As a business coach that specializes in service based businesses, one of the most common issues I address is profitability. Profitable business owners want to be more profitable and obviously those who are running in the red month after month want to be in the black. Recently one auto repair shop owner asked me "Is it possible to make a million dollars in this business?" before I could answer, he went on to ask "Heck, is it possible to make money in this business PERIOD?"
Good news. It's not only possible to make a million dollars in auto repair, it's common. In the world of business, everything has a formula and anything that has a formula can have a plan. Making money in auto repair is no different. So, you want to know how to make $1,000,000 from your auto repair business? Here you go:
Step one: Know your break-even number. You'd be amazed at how many shop owners and other business owners don't even know what they need to do just to break even. The simple formula for break-even is BE=FC/GP% or break-even equals fixed costs divided by gross profit percentage. For example, if my shops fixed costs (rent, utilities, non-production staff salaries, etc.) amount to $45,000 per month, and my gross profit percentage (total sales less cost of sales divided by sales) is say 60% overall, then I need to divide $45,000 by 60% to know my break-even point. 45000/0.6=75000. My break-even is $75,000 in sales. If my monthly sales are always at break-even; guess what? I will never make any money in this business!
The best shops can make a 20% net profit on sales, so the new formula should be NP20=FC/(GP%-20). For example, in the same scenario as above; my fixed costs are $45,000 per month, and my gross profit percentage is 60%, what do I need to sell in order to have a 20% Net Profit each month? 45000/0.4=112500. My new sales number to achieve a Net Profit of 20% is $112,500 per month.
Incidentally, If I am selling $112,500 per month in auto repair at a 20% net profit, then I am earning $270K per year in EARNINGS FROM OPERATIONS also known variously as DISCRETIONARY CASH FLOW or NET PROFIT or THE MONEY I MADE FOR MY BUSINESS. :-)
At the above rate, you will make a million dollars in auto repair after just about four years. Not bad! Now, I'm sure you're asking how to sell $112,500 per month at a 20% Net Profit in your service-based business. All I have room for here is the short answer: Hire a Business Coach and have him or her help you develop a strategic plan to achieve that goal! It works every time.
How To Make $1 Million in Your Small Business - To learn more about this author, visit Randy Nowell's Website.
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Randy Nowell
(Visit Randy's Website)
My name is Randy Nowell. I'm a Licensed
Professional Business Coach, and the
President of Success Coaching & Business
Development based in Arizona. For 25
years I have been helping business leaders
develop, grow, and improve their
businesses. I specialize in helping owners
of small and medium sized service based
businesses make significant and lasting
improvements in the key areas of
marketing, sales, customer service,
profits, human resources, systems,
financial management, leadership, and
work/life balance. I have a degree in
Business Management and personal
experience growing a business from an idea
to multi-million dollar sales in just
three years. Call me today for a free
coaching session at (623) 225-7997
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