151 - ”Ask Me Anything” with Michael Smith & Lucas Underwood

151 - "Ask Me Anything" with Michael Smith & Lucas Underwood October 1, 2025 - 00:57:35

Show Summary:

Firefighting your week away? Lucas Underwood and Michael Smith chart a clear path from operator to investor, showing shop owners how to turn daily chaos into durable, transferable value. Human capital takes center stage with culture, trust, and leadership systems that make great work repeatable and businesses sellable. They unpack exit strategy myths, the three “languages” of success (repair, leadership, finance), and why abundance beats scarcity every time. Expect practical plays for full transparency DVIs, customer stewardship, and quality control that builds loyalty instead of skepticism. The message: compete on value, not price, and future proof your wealth while your team and customers win too.

 

Host(s):

Lucas Underwood, Shop Owner of L&N Performance Auto Repair and Changing the Industry Podcast

 

Guest(s):

Michael Smith, Chief Strategy Officer at The Institute

 

Show Highlights:

[00:01:00] - Michael shares his background in consulting and why he fell in love with the automotive industry after helping shop owners improve profits and quality of life.
[00:03:30] - Discussion on how many owners spend decades just getting by without building business value or retirement plans.
[00:06:00] - Lucas reflects on how shop owners often fight daily fires without fixing the core issues that cause them.
[00:08:20] - Michael explains why every shop owner must define their exit strategy from day one to avoid regret later.
[00:11:20] - The two contrast the operator mindset versus the investor mindset and why both are necessary for long-term growth.
[00:14:10] - Michael describes the three essential “languages” of success: repair, leadership, and finance—and why all can be learned.
[00:20:00] - They dive into how shop culture forms naturally, why it often becomes toxic, and how leaders can “clear the water.”
[00:25:00] - Lucas shares how rebuilding culture requires trust, accountability, and servant leadership focused on people first.
[00:28:30] - The conversation shifts to abundance vs. scarcity thinking... and how businesses built on abundance outperform over time.
[00:50:00] - Michael and Lucas break down why competing on value, not price, is the key to profitability and long-term sustainability.

 

In every business journey, there are defining moments or challenges that build resilience and milestones that fuel growth. We’d love to hear about yours! What lessons, breakthroughs, or pivotal experiences have shaped your path in the automotive industry? Share your story with us at info@wearetheinstitute.com, and you might be featured in an upcoming episode.

 

👉 Unlock the full experience - watch the full webinar on YouTube: https://youtu.be/6r8KExJtBgk

 

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Episode Transcript Disclaimer
This transcript was generated using artificial intelligence and may contain errors. If you notice any inaccuracies, please contact us at marketing@wearetheinstitute.com.

 

Episode Transcript:

Lucas Underwood: Good afternoon everybody. My name is Lucas Underwood from l and m Performance Automotive Repair, and the Changing the Industry podcast. I'm here for another AMA webinar with the Institute for Automotive Business Excellence. And today I have the honor of having Mr. Michael Smith. The main leadership man at the institute joining me.

Lucas Underwood: I am so excited to have you here, Michael. I know. Michael, would you do us a favor and introduce yourself so those that don't know you, don't know who you are yet, can kind of get a feel of who you are and where you came from?

Michael Smith: Absolutely. I am 45 years in the professional space. I grew up. Up to up 31st, 35 years.

Michael Smith: We're outside of the industry that we're in now, and about 10 years ago, I came from the big consulting firms, have experience in private equity holding companies. And I came here about a decade ago to when I met a guy who had three shops and he said, Hey. Can you help me take a look at what I've got?

Michael Smith: I'm not having enough fun or making enough money to keep doing this. I gotta change something. And I dug in with him. And guys, I gotta tell you I, I fell in love with this industry. So I've been here focusing primarily on this for almost. Almost 10 years at this point. And I bring, I have never fixed a car in a shop in my life, so I don't come as an owner operator.

Michael Smith: I come from the owner investor perspective, from the outside investment perspective, the high performance business building perspective. I bring different things to the table which is fun to be here. Lucas, it's really fun to be able to share what I know with the people here. This is a hard business and a hard industry, and we got awesome people here.

Michael Smith: So it's my privilege, my friend.

Lucas Underwood: Absolutely, sir. Absolutely. And you know, a after I got to know you a little bit and got to pick your brain a little bit, I began to see that you had a different perspective on business valuations. That you had a different perspective of why we were doing this.

Lucas Underwood: And it's something we often lose in the automotive space, and I think it's very valuable for you to be here with us for that very reason. Because I go to work to fix cars. And you go to work to make sure that I make money while fixing cars and make sure that I have something to leave my children generational wealth.

