Margin Call: It’s Not What You Make, It’s What You Keep.

We all focus on sales and growth, but with current events, inflation, and the overall cost of doing business, we have to say to ourselves, “is more really more?” 

Since the pandemic, if you are an auto recycler and you haven’t seen a dramatic increase in sales, you need to take a serious look at your business. With supply-line shortages, we have all seen an increased opportunity for sales that we would not have seen before, as well as a very nice increase in prices on our commodities. We all have one thing in common right now: we are all shorthanded, and business is good. 

Now, with what is going on in the rest of the world we have seen a huge jump in gas prices and transportation costs, (as of writing this the price of an overseas container has quadrupled).

Everything is going up!
There are post pandemic labor shortages, which I don’t understand. Where did all of these workers go?

Either way, we have to pay higher wages to compete with all others for the same employees, not to mention our cost increases to keep our current staff.

I have even heard that in the collision industry, that there are certain companies that are poaching other shops’ best help. They are looking at their current staff and giving substantial raises only to the ones they want to keep. They are then going to their competition and offering their best guys the same. For the independent shop owner, this is bad news. They may have only one certified technician and are caught between a rock and a hard place when this tech tells them that they can make $8 more per hour going to work for the next guy. The shop now doesn’t have much of a choice. He either pays him, or he loses him. If they lose him, they may not be able to take on most jobs. 

I remember speaking to someone a few months back, and they were working on a budget for labor for the following year. They asked me what I felt my increase in labor costs would be? I joking said, “twenty percent.” I think with inflation being what it is now and what it will be going forward, I might not be far off the mark. 

Everything is going up. The cost and competition for salvage has gone through the roof, along with everything else. So, like everything else, we have to figure out how to pass these costs on to our customer. For right now, with the shortages, we may be able to do this, but what will happen when things get back to normal? Remember, the cost of salvage may go down, but our labor cost and other expenses will probably remain the same, (or go up). 

So, this brings me to my point. Is more really better?
You really have to keep an eye on your expenses and your profit-margin. It is really easy to get caught up in increasing sales, only to find out afterwards that you actually made the same amount of net profit, or less with doing all of this extra work. It is also a slippery slope if you have a downturn in sales. You can get into trouble very easily if you don’t keep an eye on expenses. There have been many companies that have had record years only to go out of business because of this.

Sales and profit have to be manageable, controllable, and sustainable. It’s not what you make, it’s what you keep. 

All I’m trying to say here is keep an eye on your bottom line, but focus on what drives your numbers Support your state associations!

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Marty Hollingshead

ARA Secretary · Northlake Auto Recyclers — Hammond, IN

Hollingshead has been in the professional automotive recycling industry for 45 years, including 34 years as President/Owner of Northlake Auto Recyclers, one of the industry’s leading facilities. Hollingshead prides himself on taking a hands-on approach in the business, employing the use of checks and balances for quality control to ensure customers only receive the highest quality parts. Northlake was one of the first automotive recycling facilities in the state of Indiana to receive from the Indiana Department of Environmental Management the Indiana Clean Yard – Gold Level Certification in 2009. Northlake was certified as one of the Indiana Certified Automotive Recycler Exemplary Standards (INCARES) program’s inaugural medalists and was the highest scoring facility in Indiana in 2014, 2015, 2016, 2017, and tied for first place in 2018. Northlake was also the recipient of the 2016 ARA Certified Automotive Recycler of the Year award, having been nominated by his peers in the industry.