c1 cover3 5/21/14 11:04 AM Page C1
Working ‘On’ Your Business
‘Gen Y’ Workforce
It’s more than just fixing cars
Eagle Automotive Empowered Employees Team Up For Service Excellence
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C2-01 Wix SPD SO 5/29/14 11:11 AM Page 1
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Shop Profile 22 Eagle Automotive, Littleton, CO 42 Convenience Auto Service, Ann Arbor, MI
22 Shop Profile: Eagle Automotive
Features 14 Shop Management: Working ‘On’ Your Business 18 Shop Operations: Higher Profits, Happier Customers 48 H.R.: Changing Workforce, Gen Y
Shop Management: Working ‘On’ Your Business
Shop Profile: Convenience Auto Service
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Departments 6 30 38
Shop Owner Staff Publisher
Jim Merle 330.670.1234, ext. 280 firstname.lastname@example.org
Mary DellaValle, ext. 221 email@example.com
Cindy Strubbe, ext. 231 firstname.lastname@example.org
Advertising Services Director
Cindy Ott, ext. 209 email@example.com
Chris Crowell, ext. 268 firstname.lastname@example.org
Technology: Workflow Management
Buying/Selling An Aftermarket Business: Financial Preparation
Shop Safety: Protecting Your Employees And Your Business
Tim Fritz, ext. 218 email@example.com Andrew Markel, ext. 296 firstname.lastname@example.org
Director of eMedia/ Audience Development
Brad Mitchell, ext. 277 email@example.com
Maryellen Smith, ext. 288 firstname.lastname@example.org
Babcox Media, Inc.
3550 Embassy Parkway Akron, OH 44333-8318
Bill Babcox email@example.com
Vice President/ Chief Financial Officer
Greg Cira firstname.lastname@example.org
Jeff Stankard email@example.com
Beth Scheetz firstname.lastname@example.org
|Shop Owner|May|June 2014
Founder of Babcox Publications
Edward S. Babcox (1885-1970)
Tom B. Babcox (1919-1995)
䊚2014 by Babcox Media, Inc.
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06-10 Technology_Workflow Mgmt 5/20/14 7:55 AM Page 6
by Uwe Kleinschmidt, CEO, AutoVitals
Smooth Workflow Or River Logging? New Technology Boosts Tech Productivity; Fosters Better Team And Customer Communication Shop owners using the electronic inspection sheet, as well as the paperless back shop, have been going through some inflection points. Getting rid of paper has allowed them to present professional-looking inspection results to their customers and an unprecedented opportunity to educate on “Why now?” and “What happens if I don’t do it?” With the introduction of a tablet per technician, a new tool in the tech’s toolbox has been introduced and it has changed the way techs docu-
|Shop Owner|May|June 2014
ment inspection findings and record jobs they’ve completed. And, it has allowed the shop owner to measure technician productivity and efficiency. The service adviser’s confidence to recommend the technician’s findings to motorists has also significantly increased, due to the consistency of the process and the ability to look up the vehicle’s service history and compare it with the OEM service recommendation. Using images and voice recordings, the customer experience could be personalized so that emails with inspection and test results can be reviewed at the customer’s home or workplace, and the estimate gets authorized sooner. These enhancements are possible because of a new Internetbased IT infrastructure where the Shop Management Software
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(SMS) and its database are made available in the cloud so that mobile devices are updated in real time.
Workflow Management Is Controlled Chaos Interestingly, even shops with the most refined processes still use a paper rack for their workflow management. Existing shop management solutions don’t seem to be adequate in providing a fully digital solution that allows all participants to work effectively together, be it the service advisor, service manager, technicians, parts order people or the shop owner. As we were talking to shop owners and service managers across the country, we realized that we had a big opportunity to tackle the removal of the paper rack. After we invested time to come up with the best approach, we learned that it was not a sequential process, simply moving
|Shop Owner|May|June 2014
the vehicle from one defined workflow status, like “Inspect,” to the next step “Estimate.” Larry Moore with Larry’s Autoworks in Mountain View, CA, said it best: “Moving vehicles through the shop is more like driving logs down a river. Sometimes, there is seemingly effortless floating, and other times, the river can’t carry all the logs at once and they get stuck.” Or, as Darleen Reese with Christian Brothers Automotive in Brentwood, TN, put it: “At any point in time, I want my technicians to work on a vehicle, no matter what workflow status the vehicle is in.” Realizing the difficulty of managing this complex workflow, we tackled the daunting task of helping to control the chaos. And, we can proudly say that testimonials from shop owners around the country indicate that we are on the right track. While reading this, I’d like to suggest visiting www.AutoVitals.com/ShopFlow
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to watch the video taken in one of our pilot shops. “Everybody has complete visibility of what’s going on in the shop,” said Bill Connor, general manager at Craig’s Car Care in Allen, TX. Connor and his team demonstrated just how ShopFlow works in their shop. No change of the existing workflow is required, just some initial configuration in the ShopFlow tool. And, you can continue using your existing SMS, as we pull the data out of it in real-time and make it available on the techs’ tablets. There is no duplicate effort, and no confusion about what to do next. The best way to understand how ShopFlow works is as an add-on to your SMS, which makes it really easy for the service adviser to know where every vehicle is at any point in time, and how far along each technician is on each job. Plus, they have all the data at their fingertips: jobs complet-
ed, time budget available, service history vs. OEM service recommendation, inspection results, etc. The paper rack has been replaced with a big screen TV so everyone in the shop can see what’s going on. Or, affordable touch screens are made available to service advisers to not only run the shop with a few taps, but also to show the results to the customers at the counter. The times of shouting, as well as going back and forth between the front office and back shop, are a thing of the past. The tablet has become an important tool in the technician’s toolbox and is used not only for documenting a job’s progress, but also for looking up where the next job is in the repair process. Is a log getting stuck in the approval process river while “waiting on parts?” Just check the status on the tablet assigned to the technician. In the bottom photo on page 10, you can see how many
Bill Connor, general manager at Craig’s Car Care in Allen, TX, explains inspection findings at the counter on a one-touch screen.
