Join Ray Konderla, Bill, and Uwe in discussing why planning your succession is key for the health of your business, how solid shop operations are necessary, and the introduction of The Digital Shop is more than helpful.
Episode Transcript
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Bill Connor (00:06):
Good afternoon and good morning. I’m Bill Connor. Have you reached a Digital Shop Talk Radio where we gather with our panelists to have them share some wisdom about all things about the digital shop. Today I’m here with Ray Konderla, owner of Rick and Ray’s Auto Plaza. Welcome Rick. We certainly appreciate you joining us and also AutoVitals’ founder Uwe Kleinsmith. Join us today for a discussion about why planning your succession is key to the health of your business, why solid shop operations are necessary, plus how the introduction of the digital shop really helped to define the processes. What are some examples and their advantages and maybe some potential pitfalls you might run into along the way. As always, teamwork is required in everybody’s shop to provide the greatest results. You’ll take away some tips today learning from your peers and use what you learned today about planning your strategy for your shop. As always, you’ll learn from our guest panelists who operate shops just like yours. So Eva, if you wouldn’t mind getting us started, we’d certainly appreciate it.
Uwe Kleinschmidt (01:13):
Of course, I will. But I want to say our guest is Ray Norwick.
Ray Konderla (01:21):
Its like dumb and dumber interchangeable. It’s fine.
Uwe Kleinschmidt (01:25):
I don’t believe that.
(01:27):
So thank you Ray for joining us. It’s going to be awesome. So why did we pick this topic In the context of the digital shop, we have noticed that the digital shop enables process and procedures, or actually if you have them and you use the digital shop, you can create results, which were thought impossible before, right? It’s not just the tool. And when you think about succession, then it’s much better to have a business with established process and procedures to hand off to somebody than trying to make an overnight decision because your offer is so high or you perceive it as high when you want to sell your shop. And so thank you for joining us. We want to explore what you have done about it and what you’re still doing about it. And if you wouldn’t mind taking us back to when you started being a shop owner and how over time this has developed, and if you wouldn’t mind sharing some KPIs, a OO or revenue call, count those things so our listeners can compare your numbers with their own and see how similar everything is. Sure. Thank you.
Ray Konderla (03:02):
Alright, so I’m Ray Konderla, Rick’s business partner for 29 years now. Got into the business as a 24-year-old punk kid. Thought I knew everything. I was a really good technician, didn’t know anything about business. My business partner, Rick fortunately, had five different gas stations, full service with garages attached for years. He had sold damage in the process of finding out what he wanted to do next and we got together and bought out A guy that just started business, didn’t really know what he was doing and we were there for 20 years just rocking along, barely making any money. Our plan was once we paid off the building, then we would make some money but not making anything on parts. Hell, I think it was at 38% was my target on parts margin and we were repair only shop. We did about 110 cars a week.
(04:03):
Our average RO was about $280. Had a really good crew, a very loyal technicians, great customer base. Paid them well, treated our customers well. Did a bunch of discounts just because we thought it was being nice to them. So then in 2013 we got eminent domain, bought another building in a blighted area off the beaten path. I mean we used to be on a very busy intersection, about 22,000 car traffic at that intersection a day. So it was really high visibility. Moved to a blighted area because it was the only building available at the time.
(04:50):
We were notified one of the very last businesses. Anyway, only building left that was available. Beautiful building, way bigger than what we had prior, but it was in alighted warehouse area with about 600 cars a week. So it had no traffic flow. Fortunately we had a very committed customer base and Google was around. So we had a pretty strong Google presence so people could type in Rick and Ray’s and find our new location. We sent a bunch of flyers so we really didn’t lose big car count until the construction started and we had a triangle traffic flow and they took two of the three legs of traffic flow out. So we went from three legs of traffic flow down to one basically. So we went from 110, no, okay, alright, I’ll talk to him.
(05:58):
We went from about 110 car count a week to about 60 pretty much overnight. It was amazing how quick it went away and it was just because nobody could get to us and that went on along for eight years, but that was in 2013, the beginning of 2013, I was at a NAPA Expo and ran across AutoVitals presentation there. I thought it was the slickest thing ever. Bought it immediately and started implementing it. And one of the things that I did realize that we had to change, we had to start the advantage of having digital inspections. We had to start doing inspections on every vehicle, bumper to bumper to take full advantage of everything that was there. We were leaving so much low hanging fruit because we were a repair only. We didn’t do any maintenance unless somebody came in and asked for it. We certainly didn’t schedule any deferred work or talk to them about this doesn’t need to be done now, but it needs to be done by the middle of three months from now. So we became very proactive on capturing that low hanging fruit. If a customer declined some repairs,
Uwe Kleinschmidt (07:11):
Can I ask a question?
Ray Konderla (07:12):
Sure.
Uwe Kleinschmidt (07:14):
And your technician said, no problem. I’m going to spend more time inspecting.
Ray Konderla (07:20):
Did
Uwe Kleinschmidt (07:20):
You pay them?
