Why Some Shops Fail

Why Some Shops Fail

Repair shops come and go and often we look around and wonder why they failed.  Sometimes the economy gets them and sometimes a vast combination of negative factors point to a failure. Good technicians don’t necessarily make good business owners, no more than good parts people necessarily make good store managers. 

As a student of business management and administration, I’ve seen that not all people are business-minded. That doesn’t mean they can’t learn but, more often than not, they choose to do things their own way and not listen to those who have been there before them. Even if you have only been in the automotive field a short time, it’s likely that you can name several shops that have opened and closed without much reasoning.

How often have we seen it happen? The technician in the back has been a great performer and made a shop owner very good money for years. Then one day, that technician decides to go out on his or her own or even buy that very shop that they have been working in. So many times when this happens the technician sees the dollar signs but little else that goes with running a business. 

Again, not all people who go into business are smart or skilled at business. Most start out under a mountain of debt. That is one of the biggest mistakes they make. Yes, some debt is ok. Some is necessary. But, more often than not, the business has to absorb all the initial start-up costs and that leaves very little operating capital. 

Operating capital will certainly be on the list of why a business fails because most business owners simply do not plan for the long term. Most do not understand that bills will have to be paid even when there is no paycheck to take home. The truth is that most businesses will have to operate for as many as five years before they show any form of lucrative profits.  Some may be better than that but, without the operating capital, lack of profits makes it very hard to stay in business. 

How many times do you see middle-aged people who have worked for someone else all their lives venture out on their own for the first time? Many times, the new shop will open with another family member involved. Sometimes it will open with a paid employee on the staff. 

Either way, getting too deep in with payroll is a sure way to kill a business, especially with someone who has never had to control expenses in anyway. Furthermore, when a new shop owner hires their family, it adds to the expenses and the stress level for all.

The overall stress of life in general can be overwhelming. But when a person takes their life savings and invests it into a do-or-die situation, there is a certain sense of pride attached to it. The stress will be multiplied since that person’s paycheck is no longer guaranteed but dependent upon what they profit from each job. That stress will be compounded by the longer hours worked and the sense of urgency that surrounds making sure everyone gets paid. Stress turns to desperation if one is not careful. Desperate people do desperate things, like let their parts bill get too high.

Concerns over expenses and lack of management experience also figure into reasons a shop will fail. How many technicians do we know who possess strong management skills? 

Lack of business or customers is yet another factor. What’s a causing a lack of customers? Was it a lack of consistency or the failure to build a strong marketing plan?

Arrogance rears its head in many ways. Yes, there is a certain sense of pride in owning your own business. Even being in a management position is something to be proud of. But an unwillingness to learn and listen as though you know everything can be a business killer.

If a shop is being run by a relative newbie or technician who thought it was a good idea to own the business, expect that there will be some bumps along the way. The more we can do to help smooth them out, the better.

As parts professionals, we can only assist the repair shop by providing the best service we can and hope they, too, do the same.

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