snap a pictureand add this to the job on the work-sheet. Fig. 3 shows the tablet screen atthe moment when Jamie is about tohit the “smart chat” button (red arrow)after he selected how far he is into thejob (50%, marker A), snapped onepicture (marker B) and added a note(marker C).

Motsen receives the following chatafter that (see Fig. 4, marker 1) andclicks on the link for RO #148258.

His browser opens and takes himexactly to the spot on the work orderwhere the job is highlighted and hecan explore the note and image. SeeFig. 5.

Motsen then asks Jamie to retakethe rotor image so that the completedwork can be better illustrated oncethe customer picks up the vehicle.

Decisive Actions In AHeartbeatCommunication between the techni-cian and service adviser is crucial for ahighly effective workflow in a shop.The tablet for the technician and thecomputer for the service adviser areon hand, even to do the most event-driven communication. All informationis at both the tech’s and service advis-er’s fingertips and, moreover, can betracked and audited by the shopowner to uncover potential for improvements.

The next step is to tap into “bigdata” and make the technician’s lifeeven easier. I’ll keep you posted aboutthat, so please stay tuned. SO

www.ShopOwnerMag.com July|August 2014 |Shop Owner|9

Fig. 5


I was actually faced with twochallenges: having to somehowlearn how to sell, and also dealwith my internal struggle of be-coming part of a professionthat I had little, if any, respect

for. So, here’s what I did. I went to the local bookstore

looking for books that wouldhelp me learn how to sell andhopefully help change my per-ception of selling at the sametime. To my amazement, I

found a book that I thoughtwould be perfect for me. Thenation’s top car salesman at thattime wrote it, and even thoughhe sold cars instead of service, Ithought it was likely more

closely related to the automo-tive service industry than anyother book I would find.

I bought the book, hurriedhome, and began reading eachand every word. I was thrilledwith what I was learning, so I


Shop|Management|

What Every ServiceAdviserShould Know About Selling

Many years ago, when I was still working on cars, I came to therealization that I would someday own my own shop. I also realizedthat in order to do so, I would first have to learn how to sell service.At that time, I didn’t know how to sell, and I also had little respectfor salespeople because I viewed them as people who would takepeople’s money and, more often than not, do little in return.

by Bob Cooper, president, Elite Worldwide, Inc.

The true superstars will always

sell from their hearts, and they

know that when that magic

moment occurs, and the

customer believes in what they

believe, then, and only then,

have they closed the sale.

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was circling key phrases and takingpages of notes. And then I cameacross a part that I will never forget.The author said that every time hewas selling a car, he would lookacross his desk at the customer andview him/her as a bag of groceries.He said the reason he would do thiswas to convince himself that if thecustomer didn’t buy that car that day,he would not be able to eat dinnerthat night.

As soon as I finished that passage, I

folded up the book and put it away.To this day, I have never finished thebook, but it still sits on my bookshelffor one simple reason: to remind meof everything I never want to be.

With all due respect, that authormay have transferred a lot of titles,and he may have run up the numbers,but the one thing that he appears tohave forgotten is this: The people hewas dealing with were your momsand dads, and your brothers and sisters. They were people with hearts



and souls, not just commodities, or ameans to an end.

At the same time, I was also capti-vated by two people; the late, greatJohn F. Kennedy, and the late, greatMartin Luther King Jr., and what Ilearned from these two has been

ingrained in my mind ever since. It’sthe understanding that selling reallyhas nothing to do with money. Itnever has, and it never will.

You see, what selling really is, ishelping people believe in what we believe. President Kennedy was ableto unite America by helping us believe that we were the greatestnation on earth, and Dr. King wasable to help us believe that allmankind is equal, regardless of thecolor of our skin.

Over the decades, I’ve hired manysuperstars, and, as a company, we’vetrained tens of thousands of advisers,so I can tell you with a clear heartthat the best advisers in Americahave a number of things in common.Most importantly, they never putmoney ahead of people, and theyunderstand that just because some-one authorizes a repair or service, itdoesn’t necessarily mean that they

were sold on the service.The true superstars will always sell

from their hearts, and they know thatwhen that magic moment occurs, andthe customer believes in what they believe, then, and only then, havethey closed the sale.

The money? Interestingly enough,there is another principle that I’velearned over the years, and it’s anoth-er one that’s timeless. It’s the one thatsays, “If we do the right things for theright reasons, the money will follow.”

Selling service is one of the easiestand most rewarding jobson earth, as long as youbelieve that the serviceis the right choice forthe customer, and aslong as you sell…fromyour heart. SO


The money? Interestingly enough, there is

another principle that I’ve learned over the years,

and it’s another one that’s timeless. It’s the one

that says, “If we do the right things for the right

reasons, the money will follow.”

Since 1990, Bob Cooper hasbeen the president of EliteWorldwide Inc., www.EliteWorldwideStore.com, anethics-based company that helps both strugglingand successful shop owners take their businesses tonew levels through one-on-one coaching from theindustry’s top experts. The company also offers shopowner sales, marketing, and management seminars,along with service advisor training. You can contactBob at [email protected], or at800-204-3548.


The Automotive AftermarketIndustry Association recentlyrebranded itself the Auto CareAssociation, favoring the phrase“auto care” over “aftermarket.”What are your thoughts onmoving away from the term“aftermarket”?

We have always feltthat the term “after-market” is an indus-try term that is notwell understood byconsumers. We useterms such as “CarCare Centers” forour shop partnersand always try tocommunicate in amanner that willmaximize under-

standing and effectiveness. Wefully support the new associa-tion name and feel that it willdefinitely add to the under-standing of what our industry

is all about.Promoting “auto care” is a

natural for our members andwe will work to support notonly the new name but also theconcept of taking care of vehi-cles. There is no doubt that thisis a solid upgrade and one theentire industry should be excit-ed about supporting.

How does Federated get theright mix of parts on the shelf?

Having the right inventoryavailable for our customers iscritical. We believe that inven-tory management is a combina-tion of focus and execution.Our members need as much information as possible on vehi-cle population, replacementrates, proper pricing, brands,quality levels, national and regional sales and a host ofother input. This information isthen applied to local markets


Executive|Interview|

Roy KentChief Strategy Officer And President, New BusinessDevelopment, Federated Auto Parts

Roy Kent joined the Federated Auto Parts management team inJanuary 2014 as chief strategy officer and president of new businessdevelopment. An industry veteran, Kent’s vast aftermarketexperience includes a long career at Federal-Mogul where he held avariety of positions, most recently serving as vice president ofwholesale distribution. At Federated, he oversees a number of keyareas including membership development, vendor relations andstrategic planning.