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“I’m running some good hours, and it’s all on my tablet,” says Markel Franklin, a tech at Craig’s Car Care.
tive networking in the shop. I’m proud to announce that our proprietary technology allows us to integrate with any SMS in the market, and we’ve started releasing ShopFlow add-ons that allow for saving data, like inspection results, back into the SMS database so everything can be stored in one place! I’ll keep you posted, so please stay tuned. SO vehicles are “Idle” in “Estimate,” waiting for customer approval. Technicians now have everything on their tablet. Clocking in and indicating when the job is done is all just a few taps away. Moreover, the tablet now seems to be the place where all the work is documented, so when payroll time comes, everything is clear. What’s Next? I’m excited to see ShopFlow taking hold in more and more shops. Integration with the shop management software is vital for effec-
|Shop Owner|May|June 2014
Uwe Kleinschmidt is the CEO and founder of AutoVitals in Santa Barbara, CA. The company’s Web-based services focus on the independent automotive repair industry. AutoVitals’ products facilitate highly effective Concierge Auto Repair services, covering all aspects of the service advisor’s interaction with prospective and existing customers. Highly effective and optimized websites, workflow support in the shop, as well as customer retention and social media services are just a few ingredients. He can be reached by visiting www.autovitals.com or calling 1-866-949-2848.
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12- Federated Spotlight 5/29/14 11:03 AM Page 12
Working Together — The Federated Way Federated Auto Parts’ dedication to building profitable and successful relationships has made it one of the automotive aftermarket’s premier programmed distribution groups. Federated is devoted to providing professional technicians with superior customer service and name brand quality parts at competitive prices along with a full array of training and business support tools. Since Federated was established in 1985, the name has become synonymous with quality in the field of vehicle repair with more than 8,000 stores and service centers nationwide. Federated Auto Parts stores are independently owned businesses that serve their local communities and are often family-owned and operated. These stores provide the highest quality replacement parts and accessories at competitive prices, but also have the most knowledgeable people who can help with whatever the problem or challenge a customer may face. They also provide training and a host of other technical and marketing support programs including Federated Car Care, which identifies some of the best service providers in the country as being on the Federated team. Federated Car Care is a sign of confidence for consumers looking for a quality repair facility. To be eligible to be a Federated Car Care member, shops must meet strict criteria for performance like employing ASE certified technicians that have the proper training to tackle the toughest repairs. Shops also receive on-going training and marketing support along with a program that helps them have the most up-to-date, state-ofthe-art equipment.
Independently owned and operated, Federated Car Care centers are usually managed by the owner so customers can develop a relationship not only with the business but also with a person who will take an interest in keeping your car performing at its best. Federated Auto Parts, headquartered in Staunton, VA, is one of the largest auto parts distribution and marketing organizations in North America. Federated is dedicated to supporting its customers with quality name brand parts, programs designed to grow their businesses, and experienced counter sales people who are knowledgeable in today’s evolving automotive technology. For more information, visit www.federatedautoparts.com.
Federated Auto Parts 508 Greenville Ave. Staunton, VA 24401 (540) 885-8460 www.FederatedAutoParts.com
|Shop Owner|May|June 2014
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by Terry Keller, shop owner and president, Auto Profit Masters
Working ‘On’ Your Business Not Just ‘In’ It
Before I dig into an article about how to work on your business instead of in it, I’d like to share a story with you. Once upon a time, my accountant had to prepare 102 W2s in a single year for my shop. We had so much turnover, dealt with so much chaos and were putting out so many fires that it was impossible for me to contemplate working “on” my business instead of “in” it.
Sure, I was doing some basic measurement, and I had some understanding of how my shop was doing on a day-to-day basis. But I didn’t know how to measure my employees, meaning I couldn’t hold them accountable. I had my customer base completely backward, leading to constant problems. In short, I was the poster child for a business owner who was trapped working in my business instead of working on it. Perhaps the worst part is feeling trapped in the cycle. Chaos in the shop means I spend my time putting out fires and not on improving systems; a lack of good processes and procedures leads to chaos in the shop. So what’s the way out? How can we break the cycle? I’ll come at this problem from two directions, but, truthfully, it comes back to a single principle: we have to focus on results instead of activity.
|Shop Owner|May|June 2014
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Activity Or Results From Marketing? I mentioned my customer base earlier. At the same time I was preparing 102 W2s, my shop was doing 70 cars a day. My advertising was comprised of discounts and fine print, meaning that I was attracting the lowest-quality customer possible. Those 70 cars per day were averaging a ticket in the mid $100s. We were running ourselves ragged, trying to take care of customers who only wanted a cheap price. We couldn’t care for the few great customers we did have because we were so swamped. I had settled for activity (a busy shop) over results (a successful shop). If you’ve ever been in this situation (or even if you’re there now), you know that it’s not easy to pull out of this kind of nosedive. Even if you switch your marketing approach tomorrow, unless your staff can follow through on the promises you make in your new advertising, you’ll never keep
those new, high-quality customers. So, if it seems like I’m glossing over the marketing side of your shop, it’s because working on your business is in large part about focusing on results instead of activity when it comes to
training and accountability in your shop.
Starting The Accountability Cycle Pulling out of the nosedive called “102 W2s in a year” meant two things: hiring better people, and holding them accountable. The former took setting aside my ego and realizing that we’d never grow if I was always the best at everything in the shop. The latter took the Auto Profit Masters (APM) Accountability Cycle. It wasn’t called that at the time, of course. At the time, it was just a way to make training stick. If you’re the one who is constantly asking your employees what they learned in a training class, or reminding them of their commitment to fixing a number they control, this APM Accountability Cycle is for you. It all starts with the same question I’ve been asking: Are you focusing on
activity or results? If you assign a training class to an employee
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and hope they get something from it, they will probably listen to the class. Because the goal was to “listen to a class,” that training might last a week before things go back to life as usual. But, what if you give them a deadline to complete it, hold them to it, have them report what they learned and the things they’re going to change immediately, and then hold them to that promise? That’s a focus on results, and it leads to a lasting change in your business. It’s true whether you’re talking about sending them to a conference to learn
This is the APM Accountability Cycle, and even though it’s nothing more elaborate than focusing on results instead of activity, it’s the difference between working longer and longer hours at your shop hoping things get better... ...and actually fixing problems. From there, working on your business only accelerates. From there, you can bring more and more numbers into focus and see them change. From there, it’s not a big leap to daily measurement, daily accountability and daily growth. There’s a lot to be said
about customer service, or simply holding them accountable for working on Parts Gross Profit Percentage in your morning meeting.
