Diesel Connect Recap: Shop Financial Planning

It’s a bird!

It’s a plane!

It’s a financial plan!

Yes, folks, we’re back with another recap from Diesel Connect, and this was a big one. Over the years, our subscribers and readers have expressed a lot of interest in financial planning. We’ve written blogs about it and even created a free calculator to help shops get ahead…but people kept asking for more, so naturally we incorporated it into DC.

We figured people would be into it. We weren’t counting on standing room only—but hey, we’ll book a bigger room for it next year!

The shop owners who attended were in good hands: the panel was presented by Fullbay Co-Founder & Executive Chairman Jacob Findlay and VP of Finance Robby Gilbert. Both of them come from accounting backgrounds, so you can trust that they know their numbers.

Attendees received a case study featuring the fictional Dave Sutton of Sutton Fleet Services. The handout contained information on where Dave’s shop had been and where he wanted it to go—both financially and overall. You can review Dave’s case study below:

Download the Sutton Fleet Services

Jacob and Robert went over the basics of a financial plan, then enlisted the audience’s help in adjusting Fullbay’s free tool to “help” Dave get to where he needs to be by the end of the year.

WHO USES FINANCIAL PLANS?

If the continued popularity of our financial planning offerings is any indication, a lot of shop owners aren’t diving into the subject as fully as they could. We get it—the term “financial planning” feels…heavy. Complex. It probably involves numbers and spreadsheets and math and stuff. And most shop owners are doing so much, adding yet another task to the pile—especially one you have to keep revisiting—seems like a lot.

About 42% of the attendees reported they did not do financial planning. Thirty-eight percent said yes, they did. And 19% indicated they did make financial plans, but did not work on them consistently. (Robby secretly thinks the 19% is closer to the “no” bucket.) We like to think Fullbay users are pretty with it in terms of adapting smart business planning, so let’s figure the real-world adoption of financial plans is a little lower.

In the very beginning of the session, there was some discussion over whether a shop can be too small to merit a plan. Jacob doesn’t think so—and, as he points out, if you want to grow, you’re gonna want/need a plan to follow. Your financial plan is your map to buried treasure (aka revenue), your Gandalf lighting the way through the mines of Moria.

BUILDING A FINANCIAL PLAN

We hope you take at least one thing away from this recap: A plan doesn’t have to be daunting.

Believe us, potential complexities shouldn’t be scary. You can make a simple plan. In fact, a simple plan is the best kind of plan. The more goals you add to a plan, the lower your chances of achieving them all. Humans are great, but we can only do so much at once; the more goals you make, the fewer you can achieve with greatness. “At some point,” Jacob said, “you won’t achieve anything with excellence.”

Dave’s goals are laid out in the case study. Jacob and Robby took his info and plugged it into the financial plan to come up with a one-year goal for Dave, two to three goals to set for his shop, and what he should be doing in the first 90 days of the year.

SETTING YOUR GOALS

So, before anything else, figure out why you started a diesel repair shop in the first place.

“A lot of people say, ‘I’m in it to make money,’” Robby said. “Good! But that cannot be your ultimate why.”

Jacob took it a step further: “What makes us different from other people?”

Figuring out what makes you different will help you define your core values. And those values will influence everything about your shop—from who you hire to how you do business and how you present yourself in the community. And once you have them, you can effectively set goals that align with said values.

So: every year, take a day—just one day—and lay out your goals for the year.

Then, once you define your goals, every 90 days sit down and re-evaluate everything and set your goals to the next 90 days.

So, how did Dave handle all this? Let’s check on him.

HOW CAN DAVE INCREASE HIS REVENUE?

Dave wants $5 million in annual revenue within three years and $36 million in annual revenue within 10 years. Jacob, Robby, and the audience worked out what Dave could do to increase his shop’s revenue (under the assumption that he did his planning at the very beginning of January).

They used Fullbay’s sample financial plan, already loaded with Dave’s information, to help figure out where he was and where he needed to be.

So, right now Dave’s net profit is $889 a month. That is…basically break-even territory. One comeback or bad job and he’ll be into the negative. Even with that low net profit, though, he’s making $1 million per year (“Crazy, right?” Jacob asked).

• Hire a new tech. Let’s assume the hiring process goes well and Dave snags a new tech by the end of March. But he won’t be contributing to revenue until April. Still, that fourth tech puts Dave at $1.2 million in revenue per year.
• Increase parts markup. The financial plan uses markup, but Robby included a margin-to-markup calculator for those of you who live and die by margins. At the moment, Dave marks up his parts by 25%. The audience decides to raise that markup to 53% (based on a 35% margin). Dave starts it in January. Revenue goes up to almost $1.4 million per year.
• Increase the labor rate. Dave currently charges $110 for labor. Here the audience lapsed into discussion. Yanking up labor rates and parts prices could lead to a revolt amongst valued customers. They decide to bring it up over time. He’ll go up to $135 immediately. That brings Dave and his crew to $1.6 million in yearly revenue.
• Increase billable hours. Dave’s techs are currently billing 32 hours per week. Assuming he can get his regular crew and the new guy to 36 hours a week by March, he’s looking at $1.8 million in yearly revenue.

After that, it became a matter of playing with numbers. If Dave can add a fifth tech by October, then his shop will bring in over $2 million in yearly revenue. There we go—one year.

Now he has two years to go from $2 million to $5 million. Maybe he’ll duplicate some of the steps above—hire more techs or up his parts margin—or maybe he’ll add a new revenue stream, like emergency repair. The audience suggested hiring a service manager, eventually a parts manager, maybe more office help.

As Dave hires more people and expands his revenue, he’s able to offer more things to his people: PTO, 401Ks, and so on. Happy techs are harder to poach than unhappy techs—Dave knows it, and so did the shop owners who attended the presentation.

YOUR FINANCIAL PLAN IS YOUR MAP TO SUCCESS

The coolest thing about this session—besides watching the magic of Excel formulas changing numbers—was the discussion that arose during each change made. Shop owners and managers chatted with the hosts and each other. We’re fairly certain some interesting conversations followed!

If you’d like to help Dave out—or, you know, work on your own goals—give the financial plan a try! Download it here and start plugging in the numbers. Try different things and see where they take you—the whole point is to experiment and give you a place to start.