14-16-Federated Executive Interview 7/15/14 9:31 AM Page 14


where individual expertise on area demand and customer needs areadded together with supplier input andother distilled data sets so that invento-ry can be tailored for each market.

It is definitely not an exact science,but there is more information availabletoday than ever before, providing insight and support for managing hun-dreds of thousands of items on a dailybasis.

What particular attributes aboutFederated give your group a leg upover the competition?

We believe the strength of our groupis in the collaborative sharing of ideas,insights and innovations. Federatedmembers are selfless in their approachto helping the sum of the total be asstrong as possible. This may be in shar-ing processes, ideas or experiences inthe market. This can include areaswhere cost and inventory efficienciesare leveraged. One example is the Federated Car Care program wheremembers share ideas, approaches andimprovement initiatives.

Another is eCommerce activities, including our in-house electronic cata-log and Enhanced Supply Chain pro-gram that allow sharing of the highestquality information. Collaboration alsooccurs with our member-owned Co-Man warehouse that receives tremen-

dous support from all members and alarge number of suppliers.

Whatever the area, our membersare willing to work together for the common good of all. Individual mem-ber success is contingent today ongroup collaboration and our membersare dedicated to this process.

The aftermarket truly has become aglobally reaching industry. How mucha part of your group will be represent-ed by stores or warehouses outsidethe United States?

While we do have members outsidethe U.S., it has not been a priorityfocus. Federated exists for the benefitof our customers and our member-ship. While we may look at globalmarkets, we have not found sufficientadvantages to pursue this in a majorfashion. If our members see a benefitin increasing the focus outside NorthAmerica, we will respond to their


direction and increase the effort ontheir behalf.

Do program groups look differenttoday than they did, say 10 yearsago? If so, how?

First of all, there are fewer groupsand that is a significant change. Thosethat have survived have found newways to add value for their member-

ship and their customers. Certainly thelast 10 years have provided an oppor-tunity to address new challenges suchas exploding inventory proliferation,new retail competitors, consolidationof customers, national accounts,eCommerce and data needs.

Other issues include new efficiencymethods, such as bar coding; directimport; and working capital chal-

lenges. Tools have been developed tohelp us address some of these chal-lenges, and programs, such as our Co-Man warehouse and data sharing initiatives, have accelerated in importance.

Program groups are much more involved today with associations likethe Auto Care Association andAWDA. These organizations work onour behalf to address such issues asevolving technology and the impact

of government policies concerningour industry. The bottom line is thatprogram groups like Federated existtoday to help us leverage our collec-tive strength in many areas that werenot as significant 10 years ago. If wedo our job correctly, there will bemany new areas to explore 10 yearsfrom now. SO



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Once you start measuring a fewimportant metrics, especially effective labor rate (ELR), youwill be able to make meaning-ful decisions in your business.Measuring and managing thesemetrics will help you find exist-ing, hidden labor dollars — andcollect more labor dollars —which can boost your bottomline.

Are you collecting labor dollars for indirect labor costs?

Most shops have a matrix fortheir parts, buthow manyshops areusing amatrixfor theirlabor?We allknow thatdrive-

ability testing takes time and talent to perform; that’s why weneed to charge differently forthat service. For example, saymy hourly labor rate is $100,but using a labor matrix, Icharge $129. My techniciangets paid for the one hour, butbecause of the equipment andtraining I need to perform theseservices, I need to charge anadditional $29 for this time.

Essentially, you are preventinga bleed-out of financial resources from the indirect andhard-to-measure costs of labor.These costs may seem small

per job, but they can add up“big time.”

Why is it so importantto collect as many labordollars as possible?

We pay our billsfrom the labor

dollarswe


Shop|Operations|

Your roadmap begins with collecting all the labor dollars for yourtechnicians’ time. Through measuring and managing, you candetermine whether or not you are collecting all the labor dollars thatare available to you, or if you are leaving money on the table.

by Dave Justice and John Fowle, shop ownersand creators of Labor Profit Management

Roadmap To ProfitabilityWhere Does Yours Start And End?

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collect for our technicians’ time.Therefore, it’s important that we col-lect for the time it takes our techni-cians to complete a task.

For example, a job that has an esti-mated four hours of billed time and issold at $80 per hour equals $320. Ifthe technician does it in three hours,you should still collect the $320,rather than $240. This is a good, prof-itable technician and his labor shouldnot be discounted. Again, this profit iswhat we use to pay our bills, keepour staff employed and keep our busi-nesses afloat.

Tracking technician productivity, efficiency and ELR will help youmeasure and manage your labor dollars.

Productivity is defined as billedhours divided by clock hours (the timeyour technician is in the building.) Forexample, if a technician bills 40 laborhours and is in the building for 40

hours, the technician is 100% produc-tive. Determining the productivity(and efficiency) of your technicians isthe first step in determining whereyour labor dollars are bleeding out.

Efficiency is defined as billed hoursdivided by actual hours (the timespent working on cars). For example,if a technician bills 50 hours and doesit in 40 clock hours, the technician is125% efficient. In order to accuratelytrack efficiency, you’ll need a timeclock for the technician to clock inand out of each task.

This brings us back to ELR, which isthe most overlooked number in ashop. What is ELR and why is it soimportant to measure?

ELR is the actual dollar amountyou collect for each hour of yourtechnician’s time.

In the gas station business, there is aterm called pool margin. For example,if I sell 100,000 gallons of gas at a$0.10 pool margin, I would make$10,000. If I sell the same 100,000gallons at a $0.13 pool margin, Iwould make $13,000. Tracking thepennies over a period of time is important to maintaining profitability.

The same concept holds true withELR. If your labor rate is $100 an hourand your technician bills 40 hours,you would expect to collect $4,000 inlabor. Let’s say your service advisergives a discount on the labor to sell ajob and only charges $90 an hour forthe 40 hours; you would collect$3,600. That’s $400 less in one weekoff of your bottom line. And, over thecourse of one year you would losemore than $20,000. Again, trackingthe pennies, and in this case dollars,can have a positive effect on your bottom line.