Lucas Underwood: And it's bigger than just money, right? Like it, it's a sustainable business. It's something that isn't as taxing for the next generation. It's smart business. More than anything else.

Michael Smith: I'll tell you one of the first things I learned when I got here was what a challenge our industry is.

Lucas Underwood: Yeah.

Michael Smith: And it's, it can become a daily urgent to urgent issue, one after the other, and then the days fly by.

Michael Smith: And the week starts on Monday and you know, before you unlock the door, it's like, okay, here we go. And then the hell storm starts, if you will, for lots of folks. And then you crash your way through the week and Friday afternoon you're trying to get as many cars out as you can and then the doors lock and you're like,

Lucas Underwood: oh.

Michael Smith: And then, you know, maybe you have a weekend and you pick up and do it again. And I say that only from the perspective that you can do that for 30. 35, 40 years. You're exactly right. And the end, back to the value question. Doing that in such a way that you're just getting by no investment perspective, no money, set aside, profits are, when they do finally show up and they're stable, you pull it out because you're not sure if you're gonna see 'em again.

Michael Smith: And time flies by. And the sad statistic is, and I'll turn it back over to you, 75% of owners of privately owned companies, and I actually believe it's more in our industry, they, this is the quote. Profoundly regret. The way they exited because they didn't know what they were doing. And I've got stories under my belt knowing all the people we know.

Michael Smith: $120,000 for your shop, that's what you have to retire on at 65. How can you retire at sixty five, a hundred twenty five grand? You can't, you end up working somewhere else. And that literally, we've talked about this, that's why I'm here. I don't want that for as many people as we can touch and help. Right.

Michael Smith: That's literally what. Yeah,

Lucas Underwood: so absolutely a hundred percent. And you know, we I met you the first time at Leadership Intensive and some really interesting things because. I'm not gonna lie, Michael, the first interaction with you, I thought, this guy's trying to convince me to sell my shop. This is some wonky proposal, like one of those weird deals.

Lucas Underwood: Is this a Ponzi scheme? What's this guy up to? And then the second meeting that I was in that you were at, you said something that I thought was extremely profound and you said venture capital and private equity realized that nothing exists without human capital. There is no profit without human capital, and they understand the value of human capital.

Lucas Underwood: And so if you don't understand the value of human capital, why are you doing what you're doing? And I thought that for, well,

Michael Smith: Lemme add to that. Some of the finance guys get it. And what I mean by that is you can play a pure finance game irrespective of humans, and you'll do okay, but you can't optimize unless you understand that.

Michael Smith: I mean, we're as about as technical a business as you can be. But if you think about it, all the work passes through multiple hands from the first time a customer drives in until they drive home. And many humans are touching that. So we can SOP ourselves to death and we need to, from a sustainability or from a transferability to a new owner and a consistency standpoint for quality.

Michael Smith: But that's not the key to getting it done. Every time a human touches it, if they blow the systems or they screw up the relationships, then everything starts to slow down and not be as good as it could be. And so at what you and I have talked about a lot, it comes back to the human factors. Yeah.

Michael Smith: People, human capital is your greatest. Asset. And if you don't know how to manage it, that's a great place to start. 'cause fixing cars is a lot easier when you have phenomenal people who are doing it well because they care makes a big difference.

Lucas Underwood: You know, for years I've watched a lot of owners do this, and it's one of the reasons that I do what I do.

Lucas Underwood: It's the reason that we have the podcast. It's the reason that, that I'm out here at these trade shows trying to talk to people and it's, the reason I answer the Facebook messages and all that stuff is because I've recognized a pattern that I once had in my business. And I see almost every single independent shop owner doing this.

Lucas Underwood: The pan is on the hot eye, there's oil in the hot eye. It is on fire, and the shop owner takes the lid and they put it on the pan and they put the fire out. And they pull the lid back off and the fire starts back. They never empty the pan of the oil. They never turn the eye off. They just constantly fight to put that fire out, but they never build the system around it that says I'm gonna do something.

Lucas Underwood: So I get a different result. And so much of what you've taught me is very much about getting a different result, seeing things differently. And, you know, as I've kind of moved into this retirement concept, in other words, not that I'm gonna retire. But after we really had some in-depth talks, I'm sitting here saying, Hey, now wait just a minute.

Lucas Underwood: I thought my business was gonna be my retirement, but maybe I need to have some other safeguards in place. And so I start playing with the market a little bit. You know, I've got my 401k through the shop and I started looking at the numbers and I thought, now wait a minute if Wall Street values that business like that.

