8 indicators of success for any workshop

8 indicators of success for any workshop

How do you know if your workshop is running like a well-oiled machine? Workshop Whisperer Rachael Sheldrick explains 8 key indicators of success for Members.

How do you know if your workshop is running like a well-oiled machine?

For 52% of Members, according to the State of the Nation Report 2020, simply being able to pay their account at the end of the month is the top indicator that things are running efficiently.

But that kind of basic financial viability is a pretty crude measure and not really the best way to work out whether your business is successful. In fact, relying on being able to pay your bills at the end of the month as a marker of success could actually be hiding signs of longer-term strain, as it tells you nothing about your overall operational and financial health.

The report also told us that the Members who considered themselves either not at all successful or only a little bit successful were much more likely to use financial considerations as markers of success.

When asked “what does success look like?” 64% said “being profitable or having no financial stresses”. That compares to just 46% of those who considered themselves very or extremely successful who gave the same answer. Success also looked like being able to pay yourself a steady wage to 32% of the least successful Members, compared to 13% of the most successful. It also meant being able to manage cash flow efficiently to 27% of the least successful Members but just 19% of the most successful.

On the flip side, what did success look like to the most successful Members? When choosing from a list of options:

  • 61% said customer recommendations/referrals
  • 57% said doing high-quality work
  • 57% said having a good work-life balance.

Success, therefore, is not just about financial metrics — at least in the eyes of the people who consider themselves very or extremely successful.

We asked automotive business coach Workshop Whisperer Rachael Sheldrick for her top indicators of success for any workshop.

You’ve overcome your financial illiteracy

“You have to overcome your challenges with financial literacy, through seeking help from a good accountant and coach,” Ms Sheldrick said.

“99.9% of shop owners will tell you that they’re just a mechanic and that interpreting a financial report is something that they hate because they don’t understand it. They’ve just never been taught.”

You review your financials regularly

It’s not enough to know one end of a spreadsheet from another. Ms Sheldrick said successful workshop owners also religiously review their financial statements, “and not just when their accountant says it’s time”.

You’ve reduced your key-person risk

Is a whole heap of information about the running of your business stored in your head? Or in the head of one of your team?

What happens if something goes wrong?

“Most workshops will go a couple of weeks without their key person, but turnover will be down and there’ll be big mistakes with work,” Ms Sheldrick said.

Successful businesses have reduced their key-person risk. They have systems in place to ensure work will continue if someone is missing. Work is delegated.

You’re transparent with your team

Successful shop owners are transparent about their numbers with their team.

“It actually ensures a higher-than-normal level of buy-in from the team, because they understand why the owner is asking them to do things,” Ms Sheldrick said.

“Definitely have a whiteboard showing billable hours and charge-out hours against available hours.

“But also, get the team familiar with the top section of your profit and loss statement, because they have a direct impact on gross profit. If they take too long to do a job, you can’t sell all those hours. If they put the wrong part in, or they break something, then that all affects your gross profit results.

“Obviously the second part of the profit and loss statement is the owner’s responsibility, but definitely get the team involved in the top part.”

You’ve stopped taking on debt for assets that don’t make profits

Ms Sheldrick said successful workshops don’t accrue debts that don’t have an appreciable asset attached to them.

“You see shop owners who will buy the latest dual cab ute, have the flashy jet ski and boat, and they’ll do it through the business,” she said.

“That puts those businesses under stress. The successful businesses will know what they can take from the business and they won’t stress the business out. They’ll aim to be debt-free.”

You’re working on your leadership skills

“Successful workshop owners recognise that their own leadership needs work and that if they were a better leader, their team culture would be better,” Ms Sheldrick said.

“So, undertake some kind of personal development in that space.”

You have clear goals and you know how you’re going to meet them

Successful shop owners are very clear on their end goals.

“They know how much money they want and they know how many customers each day are required to produce that result,” Ms Sheldrick said. “They don’t just open the doors and see what they get in.

“For them, it’s very, very defined and they ask for accountability. They don’t think they’re above working with someone, or answering to someone, if it helps them achieve their goals.”

You benchmark yourself against the right metrics

Ms Sheldrick said there are more than a dozen metrics you can benchmark yourself and your workshop against, but if you want to know “at a quick glance” how you’re tracking for a particular week, she recommends checking these three figures*:

  • Gross profits (the amount of money you take from customers, less the costs of parts/labour sold). As a guide, Ms Sheldrick said successful workshops she’s worked with aim for a margin somewhere between 48% and 52%
  • Net profit (your revenue after subtracting all your costs, including interest, tax, etc.). Ms Sheldrick said in her experience successful workshops aim for a margin somewhere between 18% and 22%
  • Effective labour rate (the total labour sales in dollars divided by total labour hours billed). Ms Sheldrick recommends hours sold should be within 10% to 15% of your advertised labour rates (to take into account unsold hours).

“And you want to know your ideal daily car count, which is different for every shop,” Ms Sheldrick said.

“If you go above what’s ideal for your shop, that will have a detrimental impact on your gross profit.”

How so?

“If your ideal number turned out to be 10 but you’re putting through 15 cars, that could be a stress on the business because your techs are just focused on getting cars back to customers instead of focusing on upselling. So, your gross profit will go down on those jobs.”

If you’d like more insights into Members’ perceptions of success, the State of the Nation Report is available here.


*These examples of benchmarks used by some workshops are provided as a guide only and should not be considered financial advice. Talk to your accountant or business adviser before setting your own benchmarks.

This article was published 23/11/2020 and the content is current as at the date of publication.