Menu-priced items and discountedoil changes also affect your ELR. ELRlooks at our service adviser’s ability tosell maintenance and service at therate you expect in order to maintainyour profitability.

Fixing the labor in your shop costsyou nothing.

You don’t need to buy anotherscanner, turn on another light or hireanother technician — all you need todo is measure and manage what youalready have. When you have a timemanagement system in your shop,you can easily make on-time businessdecisions. If you set goals for yourtechnicians and they are able to seetheir progress every day, they will naturally work to get to the goal.

And, if you can see a technicianhaving some challenges, you can address them this week, not at the endof the month when the game is already over. We must inspect whatwe expect. Having the processes inplace will bring technician accountability.

Determine the type of techniciansyou employ and pay accordingly.

In our industry, we have differenttypes of technicians. The time banditjust mulls around all day at his ownpace, making an hourly wage thathe’s comfortable with. Then, you havethe technician who’s good, butdoesn’t know management’s expecta-tions. You can boost the accountabili-ty of this type of technician by givinghim a process to follow. Lastly, youhave the great technician who wantsto be recognized for his efforts. Hav-ing each of your technicians on thecorrect pay plan for your business isvery important to the success of your

labor profits.

Help your technicians get better,and they will help your business getbetter.

If you are motivated and focused onaccomplishing something, it usuallyhappens – that’s human nature. Show-ing your technicians their goals everyday creates a sense of self-worth whenthe goal is met. Compare it to a golfershooting below par; there is an imme-diate sense of accomplishment.

Implementation of the processes tohelp your team reach shop goals iswhat makes a shop owner successful.What we do today takes care of tom-orrow. What are you doing to secureyour future? In the end, a road mapfor optimizing your labor dollars willlead you to profitability. SO


Ohio repair shop owners Dave Justice andJohn Fowle developed a program called LaborProfit Management (LPM). LPM helps shop own-ers measure and manage technician productivity,efficiency as well as their effective labor rate andlabor profit percentage. LPM integrates seam-lessly with NAPA TRACS, ROwriter, Mitchell, ALL-DATA and TCS. For more information, go towww.assettechs.com.


“My grandfather, Ted Rischbi-eter, first opened the doors in1941 as a filling station alonghistorical Route 66,” Bob says.“Shortly after opening, he sawthe need to service those travel-ers’ vehicles, and he put in anoutside lift. Within two yearsthe shop had two bays, one forrepairs and the other for wash-ing vehicles.”

Bob says a third bay wasadded in the mid-1960s after

his father, Bob Rischbieter, Sr.,took over. By the end of thatdecade, Bob Sr. removed thetanks and pumps and transi-tioned into full-time auto repair.

“In 1996, I purchased thebusiness from my family,” Bobexplains. “I grew up at theshop, cutting grass, cleaning theoffice and assisting the techni-cians. By the time I was 15, Iwas working in the shop anddid so all through high school

Shop|Profile|

Rischbieter’s AutomotiveContinues Long Tradition Of Quality Service

For some, automotive repair is in the blood — especially when youfollow in the footsteps of your dad and his dad before him. BobRischbieter, Jr., grew up working at Rischbieter’s Automotive in St.Louis, MO, so it comes as no surprise that he now owns it.

by Debbie Briggs, contributing writer

22-24,26-Shop Profile, Rischbieter's Automotive 7/15/14 4:02 PM Page 22

and college. I camehere full time about twoyears after I graduatedfrom college.”

And the rest, as theysay, is history.

Latest TechnologiesEven with a long history of success,Bob knows that staying successful intoday’s marketplace means stayingcurrent on changing automotive technologies.

“As an independent shop, we havehad to stay abreast of all the latesttechnologies to service a variety of vehicles, whether it’s an oil changeand tire rotation on a Chevy Cobalt ora cylinder head replacement on a

Volkswagen turbo diesel,” he says. Bob says techs utilize resources like

iATN, Identifix, ALLDATA, the Internetand fellow shop owners for the latestrepair information, and they also useSnap-on VERDICT and AUTEL Launchfor all engine diagnostics. Also recent-ly replaced was the shop’s tire ma-chine with a new Corghi machine toservice low-profile tires or rims up to30 inches.

“To stay competitive as an

independent, it’s imperative tohave up-to-date tools and equipment,”Bob says.

Rischbieter’s two ASE-certified tech-nicians also use their combined 20-plus years of automotive repair experi-ence to skillfully fix customer cars.And as an ACDelco PSC shop, Bobsays they constantly take advantage ofonline and classroom training. Fortu-nately, Rischbieter’s has seen very littleturnover in its 73-year history.

“When I purchased the business, I


From July 1942

Bob Rischbieter, Sr.

Ted Rischbieter

Ted Rischbieter


‘inherited’ two techs that were with myfather for 20 years each,” Bob explains.“One retired in 2005, the other in2007. Although it was difficult, wehave found not one but two top techsin Jeff Autery and Beau Douglass.

“Jeff came on board six years ago asa referral from the parts store we use,and the two knew each other fromworking at the local Honda dealer-

ship. Beau moved over to Rischbieter’s almost three years ago.”

Day-to-Day OperationsAny small business owner will tellyou that the toughest part of their jobis needing to wear so many hats. ForBob, trying to act as owner, servicewriter, tech, maintenance man andjanitor just wasn’t working.

“I decided we needed a change,”he says. “About two or three years

ago, I re-examined the direction wewere heading and chose to removemyself from the shop — focusing ononly running my business and notworking at Rischbieter’s.”

When you’ve poured your heart andsoul into a business, backing off canbe challenging. But Bob saw an immediate change that not only bene-fited him, but also his customers.

“Although this was difficult at first, Ihave found it to be not just more prof-itable, but less stressful as well,” Bobsays. “When we were busy and I wasturning a wrench in the shop, it wasalmost inconvenient when the phonewould ring or a customer wouldcome in. I’m sure the customers couldsense the stress.

“Now, I’m at the service counter togreet my guests when they arrive,” headds, “and I have time to listen to my


The shop facade before (above) and after a facelift courtesy of ACDelco’s shopEnhancement Program.


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customers and then explain the what,how and why of what will be done totheir vehicle and answer any questions.”