Lucas Underwood: And the PEG and the PE ratio and all this other stuff is over here. And I apply those metrics to my business and I say, wait a minute, everybody says, I wouldn't buy that business for that. Yep. Wait

Michael Smith: a minute now. Hang on brother. Here's the scary stat. If you ask the private equity industry, there was a little gap there.

Michael Smith: We froze. If you ask the private equity industry how, what percentage of privately owned businesses after they look at them, they'd like to buy. The number is 10 to 15%, so let that sink in, right? If there's a hundred folks listening in here, a thousand, right? 10 to 15%, somebody who's a real professional investor will come and consider paying you money for all the rest.

Michael Smith: To this because we haven't run it with an owner or with an investor value perspective. We'll have nothing to sell at the end, but assets or, and here's how our industry's gone. This is history. As we turn around and sell it to a key employee, who can I be honest, frankly, doesn't know any better, how little value they're buying for the price they pay.

Michael Smith: And that's been our industry's history and what you and I have talked about, this does not have to be, if owners understand you and I talked about this. Day one, I meet somebody, I start asking questions, what's your exit strategy? Why are you in this business? What's the legacy that you wanna leave when you're done?

Michael Smith: 'cause if they can't answer those questions, it's time to stop and think about those answers. And when you have that futuring kind of a model in your head, then you go back and say, well, what are you holding in your hand right now? And whatever the gap difference is between what you got and where you're gonna go.

Michael Smith: The job between now and then is to close it and grow it and enrich it and get it ready for that final set of transactions. And so people will say to me, Lucas, it's like, look, I'm 30. How can I have an exit strategy at 65? I can't see that far. And I say, I know. Think, pretend you can start now headed in a wise direction, and then this thing will stay alive for.

Michael Smith: 35 years, you'll change it 15 times between now and then. But don't wait until you're 64 and ask the question, what do I do now? And brother, our industry is rich with people who've been, or they're now, they're in their sixties. They're sitting on it. They haven't thought about this stuff ever.

Michael Smith: Now they're getting tired and they're like, maybe I should be retiring. And now it's not too late. To start, but it's a whole lot better. The sooner you start, the better off you can be. Over time, you can build in a direction and build something much stronger if you do that, which will get you better outcomes.

Michael Smith: Right?

Lucas Underwood: Yeah, absolutely. And you know what I'm seeing though and here's the issue is they get very nervous. They get very upset when you talk about exit strategy. I don't wanna sell my shop, I don't wanna retire. I care about my guys, I care about their best interest. Okay. That's the point.

Lucas Underwood: It's because if you care about them, you have to build an organization that can stand on its own. Yep. That if something happens to you, they're taken care of. Right. Right. And we don't like to talk about that. We don't like to talk about what could happen. And you know, I've shared this before that, that when I started the shop, oh, I'm gonna be the technician.

Lucas Underwood: I'm gonna be the guy working on the cars. 10 years in, I realized, hey, I'm not the best guy to be working on the car. You got it. I've got people that are way better than me. They're way more efficient. I need to be running the business. So I became the service advisor, so now I'm the service advisor in the shop.

Lucas Underwood: And after a while I'm like, this is great. I'm a wonderful service advisor. I make everyone happy. The only problem is I don't have any money because I gave it all away. And I'm like, okay, so maybe we need to do something different with this because this is not working. And then, okay, well I'll manage.

Lucas Underwood: Right? I'll be the manager and I'll, you know, I tell people all the time, well, how can you steer the ship from the engine room? You can't really see where you're going. So you kind of have to have like a perspective where you can see things. I'll be the manager. We put 10 bays in the shop and I'm like, holy Carol, this is a lot of work.

Lucas Underwood: Like, I'm gonna do a lot to keep up with this. I dunno that I have the capacity here. I need to hire a manager. Yeah. And so it, it's like it's a wake up call that as I've gone through this process and then the business is developed and the business has got more profitable and can do what it's supposed to do.

Lucas Underwood: Yep. That, that my role has to develop. Yes. Right. And where I was 10 years ago is not where I'm at today. And it's so important that we think about where we're going. Right. Because I, I worry that there's so many of these guys. They were just excited about having a business. They were just excited about getting the business off the ground.

Lucas Underwood: Well, I hate to tell you this, but you're planning your exit strategy from the day you start. Yes.

Michael Smith: And you know. Go ahead. Go ahead. No, you're planning your exit strategy from day one because if you think you're not doing it, you are doing it. People joke around about this, right? And it's a joke until I say this, everybody has an exit strategy.

Michael Smith: Like, well, I don't. I go, yeah, you do. If you don't declare one, your death is your exit strategy. Yeah. And then they get real serious, and I'm not being mean, it's, they think about it and they go, oh, I guess if I don't set one, I still have one. It's like, yes, you do. The day you become disabled and can't do it the day that you are so tired, you have a mental breakdown the day that you, right.