about the right software and applications, but, for now, we’ll stick to getting started working “on” your business.
|Shop Owner|May|June 2014
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Is Your Parachute Packed? Does it really matter if you want to work in your business? What if you really enjoy being a part of the day-to-day, turning wrenches or advising customers? The answer, of course, is that you should keep doing what you love. But I’d caution you to keep your eyes on the finish line: what is your exit plan? It’s not even fully implemented yet, but we’ve already seen what the Affordable Care Act has done to the cost of owning a business in just four years. Whether because of legislation, a family emergency or simply sailing into the sunset, working on your business today means you can pull the ripcord down the road at a moment’s notice. After all, what’s an exit strategy other than working on your business each day? Systematize operations; measure, manage and improve your important numbers; move toward remote management. The only part I haven’t already talked about is securing good legal counsel. Ultimately, it comes down to your answer to this question: Are the next 10 years going to be easier or harder for you as a business owner? I know my answer, which is why I choose to focus on that exit strategy today. It’s why I choose to work on
my business today. The good news is that getting to a place where you can guide or direct the business without having to be physically on-site — or rather, to a place where you’re working on your business, whether or not you’re in your business — is just a matter of focusing on results instead of activity. Doing this in marketing leads to better customers; doing this with employees leads to more effective training; and doing this with your numbers means security for your business both now and in the future when you’re
ready to hit the eject button. SO Terry Keller is a shop owner, service writer and AMIApproved trainer for auto repair shops. He is also the President of Auto Profit Masters and creator of the RPM ToolKit™, which integrates with shop POS software to help owners identify problems in their shop and get one-click training solutions. Reach him at email@example.com or (303) 795-5838.
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by Bob Cooper, president, Elite Worldwide, Inc.
The Best Kept Secrets
To Higher Profits And Happier Customers In order to build a successful auto repair business, most shop owners feel they need to sell more parts and more labor. Although both of those items are a part of your business model, one thing is certain: your customers don’t look forward to buying either of the two, at any price. Yet, thousands of shop owners are having sleepless nights trying to find ways to squeeze more money out of their parts and labor sales. While I was still operating auto repair shops, I was intrigued by the fact that while my customers had little, if any, interest in the parts and labor they were buying, they were quite interested in the warranty we provided on our repairs. In essence, what they wanted more than anything else was the peace of mind in knowing they would have good, dependable transportation, and that they wouldn’t have to worry about paying again if the repair were to fail.
|Shop Owner|May|June 2014
It was at that time I realized that what I needed to sell more than anything else was peace of mind. I did a tremendous amount of homework on the insurance industry, and it didn’t take long to realize that insurance companies are all in the business of selling risk. The way they win is by factoring the inevitable losses into their premiums. As an example, for every 1,000 people they provide life insurance to, a certain number will inevitably die during the insured period, but if they choose the right customers, and charge the right amount, they’ll have plenty of money to cover
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In essence, what customers wanted more than anything else was the peace of mind in knowing they would have good, dependable transportation, and that they wouldn’t have to worry about paying again if the repair were to fail.
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those few expected deaths. Next, I evaluated the probabilities of different types of part failures, and the kind of customers I wanted in my shop. I quickly discovered I could take the repairs that had the lowest probability of failing within five years, price them out as optional services, and completely change the way I was operating my business. First of all, most of our failures would typically occur within 30 days, so regardless of whether I offered a longer warranty or not, I would be covering that repair. I also discovered that if the repair failed shortly outside of our standard warranty, we would cover the cost for the purpose of customer satisfaction. With this understanding, it was obvious to me that the only additional risk I would be taking would be for any failures that occurred beyond the term of our standard warranty, yet within the time outlined in our extended warranty. In my case, on our targeted repairs we offered lifetime warranties that were non-transferable. Now here is the best part: I discovered that no matter how much someone loves their vehicle at the time of repair, odds are that they’ll no longer own the car three years later due to lifestyle changes, tempting car sale ads, etc. So my exposure (risk) was more limited than you’d imagine. Now let’s talk about profit and happy customers. Imagine if you were to offer your customer a standard master cylinder for $XXX (with a oneyear warranty), and at the same time you offered them the option of a premium master cylinder (with a five-year warranty) for a small additional amount. If they elect to go with the part that carries the longer warranty,
then all of those added dollars fall right to the bottom line. When done in the right way, the added profits will dwarf the few additional repairs you’ll have to perform. If you do the math, not only will you be amazed at how profitable this can be, but, as icing on the cake, the customers who choose to invest in the services that carry the longer warranties will be thrilled with the peace of mind you’re providing them. Now if this isn’t all reason enough, consider that Harvard Review reported on a study of what occurs when people are provided with options in a sales environment. They discovered that when test groups were offered one DVD player (Brand A), only 10% would buy. When they added a second player to choose from, 32% purchased Brand A, and 34% purchased Brand B. The lesson? People love choices, so offering them the option of a repair with a longer warranty is one that many of your customers will love, and it will put more money on your bottom line at the same time. Note: Many states view offering different warranties as offering insurance, which requires a license. By providing different parts or services in your options, you’ll be good to go. SO Since 1990, Bob Cooper has been the president of Elite Worldwide Inc., www.EliteWorldwideStore.com, an ethics-based company that helps both struggling and successful shop owners take their businesses to new levels through one-onone coaching from the industry’s top experts. The company also offers shop owner sales, marketing, and management seminars, along with service advisor training. You can contact Bob at firstname.lastname@example.org, or at 800-204-3548.