Ray Konderla (07:22):
One thing I did do, and I realized early on that doing a digital inspection, if you do it right the way I don’t say right the way we do it, it takes an hour of invested time to do. And so taking a production guy out of production to do a digital inspection for me just didn’t make sense. The good thing is I already had two general service guys on staff, so all I did is train them to do a proper digital inspection. Now, oil leaks or the difficult things, I’ve got three at the time I had three technicians, they would call over and identify a problem area to give them advice on what to write down on the digital inspection. The general service guys, I’m paying 10 bucks an hour to do. They did the digital inspections. They took 21 pictures and that was something that was critical for me is we had a picture policy and if it wasn’t followed, my service riders, the ones that held my technicians accountable.
(08:25):
So if they didn’t take pictures of the tires or they didn’t take pictures of the brake measurement, the inside brake pad and the outside brake pad, it was brought back in and it was done right. So my service writers were really the people that held them accountable for that. I held the service writers accountable by doing RO audits, I would randomly take one, make sure the picture poly is being followed, make sure the digital inspections being set. The third thing that was critical for us is building an estimate on everything that was on the digital inspection. They couldn’t pick and choose what they were going to write an estimate on or not, right? If it was on the inspection, the digital inspection and it had photos, it better have an estimate written. It might not be sold, but at least I know if it was written than it was presented. The other thing that we did is our estimates exploded. We started writing $3,004,000 estimates because we started including everything.
(09:28):
This is another thing that we had to do and we worked through as a group, is the smell test, if you’re familiar with that term. So everybody’s got an idea of when shocks certain struts are due. Everybody has a different idea when the brakes need to be replaced. Everybody else has a different idea when tires need to be replaced. What we had to do is sit down as a team and say, okay, as a team, this is the standard we’re going to go by. The good thing is we also had maps. What does that map stand for? Bill Motors motorist I program. Okay. So they have some basic standards for industry. So we didn’t have to reinvent the wheel, but I can guarantee you we didn’t go by what manufacturers said was recommended on a lifetime transmission fluid that BMW has. That’s bs. We know that that’s not legit, right?
(10:22):
We know that preventive maintenance prolongs the life of a vehicle regardless of what fluids we’re talking about. It prolongs the life of the vehicle. So we as a team sat down and said, this is our standard at our shop. Once we had that built, then anybody didn’t follow that standard at the shop that I could hold accountable. So it was big for buy-in and it was not me dictating to them. It was a cooperation instead of a dictation because being a dick is dictating, we have to cooperate. So we as a team have to decide what’s best for our shop. So that was big also for us, but it allowed us to start writing big estimates. We were afraid of big estimates. One, we didn’t know how to present. And then two, when you present something to a client that says you need this, this, and this and this and this, and they say, how much is it?
(11:21):
And you say, four grand. They’re like, oh my God, are you crazy? What are you thinking? We’re made out of money. You guys are stealing from us. Well, one, we had to make sure that the customer understood the why for them. Why are we suggesting it? What’s the benefit for them? And then second, I had to be proactive on my sales pitch. If I’m swinging for the fences and they say no, what’s my plan B? So what we did before we made the sales calls, we broke up and do three or four bite-sized pieces, right? Let’s go ahead and take care of the immediate needs. Now your tires and brakes and alignment can wait until three months. Your valve covers that are leaking your whatever. Shocks and struts are a safety item. We have to handle those pretty immediately. So let’s put those off. Those are a safety issue, just like your tires and brakes.
(12:21):
So let’s do those. Then third bite and then the fourth bite. Let’s catch up on your maintenance. So what you’re doing is giving them a roadmap on how to get vehicle back to good vehicle health instead of $4,000. Do you want to do it? That’s what we were doing and we learned by mistakes. What we didn’t do is we did not give into, this may scare the customer away. So I don’t want to tell him the truth. What the hell is that? In the medical field, if a doctor saw that you had an ingrown toe now and it was infected really bad, but you were here to take care of an elbow issue, he would be practicing malpractice if he didn’t tell you about your toe, right? So we have to be honest with our clients, even though it freaks ’em out. That’s what we’re there for.
(13:14):
We’re there to talk them off the ledge. This is what we can do for you. This is how we can do it and we can help you through this process. The thing we cannot do is practice mal malpractice. We have got to be honest with our clients. So a lot of it is getting your service riders on board to this is what we have to do. We have to be truthful, we have to be honest, we have integrity and we have to practice that integrity. So that’s what we did. And a lot of it came from, of course, the digital inspection. How do you handle the digital inspection? What kind of estimates are built on the digital inspection, and then who’s holding who accountable? So that’s the stuff we did to blow up. Now we went from 280 average RO to now. I think Bill said we were about nine 80.
(14:04):
It’s a little bit higher than that, but nine 80 is freaking awesome. I could never have imagined being there and we’re still doing it with 65 cars, 70 cars a week. Traffic flow just opened up the fall of last year. So this is the first year that we have had, we’ve had full traffic flow, and so I’m very interested in how we end up the end of the year. I know right now we’re standing about 28% higher than we were in 2019. 2021 was pretty good. 2019 was our banner year. So I’m very excited to see what happens by the end of this year. I mean we’ll be up 25, 30% and it’s all because we have processes in place, we have accountability in place, and we have buy-in from our team.
