November 28, 2016
As the owner or manager of a driving school, do you ever feel completely lost when it comes to your business finances? The truth of the matter is that you’re not alone. Because of low driving school profit margins and high operating costs, schools simply fail, no matter how good they are.
That’s the bad news. Now, here’s the good news. It is 100% possible to turn a profit and grow your driving school business.
So, you’re saying, “Yeah right.” But it’s true. Like you, I remember staring at a wall and wondering how I was going to make payroll, especially in the slower months when a dollar is harder to come by than winning the lottery. After years of trial and error, my driving school became profitable and continues down the road to growth.
So, today is your lucky day. If you follow my advice, your own driving school will soon be on the same path to success. It isn’t rocket science. In fact, it’s the opposite. Too often we delve deeper than necessary to unearth common sense solutions to everyday problems. Yes, owning a driving school comes with its own unique set of challenges.
That doesn’t mean you can’t make a nice profit. I do and you can too. And yes, you can thank me later!
Simply follow these 7 simple steps outlined below and you’ll soon be driving sales and turning a healthy profit.
1. Sales is Vanity, Profit is Sanity
The old adage of quantity versus quality comes into play here. Would you like to own a driving school that does $500,000 in annual sales with $125,000 in profit? How about one that does $1,000,000 in sales with $100,000 in profit? Which option would you pick?
This should be an easy choice…the driving school that makes $500,000 in sales with a 25% profit margin. Higher sales never automatically equate into more profit. Ever. I know because I used to measure my success by the sales volume of my schools. This was a mistake.
Now, we focus on being lean and mean. Because we’ve slashed operating expenses and have become smarter about how we spend our operating budget, we make more money on every dollar we pull in. It didn’t happen overnight and the process wasn’t easy. In fact, it was the very opposite of easy! But the entire effort was worth it and continues to pay off today.
Your first step is to define your driving school’s business profit. For every dollar in sales, how much will go towards operating expenses? If you haven’t trimmed excess expenses, you may only earn 15-20 cents in profit for every dollar in sales. Imagine doubling that profit margin! Now, turn it in to a reality by sharpening that pencil and slashing every single unnecessary expense.
Without explicitly defining your driving school’s profit, it will be impossible to know whether you successfully hit the mark or not.
2. Set Sales Goals
History repeats itself in the driving school industry. That’s because our business is cyclical, meaning there are expected peaks and valleys. Students want to take driver’s ed when school is out and they’re not overwhelmed with projects, tests and sports activities. That’s why the summer months for our industry are similar to tax season for accountants.
Your driving school will always be busier in June and July than it is in August and September. The key to increasing sales is to “fish when the fish are biting.” If you know that people are in the market for your services more in June, why would you increase your marketing budget in September? It just doesn’t make sense.
What total sales level will your own driving school reach next year? Based on this sales goal, it’s critically important to determine a needed profit level to have your BEST year ever.
Below is a breakdown of a typical driving school’s sales for a single location that averages $500,000 annual sales.
- January – $30,000
- February – $35,000
- March – $40,000
- April – $50,000
- May – $80,000
- June – $70,000
- July – $45,000
- August – $30,000
- September – $25,000
- October – $25,000
- November – $40,000
- December – $30,000
Yes, a single location CAN make $500,000. Don’t worry if you’re only at $50k (or less) per year though. Rome wasn’t built in a day and great driving schools aren’t either. However, by following my advice and learning from my experience, the journey to higher sales, lower expenses and a healthier bottom line becomes a shorter one.
3. Start Scoreboards
If you are a big fan of a particular sports team, chances are you look up its performance stats after important games. So, why wouldn’t you do the same with your driving school? Are you tracking your sales weekly? Daily?
The most successful business owners track their sales every single day. Do you know what happened when our driving school started using software to track sales? Our sales increased! That’s right.
There are a ton of tools available to help you keep score on how well your driving school is doing. Without a daily scoreboard, how does your team know if they had a great day or a terrible one?
If your driving school isn’t utilizing available software to track sales daily, you’re missing an easy opportunity to track your teams performance. Without this simple step, your weapons arsenal is empty.
Information is POWER. The power to change, grow and meet your goals!
4. Accurate and Timely Bookkeeping
On a scale from 1 to 10, how organized is your bookkeeping for your finances?
Be honest. Are you always rushing to close out each month’s books? My driving schools always have their month’s books closed by the 20th of the following month.
For example, the January books should be closed no later than February 20th. I strongly recommend outsourcing your books to a bookkeeper and focusing your time on growing your driving school’s profits. If your books are inaccurate or not up-to-date, then you’ll never be able to reach your true profit potential.
If hiring a bookkeeper is too expensive, there are more affordable tools available to help make bookkeeping not so tiresome and cumbersome.
Again, if you’re not using the right tools to get the job done, you’re behind the times and spending unnecessary money. Not to mention your valuable and limited time!
5. Obsess Over Your Payroll Costs
For every dollar that you make, how many cents are going to payroll? 30, 40, 50 cents?
In the driving school industry, payroll is always the biggest expense. That’s why it’s critical to set payroll budgets and monitor them at least once a month.
I’ve seen driving schools hit a 25% profit margin with 50% of their revenue allocated to payroll. Yes, it can be done, but I recommend you try to push your payroll costs closer to 40%.
You can spend hours cutting costs by reducing things such as office supplies, but it will only make a marginal difference to your driving school’s overall profit picture.
Cutting payroll costs is the game-changer. When you cut your payroll, your driving school’s profit margin will increase quite dramatically.
This is why it’s also important to retain good employees. It costs money to train a new one. If you can keep your best employees happy, you’ll increase their retention rate and decrease your onboarding and training expenses.
6. Fleet Utilization
How many drives does one of your school’s vehicles typically complete in a day? 3, 4 or 5 drives?
The most successful driving schools have vehicles that complete 5 to 6 drives per day.
Take a look at the scenario below.
- Driving school #1 has 5 vehicles doing 6 drives daily, thus completing 210 sessions a week
- Driving school #2 has 10 vehicles doing 3 drives daily, thus also completing 210 sessions a week.
- Driving school #1 is completing the same number of weekly drives as school #2, but with vehicle expenses that are 50% less!
STOP reading and block out three hours in your calendar to implement this ASAP.
Fewer cars + more drives = higher driving school profit margins and happier instructors that stay busy during their shift.
But, how can you successfully schedule more drives with fewer vehicles? See below right now!
7. Scheduling Software
How does your driving school schedule driving lessons? If you’re not using scheduling software specifically designed for driving schools, you’re leaving money on the table.
Scheduling with calendar books or by hand might have worked in 2005, but the competition will pass you by (if they already haven’t) if you stay on this path.
The right scheduling software will save you time AND money.
Before we started using scheduling software, at least 50% of our incoming phone calls were related to scheduling issues. This meant that our office personnel spend the majority of their time putting out fires and rescheduling drives or classes. I thought, “Wouldn’t it be more profitable if they were busy making outbound calls to increase sales?” Yes, it would.
Take a breath. I know this seems like a lot of work, but it’s not. Start with just one of the items above and then rinse and repeat.
Make it a top priority to implement the above tips by the end of Q1, then watch your driving school profit soar!!
Want to make your driving school more efficient and increase profit?
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