July '16

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48 THE SHOP JULY 2016 RESTYLING/AFTERMARKET ACCESSORIES W hether you are a restyler, perfor- mance mechanic or hot rod shop, you no doubt are always worried about sales. Selling and installing products is the heartbeat of our businesses. Many—if not all—of our employees spend a good amount of hours during the week trying to increase sales and mar- keting. However, no matter how much your shop sells, the real question is, "Are you making money?" We know that the more the company sells, the more money the company should make, but any business owner will tell you that equation doesn't always add up to a positive number. There are so many factors that determine a profit level for any size shop. To make sure you are profitable, there are some important things to look for to either maintain or increase your com- pany's profitability. "Overhead" is a generic way to describe your company's operating expenses. Those expenses that every company has can usually be divided into two cat- egories: "fixed expenses" and "variable expenses." They mean exactly what you think: fixed expenses are expenses that a com- pany incurs every month. Even though there may be some minor fluctuation such as wage amounts, each month you can bet that you are going to have to pay a certain amount for fixed expenses. Variable expenses are expenses that may not happen every month but are still expenses that come up from time to time such as equipment repairs or busi- ness travel. Variable expenses can many times be unexpected and can quickly erode the bottom line. THE COST OF DOING BUSINESS Going back to fixed expenses for a minute—there is a way to make sure that your fixed expenses can be managed properly and, if successful, you should be able to have a good idea on what those fixed expenses are every month. Here are some questions that many companies ask themselves to make sure they are con- stantly monitoring and improving their fixed expense output: • Rent/mortgage. Is this occasionally looked at to see if any cost savings can be had to either reduce the rent paid or refinance the place of work? • What about business insurance? Is this being competitively bid on by different suppliers at least every other year, if not every year? • What utilities are being paid for and are there any savings with co-op com- panies or amount of utilities used by employees? • What monthly loans, subscriptions or services are being used and are they necessary or can they be reduced? Finally, it's always a good time to look at investing in efficiency: • When is it the right time to invest in reducing fixed expenses (e.g., more-effi- cient shop lighting; efficient heating/ cooling and building insulation; water- saving devices); and what is considered to be a reasonable period for the return on investment? Normally you want to see a ROI within three to five years. WAGES Employee wages themselves can be a large part of fixed expenses that can raise many questions. Some questions to ask regarding wages: • Is there unneeded overtime being paid to employees? • Are there areas of the company where employees are under-producing and thus are being overpaid? • Are there unnecessary or unpopular benefits being paid that could be used to help the employees in another way? Watching the Bottom Line Don't let those dollars just fly away... By Josh Poulson Don't let those hard-won dollars just float away. 48 THE SHOP JULY 2016

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