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“I believe leadership is critical to being and remaining successful in business. At the level most shops are running, you have to hire people to help the business succeed, and leadership is going to empower employees to perform their job with minimal input from the owner.” –Brian Bates, Owner
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by Debbie Briggs, contributing writer
Eagle Automotive Teamwork And Service Excellence Combine For Business Success When Brian Bates opened Eagle Automotive in Littleton, CO, 10 years ago, he knew he wanted to build not only a successful business, but also a rewarding environment where employees wanted to excel. If opening a second location in 2012 is any indication, Bates is on to something, and that something is teamwork.
“Honestly, I have my job as the owner but the employees work a heck of a lot harder than I do (most days)!” Bates points out. “The business would be nothing without them.” That’s high praise from an owner who is an ASE/Hondacertified Master Technician in his own right, coming from a dealership background before opening his first location in 2004. So, it’s no surprise that Bates values education and makes it a priority for Eagle Automotive’s seven certified techs, five of whom are Master Technicians with the other two working toward that designation. “We require that all of our technicians attend 40 hours of training each year at any of the training opportunities that I make available to them,” Bates says of the importance of continuing education. “We send our technicians to NAPA Autotech training, WORLDPAC
WTI training and CARQUEST CTI training. “We’ve also started doing cooperative training with other shops in our NAPA Business Development Group where we have our technicians teach each other certain skills in an informal shop setting after work.”
Employee Retention & Recruitment In addition to numerous training opportunities, Bates says offering competitive pay and benefits helps keep the qualified employees the business has, and it also positively impacts the working environment at both of his shops. “I’m finding that it’s becoming very difficult to find technicians, so I have become highly focused on retaining and attracting good people to staff our company,” Bates explains. “We also maintain an environ-
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ment that is friendly and team-based. I want to make sure that all of our employees have a fun and rewarding environment in which they are able to be successful. Pay is important, but the environment is what retains the employees.” When it’s necessary to fill a vacancy, Bates is ready, as he’s “constantly recruiting.” And that consistent networking pays off. “The best results I’ve found come from constantly talking to people about the opportunities at our company and staying in touch with people in the industry,” Bates says. “I can usually call someone I know and find a technician who is looking for an opportunity that we have available.”
Shop Affiliation & Appearance Bates says making the decision to cobrand Eagle Automotive with NAPA has paid off for the shop — he’s always believed that partnering with a nationally recognized company can be a huge benefit for a small business. “NAPA provides an excellent opportunity to use its branding at a high level,” Bates explains. “The brand’s PROimage program helps with the design and implementation of the standard appearance of a NAPA Autocare facility. NAPA will actually reimburse some of the cost of enhancing the appearance of your shop.”
|Shop Owner|May|June 2014
Danny Arguello And Bates knows that shop appearance is critical to the success of an independent repair shop. “It speaks volumes about the kind of business you run,” he says. “If it’s run-down, then customers make assumptions about the type of work that you produce. On the other hand, if it’s clean and inviting, they assume
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ings to retain our image as the top shop in our market.”
Shop Productivity & Profitability
Dave Slawson, Lynn Rice
Rhondi Bates your team is producing a higher quality product, and you attract a higher quality customer as a result. We constantly clean and improve our build-
The techs at Eagle Automotive rely on invaluable information from both Identifix and iATN to repair vehicles with efficiency as well as precision, both of which improve shop productivity. “These online tools have been instrumental in helping us diagnose vehicles more quickly,” Bates says, who adds he also “makes sure that technicians maintain solid diagnostic processes when using these sites so that we don’t assume the diagnosis. We don’t want to run the risk of a misdiagnosis due to cutting corners.” Bates says joining the Bottom Line Impact Group and working with Dan Gilley, John Wafler and others in the company also positively impacted shop processes and, just like the name suggests, the business’s bottom line. “The Bottom Line Impact Group has brought our shops to a level of profitability that we would have never achieved without their help,” he says. In addition to impact group coaching, use of an LPM electronic “flag sheet” developed by David Justice has also helped boost productivity at the two shop locations. The sheet provides a way for technicians to communicate where problems are arising in the vehicle repair process: Are they consistently waiting for parts? Waiting for authorization? “We take that information, and we
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“When the right team is assembled and the business is working well, customers will get what they are looking for, which will result in a business that thrives!” identify which areas are working efficiently and which areas need attention,” Bates explains. “Then we focus on the improvement of the areas that need it and maintain the processes that are working well.”
Shop Marketing & Web Presence While he’s found that there’s no
|Shop Owner|May|June 2014
“silver bullet” to marketing, Bates says he does rely on direct mail and Internet advertising to bring in new customers and communicate with repeat patrons. Making sure that his service staff is up to date on marketing efforts is also critical. “I also dedicate a portion of our marketing efforts to training our service advisers so that they understand how the marketing plan works
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and how their actions fit into the plan,” Bates continues. “This maximizes efforts and keeps our customer happy, which means higher retention and greater word-of-mouth referrals. As a result, our car count consists of the base number of vehicles that come to the shop through loyalty, and then the attraction of other vehicles through marketing efforts.” Bates says the shop’s online presence is becoming equally important in today’s digital landscape, as customers consistently turn to a company’s website to learn more and decide if they want to do business there. “The website is a constantly evolving item that requires constant attention and improvement,” he says. “We recently refreshed our website and implemented some improvements for search engine optimization and customer convenience, but I expect we will be remodeling the site every couple of years from now on. “Your website is critical,” he continues. “Customers will use the web to learn about your company, its reputation, and will decide where you stand amongst competitors by how well you have developed your site.”
Shop Leadership & Empowerment At the end of the day, Bates says many factors impact the success or failure of an independent repair shop, but first and foremost is leadership. “I believe leadership is critical to being and remaining successful in business,” Bates says. “At the level most shops are running, you have to hire people to help the business succeed, and leadership is going to empower employees to perform their job with minimal input from the owner.” Bates says it’s his job to facilitate an environment that enables people to be successful in reaching both their career and personal goals. “We need to provide the support for success and maintain the administration of the business in the areas of marketing, vendor relations, company vision, accounting, financing and human resources,” he concludes. “When the right team is assembled and the business is working well, customers will get what they are looking for, which will result in a business that thrives!” With two shop locations and counting — both being run by top-notch teams — Eagle Automotive is sure to provide quality repairs to the residents of Littleton, CO, for years to come. SO
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Buying & Selling|An Aftermarket Business
by Art Blumenthal, MBA, CBI
Preventive Measures For A Shop Owner To Take To Avoid The Risks Of A Deal Falling Apart A business sale requires the full attention and cooperation of the seller. Take your vacation before putting the business on the market. Then be prepared to dig in, be available and be actively involved in the stages of the selling process. Once it’s sold, then it’s time for that trip of a lifetime.
