It’s Summer, and Business Is Idling
Halfway through the summer season, Watkin’s Eurocare Auto Service is still waiting for an acceleration in business from vacationers and drivers who want their cars in good shape for hot-weather trips to the beach and the mountains.
The slow start comes on top of months of red ink and flat sales at the Laguna Hills business.
“We can’t go on draining savings,” said Karen A. Rosiello, who co-owns the shop with an investor who leaves the day-to-day operations to her.
The amount of money she’s had to pump into the business to make ends meet has decreased recently, but the needed upturn in sales has remained elusive. The sluggish summer season has put additional pressure on the private company’s finances and fueled Rosiello’s plans to diversify sales and double the shop’s capacity to six repair bays.
Rosiello, who was a corporate controller at a hotel management company before she bought a 45% stake in Watkin’s last fall, has done her best to cut costs, advertise regularly and emphasize service by offering free customer pick-up and drop-off, quality work and a sparkling clean shop.
“It’s the hotel [background] in me,” said Rosiello, who still folds the toilet paper into a neat little point when she cleans the shop bathroom each morning.
Rosiello is taking classes to learn how to manage an automotive repair business and increase her mechanical knowledge. But she knows that her “unbelievable drive” and the top-notch mechanic who has been with the shop since it opened 10 years ago aren’t enough to meet her goal of tripling sales and taking a salary within two years.
Consultant Leonard R. Fuller agreed. And he had a shorter time frame in mind, given that the three-person business is losing money with no major change in sight.
“I’m not painting a gloom-and-doom picture, but she has to take cognizance of the fact that the current situation is not good and it could become critical if her own financial position ever dictates that she should not continue to fund the business at the rate of about $2,000 a month,” said Fuller, who started his own consulting firm in Los Angeles in 1990.
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On the plus side, Watkin’s Eurocare Auto Service provides honest, reliable, courteous service, he said. That has won the shop, which works on foreign and domestic cars, a loyal customer base. Leonard estimates that 60% of its business comes from repeat customers. That’s a good track record, but as any savvy business owner knows, a business cannot grow unless it can attract new customers to replace existing customers who move or buy a new or leased car that needs less repair.
“[The company’s] inability to attract enough business to not only break even but to make a profit” is a negative factor, the consultant said.
Another obstacle to growth is the small size of the shop, said Fuller. With just three repair bays, it simply doesn’t have the physical capacity to bring in much more work, even though it needs the additional work to turn a profit.
His road map for Rosiello’s success includes recommendations that the business owner use her financial know-how to create a break-even analysis, draw up a discount program for existing customers and aim to increase business from new customers. He suggested she evaluate the company’s progress in six months.
“I would give myself six months to demonstrate some reversal . . . then another six months [if necessary] to see if you could go into more drastic corrective measures,” said Fuller.
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Before she begins, Rosiello needs directions to reach her destination--her goal of increasing sales and taking a salary, the consultant said. He suggested she set up a minimum of three scenarios under which the business can reach the point where profit allows Rosiello to pay herself a fair wage. Each scenario should explore a different road the company can take to reach that point, he said.
First, Rosiello will need to know how much revenue must increase to cover costs. Fuller figures she’ll need to raise revenue at least 25% from the current level just to break even.
The business now brings in about $20,000 a month, of which roughly half goes to pay for parts. Increasing sales 25% would mean bringing in an additional $5,000 in business each month.
“She’s got to ask herself, ‘What would we need to do to bring in an additional 25% in revenue?’ then look at her current cost structure,” said Fuller. How many more brake jobs would it take to increase sales by $5,000, for example? At an average of $200 per job, that would mean an additional 25 customers a month, or about one a day, he said.
To help Rosiello achieve that goal, Fuller suggested offering discounts to existing customers. Repeat customers might earn a discount on certain maintenance or repairs. Once they have rung up a certain volume of business at the shop, Rosiello could offer even greater discounts.
But Fuller cautioned her to discount only the more profitable jobs, such as brake repairs, as opposed to such things as oil changes, which are a loss leader for many auto repair shops. Rosiello might also consider giving customers credit toward certain repairs or maintenance items for each new customer they refer to the shop.
Calling or writing to her customers to alert them to the new discounts is a good way to keep in touch with existing customers, Fuller said. And building that kind of relationship is important for any business owner, he said.
Rosiello knows she also needs to increase the flow of new customers. Fuller recommended she aim to attract one new customer for every three existing customers.
To reach that target, the consultant suggested several steps, including assessing the effectiveness of her current advertising, with which Rosiello has been unhappy. He also suggested she draw up a list of qualities, big and small, that distinguish her shop from the competition. Whatever the qualities--lower cost, quicker turnaround or greater reliability, for example--they should be communicated to customers by Rosiello and her mechanic repeatedly. Those qualities could also form the core message of any sales brochure the company designs, Fuller said.
To help her decide which qualities to tout, Fuller suggested she survey customers who come into the shop. The survey would aim to determine their level of satisfaction with the business. It could be done verbally or in a short written format--something customers could fill out while they wait for their paperwork to be drawn up. Any business owner would benefit from knowing what customers like and dislike about a business and what it would take to bring them back.
If Rosiello sees an upward trend in sales and profits after two or three months, the consultant suggested she act on her plan to increase the shop’s capacity and hire another mechanic.
“It would require her to be much more of a manager, much more of a taskmaster,” said Fuller. But expansion is a logical step if the shop is to significantly increase its business.
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For now, Fuller recommended that Rosiello focus on steps to quickly boost sales.
“Here’s what I’ve said to clients for 27 years: ‘When the house is on fire, you don’t talk about fire prevention,’ ” Fuller said. “She has a house that may not be engulfed, but certainly there are ash sparks. Her main [goal should be] to take corrective measures to put out the fire.”
Armed with his recommendations, Rosiello says she’s ready to roll.
“I have the drive to get almost anything done,” she said. “But sometimes I might not have all the knowledge I need to get there.”
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This Week’s Business Make-Over
Company name: Watkin’s Eurocare Auto Service
Headquarters: Laguna Hills
Type of business: Automotive repair shop
Status: Corporation
Owners: Karen A. Rosiello and Richard Black
Founded: 1989; new owners acquired it in 1998
Start-up financing: $30,000
1998 sales: $248,850
Employees: 2
Customers: Locals
Main Business Problem
How to improve sales through effective marketing
Goal
Triple sales and double space within two years
Recommendations
Do a break-even analysis that includes at least three scenarios under which the company would make a profit sufficient to allow the owner to take a salary.
Give the business six months to stem its losses, then reevaluate its direction.
Use discounts to increase business from existing customers.
Aim for new customers to account for 25% of the shop’s client base. If sales increase, consider taking action to increase capacity and hire another mechanic.
Meet the Consultant
Leonard R. Fuller is president of Fuller Consulting, which he founded in Los Angeles in 1990. Previously he was a partner at Coopers & Lybrand in charge of management consulting to state and local governments in the Midwest. Fuller was assisted by his son, Sheldon L. Fuller, a summer intern.