Customers, though, have alwaysbeen the focus at Rischbieter’s sinceits inception so many years ago. Thatkind of history has allowed the Risch-bieters to service vehicles for up tofour generations of the same family,proving that even in today’s hectic so-ciety, relationships are still important.

“It has been awesome forming rela-tionships with these customers as wellas my newer ones,” Bob says. “My customersknow thatwhen theywalk into theoffice they willbe greeted byme. With therelationshipswe haveformed comesthe trust thatthey will receive the best service and repair.”

Shop UpgradesAfter 73 years of quality services,Rischbieter’s received a facelift cour-tesy of ACDelco’s Enhancement Pro-gram. Exterior and interior upgradeshave gone a long way in presentingthe shop in the best possible light toits valued customers.

“The upgrades included fascia brickremoval, tuck-pointing of mortarjoints, new windows with supportivelentils, new bay doors, paint and newsignage,” Bob says, adding that the office was also “insulated, dry walled,and received a fresh coat of paint.”

In addition to building upgrades,Bob says the shop added ALLDATA

Manage as part of the office upgrade,which included a new website that allows for customer testimonials andfollowup after repairs.

“In just this short period of time, wehave moved up in Google search,” hesays, “and we receive at least onenew customer phone call a day fromthe improved website.”

In addition to shop improvements,Bob says it’s not just great relationshipswith customers that drive success atthe established independent repairshop. Periodic meetings with fellowshop owners and managers, and the

shop’s primary partssupplier, also fuelspositive change.

“Our first call forparts is to Lowe Automotive Groupin St. Louis sincethey offer not onlyhigh-quality autoparts, but incredibleservice,” he explains, adding that

he has his ACDelco Professional Serv-ice Center account through the partssupplier. “About six years ago, thestore manager and I started getting together about once every couplemonths to talk shop. This has growninto a get-together that involves five orsix shop owners/managers on anygiven night.

“This roundtable group has beengreat,” he concludes. “We have allformed relationships that have helpedour businesses, whether it’s been foradvice, information or even just toborrow a tool.”

It’s that kind of collaboration thatwill keep Rischbieter’s going strong forthe next 73 years, providing a greatatmosphere for employees and customers alike. SO



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But when the customer’s experience is inconsistent — exceptional one visit and so-soor poor the next — the cus-tomer’s confidence is compro-mised and, influenced by theperceived risk, they are morelikely to consider competing alternatives.

Simply put, if the customerdoesn’t trust that your businesswill consistently meet or exceed their expectations to deliver great results, they willnot consistently return or become loyal customers.

Lessons: OutbackSteakhouseOutback Steakhouse is a greatexample of a company thatuses consistency as a businessadvantage. No matter whichOutback location you visit, domestic or abroad, the customer experience is generally the same.

Like most major chain restau-

rants, the tangibles of the facili-ty – layout, design and décor –are virtually identical. Addition-ally, what the customer experi-ences when interacting withemployees is consistent. Fromthe door greeters to the friendlywait-staff that looks customersin the eye to the manager’s involvement when there is anunhappy customer, everythingtends to be choreographed withprecision.

Done this way, customers become familiar with the busi-ness. Familiarity makes customers comfortable and confident that wherever andwhenever they visit Outback’schain of restaurants, there willbe no surprises.

Consistent RelationshipsSuccess in any business comesprimarily from building andmaintaining relationships withcustomers. Once those relation-ships are built, customers

Customer|Service|

The Real Case ForConsistencyExceeding Expectations Builds Customer Loyalty

No customer likes surprises when it comes to doing business withany type of service provider. When customers can count onconsistently great service each time they do business with you, theirconfidence increases and they are far less likely to shop around fortheir vehicle service needs.

by Steve Ferrante, CEO, Sale Away LLC


28-30-Customer Service, Consistency 7/11/14 11:14 AM Page 28

expect that relationship will exist andbe consistent when they return for future vehicle service needs.

One of the things that can quicklydamage customer confidence and per-ceptions of consistency is when a shopmanager or other personnel that cus-tomers have built a relationship withover previous visits is relocated towork at another location.

This situation often leaves customersfeeling abandoned and frustrated thatthey need to start over again withsomeone new. Of course, the reloca-tion of personnel is sometimes neces-sary to replace someone who left thecompany, to staff new locations or tofill other requirements. However, unless it’s absolutely necessary, thesetypes of personnel transfers should beavoided to maintain and build consis-tency with customers.

Institutionalizing ‘Wins’Recognize that delivering consistencymeans doing the right thing regularly.It’s easy to fall into the trap of a routinewhere you’re doing the same thingsover and over, regardless of whetherthese are the best things to do for thecustomer.

To achieve world-class customerservice, you must be consistent withthe positive aspects of your customerinteractions and minimize (or elimi-nate) the negative aspects. Shop man-agers and employees regularly do won-derful things to improve the customerexperience, earn customers’ businessand maintain their loyalty. But, oftenthose feats of greatness are confined toan individual shop and not spread to asecond or third location.

As an example, one shop managermay be effectively managing his or her


It sounds simple,

but training only

works if it’s

consistent.


team members to clean customers’wheels and apply tire shine/protectanton each tire. But at another locationwithin the same business, the employ-ees aren’t necessarily doing that and,in many cases, the manager at oneshop doesn’t know what the other oneis doing.

To achieve consistency and world-class customer service, top-performingcompanies institutionalize their winsto create“best prac-tices.” Theprinciple iseasy to un-derstand: If agiven behavioris producing pos-itive results suchas enthusiastic cus-tomers at a particu-lar location, that behavior can (andshould) be duplicated atany other shop locationsto achieve the same result.

Consistency CreatesExcellenceA successful college football coachonce said, “You have to perform at aconsistently higher level than others.That’s the mark of a true professional.”

It’s true. Anyone can have a “goodday.” True professional organizationsand the people in them achieve excel-lence by consistently executing properbehaviors.

Inconsistency is a main reasontraining initiatives fail. All too often,companies treat customer servicetraining like an event. They conducta training session and, assuming it

was good, participants get energizedwith new insight, techniques andtools. Then, with no real follow-upprogram in place, participants willfizzle out and return to the samelevel of performance they were atprior to training.

Training research has revealed that,without ongoing reinforcement, 90%of what’s learned is forgotten within60-90 days. It sounds simple, but

trainingonlyworks ifit’s consis-

tent.World-class

sales and cus-tomer service

businesses rec-ognize this and

typically engagetheir employees in

100 or more hoursof training in their first

year with ongoingtraining in the yearsahead.