Your tire or auto service business has provided for your livelihood. It has created jobs, sales, profits, equity and marketplace visibility. And now you’re ready to move on. Maybe you’re seeking an exit right away. Maybe you’re planning for the future. Either way, and regardless of the phase you may be in regarding the sale of your shop, if you have questions about how to proceed, you’re not alone. I regularly address those questions in my ongoing series of articles in Shop Owner. For those who have moved through the many stages of a business sale, few things in business are more frustrating than the collapse of a sale, especially when the deal is tantalizingly close to completion. So many hours of often-tiresome work — the paperwork, responding to timewasters, showing people around the premises — proves to be in vain. But at least you found a serious buyer, albeit they ultimately withdrew interest. Many businesses, more than many realize, languish on the market for months or years without finding a remotely credible purchaser.
|Shop Owner|May|June 2014
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“Time kills all deals.”
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Why Deals Break Down Not all deals break down for the same reason, so, unfortunately, even if you learn from one deal failure, it may be another reason that causes the next buyer to withdraw before the finish line. Knowing the top risks for deals breaking down allows an experienced business broker to implement the preventive measures in preparing the marketing materials, anticipating the issues that may surface during due diligence, and recommending solutions to rectify the issues up front. Of course, deals can break down for reasons beyond the seller’s control. The buyer may withdraw after finding a more suitable business elsewhere or deciding not to buy a business at all. Occasionally, the buyer gets talked out of it by a spouse, accountant or lawyer. But you can reduce the chances of a sale collapsing. Just as your business has thrived because you’ve convinced your best customers that preventive maintenance is the key to avoiding costly repairs, there are now preventive measures you can take to avoid the top five typical risks to sales being abandoned. Keeping a deal on track is a key element of my services as a business broker and one which requires cooperation by the seller.
Risk 1: Time kills all deals. Having the paperwork in order is a key to the ultimate close. In anticipation of that requirement, I ensure that all my selling clients provide financial statements, tax returns, leases, key contracts or franchise agreements and any available environmental reports up front. Sellers need to keep their Quickbooks® or other bookkeeping software up-to-date and be prepared
to provide monthly or at least quarterly sales reports and financial statements. For example, it’s a bank/SBA requirement that financial statements be no older than 90 days at the time of application and at closing. Because this may be the first time you’ve ever sold a business, you cannot be expected to anticipate all the documentation that will be needed. In addition, a potential buyer…even a highly qualified one…may be on a different schedule than the seller. Although the seller may want a speedy process toward the ultimate close, the buyer and his broker or attorney or accountant may want to take their time at a more leisurely pace. Accountants and attorneys are oftentimes overloaded with work from other clients or court dates and it becomes necessary for the broker to play the role of the squeaky wheel in keeping the sales process on track and on schedule. Kids often say, “If you snooze, you lose.” Well, the grown up version of that mantra is “Time kills all deals.” Preventive measures: Don’t take it personally. When a lifelong business is being sold to a new owner, feelings can get hurt and that’s a good reason to have a business broker: to assist in the management of feelings and emotions. It’s not uncommon during the sales process for a buyer to discover unforeseen expenses involved in the transaction and suddenly the buyer is wondering if there will be enough cash available for a down payment. “Creative” buyers may start looking for negatives about the business, perhaps deferred repairs and maintenance in the building and equipment or dusty old inventory, as a means of
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negotiating a credit to offset their down payment shortfall. Don’t take it personally if a buyer is suddenly criticizing aspects of your business and seeking a financial accommodation. Both parties are nervous of each other and don’t want to give away too much when they’re negotiating. To avoid the risk of an emotional blowup between an offended seller and a stressed out buyer that kills the deal, it’s best for the broker to exert a calm demeanor and resolve the disagreement. Buyers are also seeking a smooth transition of ownership, entailing post-closing training and consultation and the seller’s assistance in encouraging the employees to support the new leader. Buyers may withdraw from the deal if they feel that emotional disagreements during the sales process will result in a lack of support from the seller during the critical transition phase.
Risk 2: The seller is inflexible. Rigidity by the seller, in perhaps refusing to consider partial seller financing, or to assist with the transition process, or to negotiate the asking price, can be a major factor in scaring away an otherwise qualified buyer. If a buyer feels like he is the only party making sacrifices, then pride and frustration may drive him away. Preventive measures: Be prepared to make concessions. Give yourself a better chance of realizing the highest possible asking price by being flexible with the deal structure. For example, if the bank is requiring a high down payment from the buyer, you could accept a small portion of the asking price in installments. If the buyer is nervous about
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their shortage of prior automotive experience, you could offer additional training and consultancy beyond the sale to ease any misgivings the buyer has about your business. In cases where you own the property, a short-term rent concession may serve a long-term benefit in making sure the buyer is successful and financially able to pay you rent for the duration of the lease. The bigger the perceived gamble, the less a buyer will pay — and an acquisition will naturally seem safer if the outgoing owner offers his support post-sale.
Risk 3: Due diligence uncovers undeclared issues. As the largest and most complex deal many entrepreneurs will ever undertake, the sale of a business requires mutual trust to succeed. Should the due diligence process, where the buyer examines the premises, books, and contracts and so on, reveal any discrepancies in your account of the business, then it can fatally undermine the deal. For example, an inspection of the premises could reveal deferred roof maintenance or environmental issues. Researching Internet customer reviews of your business could invalidate claims of high consumer satisfaction levels. “What else is he hiding?” many buyers will think. With their financial security potentially at stake, few buyers will negotiate with someone who has flagrantly betrayed their trust. Preventive measures: Be honest. It’s not just outright lying that undermines trust; stretching the truth or declining to mention inconvenient facts can wreck a deal as well. No buyer will blame you for highlighting your business’s strengths and down-
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playing your weaknesses — just don’t hide anything. Bold, unsubstantiated claims about the potential for boosting revenue or expanding the facility are of no value to a buyer, especially if there has been a downward trend in sales over the past few years.
