Let KPIs decide the best business decisions for your shop

June 28, 2019
Repair vs. replace, labor expenses and other shop metrics are driven by the numbers.

Last month, I introduced you to Cory Donenfeld who, along with his brother, owns and operates two Northwest Auto Body locations in Idaho, and I shared how he is using key performance indicators (KPIs) to improve their business.

Here are a few other examples:

Cory said one KPI he keeps a close watch on is the shop’s total expenses for each dollar of labor sold in a month.

“That’s your overhead expenses,” Cory explained. “For instance, in one recent report it was 65 cents per dollar of labor sold. That’s not too bad – sometimes it’s closer to a dollar – but overall I want to see that come down.”

Cory is right to want to see that number remain under a dollar. I’ve seen shops where it costs them a dollar or more for each dollar of labor sold. That means they are surviving only on profits from parts, sublet and materials. For Cory and his brother, the number may be higher than in some other collision repair businesses because of their current costs related to buying the business from their father. So he’s smart to be focused less on what the actual number is than on seeing a downward trend in it overall.

KPIs also are helping Cory and his team analyze a number of other aspects of the business.

“Some of my guys thought it was more profitable for us to do repairs as opposed to replacing a part,” Cory said, for example. “So one month, when there was a borderline decision, that could go either way, we opted to replace the part. The following month, we did the exact opposite. We checked the KPIs and found that because of our discounts and other aspects, it’s more profitable for us to replace parts than to repair them. So if there’s a borderline decision, that’s the way we go. I feel like we’re just started this, that there’s so much more we can learn from these numbers.”

But one of the other real powerful uses of tracking KPIs is using them as a management tool. Cory shares his monthly KPI report with his team, highlighting areas that appear to need some attention.

“Some were a little resistant at first, feeling like I was trying to point out their problems or weaknesses, or make a bigger deal out of something that I wasn’t,” Cory said. “I had to explain to them that we were doing this so the whole company can grow. If we don’t know what to fix, we’re not going to be able to fix it.”

It took a little time to get them on board, he said, but now he can send out the report without saying anything about it.

“They now come to me and say, ‘I know why this number is off,’ or ‘why that one was down,’” Cory said. “They are looking into it, and are on top of it without me saying anything. I have some really great employees who, like me, want to see the company grow. Once I got them on board with the KPIs, they love it.”

Cory said tracking KPIs has become a critical piece of reaching their business goals.

“My brother and I want to get to the point of not working in the business but working on the business,” he said. “I feel like the only way we can do that and feel comfortable is to be able to track these numbers. Years from now, when I feel I can let a management team take over, I can just follow these numbers to see if we’re making money and where we’re losing money so we know what we need to focus on.”

In upcoming columns, I’ll share how the owner of an even bigger collision repair business built the value of his company by using KPIs to keep an eye on his shop locations without a need to even set foot into each of them.

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