Uwe Kleinschmidt (14:57):
I mean, this is a super story. And you said you made mistakes. It didn’t sound like it. Can you?
Ray Konderla (15:05):
Sure.
Uwe Kleinschmidt (15:08):
What was for yourself the biggest learning experience throughout those years?
Ray Konderla (15:15):
So let’s back up to where we just implemented a digital inspection. One is how do you do a digital inspection? What’s the process if you’re taking off wheels on a digital inspection? So I’ll back up to on our oil changes, we don’t do drain and fill oil changes. We do a full service oil change, which includes a tire rotation. We have the wheels off, so we’re going to go ahead and do the brake inspection while the wheels are off. So now I’ve got the vehicle halfway up in the air. I’m doing the tire rotation. I’m taking a picture of the brakes, doing the brake measurements, doing my tire tread depth inspection, measurement,
(16:02):
Checking my suspension. I’m doing all of that while I have the lift halfway up, put the wheels back on. Now I get it all the way up in the air. Now I’m doing my drain on the oil, taking the filter off. I’m taking all my pictures underneath, any leaks, any concerns, any leaks or concerns I have under the undercarriage. Then I’d drop it all the way back down and I do all the pictures of under the hood stuff. All that takes they process because everybody wants to do it different. Somebody wants to take it all the way up, drain the oil, drop it all the way down, put the oil in, put the vehicle halfway up, pull the wheels. It’s a lot of wasted steps. So a lot of it’s just getting the processes in place. Once you have the processes in place, how do you hold people accountable to make sure that they’re doing it the same way every time?
(17:02):
And that’s where the service riders come in to make sure they hold them responsible for the picture policy. And as the owner, I do a random survey and do an RO audit. So I grab a digital inspection, I grab a estimate written, I put those down on piece of paper and make sure that they match right. I have a checklist that I actually go through that I built myself to make sure that they have mileage. They have the oil chain sticker pitcher taken. They have the recommendations for all the recommended repairs. So that all doesn’t happen by accident. It’s part of the procedure. It took me two, two and a half years to
Uwe Kleinschmidt (17:47):
Really, oh, I see. I was going to ask,
Ray Konderla (17:51):
And the other thing is, you got to have the right personnel. If you don’t have the right personnel doing the right job, then you got to make sure that you change people or you change people. Those are your choices. Either they buy in or you find somebody that’s going to buy in. Don’t be afraid to change. I’ve had a guy here that was here for about eight years. He just was really reluctant to do what I was needing him to do. Guess what? I found somebody to replace him. It took about a year of me beating my head against the wall to finally realize he, he’s not going to change. So I now have a choice. Do I stick with somebody who’s not going to change or do I change to a person that’s going to accept what I’m expecting? So that was another big deal that we learned through hard knocks. So
Uwe Kleinschmidt (18:43):
Very cool, very cool. I can reveal to the audience in the pre-meeting, you said something which hit me and we should have named this episode after, which is Build your Business. You want to sell it. So talk about how you are preparing your succession.
Ray Konderla (19:10):
Okay, I’m blessed to be a TI client. So a TI is a group out of Baltimore. I did get clarification that Bill and Uve were okay with me mentioning that. One of the things they have is they have a succession plan class. It’s a three day class. You go to Baltimore, you sit in the classroom for three days and you learn what true is. So we all have an idea of what our businesses are worth by EBITDA times three and a half times, five times, whatever the hell we want to come up with. The reality is that really is not true. What is true is your business is worth, somebody will give you for it, right? That’s really what your business is worth. So 2019, the fall of 2019, I had a company that had made me an offer. We negotiated a price on my business and I was very excited to sell because it was a big freaking number and I was going to be able to go and buy another shop, Rick and Ray’s 1.0 that was making zero money and be able to put my processes in place to make it explode like we did here, right?
(20:33):
All I was doing is just taking that carbon copy and putting it in place. So I went and looked at a number of businesses that were listed for sale and I was shocked at what kind of crazy pricing they were wanting. Most of them, the owner was a intricate part of the business. Either a salesman, general manager, taxi driver, clean windows. The business would suffer if he was not there. So I’m not that business owner. I’m the business owner that shows up whenever I want. I go through KPIs to make sure my guys are hitting what they are supposed to be hitting. I have the big yata boy, awesome job meetings with all my guys, and I go to the golf course or I go travel. So I’m looking at these businesses and they’re not charging themselves fair market value on rent. If they own the building, they’re not paying themselves a reasonable salary if they’re a positioned employee, which is fine, that’s what I was doing.
