with Mike Anderson
This month, we “ASK MIKE” for his thoughts on where shops should – and shouldn’t – be investing their money. We at Hammer & Dolly hope you find the following exchange useful, and we encourage you to reach out to us if you have a question for Mike on this or any industry-related matter that he can answer in a future issue.
Hammer & Dolly: It’s sometimes difficult for shop owners to determine the right investments to make for their businesses. What are the most critical areas in the back end where they need to start putting their money right now?
Mike Anderson: Number one, the industry is still trying to determine how quickly the electric vehicle boom is going to hit. I don’t know if shops want to run out and start buying a bunch of EV equipment until we can figure out how fast that change is going to happen. Still, I do believe that you should have a facility assessment performed to determine if you have enough power coming into your building for when the EV wave does come. With EVs now, it’s not about equipment – it’s about whether your building is equipped for the electrical needs of the future.
Number two, we must keep in mind that we need to torque fasteners to the proper specifications with a torque wrench. A lot of people don’t realize that those torque wrenches need to be calibrated every so often. Some OEMs – Subaru, for example – require that. Shops need to show proof that the torque wrenches have been calibrated whenever certain OEMs do an inspection. Shops may want to consider investing in a second torque wrench so that if they send out one to get calibrated, they have another one to use. That’s one thing a lot of shops don’t think about. In reality, every technician in the shop should have a torque wrench of their own.
Another thing I’m finding is that a lot of shops aren’t doing computer software updates on their welders. That could cause a weld to fail. Some of this stuff isn’t high-dollar, but these are things that a lot of people aren’t thinking about.
When I was a shop owner, I would contact all my equipment vendors every October and ask them to give me a quote for what it would take to get my equipment serviced in the next year. I’d reach out to my IT person to see what upgrades I would need to make in the next year. Once I got that information on these things, I would budget for them.
If you think you’re going to need a spray booth within the next couple of years, I’d suggest doing that sooner rather than later because you’re going to see an increase in larger vehicles – like Amazon vans, Rivians and Mercedes-Benz sprinter vans – that will require a taller and wider booth. It’s a good idea to consider looking into a larger booth now, so you can be equipped to repair those larger delivery vehicles.
Also, there are always opportunities to acquire additional locations. If there’s somebody older who wants to get out of the business, cash counts. If somebody’s trying to sell their business and you have cash, I’d encourage you to grow by buying that business.
H&D: What are some areas in the front end that would benefit from new financial investments now and not later?
MA: Training is a piece that a lot of people miss. We send our technicians to training, but we don’t always send our bookkeepers or customer service representatives to it. The customer experience is more important today than ever before. Your customer service reps need to understand how to deliver an extraordinary experience. It’s also important to train your people on any new features with your management systems. When was the last time you brought in somebody from one of the management system providers to do a one-day training to make sure your people stay up to speed with things? Investing in negotiation training is also very important, as it helps equip your people to have those hard conversations with third-party payers.
Right now, a lot of shops are having record sales and making decent profits. If there was ever a time to apply for a credit line just in case something bad ever happens, it’s now.
H&D: Let’s focus on the other side of the coin for a moment. Are there any areas that shops shouldn’t invest in if they want to remain successful?
MA: My dad once told me, ‘It’s not what you make; it’s how much you spend.’ A technician may say, ‘Man, if I can only make $70,000 a year, I’d save more money.’ Then they make $70,000 a year and go buy a bigger house or a nicer car. Then they say, ‘Man, if I can only make $100,000, I’d save more.’ Then, they earn $100,000 and immediately get an even bigger house or an even nicer car. We just need to be careful with doing things like that. I encourage all my clients to have a minimum six-month operating capital in the bank. That way, if something happens and they don’t have any income, they can still survive for those six months.
Want more? Check out the January 2024 issue of Hammer & Dolly!