Achieving and sustaining successin your auto service business re-quires discipline and commitment tocontinuous improvement, along withconsistent trainingand reinforcement.SO

Steve Ferrante is the CEO ofSale Away LLC and has morethan 20 years of successfulsales, sales management andsales training experience. He isthe producer and host of the Pinnacle Performance salesand customer service training program that helps inde-pendent tire and auto service businesses improve cus-tomer relations and produce greater sales results.Steve can be reached at 866-721-6086 ext. 701 [email protected].



31 bosch2_Layout 1 7/17/14 10:23 AM Page 31

Of course, generational differ-ences aren’t the half of it. Ifwe could overcome employee conflict andimprove morale simplyby holding a shop ther-apy session and walk-ing a mile in anotherman’s (or woman’s)shoes, there wouldbe no need for anarticle like this.

The problemisn’t just thatshop therapysessions

don’t work.If that

were thecase,wecouldjustchange

tactics,from role-

playing to a different kind ofclassroom workshop. The prob-lem is that we simply can’tcram employees into behaviormodels that predict how theywill react in every situation.

The truth is, shops don’t needa therapist. They need greatleadership.

Resolving employee conflictand improving morale is aboutdigging deeper than the superfi-cial feelings of anger, frustrationor distrust, and actually ad-dressing the cause of theseproblems. Understanding thestruggles we all face is part ofwhat defines a great leader.

But saying that shops needgreat leadership means thatshops need a leader who willset down clear policies, followthose policies themselves andhold employees accountable forfollowing them 100% of thetime. Great leadership means


Human|Resources|

Leadership &MeasurementTwo Tools For Resolving Employee Conflict andImproving Morale

Is your shop a hotbed of employee conflict? Even if we look only atgenerational differences, it’s not hard to see why employees canbutt heads and morale can suffer. Millennials are replacing Gen Xers,who displaced the Baby Boomers before them. Each group grew upin a vastly different world, and each has their own ideas about workethic, customer service and even taking direction from management.

by David Rogers, COO, Keller Bros. Inc. and president, Auto Profit Masters

32-35-H.R. Resolving Employee Conflict 7/15/14 11:25 AM Page 32


providing an example of care, consid-eration and higher principles. Greatleadership also means being consistentand requiring follow-through to creategreat results.

The Two Critical Faces ofLeadershipA great leader must play two roles: thecompassionate, understanding leader;and the strong leader who holds his orher team accountable for followingpolicies and procedures. Being a greatleader means acting like both GeneralPatton and Gandhi.

If that seems like an impossible combination to you, you’re not alone.Many shop owners feel the same way.

One example is my own, when Istarted out at Keller Bros. Auto Repairin 1997. Employee conflict wasn’t sim-ply about a generational divide or frus-

tration between cliques.The disagreement was

between a group of

employees who wanted to followthe rules, and a group who didn’t. The latter were deter-mined to squeeze down the shopand dominate the rule-followers. Theywere in it only for themselves.

Keller Bros. isn’t unique. It’s whathappens in any shop when the frustra-tions and differences of opinion are allowed to fester and grow into anopen wound.

For many, the first instinct is to takecommand. If you can control every

element of what goes on in the shop,you can eliminate the chaos and con-flict, and micromanage the outcome.And in a way, that instinct isn’t wrong.But, you’ll be trading your happinessand health for a shop that operates exactly like you want it to. The resultwill be increased profits and feweremployee disagreements, but in exchange for putting aside your lifeoutside of work.

But the problems still won’t be fixed.Any time you step away from the

shop — to spend time with family, torelax or to work on your favoritehobby — things will quickly slide backto how they were. If things are onlyworking because you’re forcing themto work, it’s not sustainable.

More than that, if you act like Patton100% of the time, you limit how muchyour business can grow. Even afteryears and years of learned experienceand training, most shop ownersdon’t have all of the knowl-edge they need. Control-

ling every aspect of the shopmeans every aspect of theshop can grow only as far

as you know how.At the end of the day, if you can’t

hire people who are smarter or moreskilled than you, you’ll never reallysucceed. That means you need to builda team that wants you to succeed,something that won’t happen if you’releading like a dictator.

The truth is, shops don’t need a dictator any more than they need a


therapist, which is why leadership isabout striking a balance.

In our shop and through our train-ing, we call this balance the “TwoCritical Faces of Leadership.” Onemask — the concerned, caring side ofleadership — is what you wear whenyour team is doing what they need todo. In this role, your job is to make itabsolutely clear that you’re happywith their performance.

The other mask — the drill instruc-tor side of leadership — only comesout when things are broken. Whenemployees aren’t following policies orprocedures, your job is to make it absolutely clear that you’re unhappywith how they’re performing and howthey can fix it.

There’s no other mask to wear inleadership. There’s no lukewarm, unfocused gray-area role to play.

The important takeaway here is thatthese are masks. If you nat-urally fall on the side ofthe spectrum whereyou prefer playinga caring, com-passionateleader, youdon’t have tochange whoyou are. You justhave to be will-ing to wear themask and play therole of command-and-control leaderwhen people are acting incorrectly. Your team needs toknow how serious you are or they’llnever change.

The same goes for leaders who nat-urally fall on the drill instructor side ofthe spectrum. If your team doesn’tknow when they’re performing well

and never sees you happy and content — if they don’t see you wearthe mask of a shop owner who ispleased with their performance —they won’t want to help you succeed.

If you’ve seen the movie Patton,you’ve seen what it means to wearone of these two masks of leadership.After General Patton has done some-thing outrageous to motivate histroops, one of his staff officers says tohim, “You know General, sometimesthe men don’t know when you’re acting.”

Patton responds: “It’s not importantfor them to know. It’s only importantfor me to know.”

Being a great leader doesn’t meanchanging who you are. It just meansconvincing your team.

A Measured Approach toLeadership

Left unsaid to this point,however, is how you

can know what roleto play and when.The truth is, unlessyou have reliable,daily productionnumbers, it’s hardto know who isfollowing your poli-

cies and procedures,much less which of

your two critical facesof leadership to show.