(21:44):
But the problem is I’m going to buy the business and hopefully I’m going to buy the property and now I’ve got to hire somebody to replace the owner because I’m not going to do what he was doing. So now I got to spend 80,000, a hundred thousand a year to replace him and I’ve got to increase my rent because all they were charging themselves in rent was the mortgage payment on the building, right? Well, I’m going to make rent income off of my rent and I don’t want to work in the business. I bought a business to make money not to have a job. So the first thing that I would do with anybody that I actually sat down with the negotiation table with was explain that to ’em. And you realize that all that money comes off of the net, right? That’s a business expense. So I hire a manager that’s a business expense comes right off the net, goes on, the fixed expense rent is going to go up. So that’s a fixed expense. It comes right off the net. So you think you’re making fixed amount of money, you’re really making about half of that, but considerably less than what you’re showing on paper.
(22:55):
So going back to building a business to sell it. So if you’re working in the business, get out of the business as quick as you can. And the way you do that is you figure out what it’s going to cost for you to hire your replacement. And so real simple math, you know what your average RO is. You know what your gross profit is on that average RO. How many cars do you need a week to generate enough income for you to pay that person to replace you? If it’s 80,000 a year, it’s a hundred thousand a year. Whatever that number is, you’ve got to figure out how many cars you need a week to replace you and work diligently to get that many fricking cars. And I guarantee you, if your estimates are less than 1500 a car and your average RO is less than 400, $500, you don’t need more cars.
(23:47):
You just got to take opportunity on the cars that you have. The problem is we all think that we need more cars. The fact is, if your service riders aren’t writing big estimates and you’re not making big sales, then you’re not taking advantage of what’s in your parking lot. That’s the easiest thing to do. The hard thing is to acquire new customers. What that allows you to do is let’s say you build it to sell and then you realize, holy cow, man, I’m making a lot of money and I don’t have to work. I don’t want to sell. I just want to kick back and manage my KPIs. I want to be right. So the point is that build it as if you’re going to sell it and maybe you realize you don’t want to freaking sell it. Or the other side of it is now you’re 65, 70 years old, your wife’s dying to go to Europe and you have been working six days a week since you were 18.
(24:43):
So your wife wants out, right? She wants you out. So if you build it to sell it and you’re charging a rent and you are not a part of, you are a W2 employee. If you want to be a W2, but you’re not an intricate part of the business and it can operate without you, then you have something to sell. So that’s what I would suggest doing is get out of the business as quick as you can. Figure out how many cars you need or how many hours per ticket or whatever KPI you want to freaking use. If you don’t want to change your model and then work diligently towards that and then find somebody to hire to replace you. That normally is that number two guy. How long does it take to train your number two to take over for you? It may take three to five years. You may have somebody already on staff. So just figure out who that is and start working towards training that person to take your responsibility.
Bill Connor (25:40):
So now that almost all auto repair businesses are over the million dollar a year plus and so on, we also have to be thinking about that. People aren’t going to be coming in with a million dollar plus cash. They’re going to have to finance this thing. So process, procedure, business plan, all the things you’re talking about is all part of making that business bankable.
Ray Konderla (26:01):
Well, there’s no doubt, and that’s where the EBITDA times three times four times five comes in is when somebody can look at your business and say, one, it’s a turn true turnkey business, two processes and procedures and employees. They love being there, their culture is fantastic. Then you have a product you can really sell at a premium. So yes, going back to what you were saying, bill, those processes and procedures, written business plan, all of that, all that does is increase your value. And I would argue if you look at McDonald’s, why is McDonald’s successful? They have a process and procedure business, anybody can do it. All they have to do is follow that process and procedure and the banks will look at that and say, okay, the business plan’s solid. They have three to five years return or 10 years return, whatever it is, returns to look at the, it’s repeatable.
(27:02):
So you don’t have to have the owner as the face of the business. Alright, I’ll give you an ego trip that we all get into as owners. I want everybody to know that Rick and Ray’s is owned by Rick and Ray’s. That’s the way I always run my business. I’m the face of the business. Nobody even freaking knows who Rick and I are. I have to introduce myself to my new customers. That is a beautiful thing. I promise you, it is a freeing thing when you get past the ego thing of I want everybody to know who I am. I don’t want anybody to know who I am. Sergio and Jamie run the shop for me. You got a problem, Sergio and Jamie who are going to fix it. It’s rare that I have to step into any type of fixing it, but that’s because we set it up and empowered them to handle it.
(27:54):
I was talking about the Hilton hotels. They had a 90% satisfaction rate, which most companies are very happy with 90%. The problem is he looked at that as a 10% failure rate. He wanted to cut that down. So he had a big meeting with all his managers and what’s going to take to make most customers happy? And they’ve realized it would only take $200. So he empowered all of his managers with $200 per customer to satisfy that client, right? In a year, year and a half, it cut the dissatisfaction rate from 10% to 5%. So their failure rate was cut by 50%. That’s a huge win in the service industry. So as an owner, I have to empower my team to make everybody happy, and that’s my job is to make sure that they can do that. The problem I had and most owners have is we have a big ego one, they’re going to screw it up, and if they screw it up, then I’m going to have to step in and fix it.
