John Bootsma bought a small auto-repair business that was expected to provide a healthy retirement income, based on its external financial information. However, after a short period of time, the little shop was losing $100,000 a year. The problem was a lack of business coming through the door and their prices were set too far below the industry standard. Mr. Bootsma then hired a business coach who turned things around by starting to monitor and to test everything. They tracked sales on a daily interval, determined the breakeven point, set daily sales quotas, and wrote everything on a white board. The auto repair shop also cut unnecessary advertising costs and increased their usage of word of mouth referrals. They tightened up on what they provided for free, and raised their prices from $69 per hour to $91 per hour. To Mr. Bootsma’s surpise, they did not lose a single customer as their new rate was the industry standard. As a result of hiring their business coach, the shop went from losing six digits a year to making five digits a year. This article covers the importance of applying the aforementioned elements of managerial accounting to run a successful business.
Below is a link to the article:
http://www.vancouversun.com/Owner+fixes+auto+repair+business/3692321/story.html