In other words, until youknow where you shop stands, where

the holes are, where your employeesneed to be trained, how to fix theseproblems and provide the necessarytraining, you can’t be an effectiveleader.

This is far from everything you need



to be a great leader. Bedrock princi-ples like chains of command, dailyaccountability meetings, setting ap-propriate targets and daily teambuilding are fundamentals of bothemployee conflict resolution andgreat leadership.

But shops aren’t fixed by piecing together solutions. Downloading achain of command resource from theInternet can help in resolving employ-ee conflicts, but without good leader-ship to enforce a chain of command,it’s just another document in the employee handbook.

Similarly, if your staff is in turmoil because of cliques and divisions, thefix may include a shop therapy ses-sion, but the fix begins with the kindof leadership that provides clear ex-pectations and accountability. The bot-tom line: resolving employee conflictstarts with good shop measurement.

It may not be easy to hear (or read)

that we have to learn to be greatleaders before our shops can havegreat teams, but it’s the truth. Truly re-solving employee conflicts and fixingmorale issues doesn’t boil down to apolicy or a procedure, but to greatleadership. I know because I have the

battle scars to prove it. The good news is, the path to

becoming a great leader is straightfor-ward: measure, holdaccountable, train, adjust and repeat. SO


David Rogers is chief operating officer of KellerBros. Inc., president of AutoProfit Masters and creator ofthe RPM ToolKit™, which integrates with shop POSsoftware to help owners identify problems in theirshop and get one-click training solutions. Reach himvia email at [email protected], toll-free at 1-866-826-7911, or online at www.Auto-ProfitMasters.com.

The good news is, the pathto becoming a great leader isstraightforward: measure, holdaccountable, train, adjust andrepeat.


“I believe that my No. 1 job as the president of

3A Automotive Service is to create an environment

where everybody involved wins — the customers, the

company and the employees.”—Jimmy Alauria, president (left) with father Jim Alauria, owner


36-40,42-43 Shop Profile, 3A Automotive 7/15/14 1:30 PM Page 36

Let’s face it: No one likes working weekends. Saturdays and Sundaysare a chance to catch up on chores, visit with friends and, mostimportantly, spend quality time with family. It’s why 3A AutomotiveService is closed on the weekends, and it just might be one of thereasons President Jimmy Alauria doesn’t have much trouble staffingthe facility in Phoenix, AZ.

“My dad started closing onweekends back in 1998, andwe have never seen a declinein weekly production as a result,” Jimmy explains. “Plus,that gives us a huge advantagewhen hiring. I’d say that 90% ofthe techs I interview are look-ing because they are tired ofworking weekends.”

Jim and Earlene Alauria,owners of 3A Automotive Service and Jimmy’s parents,have been providing “Friendly,Honest Auto Repair Since1975,” as their tagline accu-rately states. By focusing onboth employee morale and thecustomer experience, the fami-ly-owned shop has remainedprofitable throughout its 39years of operation.

“I believe that my No. 1 jobas the president of 3A Automo-tive Service is to create an envi-

Shop|Profile|

3A AutomotiveServiceWhere Friendly, Honest Auto Repair EqualsHigh Profitability and Customer Satisfaction

by Debbie Briggs, contributing writer



ronmentwhereeverybodyinvolvedwins — the customers, the companyand the employees,” says Jimmy, whohas handled day-to-day operations ofthe shop since 2002. “Our commit-ment to our staff is to ensure that theirstandard of living is improved byworking with our company.”

High Morale, HighProfitabilitySo, how do they achieve a positive

work environment andhigh employee morale?First and foremost,Jimmy says, special attention is paid to productivity.

“The only happy environments I’ve ever seen are pro-ductive ones,” he says. “We spend alot of time ironing out any stops orbottlenecks in our shop flow process,which starts from the scheduling allthe way through to the customer pick-ing up his/her car when it’s complet-ed. That process is essential for allow-ing each person on the team to bereally good at what they do, and theycan count on their teammates to bereally good at what they do.



“When that process is dialed in,you get high production, high quality,happy employees and happy cus-tomers. That’s the makeup of a cham-pionship team, and winners like to bea part of a championship team sothey aren’t likely to leave.”

3A Automotive currently employssix ASE-certified technicians, four ofwhom have earned Master Technicianstatus, and it’s not only the techs whoattend training, but managers andservice writers as well.

“I think that we, as an industry,need to up our game a lot when itcomes to training,” Jimmy says. “Withnew technology like electric and al-ternative-fuel vehicles, as well astelematics, this game is going tochange a lot over the next five years.It’s not just training the techs either:Owners, managers and service writersare all going to need to be educatedon how to market and sell as an independent repair shop.”

Satisfied CustomersWhile marketing is important at 3AAutomotive Service, constituting about8% to 10% of the shop’s income,word-of-mouth can’t be discounted.

“Word-of-mouth still dominates andis even more prevalent today with theInternet,” Jimmy says. “It used to bethat people would ask a neighbor orfriend for a referral to a mechanic.Now those referrals happen on the Internet through review sites likeGoogle Reviews, YP.com, Yelp.comand Angie’s List.”

The result is that the shop’s organicmarketing efforts online support moretraditional paid marketing tactics.

“When we send a direct mail pieceout, that potential customer is likelygoing to go to the Internet to check usout before they call. They will be greet-ed by well over 200 customer reviewson our company. Then, when a newcustomer calls, they have a lot of confi-dence that we are their best option.”

Those new customers are greeted


“With new technology like electricand alternative-fuel vehicles, aswell as telematics, this game isgoing to change a lot over the nextfive years. It’s not just training thetechs either: Owners, managersand service writers are all going toneed to be educated on how tomarket and sell as an independent repair shop.”


by an inviting shop appear-ance, both inside and out.The building has been pro-fessionally painted and land-scaped, and customers appreciate the relaxing envi-ronment in the waiting area.

“It’s not uncommon tohear comments about howclean it is, and that it’s notwhat customers expected,”Jimmy says. “Our building definitelylooks like a shop, but we’ve tried tomake it about as appealing, warmand welcoming as possible becauseimage is everything — especially when 70% of your customers are women!”

Customer AppreciationIn an effort to not only educate butalso show their appreciation for thecustomer, Jimmy says the staff hosts

an annual Women’s Car Care Clinicthat’s always a hit with customers.