(29:07):
And nobody can do this but me because it’s a real hard and complicated job and blah, blah, blah, whatever we feed ourselves. The fact is that keeps me imprisoned to that attitude. So what I had to do is realize, holy cow, I screw up. I mean, I screw up a hell of a lot more probably than most of my team screws up because I’m a freaking fly by the night, fly by the pants guy. They’re at least a little bit more disciplined. So what I had to do is realize my freedom is worth X, whatever that X is. So what are my cost of screw ups? As long as my cost of screw up is less than what my freedom is, I freaking win. I want freedom. So if it costs me $5,000 a year and giving money back to clients, $10,000 a year, shit, I will take that any day.
(30:00):
I don’t have to work, but I don’t know what work is. I don’t have to be at the shop, but three or four days a week, two or three hours, most of the stuff I can do at home, I show up just to say hoorah and I’m a big cheerleader now, but the reality is, is that everybody’s going to screw up. The fact is what’s your freedom worth and how do you groom your team to have the confidence to handle problems instead of you being the crutch, oh, just give it to Ray. He’ll figure it out. Or he’ll take care of this problem. I don’t want that you handle it. When stuff really gets deep, then I’ll step in. But I don’t want to be the crutch of Ray, just handle all the problems. So that’s kind of what we did is empowered our team to make decisions and we meet about those decisions. If I think those decisions might’ve been a too easily come to or it’s easy to give, raise money back, I’ll draw it back a little bit, but I promise you I haven’t run into that problem. The problem, the problem is I get too much free time now. So anyway,
Bill Connor (31:07):
Did you find by giving them, empowering them to do that, it actually costs less to fix it because they can fix it on the spot rather than saying, oh, I’ve got to go ahead and pass it on to somebody else, and if it gets to you, you’re going to pay to get it fixed anyways.
Ray Konderla (31:22):
Yes. So front counter and I’m not here to fix it, then the customer goes home. Now they’re at home. I have zero power of who they’re freaking texting or posting or giving bad reviews because they can fix it right at the counter. Then the customer at least is taken care of. So as long as I can take care of them, that’s the biggest thing. I take care of ’em immediately so they don’t go home and chew on it and they may not go home and tell their husband or the wife. So then all that stuff starts. They’ve been satisfied as much as they can be satisfied, and hopefully the relationship is repaired.
Uwe Kleinschmidt (32:04):
How long is it? The two and a half years, you were talking about how long it took you to put this all in place and also change your own attitude towards it. Because I assume in the beginning you were the smartest guy in the room and everybody came to you and you fix it. So how long did it take you? Can you share maybe if there was one, like the light bulb moment when you thought, dang,
Ray Konderla (32:36):
I’ve got that bulb moment I need to change. Right. Okay, so first I’m going to give everybody a book to read. It’s called Make the Noise Go Away. And it’s all about the transition from the owner to the number two in power to free up the owner. So I wish I had read that book 10 years ago. Sergio and I are very, Sergio is my general manager. He is been with me now 20 years. And dude, we are like brothers. We fight. And the problem is, is we have 20 years of history. So every time we bring up something new, it’s back to what happened 15 years ago. So with that is said, I was not the ideal owner giving power to Sergio. I was a micromanager. And so if Sergio finally came to me and said, look, when a customer has a problem and then they see you in the other office, then they go and say, Hey Ray, this is what Sergio’s doing.
(33:38):
And I immediately say, oh man, that’s, let me see if I can knock off 10%, 5% some Bs and Sergio’s like you take my credibility completely away and you train the customers. Just go and talk to Ray. So finally that was that after that conversation, and it was a heated conversation and it was like, you can’t tell me to wave my run my business, Sergio, and all this other BS ego shit. When I finally got over myself, I realized that’s exactly what I was doing. I was training my customers to come to me, which keeps me locked to the shrinking shop again. So finally it was, Sergio, come in here. Why are you giving him such a good deal? It should be more here and more here and more here and more here. This should be 10% more than what you’re fricking quoting him. They finally stopped talking to me because Sergio was treating them well, right? So a lot of it was a mindset of Sergio, of one having the confidence to come and talk to me, and then two, me putting my ego away and saying, I hear where you’re coming from and I am completely undermining you. And it happens with clients and it happens with employees too. So I had to be cautious of both those. But I would suggest reading as much as you can about that second in command before you start screwing yourself by not listening to ’em or falling in the traps of the ego.
Bill Connor (35:09):
It’s interesting. We’re on episode 182 and the common theme is always educate, delegate, measure, and get the hell out of the way.
Uwe Kleinschmidt (35:21):
Easily said than done.
Ray Konderla (35:24):
Yeah, screw that.
