Dan:
Okay, so welcome back. We’re gonna do another podcast as a video podcast series. I’ve got Jimmy here with me, Jimmy Alauria, welcome.
Jimmy: Hey Dan, how you doing today?
Dan:
Yeah, all is good. All is good, man. Hey, we had picked up on this last thing. I wanna get right into it. We were talking about hiring techs, really hiring any staff for your shop. It’s interesting times right now – we went through a bunch in this first one. And for those of you who did not see that, you want to see number one, we’re gonna do lots of podcasts, but this is a hot topic. So Jimmy, we talked about a lot of things in this last one. Let’s jump straight into it. So what do you got for us this this time? We’re gonna talk about how the landscape for automotive technicians has changed a lot and it’s a very recent change.
Jimmy:
It’s not like it’s been around for five or 10 years. It’s been coming for that long, but all of a sudden, I don’t know if it was COVID or, you know, what changed, but all of a sudden the scarcity of technicians changed quite a lot. And I don’t know that it’s necessarily a scarcity of technicians as much as it is the fact that the population in general is a little bit more conservative and they’re afraid to move around. So, you know, it seems like there’s a huge scarcity of technicians, even though there’s really just as many out there as there were a year ago. Okay. So we wanna talk a little bit about, you know, that landscape, and what shops need to be doing and thinking with, and not just reacting to the hype and what everybody’s talking about, and how much you have to pay ’em or what you can’t pay them. Things like that.
Dan:
Well, light it up. You know, I, I wanna talk, you, you put some points forward to me that I thought were very interesting. You know, the fact that costs are going up labor rate increases, you know, let’s talk about that for a second. Yeah. I mean, we all know in general, we’re seeing costs go up. The consumer is paying more. They’re paying more for gas. They’re paying more for cars, used car market. There’s used cars right now that are selling for more than they were new. They’re paying more for beef. They’re paying more for, I mean, you name it. The consumer knows that inflation has taken hold and they’re paying more. The truth is that that’s affecting our shop as well. We’re paying more for parts. We’re paying more for utilities, we’re paying more for insurance.
And the only way that we’re as a business gonna be able to survive is we have to adjust our pricing based on those costs going up. Sure. So finding technicians, hiring technicians, paying technicians is no different. It is a direct cost. What I mean by direct cost is that for every hour of labor that technician puts into that car, you’re having to pay now, even if you’re paying a technician salary or hourly, what you’re paying them to do is going towards fixing that car. So it’s not overhead per se. It is a direct cost. It’s no different than we used to buy a water pump for a $100. And now it’s $110 or $120. That’s the same thing that’s happening with the technicians. It used to cost us $25. Now they’re costing us $35 or $45 an hour. So those direct costs are affecting the shop and they’re affecting the bottom line, and shops need to adapt the way that they’re doing business to the current times.
We can’t just say, well, I can’t afford the master technician that I need. He costs too much. There’s no alternative. It’s just like, if you’ve got a car that’s coming in and you have to buy part for it, you’re gonna pay what the market bears for that part. You know, maybe you can find a used part or something, but that’s not the right way to do the job necessarily. So you have to adjust your pricing and we’ve gotta get better at selling our services based on that new price.
Dan:
Nice. Okay. Good. Well, let’s talk about that. I think you you’re spot on, you can’t just, not buy a part. You, you’re not gonna pay current labor rates. So let’s talk about how you look at this and you did this whole analysis of service and how to do it. Can you touch on that?
Yeah. You know, it’s, it’s interesting. Like I hear shop owners all the time that will say, I’m just not willing to pay a technician that much, or I can’t afford these guys. They want too much. And they’re passing by a really qualified guy that can flag 50, 60, 70 hours a week and they’re getting hung up on what these guys want to make. And you’ve gotta take the viewpoint of the technician right now. You know, they know that they’re scarce and they know that they’re becoming more and more valuable. So put yourself in their shoes, like, what are you going to do? Obviously you can’t compromise your financial ability to pay them. Like you can’t pay a technician $60 an hour in Phoenix, Arizona and remain viable.
That’s just not gonna work. You know, that doesn’t mean that’s not true in New York City. So, that number of how much you’re paying a technician is really relevant to the area that you’re coming from. If you’re in a more rural area in Minnesota, you know, your high guy might be $25 or $30 an hour. Whereas, you know, you talk to people in New York or New Jersey, these guys are making $45, $55 an hour. So we wanna make sure that we’re really thinking with what’s going on with the technician market. How much more are they worth? It’s like this, you know, people going crazy last year on, this is a bad example, but it’s true. How much were people willing to pay for a roll of toilet paper last year?