“This year, our NAPA store spon-sored the event and provided goodybags, beverages, tables, chairs andeven a pop-up shade so our teamcould just focus on the event details,” he says. “The customerslove it, and it’s a great way for themto see a more personal side of ourstaff, while also getting a chance tolearn a little more about their cars.”

Getting to know the staff is key,Jimmy says, as service writers and

front officepersonnelhave themost directcontact withcustomersand, there-fore, themost oppor-tunity to

interact with them during the repairprocess.

“I believe retaining customers haseverything to do with who is runningthe office,” he says. “The shop manag-er, service writers and receptionist arethe ones dealing with that customer,and they either have a good experi-



41 federatedlogo_Layout 1 7/17/14 10:24 AM Page 41

ence, an OK experience or a bad experience. We try and give them a‘wow’ experience: We want to makesure we have agreements on the prob-lem, solution, price and time all alongthe way, and when they come to gettheir car all they can say is, ‘Wow!That was the best automotive repairexperience I have ever had.’

“Nobody likes spending money tofix or service their car,” Jimmy contin-ues. “But the right people with theright training in the office can take themystery and fear out of that experi-ence for the customer. The best cus-tomer retention strategy available is ahappy, well-informed customer.”

Part of ensuring customer satisfaction at 3A Automotive Service

is providing each vehicle and repairwith the utmost attention to detail. Asystem of checks and balances ensures that each vehicle leaves theshop fixed right the first time. And ifthere is a problem, customers need toknow it will be corrected.

“When the economy crashed in2008, we had car counts drop 30% to50%,” Jimmy explains. “We knew wecouldn’t drop our prices because thatwould only make things worse finan-cially. So, we decided to really take alook at our quality and improve theperception of value that the customerfelt when dealing with us.

“Now we make sure every car getschecked out by another technician before it leaves. Every car gets a car

“When that (productivity) process is dialed in, youget high production, high quality, happy employeesand happy customers. That’s the makeup of achampionship team, and winners like to be part ofa championship team so they aren’t likely to leave.”



wash. Every new customer and all repairs over $500 get a phone callwithin a week after pick up. Andevery customer gets a comment cardsent home with them at checkout. Theidea is that they know we are 100%committed to their satisfaction, and ifthere is a problem, they have no rea-son not to inform us and allow us tofix it.”

Expansion PlansCurrently, two more bays are beingadded to the existing 10 at the shopto handle the influx of mostly Ameri-can, Asian and light-duty diesel vehi-cles that the shop services on a regu-lar basis. But in addition to physicalwork, the shop is also expanding virtually. Every shop owner, Jimmysays, has to make web marketing a priority.

“We are always working on ourwebsite (www.3AAutomotive.com),”Jimmy says. “But it’s not just the web-site as much as it is a web presence.A website is one location. A webpresence means that you are a part ofthe conversations that are going onwith regard to auto repair. Email openrates are going down, so being a partof social media is becoming more andmore important. We’re currently work-ing on the production ofvideos that will serve asfree information for anybody to use, but theywill position us as theexperts.”

Overall, Jimmy saysstaying ahead of thecurve when it comes tomarketing and training isessential to remainingprofitable in today’s so-cial media- driven society.

“There’s a generational and techno-logical swing happening right nowthat I believe is crucial to the successof shops today,” he explains. “Weneed to become better at the market-ing and sales of our product — auto-motive repair and service.

“There are also fewer young profes-sionals coming into this industry,” hepoints out. “At the same time, thequalifications necessary to work onthe modern car are getting tougherand tougher. The only shops that willmake it will be the ones that can offerthis younger generation the thingsthey want and need. Studies showthey want good pay, benefits, retire-ment plans, vacations and continuingeducation. The shops that will attractthis new qualified workforce will bethe ones that can fill the bays, prof-itably sell the work and create enoughof a positive effect with their cus-tomers to survive a social media- driven world.”

With an eye on the future whilemaintaining a track record of honesty,integrity and customer appreciationand satisfaction, 3A Automotive Service is poised to remain profitablefor many years to come. SO




Dan has decided that it’s time tofind a buyer for his aftermarketbusiness. He looked ahead a fewyears ago and planned to sell atan unspecified date in the future.Now is that time. For years, as hisfamily grew and matured and be-came involved in the business, hehad assumed one or more of hischildren would carry on the lega-cy of the firm. But, as adults, theyhave now clearly told their fatherthat the 60-hour workweeks andpersonal sacrifices they witnessedDan experiencing for so manyyears, along with all the inherentrisks in running a family business,do not interest them.

Dan’s fallbackhad been to

sell to trust-ed long-

term employees and retire on thenote payments and rents that hewould receive out of the futureearnings of the business. But aftertaking a long, hard look, Dan realized that as skilled as his em-ployees are, the downside risks ofhis financial security being de-pendent on his employees are toogreat. He was not sure he couldsleep well at night, worryingabout whether or not they couldrun the business as well as he hasand provide for his comfortableretirement in the process.

So, the optimal option, Dan has determined, is to find a buyerwho can grow and expand hislegacy while also receiving a cashsettlement that he could safely invest for his retirement.

That being the case, there is oneparticularly significant task thatmust be done to prepare for suc-cessfully selling at a price that willjustify the years of hard work Danput into his business.

Will Your Tax Returns DrasticallyUnderstate The True Value of YourAuto Service Business?Properly Recasting Your Financials Will Showcase YourAftermarket Business and Accurately Justify theSelling Price You Had Hoped For

After more than 30 years of owning and successfully running thetown’s well-known and successful auto service business…startingout long ago as a single location and growing to multiple sites overthe course of his career…Dan the Auto Man is about to make thebiggest decision of his professional life.

Buying & Selling|An Aftermarket Business by Art Blumenthal, MBA, CBI

44-47-BuyingRecast Financials 7/16/14 11:26 AM Page 44

Recasting: Because a Buyer isBuying His Future, Not YourPastOne of the biggest mistakes a sellercan make is simply providing a buyercopies of the business tax returns orunadjusted financial statements. Theobjective of most owners and their ac-countants is to do everything that theycan to minimize taxable income. Thisis effective for reducing taxes, but itpaints an incomplete picture when itcomes to showing a potential buyerthe true cash flow, and hence the max-imum value, of the business. If youwant buyers to get excited about yourauto service business, they need totruly appreciate the full financial bene-fit and actual income-generating ability.By “recasting” or adjusting the finan-cial statements for presentation purpos-es, the “real” financial performance ofthe business can be demonstrated.