Uwe Kleinschmidt (35:28):
No, thank you. Thank you, Ray for sharing. That was very powerful. And Bill, and I know Sergio really well, so we can imagine, I can
Ray Konderla (35:38):
Picture the conversations. So the other thing that I would suggest, if anybody is wanting to be the build the shop to sell the things that I would highly suggest doing, just because I looked at other businesses weren’t doing this and their value was a lot less than their owner wanted to admit, start paying yourself as a W2 employee, okay? The reason that is, is that now the business can support whether I’m a general manager or I’m just in charge of marketing, whoever buys it knows that this salary can be supported on top of the salary to replace you as a key member of your team. So those two things are critical in my opinion. Know that three to five years of you being pretty much hands-on training, your number two is the target time. So it’s never too early to start. And if you have somebody on your staff, go ahead and start having conversations with them. What is your vision five years from now? Let me tell you where I’m at five years from now, would you ever consider doing this? If you say yes to considering doing this, know that this is going to be a buttload of after work hour homework, reading you and I meeting, having conversations, going to lunch, 10 o’clock in the morning, three times a week. We’re having a conversation. Start grooming that person to that leadership role.
(37:22):
And if you own your business, start really jacking your rent up, start jacking it up to where you want to when you sell, you want to take that and be a landlord on that business. So start raising that rent up dramatically. Okay? Now there is a limit you can go, but believe me, that limit’s pretty broad. I mean, if I were you, I’d maybe even talk to a real estate agent that does leases of buildings that are similar to yours and start having a conversation what a range of price would be and put it at the high range.
(38:11):
If you don’t own your business, I mean building, if your building is adequate for growth, if your building is adequate for growth, secure a long-term lease, secure a 10 year lease with two five year terms, that’s 20 years that you have real estate security. Because if I sell a business and the person I’m renting from that business is renting from has a two year lease with no option to renew two years from now, I may be finding a new building that’s not very attractive to me as a buyer. I want to have security. I want to have security in team. I want to have security in clients, and I want to have security in real estate. If that building’s not big enough for you three years from now, do what is hard now. Find a new building, move your business secure, because the longer term you secure, the more valuable your business is to me or as to the buyer. And the more valuable your business is to the bank. Because honestly, like Bill said, how many people are going to have 1.2 million to just drop in cash? They’re going to be financing this and a base going to look at long-term stability. So it’s going to have a higher value if you secure that long-term lease. Best thing is to own. But I know there are people that just can’t own. It’s just the way it’s hell. I don’t know how people even own property in California. It it’s crazy. Move to Texas. It’s cheap still here.
(39:55):
Anyway, he’s inviting competition, huh? I said you’re inviting competition. Oh, come on, man. I guarantee you there’s plenty, plenty of room for competition in any market you’re in. The other thing that I didn’t mention, we’re in Fort Worth, Texas. We’re not in Dallas, we’re not in la, we’re not in San Francisco, we’re not in freaking New York. Our door rate is 2 0 2 now we have a door, we have a labor matrix that jumps to 2 40, 2 42 after the first two hours. So please understand, you don’t have to be in a big market to write big estimates. You don’t have to be in a big market to have a big door rate. The reason I raised my door rate is I started looking what I pay my technicians when I’m paying my service riders and my general manager. I’ve got to be a 2 0 2 to freaking make money.
(40:50):
So do a labor analysis. If you’re not familiar with the labor analysis, bill probably has one. If he doesn’t contact me, I’ll get you what a TI has. Of course, I have to scratch out a TI, I’m sure. But the point is that there’s a lot of tools that are available, but you have to start thinking long term and start thinking what is somebody buying? So my succession plan is my daughter. She’s 25 years old now. I have her on a eight year schedule that puts me in an age of older, and it puts her in an age of eight years of learning from some of the really fantastic people, gives her time to be in the a TI 20 group, gives her a lot of time to learn. But the good thing is, is that she won’t have to learn all the street struggles that Rick and I learned and all the banging your heads and all the mistakes that we made. I’m going to not curse her with the business, which a lot of owners do to their kids. She is going to inherit or buy my position, which is it’s a golden position. So the point is, is that don’t give your business your failing business to your kids. That’s a death sentence to your kids. If you’re going to do it for your children, build something that they can take and be proud of, and all they have to do is follow up procedures. So that’s what I got.
Bill Connor (42:20):
So what I really liked about what you said there is no matter where your shop is or your business is, if you deliver value that is perceived by the customer and then charge accordingly and then hire the people to continue to go ahead and demonstrate that value. That’s kind of the secret to growing in any market.
Ray Konderla (42:42):
Yeah, bill, I think that’s the biggest thing, is one, do I recognize my value that I give to my clients? Two, I don’t hire guys that have two arms and two legs and they’re all of a sudden a technician. I have the best of the best in the industry, and the only way I can do that is by being able to pay them the best in the industry. The culture that I have here. I have got to maintain a superior culture that people love coming to work. And a lot of shop owners don’t even understand what culture is or how do you even freaking gain it. So yes, the value that we offer our clients is why we can charge the prices we do. I don’t just randomly charge pricing, but I certainly can’t get the best in the industry unless I’m making money. So what comes first, the chicken or the egg? Do I hire the best employees and then raise my door rate to be able to support that? Or do I raise my door rate to hire the best employees? I would say do both. Raise your door rate tomorrow, today, right now, go in your system and freaking raise it. Nobody’s going to know, I promise you, nobody’s going to freaking know and then hire the best employees or give all your employees raises.
