Up Your Business is an exclusive GEARS Magazine feature in which I share stories, insights, and reflections about business and life.
I recently had conversations with two separate shop owners who talked about their desire and motivation to retire with their health and plenty of time to enjoy their retirement years. They both said the same thing in two different ways… “I want to retire while I’m healthy enough to do the things I’ve always dreamed about doing after I retire. I don’t want to die in my shop.”
Whether you’re just beginning your career, deep into it, or getting close to retirement, this article applies to you. It’s something we all need to think about and should have a contingency plan to deal with. After all, nobody can predict when they’re going to die or become too sick to work, and be unable to enjoy life after years of working.
In 2015, I wrote a 3-part series on how to decide if it’s time to transition to retirement. In a nutshell, it boils down to you being able to answer three questions with a yes.
- Have I had enough? Another way to look at this is to ask yourself if you’ve lost your passion for it or even worse, you dislike what you’re doing.
- Do you have enough? Essentially, this question relates to whether you have or will have enough money or income to retire.
- Will I have enough to do? As appealing as it might be to think about how nice it would be to retire, unless you have something to pursue, something you’ll really enjoy that’ll keep you occupied, it won’t take long until you become discontented. I personally experienced that and that’s why I still write, speak, and occasionally take on consulting clients.
If these topical questions interest you and you’d like to examine them in more detail, you can find the articles on the GEARS Magazine web site. The first one was in the May, 2015 issue.
Whether you think you’d like to sell your business or not, you should always be doing things to increase the value of your business. Let’s look at four mistakes that kill auto repair shop values. Of course, learning about these mistakes is of no value unless there’s something you can do to fix them. Let’s take a look at what you can do about these mistakes if you’ve already made them.
YOUR NAME IS YOUR SHOP’S NAME
Mistake number one is choosing a business name that limits your marketability and therefore the value of your business. William Shakespeare posed the question, “What’s in a name?” To paraphrase, he went on to say, “A rose by any other name would smell as sweet.”
While this might be true of roses, it’s simply not the case when it comes to business names. In particular, it’s not the case when naming a business that’s as relationship-driven as an auto repair shop.
Many shop owners proudly attach their names to their businesses and fly it on their signs with pride as an emblem of honor. They drive it even further by saying things such as:
- Owned and operated by the Johnson family for (blank) years.
- We stand behind our work with our name.
- Quality goes in it before our name goes on it.
- Our name is our warranty.
These are all great, and they go a long way toward building your relationships, but what happens when you leave the business?
A wise buyer will be concerned that the business will suffer when the owner moves on. The customer bonds with the business and employees may not be as strong as the relationships customers have with the owner.
Here are some questions to consider in determining how much your clientele depends on their personal relationship with you.
- Do most people ask to speak with you or are they just as comfortable speaking with whoever answers the phone or greets them when they come in?
- Do customers accept the recommendations from your service advisor(s), or do they try to go around them to speak to you before they’ll approve the repairs?
- When there’s a misunderstanding or customer upset, do you have to step in to resolve the situation?
If this sounds like your shop, and if you’re planning to sell or retire in the near future, it might be time to put some distance between your name and the business.
So what can you do if, 30-plus years ago, you proudly put your name on your shop — Jack Johnson’s Expert Auto Repair — and now you want to sell it and retire to your well-deserved life of leisure? Unless the new owner, by some coincidence, shares your name, he’s not going to want to pay much for the name itself. And if he changes it to Jim Wilson’s Expert Auto Repair, he’s practically starting over in terms of name value.
Here’s the good news. You can turn this otherwise negative situation into a value builder. The challenge isn’t how to keep your old customers, but how to attract new customers. You’ve built a relationship with your existing customers and most of them stay with you out of habit. Fortunately, most new customers today will find you by doing an internet search on their smart phone and clicking “call.”
Here’s a marketing strategy that provides value for a new owner: Through the miracle of the internet, you can capture customers and prospective customers by using multiple key words and a combination of domain names that all link to your web site.
It’s as simple as changing your name and not changing your name at the same time. What on earth does that mean? With the right internet strategy, you can phase into the new name or even keep the old name alive to add name equity for the new owner along with their new identity. Here are some examples of additional domain names for Jack Johnson’s Expert Auto Repair. The only limitation is your imagination.
