Planning for profit in 2021

Dec 15, 2020 | general

Planning for profit in 2021

While Tire shops experience a drastic decline in business come January there is an opportunity to make very good use of this time.

Reflecting on your previous years’ performance is one of them. This is the foundation of a forecast for your up-coming year.

If you had a terrible year in 2020, then great it’s now behind you.  You have the opportunity to learn from the experience and the ability to analyze the impact of your decisions.

Looking at prior years’ financial performance is hindsight that can be used as foresight, you now have hindsight 20/20 vision to leverage your shops performance for 2021.

A budget is a guide of what to expect in the future; however, our industry (the accounting profession) is moving away from the static budget and embracing the dynamic rolling forecast.

The difference with a rolling forecast is the fact that we create a basis for our future year, broken down by month and smoothed out over a quarter (since weather tends to fluctuate over the season, quarters are the perfect smoothing timeframe for a tire shop forecast) and we change it as new information arises.

Changes like a global pandemic on the closing of the first quarter in 2020!

How to create your forecast for 2021

Print out your 2020 monthly income statements/profit and loss statement, for March and April use 2019 data.

Apply goals to each month, based on consultant or franchisor provided figures, if you don’t have any you can request my Ideal Tire Shop Benchmarks.
Go to https://pdcauto.com/ enter your information in the section that says “Download our free financial benchmark diagnostic” and it will be delivered right to your inbox.

Now it’s easy as 1, 2, 3…

1. If you don’t meet the best gross profit margin % targets on parts and tires start with bumping up those sales figures based on achieving those targets (that’s just leveraging better markup with existing customer work)
2. Increasing sales by factoring in more work sold on inspections and
3. New customers.

Additional considerations

At year-end I always ask owners to evaluate their Capital Assets.

• Is machinery in the shop in good shape?
• Do you need new hoists or other expensive equipment?
• Does the shop need any repairs or maintenance?

Considering record low interest rates I recommend funding these acquisitions on credit.

If you have existing loans, evaluate refinancing plans; speak to your banker and and possibly other institutions to shop your business around and obtain the best rate and financing plans for your business needs.

***Note also that considering the impact of Covid on 2020 financials, I’ve been having success submitting future forecasts as an additional consideration on lending applications. ***

Same for your business insurance, with rates expected to increase now is the time to shop around.

Cheers to a successful 2021!

P.S. – If you want to learn the secret to maximizing the bottom line of your business while working less hours in it, then join me Thursday January 21, 2021 for a complimentary live webinar.

This 45 minute investment of your time has the potential to radically improve your shops financial performance and your personal life.

Register here “How my shop clients earn more bottom line profit and work less hours in their business, by relying on 4 key financial reports and one foundational operating principle.”

Leverage service writers time in December for a successful 2021!

Dec 8, 2020 | general

As things quiet down in December, make use of the lull and gear up for success in the New Year; and I don’t just mean by setting up an awesome tire Christmas tree, though it might be fun :).

For my tire shop clients, we have a fun holiday “apres work” and learning session either right before the holidays or in early January.

Creating a social fun atmosphere that gets everyone in a good mood sets a positive undertone and opens people up to learning and accepting change; especially at the close of the busiest quarter of the year.

We begin with a review of the quarterly performance for the shop, we’re discussing the results of the targets we discussed and set in September for the up-coming quarter. We are only looking at the shop as a whole, individual performance is reviewed weekly with each service writer.

I am only presenting information and I solicit feedback from the group because they have the “in the trenches” expertise to shed light on the financial results.

Engaging your team demonstrates you value their input, they are your front line, they know your customers and they know why things came in where they did.

I ask the team what could we have done differently to 1 – increase the top line sales 2 – improve the gross margin % on each product type category.

Writing down the teams ideas and goals sets the stage for our 2021 targets.

This approach often surprises owners as the results from the team are ambitious and elicit pride and motivation to attain the goals and targets they set.

We review the product pricing matrix; I ask them to identify where we can tweak things to improve margins.

We look at the product sales mix to see what tires or products we want to focus on next year to increase margins further.

They share all the challenges they encountered so we can discuss solutions and best practices.

Typically challenges and “wishes” result in identifying shop management software features that we could leverage going forward and the team gets back to the shop with high spirits and motivation to implement everything we discussed.

All this self-reflection and evaluation is performed by the team, I simply facilitate the conversation and steer it where it needs to go.

People are significantly more likely to want to achieve the goals they set for themselves rather than those management sets for them!

P.S. – If you want to learn the secret to making your time working in the shop more deliberate and focused on maximizing the bottom line of your business, then join me Thursday January 21 for a complimentary live webinar.

I promise this won’t be death by Powerpoint!

This 45 minute investment of your time has the potential to radically improve your shops performance and your personal life.

Register here “How my shop clients earn more bottom line profit and work less hours in their business, by relying on 4 key financial reports and one foundational operating principle.”