RIGHT NOW, IT’S TOUGH – HOW TO FIND GROSS PROFIT

RIGHT NOW, IT’S TOUGH – HOW TO FIND GROSS PROFIT

Profit Margin - Mark SelbstDo this Thing…
Do this One Thing…

Allow others to Do this One Thing and you will Guarantee yourself

Much Pain that you could Do WITHOUT.

I beg of you to ensure that your people, the ones dealing with the customers on the phones quoting and estimating don’t start or continue to cut or trim or discount on price. One in every three conversations I have always mentions that front of house is not quoting correctly or chipping profit of the quote or estimates… this is no time to allow anyone to be sloppy or stupid and one could argue and I will – that it’s probably more important than ever to be accurate and profitable. 

Some folks within your business will be shell shocked right now with all that’s going on and they could in a deliberate and intentional way think that to get and keep car count coming in the door they have to discount just to get the work. This is what I call Price Buying Salespeople who project their feelings onto their customers. This is not as uncommon as you may think! Projection is the key word here… it’s the word psychologists use to communicate the idea that people transfer their ideas, feelings, and emotions onto others. This is why being totally anchored as a business leader is so important right now. 

Salespeople, your people are the ones who say “Mate, I’m just like everyone else, I eat, drink and drive a car and I buy on price. Therefore, our customers buy on price.” But unfortunately, that’s faulty and dumb logic. Just because you buy on price doesn’t mean that your customers buy on price, any more than just because you like buying blue cars, means that I like buying blue cars. I don’t, I like white cars and you may not. Projection! All customers look like price buyers. Why? Well, all buyers look like price – buyers to a price – buying salesperson! 

A price buying salesperson will tell customers to buy elsewhere, you can get it cheaper elsewhere. This actually happened to me at JB HiFi six weeks ago before this sh!t storm started. I went into the store and asked for a phone splitter for my modem and the sale guy says ‘hey they’re cheaper at Bunnings’… Wow! I thought imagine owning this store and having the head of the sales prevention team working for you? This crap is going on everywhere! 

I’m NOT saying to do this… But it is extremely instructional: For example, if you currently have a 40% gross margin, and you are considering a 10% price increase, you can sell 20% less and you will still have the same total gross profit dollars in the end. If you are wondering? YES… This is taking off from where the March R.A.B.S.M.G. Newsletter left off – Page 7 Money Math For Your Automotive Business for your reference. Not nearly enough people are working on this period. 

The Bird Brain Idea that somehow, We Can Make It Up in Volume. Here is the thing, when any business gets into a tight spot financially, it is because some genius – often the smartest guy in the room – gets a bright idea that one can cut or shave price and make it up in volume to at least look “competitive”. 

Right now, none of this should be on the menu; no shaving, no slippage, no discounting, no sloth, what should be on menu though is the word like “Eke” you must without fail! Eke – out profit and margin on every sale. Please ensure you have meetings with your salespeople/team every morning to ensure they understand that they must eke out survival money. “Revenue is for your Vanity; Profit is for your Sanity/Survival.” 

Increase Prices - Gross Profit Dollars - Mark Selbst

How to find Gross Profit,
without a Price Decrease and total unit sales 

 

If you decrease your prices (a discount, cut, shave price for example), how many more units do you have to sell to keep gross profit dollars the same? What if you’re lowering prices to increase sales? We’ve calculated the impact of a price decrease on profit in the Excel spreadsheet illustration below. 

Find the gross margin of your product or service in the left column, then find the column that shows your price decrease. Where the two numbers intersect is a number that shows how many more you must sell as a result of a price decrease to maintain the same gross profit dollars

<p%EFor example, if you have a 35% margin, and you are considering a 10% price decrease, you must have a whopping 40% increase in unit sales to end up with the same total gross profit dollars. This is important to know if you are considering a sale in an attempt to increase unit sales of a product or service, especially if it has a low gross margin to begin with. 

Decrease Prices - Gross Profit Dollars - Mark Selbst

Folks as you can clearly see, no time is a Good time to tinker/discount. If you have a razor thin 30% gross margin and you drop your prices 20%, you must triple (X 3) your unit sales (i.e., increase 200%) to have the same gross profit dollars. Keep this in mind and show your staff what happens if you’re lowering prices. 

Lastly, DO NOT stop marketing! 

Please ensure that you are “Thanking Everyone” for supporting your business, your staff… Cut a short video and stick up on Facebook! 

Maybe run a Promotion!
Need Ideas from Mark – Email Here
Need a Call with Mark – Click Here

Take Care
Mark Selbst

LOST CUSTOMERS?

LOST CUSTOMERS?

Lost Customer Tally. 

This is a growing topic of conversation.
(Could it be Buyer’s Remorse?)
Workshop owners DON’T always know what their Lost Customer Tally is.

This is something I measure in any business “like a hawk”.  It is something most workshops and marketers have going on in the background… but few can actually give me a number, and even fewer do anything about it. Often, when customers walk-off, it’s thought of only in relation to bad google reviews and customer complaints about the phone. Who on your list is sleeping around with the competitor?

This is a BIG Issue in most businesses and not just Workshops, and it has a real impact on the bottom line. It is something that a business owner should NOT wait to delve into or find out about when there is a slump from one month to the next, downturn in the economy or when car count dwindles to a halt. There is a “number” of customers who buy but never return. The client who stays a while often without notice seems to suddenly and unreasonably leave with their wallet in hand and Business owners have no idea why. Customers are disappointed for a variety of reasons, often they’ll never utter a word. Perhaps they just weren’t wowed enough, for them it was too much sameness. Surveys and consumer opinions can reveal a bunch of actual faults in the products, service, customer care, poor management of customers’ expectations and lousy follow up after the sale. You’ll hear me say this more than once! But hardly anybody ever becomes a customer via one sale. There is the actual sale of the first product or service. Then there is the sale after that particular sale, of satisfaction – hopefully enthusiasm with the purchase just made. If this sale – after – the – sale is absent from your business’s “stickiness system” you ought to look into it and fix it. It is missing from most businesses.

Two weeks ago, I asked a workshop owner who was keen to increase car-count for his workshop to look at WHO hasn’t brought their car back for an extended period of time. To his credit, he did his homework and came back with the lost customer tally of a little over 200 and he went back approximately 2 years to see who had not returned.  Now if you divide 200 by 45 working weeks, that in-turn calculates to around about 4.5 cars per week. At an average work order of $360.00 and let’s say 170 customers come into the workshop twice a year that equates to $122,400 and 30 customers come in once a year that equates $10,800 add those two amounts together that $133,200 of slippage and if it is not halted over a 5 year period that adds up to a large sum of money being left on the table.

Take the time to look at your Lost Customer Tally count in your Business.

Take Care
Mark Selbst