Let’s face it your single biggest expense is cars. Your second largest expense is labor. It’s important that you have all your people on pay for performance so that you can get more performance with fewer people, and we’ve discussed this point in prior recent articles. I know it’s hard to implement, but it’s imperative in today’s times.
In this article, we’re going to talk about buying cars. I know for years you have bought cars and you bought them the same way you’ve always bought them. You have an idea about what you need, and you know about what you can pay, and yet you see people at the auction every week paying what you think is crazy money for cars.
Now, ask yourself how is it that they can be there week after week, month after month, year after year paying what you think is crazy money for cars. It’s obvious that they’re still in business, and, in most cases, probably doing OK. It’s counterintuitive that they can pay so much more than you so much so that you think they’re crazy, and still be in business for years.
It’s important to note that they have probably spent a lot more time trying to figure out what they can buy and how much they can pay for it than you have. I know you think you do the same thing, but you probably don’t. It’s important that you look at every car for action and figure which parts are salable and which parts are not. Without doing that work, how can you know how much you can afford to pay for the car, based on what those parts cost?
I know. I know. It’s a lot of work, and it’s a little bit too detailed, but it’s what it takes to compete in today’s market. That person that you think is paying too much for their cars is in fact targeting the specific cars that they need, and you’ve noticed that because, in most cases, they’re buying cars that you don’t think you can afford.
The reason you can’t afford it is because you have three of the engines in stock and they have none. You have three is because you’re probably asking too much for them, so when you buy the new car, you think the engine is worth nothing. Makes sense. You have three in stock, why would you want another one? But just think if you didn’t have any in stock you could pay hundreds more for that car because you need the engine.
In a prior article, I discussed how you could pay more for your cars sell your parts for less and keep everybody wondering what you were doing. It is very possible and the best-performing yards with the best buyers are doing it every day. They’re paying more for their cars and selling their parts for less. I know it sounds counterintuitive, but when you get your pricing right and your merchandise moves at the proper speed, you really can pay more for your cars.
We call it days-to-break-even in our world. That means the days it takes for you to recoup your cost. So, if you pay $2000 for a car, how many days does it take you to get $2000 worth of parts sales off that car? Anything below 100 days is pretty good. If it’s taking you more than 100 days, it’s probably not so good, and it’s not unusual to see people that are not paying attention to what they pay for their cars and not paying attention to their prices taking 200 days to get their money back. You can also learn a lot about your buyers and their buys and methods by studying the cars do that do best, and those that do worst.
It’s important in today’s brutal environment that you have the right pricing and that you’re paying attention to what you’re buying and calculating it correctly.
Ron Sturgeon, Mr. Mission Possible, has been a successful business owner for more than 35 years. As a small business consultant, he can deliver wisdom and advice gleaned from an enviable business career that started when he opened a VW repair business as a homeless 17-year-old and culminated in the sale of several businesses he built to Fortune 500 companies.
Ron has helped bankers, lawyers, insurance agents, restaurant owners, and body shop owners, as well as countless salvage yard owners to become more successful business people. He is an expert in helping small business owners set the right business strategies, implement pay-for- performance, and find new customers on the web.
As a consultant, Ron shares his expertise in strategic planning, capitalization, compensation, growing market share, and more in his signature plainspoken style, providing field-proven, and high-profit best practices well ahead of the business news curve. Ron is the author of nine books, including How to Salvage More Millions from Your Small Business.
To inquire about consulting or keynote speaking, contact Ron at 817-834-3625, ext. 232, rons@MrMissionPossible.com, 5940 Eden, Haltom City, TX 76117.