Risk 4: The buyer is a “tire kicker.” “Tire kickers” are the bane of the business seller. Sometimes it’s a competitor with an ulterior motive parading as a genuine buyer; more often than not it’s a window shopper with neither the financial means nor courage to make a purchase. Either way, some ostensibly interested parties will never actually buy your business, regardless of its merits or
your cooperation. They will waste your time, distracting you from more genuine buyers and potentially forcing you to accept a lower price down the road. Preventive measures: Qualify the buyer as soon as reasonable. So how quickly can you identify a tire kicker to prevent your time from being wasted? If you’re on your own in the task of selling your business, you may very well not be able to make that call. Just as you have developed the skills for “reading” your customers, an experienced business broker becomes adept at detecting a tire kicker after just one or two conversations. A good broker will ask buyer prospects a series of questions to gain insight into their history of investigating businesses and their motivations. If they’re not a serious buyer, why risk the disclosure of your confidential financial information and tax returns, and why waste precious time giving evening and Sunday tours of the facilities? Why subject yourself to the emotional roller coaster ride of being excited to have a buyer prospect, only to be let down if they go dark after a few weeks? Part of the buyer’s qualifications, of course, is their capacity to finance the business. One of the first things I work out is whether a buyer has the necessary down payment to finance the business, a good credit score and no history of a bankruptcy.
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If you lease the real estate the business operates from and you have a written lease, you will, almost without exception, need the permission of the landlord to transfer the lease. Whenever possible, I get the business “pre-qualified” by a major national bank and engage them early with a buyer to make sure they will qualify for financing.
Risk 5: Lease dispute with landlord. A landlord can kill a deal. If you lease the real estate the business operates from and you have a written lease, you will, almost without exception, need the permission of the landlord to transfer the lease. Preventive measures: Examine lease terms and extend if necessary. If your lease is close to expiring, you definitely want to speak to the landlord as soon as possible, as you need to know their intentions. The landlord may have decided not to renew your lease, which will almost certainly damage the value of your business and force changes to your selling plans. Review the date of expiry, whether the lease includes any options to renew, as well as the terms. Can you, as the lessee, assign or sub-
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lease, and, if so, will you be released from further liability? Most banks will require that the buyer have a lease or options that extend through the loan term, typically 10 years. Most sellers do not want to make long-term lease commitments if they are selling the business, but getting the landlord to provide an additional “option” term should not increase your exposure if it’s properly drafted. Many sellers tell me that they don’t want to go to the landlord until they have a deal with a buyer in hand. I’m not necessarily advocating that a seller immediately tip off a landlord that they’re selling their business, but there are many reasons for a business owner wanting to secure an additional lease option, such as a refinancing of the business or making a large investment in equipment. If you wait until you have a buyer to talk to the landlord, you may find them less willing to favorably negotiate the option terms. The landlord will know you are time constrained because the buyer needs the extension for their bank and may not be very flexible, creating an unfavorable impression on the buyer. Or the landlord just drags their feet, and, as we know, “Time kills all deals.” SO
Leveraging more than 30 years of experience as both an aftermarket business owner and aftermarket technology executive, Art Blumenthal LLC provides business intermediary and advisory services to both buyers and sellers of industry businesses of all sizes. Art is a member of IBBA (International Business Brokers Association, Inc.). For more information, or to initiate a no-obligation confidential consultation, visit www.art-blumenthal.com.
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by Vic Tarasik, owner, Vic’s Precision Automotive
Workplace Safety Protects Your Employees And Your Business
It was a misty, cold and dreary fall afternoon in 1980 in Western New York; pretty typical for that time of year just ahead of the snow for which the region is known. It was early on in my automotive career and I was working at a 4x4 and Jeep salvage yard, rebuilding the manual transmissions that Rebel, our yardman, would remove from salvaged Jeeps. These transmissions could be pretty difficult to disassemble with all the snow and salt exposure they got during the Buffalo winters. You can just imagine the type of persuasion that was required to get them apart. Hammers, acetylene torches and the occasional broken bolt were the norm. On one particular teardown, I was using a large sledgehammer and a hardened pin to drive out one
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of the bearing shafts. Of course, I wasn’t using ear protection or safety glasses; heck, I was 20 years old and at that age we all think we are bulletproof and have the notion that safety gear is not cool.
THE VALUE OF EXPERIENCE Unaware I was being observed by one of the owners, Bill came up to me and inquired as to what I was doing. I shared with him how I broke down the transmission, along with what I planned to do next to get it ready for reassembly. He was quite interested in how I did it, but he waited for the right time to share a personal story. Bill asked me if I knew that he was blind in one eye. I wasn’t aware and asked how it happened. He said he was working at the salvage yard when he was about my age, and was
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Every day we focus on sales, ARO and bottom line profits. Does any of this really matter if we don’t have a safe workplace that ensures the security of our employees?
trying to get something apart using a hammer and pin just like I was. Bill said at one point he struck the hammer and felt a sting just under his eye and didn’t think much of it until he felt something warm on his chest. After he felt it and looked at his hand, he realized it was blood and that sting was from a sliver of the hardened pin that punctured his eye. He said the doctors couldn’t save the eye and he wished he had used safety glasses, along with a better procedure than using a hardened pin for a drift. Bill’s story impacted my approach to safety. It made me realize we have only two eyes and 10 fingers, the loss of which can be devastating, but prevention of such accidents takes
WHY SAFETY SHOULD MATTER TO YOU? It shows your heart. You care about your employees and what you do to ensure their safety demonstrates this to them. It showed how much Bill cared when he took the time to counsel me and share his story on such a tragic loss. He truly cared about me and my well-being, rather than any liability the company might have if I got hurt. His heart was revealed to me on that cold, winter day in the shop. Can your employees say the same about you? Every day we focus on sales, ARO and bottom line profits. Does any of
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this really matter if we don’t have a safe workplace that ensures the security of our employees?