Dan:
Right, right, right. And all of a sudden, just outta nowhere, it became scarce. And now, you know, Costco marks up their\ toilet paper that used to cost less, I don’t know, $20. And all of a sudden now it’s $25. Why did they charge that much? Do you think it was costing them that much more to get it? Probably not. It’s because that’s what they could get. Right. It became scarce. They raised the price, and that’s what the market would bear. So it’s the same thing with, with auto technicians. They they know that they’re scarce and they are gonna demand more money. Now, how does that relate to your shop? Do you just roll over and say, I’m gonna pay ’em whatever they want? Not necessarily, there is some compromise.
Jimmy:
This guy wants $45 an hour. And I can’t afford that because my labor rate’s a $100 an hour and I can’t pay him 45% of my labor rate. Right. And that’s the truth, right? I mean that’s a high percentage of cost of labor. But at the same time, the, the owner needs to become a good salesperson about their shop and selling the opportunity. You know, we were just talking with some shop owners the other day. And one of the things that was brought up was that if I pay a technician, some of these guys, what they’re asking, I gotta pull that money from some place like that might be, I’m pulling it out of marketing, or I’m pulling it out of commissions to other people in the shop. Or I’m not able to hire that fourth, fifth, sixth guy that I need, because my cost of labor is too high.
And I can’t add that guy, you know? So it becomes, now, now it becomes a, a situation of, okay, he wants $45. I’m used to paying $30. How do I get this guy to commit, to coming to work for me for a compromise, maybe $37.50, maybe $42. I don’t know, but it’s selling your opportunity. And, and if you have a good shop, meaning you’re the shop in the area where the parts guy comes in and says, yeah, everybody’s slow. You guys are slammed. If you’re that guy, there is opportunity there to sell a technician on the opportunity of we’re always busy, right? It was one of the things that I used to tell technicians that would come in and, you know, back, let’s say 10 years ago, they’d come and say, I want $35 an hour. And our top guy at that point was about $28, $29 an hour.
And I would say, you know what? I’ve hired guys. And I’ve given them $35 an hour. And I made that mistake. And here’s what happens. You want $35 an hour because whatever your income demand is, let’s say it was $1000. So he’s used to making 30 hours a week because this shop was barely paying him 30 hours a week. Sure. That was his comfort zone. That’s what he needed to pay his bills. And so basically he looked at his average production, multiplied it by what he needed per hour. And that’s where he came up with $35 an hour. Sure (laughts) right. You know that’s where these technicians get their number from, it’s because they work for shops that are only paying them… Yeah. Guy comes in, he is making $40 an hour. Okay. Well, let me see your pay stubs.
Oh, interesting. You’re averaging 25 hours a week, right? Oh, so what do you need to pay your bills? Oh, about $1000 a week. Okay. So that’s how we got to $40 an hour, right? $40 times 25 hours is a thousand bucks. Right. So it’s a great question to ask in the interview process when we’re talking about rates, and say, hey, good – how many hours are you getting paid right now? And that would actually expose that. It does. And that’s one of the questions that a lot of people fail to ask is, let me, you know, (laughts) just like, we have that old joke that says customers lie. Potential employees lie. Sure. Okay. They’re not through the money. Yeah. And it’s not to be savage or anything like that.
They’re trying, they’re fighting for a better standard of living. Sure. So, nothing wrong with that. You know, I made $85,000 last year. Okay, good. Let me see your pay because not, I don’t want you to prove that you made $85,000. I wanna see how much production you did if you’re making $35 an hour. I wanna just divide that out because that’s gonna tell me what their real production is. And I don’t do that all the time. But I have done that in the past because I wanted to actually see what their production is, some guys won’t even think what I’m doing, but that’s actually what I’m doing. I wanna see if, what they’re telling me matches up to what they’re asking for. Gotcha. Okay. Okay. Good. And then, and then we talked about you and I talked about this, you know, the real cost, your real biggest expense is not gonna be what you’re paying these technicians.
Dan:
What’s the real big cost. What’s the real biggest expense. Jimmy, the biggest expense that you have to look at when you’re missing a technician on the floor is what is your shop not making right now? Because you don’t have that technician compared to what you’re making without ’em.
