Let’s talk about some of the mistakes I commonly see new shop owners make. The five I’ll cover are errors I made—and learned from—the hard way. If you avoid these, you’re off to the races.
1. Spending Money on Things With Little to no Return on Investment (ROI)
In 2003, I was hyper-focused on marketing paint protection film (PPF) and my brand to a market is largely unfamiliar with the product. I thought, “What if I take a business card and put a square piece of PPF on the back and then explain the product and benefits?” Genius, right? I had to have a nice surface to stick the PPF, so I bought plastic, credit-card-style business cards at $0.50 each.
A 2,000 count was the minimum order for such a specialized card. I figured it was a worthwhile investment and a nominal amount of money compared to what I charged for installations.
Well, it’s almost 20 years later, and I still have 1,000 cards sitting somewhere with a now-wrong address and telephone number. The point isn’t the business cards but rather an unnecessary expense I took during the early days of ownership when money was tight. A laminated business card that was 2,000 cards for $50 could have effectively let customers know about the product.
New owners spend too much on fancy showrooms, hexagonal lighting for the shop space and big apparel orders to showcase their brand. Let’s be honest: a big flat screen in the showroom isn’t going to increase revenues. Ninety-nine percent of people play on their smartphones anyway.
When you are first starting and reinvesting your profits into growing, look at the true ROI on an expense. Will it increase revenues, or is it just a cool factor? Cool factors are fine once your shop is creating comfortable profits. Until then, be shrewd and spend money on what makes the shop more money.
2. Not Hiring Support People Immediately
I have touched on this previously and how important this is for creating a profitable and turn-key business. Most new shop owners are scared by the added expense of employees and think, “I can do it myself until I have the money.” This is the wrong attitude and will not only cause burnout but virtually eliminate any growth.
Positions pay for themselves. A front desk person (if you hired the right one) will bring in more sales. You won’t lose money if they are under the proper payment plan (structured on how much they sell and upsell). Likewise, shop helpers pay for themselves by allowing installers to increase production. Installers can focus on installing and generating more revenue by taking ancillary tasks out of an install and shop day-to-day (ie prepping cars, cleaning shop, etc.).
3. Adding Too Many Services Too Quickly
Guilty as charged—this took a while for me to learn. Being generally good at anything I tackle and capable of learning most things, I found myself adding additional services, usually because a customer would ask, “Do you guys smoke taillights?”
Well, I had painted my own as a do-it-yourself (DIY) project, and they came out amazing. I could charge the customer another $250 (I had to stay competitive with other shops), saying, “Sure, we can do that!” I did hundreds of taillights, and they were solid. But it also led to nightmares that took time away from installing PPF or tint, which was my forte.
I didn’t have a proper paint setup and was using a corner of the shop. It began to be a hassle, so I quit doing them altogether. A year or so later, I had a good customer that insisted we do some lights for him. I was bemoaning to a painter buddy that I didn’t want to get back into them, and he said, “We will smoke them for you at $90 a pair.”
I wasted time when I could have been outsourcing the work. Vinyl color changes don’t have significant margins after totaling your work hours. Performance modifications are also tough, but PPF, tint and coatings have some of the top margins.
4. Focusing Solely on High-End Projects
This one is tough, and I get it. Many of us are car guys and gals. Working on supercars is a dream come true, but are these the best money makers for your business? Market awareness and penetration are growing (especially in the US) for products like PPF, ceramic tint and ceramic coatings. Your average consumer is starting to learn about the benefits of these products. A consumer buying their first new car, even if it is a Kia Telluride, probably cares more about that car than the guy buying the latest Ferrari F8.
Some of the most profitable, highest-grossing shops I have been to turn away the high-end, elite work. The car owners can be high maintenance, and even minor repairs are costly if something happens while in your shop and a very high degree of skill is required to produce the level of work these owners expect.
I understand these cars are suitable for marketing and showcasing your work, but I generally don’t recommend that new shop owners cater exclusively to the high-end market. It drastically narrows the pool of business and is also difficult to scale and grow as you have to find employees and installers competent at that level.
5. Lacking an Accountant
This one is short and sweet. It is so tough to get books in order years after being open. Even though I thought I knew taxes well (my father used to work for the Internal Revenue Service (IRS)), the accountant always educated me on little things I did incorrectly.
I have heard how much of a nightmare an audit can be from many a friend. Additionally, if you ever get an offer for your business or want to sell it, looking at your books is always step one. You will sleep well knowing that your business, books and money are straight so, again, get an accountant.