Bill Connor (44:00):
Did you find like I did in a shop environment that using the digital tools helped me go ahead and adjust a perception of value to the customer where it actually enabled me to charge differently?
Ray Konderla (44:13):
Alright, so let’s take that. I’ve seen people with digital inspections, and it doesn’t matter what digital inspection platform you have, I love AutoVitals because their reporting system is superior to everyone, but they use their digital inspection machine as if bought a 5,000, $10,000 snap-on scanner to use as a code reader. Okay? So please understand if you have a digital inspection tool, you have to use it effectively yet. Bill, back to your point, I don’t know how many customers in, alright, I’ll back up. I know how many customers complain about our communications, lack of communication before we got digital inspections, and how many don’t complain about communication now because it’s communication is built in. It’s the process of once the inspection’s done, it goes to waiting for approval, it goes to waiting for finish, it goes to complete. I don’t ever have to call the customer.
(45:11):
They know exactly where in the process they are. The car is, right? The digital inspection platform by itself is I can take a picture of brakes, I don’t have to say anything. Customer can see the freaking brakes are in the red, right? Tires weren out to the freaking inside of the tire, the struts leaking, valve covering, caskets are leaking. I don’t have to sell anything. Now we’re just advisors, right? This is what we want to do first because you see the freaking problems, right? So yes, the digital inspection by itself puts you in a category above 80% of the other shops out there, right?
Bill Connor (45:49):
I would say that you’ve actually moved from the advisor position more to the consultant position.
Ray Konderla (45:54):
Sure, sure. That’s a good term to use because at some point, no customer is surprised when they bring the vehicle in and they haven’t maintained their vehicle that the vehicle needs repair. Nobody’s surprised. Now, they may be surprised by the price, but they’re taking care of my car. But the digital inspection puts us at a completely different professionalism. Now we can talk through the customer on why it’s good to invest in this car. This car is great. The body’s in good shape, the interior’s in good shape, engine train is in good shape. Everything is fantastic with this car. So we just got to get it up to good health. So that’s the benefit of the digital inspection is being able to walk step by step with the client on what needs to be done to the vehicle and why the training videos or the educational videos that are attached to each item that’s suggested.
(46:56):
Why does my cooling system need to be done? It needs to be done because all fluids break down. It deteriorates the system from the inside out. We want to get it before it gets aesthetic. So I give them the 10,000 foot view, and then I say, look, on your digital inspection, there’s a little, what’s that called? The blue Hyper Drive Hyperlink. Hyperlink helping me and struggling here. Click on the hyperlink and check it out. So the point is that it’s back to where we’re consultants and educators more than we are a sales. So it’s completely different role than we’ve always had in the past. So integrity, it keeps integrity high. They can see what we say. I don’t have to tell ’em anything. Plus if dad lives in freaking Oklahoma or New York and their kid’s going to TCU here, kid ain’t paying for the bill, dad is.
(48:02):
So I’m going to call the kid and tell the kid what’s going on. The kid somehow is going to call dad. No, give me your dad’s email. Give me his cell number. I’m going to text him the digital inspection. Let him look at it. The woman he looks at it, then he can have a conversation with me. So like I said, it is truly a completely different professional level, and the ones that have a digital inspections aren’t even freaking using it, right? I’ve seen them. So use it correctly. I know that AutoVitals has a picture policy. That’s where I stole mine from. All I did is add what I wanted in it, right? Personalized it. But AutoVitals has a picture policy seconds. A motorist is looking at research seconds of motorist research. If you have less than 200 seconds per digital inspection, your service riders are not doing their job.
(49:02):
You are supposed to. Well, I’m not saying you’re supposed to. I know that when my guy started going through the digital inspection step-by-step with the client, Hey Mr. Smith. Hey, I sent that digital inspection. You have time to look at it. I know he hadn’t looked at it. He hadn’t freaking opened it, right? There’s an icon on there. It says he hadn’t looked at it. You got a minute. I’d like to go that through that with you so we can kind of go through it together, either yes, no, I’ll give you a call back, whatever. I need an answer. So we go step by step. All of a sudden, our approval rating went stupid high because we started walking the client through the pictures. They saw the value of the digital inspection, and so nobody box it Labor cost. Now, people may bulk at parts cost.
