Improving Your Bottom Line
By Mike Reusche
Adding additional services such as installation can be a helpful way to increase parts sales and improve the bottom line.
After twenty successful years catering to the auto performance market, parts sales were beginning to slip without real warning, and taking a serious chunk out of the bottom line. The relationship between my business and my key suppliers was never better, and we were still getting plenty of foot traffic and phone calls, so why were overall sales slowly dropping off?
My top counter guy mentioned that while visits and calls hadn’t really dropped off, the actual purchase of parts wasn’t typically included in the conversation. To get to why this was happening, I reached out to some of my customers and asked. Surprisingly it wasn’t a price issue. The simple response was the big online sellers had it in stock, and they could have it in a day or two, as opposed to what was often several days or more for us to get it special ordered from a supplier. Now I began to ask myself what my business could offer to its customers that the on-line “Big Box” performance sellers could not.
Realizing it wasn’t a price issue and there wasn’t a giant equity firm looking to invest in my company so we could increase the size of our on-hand inventory, the ability to offer installation came to mind. After checking the local business ordinances about my idea to offer installation – not repairs – I put together a proposal, which was approved by my local town board. We contacted our insurance carrier to explain our intentions, and they made the necessary liability changes to our business policy.
Adding Installation to Our Shop
We cleared out a portion of the back room adjacent to the garage door, installed a basic vehicle lift, and purchased the appropriate tools and fixtures. Initially, our operation would offer installation of some of the more basic bolt-on power adders, such as direct-fit exhaust systems, cold air intake systems, and engine programmers. Of course, to make this all happen, we also would need a technician.
Fortunately, my other employee, Mike, saw the opportunities ahead and stepped up to fill the need as installation specialist. Mike was already a jack-of-all-trades and helping out wherever was needed in our operation. After work, you would often find him working on his Street Stock drag car and helping friends out with their hot rods, as well. For Mike, this was an opportunity to take his passion and turn it into a career for himself.
Adding Installation Services
Next up was to advertise our installation services. We commissioned the local sign shop to create a few banners for inside as well as outside our building, and a cost-effective ad was placed in the area newspaper. We updated the company website, and posted photos of the new installation area on social media.
It took less than a week for our first installation, a cold air intake on an F-150. In fact, it was a first-time customer. The truck owner did his homework and realized our price was the same as the online source, but he needed someone to “Do-It-For-Me.” Our website directed the customer to our business for the purchase as well as the installation. We ordered the part, received it the next day, and scheduled the three-hour installation for the following day. The job went off without a hitch and the customer wrote a very positive review about his experience on our Facebook page.
In less than a week, our business expansion began to pay dividends, both through an added revenue stream and free advertising. Over the next six months, the installation side of Joe’s Speed Shop gradually increased parts sales and added to the company’s bottom line.
Adding additional services beyond traditional parts sales can create a big boost to the bottom line.
Fast forward three years, and now Mike spent more time installing performance components than he did stocking the parts shelves. Recently, customers have asked us to perform more serious installations involving suspension, drivetrain, and engine upgrades. At this point, the current amount of added volume doesn’t justify the substantial investment needed to address these types of installations, so we had to come up with a temporary solution to bridge the gap between demand and our in-house capabilities.
To prevent from losing out on that added opportunity, we found a very competent repair shop in the area that would take on this work for us while still allowing enough margin for us to make a few dollars on the labor. These larger installation opportunities are still relatively new to our operation and once the volume warrants it, we will move all installation work back to Joe’s Speed Shop and, of course, invest in the tooling, manpower, and an expanding footprint for our operation.
Regardless whether you choose to take the next step in the ever-evolving performance business, the process of keeping current customers as well as creating new customers may take some out-of-the-box thinking. And when it comes to coming up with new revenue streams and tools to both retain and grow your customer base, it’s always best to begin the process sooner rather than later.
Mike Reusche writes for Motorstate Distributing.