AN EXCELLENT EXAMPLE ExxonMobil is the largest oil company in the world and its safety credo is “Nobody Gets Hurt.” Safety briefings are the norm, whether you’re a contractor, an employee or a spouse on site for a seminar. Our shop has participated with AAA at several Car Care Inspection events, and prior to set up, an ExxonMobil employee always gave
us a safety briefing. Safety is at the core of the identity of the ExxonMobil employee, and the company’s reputation for safety is reflected in these results: The number of lost-time incidents for employees are less than 1 incident per 400,000 work hours, according to ExxonMobil.
THE UNEXPECTED VISITOR We know there are federal and state agencies put in place to make sure that industry, as a whole, remains safe. One agency we are all aware of
OSHA does offer a voluntary inspection program, which exempts you from fines as long as you contact them, schedule an appointment and agree to fix the defects they find. This allows your shop to be proactive, rather than reactive, to items that are safety threats that you look past every day.
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is OSHA, but most in our industry are not aware that OSHA has the power to visit your facility at any time to inspect it and see if the workplace is safe. During the inspection, the OSHA representative has the right to cite each safety violation. Each citation can carry a fine up to $7,000, and willful violations can be up to $70,000. So, an unexpected visit can have massive repercussions.
2013, OSHA’s On-site Consultation Program conducted approximately 30,000 visits to small business worksites, covering more than 1.5 million workers across the nation. Staying
THE GOOD NEWS OSHA does offer a voluntary inspection program, which exempts you from fines as long as you contact them, schedule an appointment and agree to fix the defects they find. This allows your shop to be proactive, rather than reactive, to items that are safety threats that you look past every day just because you have become accustomed to them. It’s a lot like what we try to teach to our customer — preventive maintenance is much cheaper than the repair. How often have we heard a noise or felt something on a test-drive that our customer hasn’t noticed because the problem had been around for such a long time? OSHA’s On-Site Consultation program is put in place for employers who want to ensure and improve the wellbeing of their employees. In
ahead of the curve as it relates to safety benefits you, the wellbeing of your employees and the bottom line.
CONCLUSION While the subject of safety is not nearly as sexy as a new marketing program or the latest on SEO, it goes a long way toward ensuring your employees and company remain a vital component of your community, and you remain a profitable entity. SO To contact OSHA to set up a free consultation, go to https://www.osha.gov/dcsp/smallbusiness/consult.html
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â€œWe strive to fix cars right the first time, and on time. We undercommit and overdeliver for our customers.â€? - Lou Lippert (left) and Mike Maloney, Owners
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by Debbie Briggs, contributing writer
Convenience Auto Raising The Bar And Committing To Excellence Helps Shop Remain Successful All too often, going into business together can strain a friendship, but this hasn’t been the case for Lou Lippert and Mike Maloney. If anything, opening Convenience Auto Service in March 2004 and working to operate a successful independent repair shop has only solidified the alliance — and resulted in the two friends celebrating their 10th anniversary in business. How do they make it work? Lou, who holds five Master Technician certifications, handles the day-to-day shop operations, while Mike runs the finance and marketing side of the business, including serving as webmaster. “Mike and I usually approach problems very differently, and while that sometimes can be time-consuming, talking through decisions usually results in a better outcome,” Lou explains. “The fact that we highly respect each other, and strive to get along, propels us.”
Tech-Savvy Customer Base Located in the college town of Ann Arbor, MI, Convenience attracts a tech-savvy customer base, one where iPhone use is a given. Mike says staying current with technology is a must. “Being in a college town, the majority of our customers have
smartphones, and they use the website not only to find us, but to communicate,” he says. “We have a very unique website that I custom-designed for Convenience Auto. The design is more inviting and informative than competitor websites.” The website features a responsive design that allows for easier use by customers on mobile devices. They can quickly find out more information about after-hours drop offs, or call the shop with the click of a button. Also unique is the shop’s Preventative Maintenance Blog, which offers timely, helpful information customers can really use. Consistent posting also helps the shop be more readily found in search results, as search engines such as Google favor well-written, regularly posted website content. Lou says Mike’s graduate degree in business administration with a minor in marketing
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gives them an edge when marketing to tech savvy customers. “We believe that we are much more savvy in the marketing area than the average independent shop,” he says.
Impeccable Service Marketing details aside, Lou is also quick to add that there is no substitute for having the best product. “We constantly evaluate the competition and determine how to provide the best service possible,” he says. “We don’t do much conventional advertising. Word-of-mouth always has a bigger impact, and it’s cheaper, too.” Lou adds that his philosophy of “product is king” helps the shop always provide the best possible repairs
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for its customers — something they appreciate perhaps more than discounts or promotional offers. “We strive to fix cars right the first time, and on time,” he says. “We undercommit and overdeliver for our customers. They respond more positively to this strategy than any discounts or advertising program.” Customers also appreciate the shop’s recent building improvements, including an enlarged write-up window, as well as a remodeled welcome area, customer bathroom and customer lounge. In addition, the heating and air conditioning system underwent a significant upgrade. “We’ve been in business for 10 years now, and our shop was starting to look a little tired,” Lou explains. “We’ve embarked on a significant
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program of building improvements this year to make our shop more customer friendly. Our initial feedback has been very positive, especially regarding the areas that customers come in direct contact with.”
Top-Notch Training About 40 to 50 percent of those customers are driving Subarus, which just so happens to be Lou’s specialty. He spent 22 years at a Subaru dealership, honing his craft before opening Convenience Auto and bringing many of his former customers with him. With the shop previously catering to German cars, those models
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still make up about 25 percent of the shop’s volume today. “Our shop prides itself on being a one-stop shop,” Lou says. “We offer everything from preventive maintenance to comprehensive engine repairs.” The shop’s three ASE-certified Master Technicians and one trainee perform that service, and Lou says he and Mike make sure they stay up-todate on emerging trends in the field by encouraging — and paying for — their employees to attend training classes. Lou says they also reimburse their techs for the costs associated with certification. Not surprisingly, the shop’s retention rate is extremely high. “For most people, compensation is only one part of their satisfaction on the job,” Lou says. “We believe in fostering a positive work environment and encouraging the good in every employee. “We constantly are looking to catch employees ‘doing something right,’ and we recognize those actions that
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improve customer satisfaction,” he continues. “After all, repeat customers are the key to our success.” When they do need to fill a vacancy, Lou says they rely on Mike’s experience with executive recruiting from his corporate days: You wouldn’t run an ad for a top-notch CEO candidate, and you aren’t likely to find the ideal technician that way, either. “Referrals for those types of jobs typically come from your network — respected professionals and folks you know in the industry,” Lou says. “Frankly, I’m surprised that more shop owners don’t use the same philosophy in recruiting non-managerial employees. Referrals from friends, neighbors and others in your professional network will almost always give you more accurate leads than a blind ad.”
