If you’re a heavy-duty shop owner, odds are you’re pretty good at making repairs.
But while you’re an expert at fixing things, you might not be, say, all that wonderful at accounting.
Hey, we get it. You got into this business to wrench on things, not crunch numbers every night. But accounting is part of running any business; it’s a language you need to learn if you want to be successful.
Keeping your books in order is a huge part of building your shop’s value, which in turn makes it both a better moneymaker for you and easier to sell down the road. But mastering shop finances can be an intimidating prospect for the novice owner (or even experienced ones). That’s why we’ve put together this post. We dug through our archives to find 10 of our best financial tips to help you get your feet wet.
And heck, if all this seems like a lot, just remember: accountants exist! They like playing with numbers. If you ever have any doubts, talk to one.
10. You can influence your profit.
To make a profit, you have to understand what goes into it. Now, your profit is whatever is left over after covering labor, parts, and overhead costs, but there are levers you can pull to ensure you’re in the best position possible.
9. Make a financial plan.
In an ideal world, you’ll do this before opening your shop, but have no fear: many owners have never once thought about a financial plan. Sit down and take a look at your existing finances and where you’d like to be a week, a month, a year, and several years from now, and work backward to make that happen. This webinar shows you how.
8. Build a revenue funnel.
Everyone needs a way to bring customers into their shop — to funnel them in, so to speak. Building a revenue funnel helps your shop drum up additional business by combining savvy marketing with good old-fashioned customer service.
7. Make sure you’re negotiating properly.
A big part of your repair work centers around the parts your techs use in each job. Are you getting the right price on those parts? It’ll depend on where you are, what the market will bear, and what the part is, of course. Brush up on your negotiating tactics and make sure you’re getting good deals.
6. Mark up your parts.
You negotiated some good prices for the parts you’re using…but that’s only half the battle. You also need to mark those parts up appropriately to make sure you’re making a tidy profit. A price matrix can help you with that. Hey, you run a business, not a charity.
5. Manage your cash flow.
If you don’t have cash, you can’t run your business. You’ve got to manage your revenue carefully, which may include providing terms to certain customers. We generally referred to money owed as “accounts receivable,” and collecting that money can be a project unto itself. We teamed up with our friends at Interstate Billing Service to produce this guide to accounts receivable, including helpful tips to manage cash flow and deal with late-paying customers.
4. Think about subletting.
What happens if someone needs a repair you don’t offer? You can say, “Hey, we don’t do that” and lose that business…or you can sublet the work out to a trusted partner. You keep the customer, the customer gets the work they need, and you forge good relationships with other business owners. It’s a win-win-win.
3. Track your burden costs.
You’re probably aware of at least some of the costs of running a business: you have employees, taxes, and rent to pay, and that’s just scraping the surface. But don’t lose sight of the other costs associated with your operation. These burden costs (also called hidden costs) are a revenue drain, so make sure you’re keeping up with (and ahead of) them.
2. Use a month-end close checklist
Staying on top of your monthly finances is a huge step toward meeting your financial goals. A month-end close checklist helps you see exactly how much money came in and went out, as well as where it went. Sticking to this checklist means far fewer surprises when you check your P&L statements.
1. Get the right shop management software.
Good shop management software doesn’t just schedule appointments or help you order parts, though it certainly can do that. It helps you run your shop and bump up your cash flow by cutting down on paperwork and boosting tech efficiency. Some software can track preventive maintenance and improve your relationships with your customers.
Fullbay is shop management software, and we’ve helped a lot of happy customers increase their revenue and productivity. Are we the right answer for you? There’s only one way to find out: give our free demo a whirl and see what we can do for you!