(49:51):
They go on Amazon and looking for some Chinese model of the same thing. You’re selling them and it’s a factory denzo compressor, and they’re like, oh, I can get that at AutoZone for 250 bucks. They never say, well, I say never. 98% of the conversations are maybe parts prices over labor prices. It’s rare that we ever get any kickback on any labor prices, but I guarantee you, if I get kickback, it’s okay. I’m already making enough on the other customers that don’t give me any kickback. If I lose a couple on Kickback, I’m okay because I have an obligation to my team, to my wife, and to the shareholders of the business to make money. And I don’t call around to see what everybody else’s pricing. I don’t care what anybody else’s pricing. I know I have the best equipment, nobody. I have the best employees. I know I have the best educated employees, and I have the best team. So I don’t care what anybody else is priced, I got to know what I got to make at the end of the day. So anyway, that’s all I got. It’s fun
Bill Connor (50:59):
For the service rider when they get to the point where they’re actually educating to the customer to the point where the customers arrived to the shop ready to engage about buying instead of somebody having to sell them something. So that authorization through education is a huge tool, and people are resistant to go ahead and buy in from anybody that’s perceived as a salesman. Now, you’ve flipped a script on them and they’re coming to you. They’ve already seen what’s bent, folded, and mutilated. Now it is just a decision of how can the shop bundle that together to help me get this done the most cost effectively as possible.
Ray Konderla (51:36):
As a matter of fact, they’re talking about roll reversal used to. You call the customer, you sit them down and go through a sales pitch. Now you send them the digital inspection and they’re calling you and saying, oh my God, I didn’t realize my valve cover gaskets were leaking. My throats were bad. My powers are bad. My brakes are bad. How much is it going to cost? And when can I get it back? Like, holy cow, the digital inspection sold itself. Why do I need a salesman? I’m going to fire all my service writers and just send a bunch of digital inspections. They do a fantastic job.
Bill Connor (52:10):
Job. Well, actually, you’ve done differently. You’ve actually repurposed their time to turn them into estimating everything. So they’re filling the inspection report outright, and they’re using the time to estimate everything and make sure that they’re prepared for the customer to ask them, how much is this, this, this, and this?
Ray Konderla (52:28):
Yeah. Amen. I do agree with that.
Uwe Kleinschmidt (52:31):
I, because we have five minutes left, I want to ask one question as a follow up of what you said. Read, read, read. Would you mind giving us the books you recommend?
Ray Konderla (52:45):
Alright.
Uwe Kleinschmidt (52:47):
And what I’m going to do is I’m going to type that quickly in Amazon and then put the link to the Amazon page in the chat for everybody.
Ray Konderla (52:57):
There are three that I would start with. Myth Revisited or whatever, make the noise go away. And then the purple goldfish.
Uwe Kleinschmidt (53:09):
Purple goldfish. Yeah.
Ray Konderla (53:12):
And that purple goldfish.
Bill Connor (53:13):
Can I add Profit first to that list?
Ray Konderla (53:15):
Huh?
Bill Connor (53:16):
Can I add profit first to that list? Oh
Ray Konderla (53:18):
Yeah, yeah. Oh, any of his books are fantastic.
Bill Connor (53:21):
There you go. Mike Micki or something like that.
Ray Konderla (53:26):
Sounds good. Yes, I know exactly. Yeah. Pumpkin Plan. Yeah. Anyway, profit First is a fantastic book. Yes.
Uwe Kleinschmidt (53:38):
Okay. I’m slow. I’m still at the Pop Go trade. And how
Bill Connor (53:42):
About while Uwe ISS doing that, how about you go ahead and write if you would, now that I’m going to go and call you by the right name, how about you give us the top three things that a shop owner should be doing to go ahead and build their business into something that is going to be purchasable by somebody at some point or have a high value to a family member that want to transfer to or something like that?
Ray Konderla (54:06):
First things first, get out of the business. Find out how many cars or how many hours per ticket or how many ways to make money it’s going to take for you to get out of the business and work 100% at that. Second thing is processes and procedures. You’ve got to build repeatable processes and procedures. That is another critical thing. There’s a bunch of stuff online that you can have come up with, and then find a number two, find a number two. So it’s not you as the face of the business. It is your number two. It frees you up and you can work on the business study in the business. I promise you. Those three things are where you’re going to be able to succeed. Well,
Bill Connor (55:01):
Awesome. So now I learned a lot from Ray today is we need to go ahead and build a succession plan for the digital shop Talk radio. It’s just like anything else. We’re going to leave one way or the other at some point. Damn it. Awesome.
Uwe Kleinschmidt (55:17):
Very cool.
Bill Connor (55:19):
So thanks again for joining us today. You shared a lot of wisdom here that I know that you’ve learned the hard way in many cases, and we certainly appreciate your honesty and openness. I’d like to encourage people to go to autovitals.com/radio and review some of the other 180 episodes that are in there from shop owners and great panelists, just like right here and go out there and make some money while your customers and build a happy and well-paid staff.
Uwe Kleinschmidt (55:52):
Yeah, thank you. Thank you, Ray. I was inspired. I wanted to ask you or recommend you have a career as an inspirational speaker in front of you and or business coach.
Ray Konderla (56:09):
Well, thank you. Well, I was honored to be invited, so thank you for this honor. And God bless every one of you shop owners out there. I know it’s a beat down, but there is some at the end of the tunnel, so for sure. Keep calm, keep strong, and thank you again.
Bill Connor (56:29):
That light at the end of the tunnel isn’t a train ready to run a mow either. It’s a Sunshine Island. Amen. Thank you, gentlemen. Thank you.