Staying Competitive In addition to a well-designed website, quality service and knowledgeable employees, Lou says he and Mike are constantly looking at processes and how to improve them to provide the best end result for their customers. For example, in order to improve wait times, they recently upgraded the shop’s computers and Internet speed — making a significant positive impact. Lou says they also recently joined a 20 Group through RLO Training, which has helped them see how other
top-notch owners run their businesses. “We’re always looking for new ideas and ways to benchmark ourselves,” Lou says. “It’s a competitive world out here. Shop owners need to establish solid processes, create a solid team and control costs. Then, minimize the variability in those processes, and once you’ve established consistency, start raising the bar.” In today’s tech-savvy world, customers are smart, Lou says, and they buy from the people they like. “They recognize good service, so value and service need to be the centerpiece of your business plan,” he concludes. “Outperforming your competition in these areas will have more to do with your success than anything else. It takes a relentless commitment to figure out what your customers want, and then give them more of it than your competitors.” With that commitment to excellence, Lou and Mike are sure to keep delivering quality service to their Ann Arbor customer base now and for many years to come. SO
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by Deanna Arnold, president, Employers Advantage LLC
The Ever-Changing Workforce
Understanding ‘Gen Y’ Expectations Can Boost Your Company’s Success, As Well As Theirs If you ask anyone in the workforce, particularly managers or business owners, what their thoughts are about working with Millennials (also known as Gen Y, and whose birth years range from 1980 to 2000), I can guarantee that they’ll have something to say. It seems to be a hot topic of discussion these days as Millennials are having a big impact on the workplace, how companies do business and how they attract and retain employees. We are in a unique time because there are four generations in the workforce, and they all have different ideas of what work and the workplace should be, which can be tough to manage for any business owner or manager. Up until recently, the Baby Boomers (born between 1946 and 1964) have primarily dominated the workforce and created the “standard” as to what’s expected from their employers, from themselves as employees and their co-workers. However, it’s estimated that as early as next year there will be more Millennials in the workplace than Baby Boomers, which completely changes the dynamic of the workforce to this point, which isn’t a bad thing. Millennials seem to get a bad rap from the other generations, but just like the generations before them, they are products of the world in which they grew up and how they were raised, which transfers into their work lives. It just so happens that technology has boomed and become more sophisticated during the years that this generation has been around, which has shaped them and what they
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know as their “norm.” Millennials grew up with advanced technology, mobile technology, real-time data and social networking, so that’s what they know and therefore expect to see from their employer. Here’s an overview of some of those expectations. Flexibility. Whether it’s flexibility with their schedule, or being able to make the choices that best fit their needs, Millennials know there is more than one way to get things done. The flexibility to work in the office or remotely from home is something that’s becoming more standard. There is an expectation to be able to work from home because the technology exists to allow it. And while this won’t work in your place of business, keep these expectations in mind as you think of other “flexible” options you can offer.
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Technology and innovation. Whether it’s being able to work remotely, being mobile with apps or having self-service capabilities, Millennials look for companies that have the technology to support the efficient operation of the business, as well as innovative ideas and the “ahead of the curve” mentality on up and coming technology. Immediate and straightforward feedback. Living in a world of instant and 140-character responses in the various forms of likes, comments, retweets and favorites, immediate feedback is essential to professional growth as well as establishing a solid working relationship. Millennials want to learn, grow and have someone guide them through their careers. This is also a good reason to eliminate annual performance reviews and incorporate real-time feedback into your company culture.
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Collaboration. Social networking, constant adult guidance and playing on a sports team that doesn’t identify winners and losers transfers the desire for collaboration into the workplace. Working on teams and with mentors to be a part of something big is important to this generation. Also, they see everyone as a peer and an equal in their efforts to collaborate, rather than seeing an organizational hierarchy. Time to break down some barriers. Blend of work life and personal life. There isn’t a clear line for Millennials between work and personal life because they are so mobile and technology-driven that everything in their lives can be managed at the same time. They will manage their personal business during what most would consider standard business hours, while also knowing they are available during non-standard business hours for work purposes. Strong values and company culture. Working for a company that has a strong culture and values that they believe in is important to the Millennials, and every other generation for that matter. The difference with this generation is that they use their network and resources to find the companies that they want to work for, rather than finding a job that they want to be in. That’s why it’s important for companies to have a strong brand, be active in giving back to their communities, focus on training, treating people with
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respect and doing the right thing. Otherwise, the employees will go somewhere else and tell the people in their network all about what it was like to work somewhere that didn't treat them right. This workforce wants an experience with their career, not a job with a gold watch after 25 years. The bottom line is companies can’t continue to recruit, retain and manage their workforce with the mindset that was commonplace 20 years ago. Company owners, managers and directors need to understand the predispositions, preferences and expectations of Millennials, and then help them channel those attributes into workplace contributions that will help foster its success, as well as theirs. SO Deanna Arnold, PHR, is the president and owner of Cornelius, N.C.-based Employers Advantage LLC, which provides practical business solutions in all aspects of human resources, including but not limited to, recruiting, benefits, employee relations, compliance, performance management, HRIS, worker’s compensation, safety, facilities/office management, and budgeting. She can be reached by emailing email@example.com or calling 980-422-7953. www.employersadvantagellc.com.
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Shop Owner brings independent repair shop owners a wealth of shop management information to help better run their businesses. Founded: 2010...