- Jack’s Expert Auto Repair
- Johnson’s Expert Auto Repair
- Expert Auto Repair (insert city or geographic area)
- Expert Auto Repair in (insert local zip codes)
- Best Auto Repair Shop in (insert city and zip codes)
- Auto Repair Experts
- Johnson and Wilson Expert Auto Repair
Now, once a shopper is on your web site, you can choose a strategy for announcing the transition into the new ownership. You might even just choose to keep it the same. You can be as transparent as you wish and take as long as you wish to complete the process.
YOUR LOCATION IS YOUR SHOP’S NAME
Mistake number two is similar to number one: naming your auto repair shop after a specific location. Let’s say you named it Oak Street Auto Repair. This can become problematic. Here’s a list of just a few reasons a specific location could be a bad idea for the name for your business; some are obvious.
- You move to a new location on Main Street.
- The traffic flow moves away from Oak Street.
- The Oak Street neighborhood changes.
- You decide to open additional shops and you need to identify them by more than one specific location.
- Your prospective buyer wants to move the business.
The solution to this situation is the same as with number one. Tap into the power of the internet and manage the process. Maintain a virtual presence at the original location while promoting the new physical location.
For either of the above two mistakes, if a buyer offers a lower price because of your business name, you can always counter by asking how much they’re willing to pay without the name. They know there’s value in the name… they’re just negotiating.
LACK OF ACCURATE HISTORICAL RECORDS
Mistake number three is failing to provide essential financial and operating statements to the potential buyer. To get top dollar for your auto repair shop, you’ll need to produce credible records.
It’s best that you have a business management software system that didn’t just do estimates and write repair orders, but also maintains accurate customer data, vehicle history, sales and financial records, along with reliable business reports. These things are what an informed buyer will require, and they’ll add value to your business.
Related to this, whether done within your software or by an outside accountant, you’ll need accurate financial statements. The days of telling a potential buyer that you make more money than it shows on the books are long gone. Most buyers will want to see your books and tax returns for at least two years. Astute buyers will have their own accountants review your books and compare them to the various reports in your software.
NO STANDARDIZED OPERATING SYSTEM
A fourth value-killing factor is not having clearly defined operating systems and procedures. Even though new owners will most likely make many changes to how the business operates, they’ll place a high value on a business that has good systems and procedures in place.
This can be in the form of a printed operations manual, but even better is if your shop management software system is designed to drive your procedures. Many software systems have replaced the need for a printed operations manual.
These systems include automating procedural steps, such as telephone, meet-and-greet, check-in, diagnosis, estimating and selling, workflow management, repair order completion, warranty issuance, and payment processing. An automated customer follow-up and retention system is another huge value factor.
Having the operations systematized widens the field of prospective buyers. Today, a large number of professional firms like dental offices, medical practices, beauty salons, legal firms, and more that are owned and operated by people who don’t know how to do the work of the business but know how to operate a business. It’s also why so many people opt for a franchise instead of an independent shop: The franchises have those procedures clearly defined.
JUST THINK ABOUT IT
In the recent past, proactive strategies like these weren’t even possible and name equity was perhaps the biggest factor in determining the value of auto repair shops. In fact, everyone scrambled for business names that started with the letter “A” to jump ahead of the competition in the Yellow Pages. Today, even senior citizens don’t use the Yellow Pages, and younger generations don’t know what the term “Yellow Pages” means.
I’ve mentioned just four mistakes that kill auto repair shop values and some strategies to fix them. While there are countless others, you’ll be more likely to sell your business faster and for more money if you avoid these mistakes.
But there’s no greater mistake than forgetting that your business is only a means to an end. Take time to think about what you want that ending to look like. You can’t go back and make a new beginning, but you can start today to make a new ending.
About the Author
Thom Tschetter has served our industry for nearly four decades as a management and sales educator. He owned a chain of award-winning transmission centers in Washington State for over 25 years.
He calls on over 30 years of experience as a speaker, writer, business consultant, and certified arbitrator for topics for this feature column.
Thom is always eager to help you improve your business and your life. You can contact him by phone at (480) 773-3131 or e-mail to firstname.lastname@example.org.