Profit is NOT a dirty word!
I was on the phone with my father in law yesterday talking about the importance of a Product Pricing Matrix (PPM) and accelerated profit margin % on low cost items (I digress…more on this topic in a later post 😉).
We are so on the same page when it comes to the importance of the psychology of a shops business culture because it determines whether service writers have the confidence and support to follow the PPM and quote appropriately on jobs.
In management we refer to “the tone at the top” of the organization, this is the leadership (owner/GM) in an organization that literally leads by example and ends up defining the “culture” of the company.
Owners and leaders who are serial discounters are creating a culture of discounting.
There are 2 major fall outs that come from this behavior
- You’ve just trained your employees and service writers to use discounting to win customers over, rather than stick to the PPM
- You’ve just trained a new customer to expect your shop to give them a “special discount”
Why do owners do this?
They’re eroding profits from their own business, this impacts the owner’s ability to give pay increases, buy new equipment and in their personal lives impacts their ability to draw more income personally out of the business.
Coming from working with companies that hired me as a Financial Controller / CFO, these entities were already growth focused and monitoring profits and margins was the focus of executive discussions in the meetings I was involved in; so why am I repeatedly faced with shop owners who literally discount their own bottom line?!?
My father in law told me that on his first job on the parts desk at the GM dealership in Kamloops BC, the owner had a talk with him and explained to him that “profit isn’t a dirty word”, it is their duty to earn profit so that the service department can operate.
He was fortunate to learn early on in his career the importance of managing the bottom line with the careful monitoring and planning of the parts purchased and the product price matrix.
45 years later and semi-retired (he continues to operate his side business “hard to find parts”) he has worked in various dealerships managing the numbers, but more importantly the people.
Kevin (that’s my father in law) understood that regardless of what PPM was in place, he had to earn the respect of the people under his charge and guide them to respect and value the importance of the margins that were set-up.
And of course, he had to lead by example.
I writing an article on leadership right now. It is foundational in the success of change management in organizations and so for my shop clients to achieve their goals, they must be able to lead their team to execute the plan.