Jimmy:
Right. Right. So if you were to make, let’s say that you were gonna add a technician to your shop. Shops are busy right now, Dan. It’s not like there’s anybody out there that’s not busy. I mean, we’re kind of in Arizona, especially right now, it’s 110 degrees today. People are keeping their cars longer. We all know that there’s not a lot of used or new cars available to buy. Shops are busy. Okay. So the biggest thing that people fail to look at is that biggest expense, the difference between what you could be making, or you should be making, and what you are making.
So what’s the difference of that master technician, that’s asking for 35 or $40 an hour, if he can flag 40 or 50 hours per week. And your labor rate is a, this is a slow labor rate. But if your labor rate’s at $100 an hour at 50 hours, right. That’s 50, that’s $5,000, right. At 50 hours, that’s $5,000. So double that with parts that’s $10,000 a week that that technician could be producing for your business. So if you’re doing $20,000 or you’re doing $30,000, and that guy that wants the 40 an hour could make you an extra $10,000 in sales. Yeah. Is that gonna lower your profit margin? Certainly it will. If you don’t adapt to that new cost, like I was saying at the beginning, we have to look at adapting our businesses around the new cost. But that cost, that real expense is not the $40 an hour that the guy’s gonna get.
It’s the $10,000 of potential income that your shop is leaving on the table because you don’t have that guy in the bay. Right. And we’re, you know, I hear shops all the time, “Oh, we’re two weeks backed up.” That’s not something to be proud of. That’s not a bragging point right there. No, that means that you are backlogged with potential income two weeks. How much business are you losing? ‘Cause people are calling up and saying, I can’t get you in for two weeks. It’s a funny thing. That’s how I got into the diesel business. We’re general repair and diesel. And it was, people were getting called. They were calling the dealership and they were telling them, yeah, we’re two or three weeks backed up the independent diesel shops. And the dealerships were two weeks backed up and I’m like, that’s ridiculous.
So I started getting into the diesel business and we still have a quick turnaround time. Sure. I mean, major repairs still take major repair time, but you gotta realize if you are telling customers new and existing, that you’re two weeks behind. If they need their car, they’re going someplace else. Right. So how much is that $40 an hour guy really costing you? Potential new business, existing customers, plus whatever you’re leaving on the table every week. That’s not getting done. That’s the expense you gotta look at. And, and I know it’s hard to confront and I know that you think that you’re gonna lose a bunch of business by raising your prices to cover that new expense. If you’re two weeks backed up, quite honestly, you probably need to lose some customers.
There’s probably people in there that you’re not charging enough for the service that you provide. And those ones that are gonna complain about you raising your labor rate $5 an hour or $10 an hour, let ’em go someplace else. Sure. Because the ideal customer is not looking at your labor rate. That’s not what they’re looking at. They’re looking at value. What do they get for, what do they pay. So here’s the question that I’m asking shop owners now, knowing the scarcity of the automotive technician right now, the top guy, the guy that’s gonna make you an extra 10,000 a week.
Is it easier to raise your rates so that you can afford that guy and not have it affect your bottom line at all, only to increase it? What your profit margin is by the increased revenue, or would it be easier to raise your rates and really focus on servicing the heck out of those customers so that they don’t even think about the extra money that they’re spending? What is that? I don’t know the answer to what you add to make it more valuable. But years ago, when the economy crashed, we did not lower our labor rate one penny. In fact, we raised it back in 2008, 2009, 2010, we were raising our labor rate. But at the same time we brought somebody on that would pick up and deliver cars, pick up and deliver people. And we washed just about every single car that came through the shop.
I worked out a deal with the car wash right down the street that gave us a discounted rate for buying bulk car washes. And on our test drive, after the car was done, we’d run ’em through the car wash. And you know, somebody comes in and spends $2,500 on their car and they walk back in your waiting room and say, thank you for washing my car. You know what I mean, it’s those things which really make the difference. Didn’t cost you a whole bunch, has a massive impact.
Dan:
I think it goes back to what you did during COVID during the shutdown and shortly thereafter, the services you were providing, maybe you just touch on those again, they weren’t for free for you, but the impact it had on your image, on your reputation and the word of mouth you got from it. I don’t even think that was your original purpose. You were just facilitating and making sure your business was open, but maybe just touch on some of those things. So some people can get the idea of other things that you have done along those lines.
Jimmy:
Yeah. You know, and that’s a good point. You gotta look at what is the perceived value, you know, like why would they go anywhere else when you’ve offered? Like COVID hit and, and where we’ve been in business for 46 years. So we have a lot of customers that were freaked out about COVID and they weren’t leaving home. They weren’t not leaving their front door, but they still had cars. And what better time than get to get your car serviced when you don’t have anywhere to go, you don’t need the car. So we, and a lot of shops did this, this isn’t like a bright idea of mine, but it was, it was like, add value.