A “recast financial statement” is a re-constructed representation of the earn-ings that a buyer would be able to

enjoy from the business. It “normalizes”the figures by removing all the unusual,non-recurring and one-time items thatwould not likely occur in the future forthe buyer. Recasting supplements theowner’s compensation listed on the taxreturn with all other “perks” or fringebenefits, while also adding back depre-ciation, amortization, interest paymentsand capital investments in equipmentor property improvements.

Recasting financials before selling a

company may raise eyebrows forthose that have not heard the term before. However, just as a homeown-er “stages” their house before puttingit on the market, you will want to legitimately dress up your business financials. You certainly can work toimprove its appearance physically,and you also should make the num-bers look as attractive as possible.After all, those cash flow numbers willbe a crucial element of how buyerswill determine the price they are will-ing to pay for your business and howmuch money that a bank will be will-ing to lend to the buyer.

Dan himself was not well versed inthe practice of recasting and was notsure what it entails, so he is using theservices of a business broker to guideand assist in the process.

Keep in mind one key principle ofthe selling process: A buyer is buyinghis future, not your past. The only wayto accurately highlight your futureprofitability is by recasting your histor-

ical financials so that the buyer canuse these figures to project out threeto five years, using the new recastbaseline as their starting point. So ifyour broker does not have an under-standing of the automotive servicebusiness or does not take the extratime to dig into your financials for allof the appropriate add-backs, yourbase year could understate your prof-itability, impacting what buyers willpay for your company.


Keep in mind one key principle

of the selling process: A buyer is

buying his future, not your past.


The person providing the recastingservice will ask you lots of questionsabout your expenses and request sup-porting documentation to find asmany legitimate add-back items aspossible. Brokers who have solddozens of automotive service busi-nesses will have the skills and knowl-edge to quickly spot expense levelsthat are above industry norms andsearch for non-recurring purchases orpersonal perks that can be added tomaximize your cash flow.

Case StudyFor example, let’s assume a buyer islooking at two similar auto servicecompanies for sale. Both are generat-ing similar levels of revenue.

Seller A gives the buyer a 2013 taxreturn showing $50,000 in net in-come and $75,000 in officer salary.Thus, Seller A is disclosing$125,000 for this year in Seller’sDiscretionary Cash Flow.

Seller B has his broker preparea detailed marketing pack-age including threeyears of recasted fi-nancials document-ing $250,000 peryear in Seller’s Dis-cretionary Cash Flow.

Which of these sellersdo you think will receive a bet-ter offer? With this example, you cansee how vital recasting is in protectingyou from offers that are too low.

One caveat: My discussion of recasting presumes your financials arein good order and expenses are cate-gorized accurately. If not, you need tostart there and get your financialscleaned up first. If not, no matterhow carefully you documentyour recasting, your actionscould be based on inaccurate

financial information.

Recasting ChecklistThe most important recasting adjust-ment is to clearly document the“owners benefit,” including all perksand personal expenses that may berun through the business. Dan workedwith his CPA and me utilizing the fol-lowing checklist to adjust the past in-come statements (the last three years)for Dan the Auto Man to documentall of his benefits of ownership beyond the salary shown on the taxreturn. Every business and situation isdifferent, but in Dan’s case it was appropriate to add back the followingexpenses:

• All health, disability and life insur-ance premiums and company contri-

butions to his retirement ac-count;

• Dan’s wife’ssalary for parttime administrative

work which could

Seller ADiscretionaryCash Flow

$125,000

Seller BDiscretionaryCash Flow

$250,000




be done by a buyer;• Dan’s teenage son’s wages, since

his occasional work cleaning uparound the shop was not essential tothe business;

• The cost of Dan and his family’scell phone, personal vehicle andmaintenance expenses that were runthrough the business;

• Parts purchased by the business tofix up Dan’s classic 1965 Ford Mus-tang convertible;

• Travel and entertainment expensesthat were not essential to the business;

• Legal and accounting expensespaid by the business for Dan’s newwill and estate planning services;

• Training and seminar expenses forDan’s networking group; and

• New computers at Dan’s houseand his personal laptop

In addition, other recasting actionscould include adding back:

• Depreciation and amortization;• Interest payments on the business

bank loan;• One-time cost of a major write-

down in inventory to remove obsoleteparts;

• Equipment lease payments sincethe small remaining balance could bepaid off at closing;

• Rent paid to Dan as the owner ofthe property over and above theamount to be paid by the buyer;

• The purchase of two new lifts, in-cluding installation, and a brake lathethat were expensed in full by the business; and

• Charitable donations and certainadvertising/sponsorship expenses thatwould not benefit the business.

You Are Not Trying to MisleadBuyersAdding transparency and portraying

the actual potential of your businesswill make it more attractive to buyers.To do this, recast financial statementsto adjust your income statement toshow what would have been real, operational cash flow.

Although it may take some time,don’t underestimate the impact recast-ing financials will have on how yourbusiness value is perceived. It’s timewell spent when selling a company.

The goal is to make the potentialcash flow of your business clear to abuyer, their accountant and theirbank. But be prepared to justify alladd-backs with supporting documen-tation such as invoices and payrollrecords. Most buyers and their accountants will demand a due diligence period to verify all claims.A good broker will orchestrate thisprocess by anticipating the questionsand being prepared to quickly respond.

Showcase your business as attrac-tively as possible to attract the buyersyou have targeted. When it comes tomaximizing the sale price, don’t leavemoney on the closing table by not investing in professionally preparedmarketing materials and cash flowstatements. Your retirement incomeand peace of mind is dependent on recouping all of the valueof building a successful enterprise. SO

Leveraging more than 30 yearsof experience as both an after-market business owner and af-termarket technology executive,Art Blumenthal LLC provides business intermediaryand advisory services to both buyers and sellers of in-dustry businesses of all sizes. Art is a member of IBBA(International Business Brokers Association, Inc.). Formore information, or to initiate a no-obligation confi-dential consultation, visit www.art-blumenthal.com.


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shop owner, july-august 2014

Documents

shop profilejulyaugust

page 1gate1 federalmogul

page gate1c2gate federalmogul

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page c1human resources

automotive servicephoenix

automotive serviceshop

babcox media