So we had, we were picking up and delivering cars left and right. Sometimes we were picking them up five, six. I think we, the, the farthest we went was like 20 miles to pick a car up for an oil change. Now that was at the height of things. But, you know, the thing is, is that we always complain about not having, you know, customers who are waiting. We want customers who drop their car off so that we have time to inspect them. Then we can call them, go over what we see, the recommendations, and if they’re already are without their car, they’re more likely to buy the services that they need than if they’re sitting there in the waiting room going, you know what, I’ve really got an appointment to get to. Right. Right. You know, so was it really costing us anything to, to add that extra service? Not necessarily because we didn’t have ’em in the waiting room where they’re looking at their watch every 10 minutes, we had their car at the shop. They were at home comfortable. They didn’t have to leave their house. They were so happy with that service, especially our older customers. And that was just one point of value that we were adding. We weren’t decreasing our labor rate.
We weren’t, you know, you mean we weren’t discounting anything anymore. We were just going a little bit more above and beyond to service the customer. And that’s what I’m gonna challenge you guys to do is stop focusing on what the costs are. The costs are the costs. You know, it’s like if delivery costs go up in any fashion, we’re gonna see it on the retail end. So if it costs the grocery store more money to get the groceries to the store, they’re going up, it’s a direct cost. So they just increase the prices. If it costs a hotel more money to service, the hotel hotel rates are going up. If fuel goes higher, we’re paying more for airline tickets. It’s no different in our business. So look at what it’s gonna take to get the right guy into your shop and don’t get focused on what he’s gonna cost you, or she’s gonna cost you in that manner, focus on what you can do to make sure that you can get that person ’cause you need ’em and then work on what things can you add? How can you add value to your services? You know, some people don’t don’t offer the maximum warranty that they might be able to. There’s still a lot of shops out there that are still at 12 months, 12,000 miles. When most of our vendors will offer three or 36,000 miles nationwide. That’s an added value in fact, by survey. And this is a most recent survey that my wife and I just finished doing with our customers. One of the top three reasons they come to our shop is our warranty. Wow.
And we barely ever – now I’m not gonna say it never happens, you know, because it happens where people are saying, well, you know, I could get this done cheaper. It does happen. This happens like with every business, but you know what I know that happens to the guy who’s 20, 30% cheaper than me. Right. It happens to him too. Sure. So it’s not like it’s the majority. It is the minority and when I say minority, it’s less than 5% of the people that come through the door.
Dan:
Wow. Interesting. Less than 5%. Interesting.
Jimmy:
You know, if we have a hundred cars going through our shop a week, there is no more than one or two people that are like looking at the invoice and going that’s a little bit high. Okay. Compared to what you know, and of course we don’t ever do any work for a customer without approval from them before we do it. Sure. You know what I mean? But get rid of the buyer’s remorse by offering so much service that they don’t even think to look.
Dan:
Right. Right. Well, I’ll tell you, I think this is fantastic information. I didn’t realize it was gonna go this direction, but boy, it makes a lot of sense and it ties in so well with solving the real problem. The real problem is you’ve got the potential delivery. If you just envision your shop, okay, this is what I’m making right now. But with the existing facilities, maybe a couple additional resources within my reality, what do I think I should be producing a week or a month instead of what I currently am producing a week or a month, do that number.
Jimmy:
And it’s a real number. It’s not some fufu number. It’s a real number, real number. Okay, good. I’m doing 60. I really think I could be doing a hundred. I’m doing a hundred. I really think I could be doing 140. I’m doing 140, I really think I could be doing 150, even if it’s that small $10,000, but that is your lost opportunity within your reality. What is that amount and that amount right there – do that number, your monthly number, whether it’s $5,000, $10,000, $20,000, $40,000, do that number times 12. And that’s what it’s costing you per year. Certainly of that number there’s gonna be overhead. There’s going to be costs involved in stuff. So, but I think everybody knows their relative margins and all your fixed costs are covered within your first, you know, X amount. Everything thereafter becomes, to a degree, a large percentage of profit.
You, you, you you’ve got some vacillation in your costs and such, but your, your rent or your lease or your mortgage is paid. Your payroll doesn’t change that much with the exception of a few. So that’s a big number. That’s the money that you’re losing because you don’t have that tech. So why are we bickering over $2 or $3 an hour when it’s costing us thousands? It’s being penny wise and pound foolish. I think it’s a big, big point. It, it really is. And the thing is, is that I have a good friend of mine who did recently sold his shop, a single location operation. He was doing about $2 million a year. And you know, he was one of the first guys to get me over this, this idea of, I can’t afford this guy at $35 an hour.
And he goes, why don’t you just bump your labor rate up a little bit to cover him? (laughs) Done. That’s just too damn simple. Right? That’s too easy. That’s just too damn simple of an answer. Right. You know, and he got me over that. He’s like, you need him, you need this guy. So get over whatever it is that you’re hung up on not paying the guy, give him his $35 an hour. And what’s the worst that can happen. And I was thinking, well, the worst that could happen was I’d have to get rid of him. You know, ’cause I couldn’t afford him. Right. And, and the truth was is that I totally could afford him. And to cover that additional, I think at that time it was about $5 an hour difference that I was paying anybody in my shop.
It wasn’t a big deal, you know, at 40, at five times 40, you know, it’s a couple hundred bucks a a week. Sure. Right. That guy consistently, while he worked for us, he was always a 45 to 55 hour guy, always, always, even when we were slow, he seemed to manage to pull out 45 hours a week. That’s a great, great tech. You know? And he was also that guy that would never miss work. He was always the first one here. And he was with us, I don’t know, five years. So yeah. I mean it didn’t cost us anything. Didn’t cost us a penny. We benefited mutually. Sure. He, he had a great relationship with us. We had a great relationship with him and it was a real lesson to me in getting over the cost going up, you know, they were going up and they are going up and they are up.
And those guys that you’re looking for, you know, one of the things that I look for when I’m hiring a technician, the first thing I’m looking for, how long does this guy stay at a shop? That guy who stays 3, 4, 5, 10 years. Yeah. He might cost you a little bit more, but if you lose that guy that’s bouncing from shop to shop to shop, how much does it cost your shop? Going back to our example, how much does it cost your shop in sales while you’re looking for the next best guy? Sure. And that’s what we gotta look at. You know, it is not just giving in and paying ridiculous amounts for these technicians. That’s not what I’m saying. There is gonna be some compromise and there is going to be salesmanship on your end, as a shop owner, to really sell the opportunity so that you’re not overpaying these guys, but just realize that you’re in a tug of water contest with finding the right middle ground between paying that guy what he’s worth so that he’s comfortable with it.
Dan:
Right. And the shop can afford it and not paying him enough or paying him too much. Right, right. Simple stuff, simple stuff, Jimmy, I think I wanna close it on that. I think this was super healthy. I wanna leave it at that for this particular one, Jim, we are on part two of this.
Jimmy:
Well, we’ve got a couple more sections here, Dan. I want to talk a little bit more about the recent survey that we did across the country with a few shops, friends of mine. I wanna talk about that a little bit more.
Dan:
And were you gonna expose like what the actual survey re results were and what you found?
Jimmy:
Absolutely. I wanna share that information because I think it’s gonna be eye-opening to some people. Fantastic. Um, and you know, it’s, it’s, it’s again, you know, we really gotta get into communication with these people that we’re trying to hire and find out what’s really needed and wanted because the truth of the matter today is that if you’re lucky enough to sit down with a master technician face to face in your office, interviewing them, you gotta realize this – they’re interviewing you as much as you are interviewing them. And so I want to talk about that because I want to go into ad content and some different ways that we are reaching out to technicians now. And what do you say? How are you gonna be any different than the 1800 shops? I think is what I looked at yesterday, on Indeed in my area, 1800 shops, looking for master automotive technicians.
Dan:
Wow. Okay, good. So, so in the next one, we can cover survey results. Like what’s going on inside the head of these texts and how, how to actually find out what their reality is. So we can communicate at their reality. We’re gonna take up that process of as much as you’re interviewing them, they’re interviewing you, and what you need to be looking like, saying, presenting, etc. And then will we be able to see some actual ads, some of the successful ads that you’ve been running?
Jimmy:
Yes, absolutely. I’m more than happy to share, and again, there are ads that I’ve used over several years and they are different and people are like, you do what? (laughs), but I will share them with you. My ads that I use for technicians, service advisors, customer service reps, bookkeepers, they’re different, but they work nice.
Dan:
Nice. Love it, Jimmy. Thank you so much. This has been awesome. I’m enjoying it. I don’t think I should be enjoying it as much as I’m enjoying it, but I am. And I think it’s valuable data. I really look forward to the next one. Thank you again for today.
Jimmy:
Thanks Dan. It was a lot of fun.