Michael Smith: I mean, there is an end to this and so the point of it is. Why wait till the end and not be building something intentionally. And you're right, you're absolutely right. It can be very difficult to do the thinking early 'cause we don't live here, we don't live in exit strategy, legacy zone most of the time.

Michael Smith: And for some folks be straight up about it. People who didn't have. A strong upbringing as a child where it was safe to dream and look forward? Yes. If you're in any kind of an environment where there was pressure on you to either perform or be quiet, not cause trouble, you know, you grow up and buy a business and you bring all of that, I'm gonna say baggage with you, but you bring the perspectives with you and you jump in as a business owner and you start as an operator.

Michael Smith: Now you're an owner operator, and your mindset is, I'm gonna operate this thing the way I always thought it should be done. And that has. Sometimes very little to do with the investor perspective. I got two business models. Lucas, you've seen them? Yeah. We teach them on the leadership intensive. One is an investor's view of a company.

Michael Smith: The other one is an operator's view of a company. They align with each other, but they are not the same model, and you can be a fantastic operator and not be building value in your company. And that's what I don't, that's what we want people to know, both, right? You and I talk a lot. Our mission is to get this word out and get it into as many people's hands as we can so they can think about it.

Michael Smith: And I'm gonna say this about being intimidated by all this, whatever. I'll say this and I'll turn it back to you. I talk about three languages, that if we're gonna do this right and succeed in this industry, we're gonna need to speak. One of them is automotive repair. And I'm gonna say probably every single person on this listening to this is.

Michael Smith: Fluent in automotive repair. Congratulations. I say this. That's the hardest language of the three. Yeah. The next language to be a top player in your market, which is what you want to be as an influencer and have the most sway, is what does it take to run a high performance championship team? Guys, that is not psychology.

Michael Smith: It's not just winning, it's how humans work. But I'll tell you, that's an. Easier language to learn than automotive repair. And the third language that you need if you're gonna play this game as an investor, is you gotta learn finance and don't run away from the speaker. When I say that, that's easier than high performance championship stuff, which is easier than fixing cars.

Michael Smith: Yeah, so think about that. Can you be trilingual and build generational wealth? That's you and I've talked about this. That's what we're trying to get the message out. Come tick the tires. Test it a little bit. See if this isn't scary 'cause it isn't. 'cause we know how to do all this stuff. Can you learn it?

Michael Smith: You absolutely can. You learn the hardest thing you have to learn already. Now, can we add to that so that we have more leverage, more opportunity, more power, more op? Yeah. Yes, you absolutely can. And that's literally what we're trying to get out, you and me, the message us, right? That's what we're all, you're exactly

Lucas Underwood: right.

Lucas Underwood: Exactly. And, you know, I'll tell a little bit of a story. I watched a situation unfold right in front of my eyes. I watched an older man with a shop and I talked to him about buying the shop. And I went and I talked to him and I said, Hey, what are you looking to get for the shop? He said, I'm looking to get 1.5 for it.

Lucas Underwood: I said, okay. So p and l. And he, he said, well, I don't really have a p and l, but I'll come up with something. We'll get something put together. And I get the p and l and on this p and l, you know, $60,000 of revenue for the last year. And he says, well, I've been shutting down. I've been, you know, just tinkering.

Lucas Underwood: And I said, okay, so let's look back a little bit. And he said, well, you know, now I took a bunch of cash payments and I did this, and I did that. I, you know, I didn't really need that much income to survive. And I said, right, but if I'm valuing your business. You want to sell it for $1.5 million. That's not how it works.

Lucas Underwood: And he said, well, Lucas, nobody ever taught me that. Right? Nobody ever showed me that. Right? Well, well here we are in an age, in a generation when every bit of information you could ever want is directly in front of you. You don't even have to pay to get much stuff, right? Most of this stuff is very easily accessible and you can start making some steps.

Lucas Underwood: The key

Michael Smith: Is you have to know what steps. Yes. And curating the vast universe of information yourself to get it down to say, okay, of all the things I could look at regarding income statement, balance sheet, cash flow statements, I need to know that stuff as an investor to understand my own business.

Michael Smith: Let me go dig in. And you get about a half through, you know, the first two pages of a, of an accounting class, and you're like, oh my God, I don't have. The brain power or the energy right now to do this. I'll do it later. And then guess what? It never gets done. Yeah. And so part of what we're doing is we cur, we're curating outta the universe of noise, the stuff that we know actually works.

Michael Smith: It's part of you and I've talked my background. I grew up in the big consulting firms. I was the. I worked with the Fortune 100, the Fortune 500. We did strategy, we did business development. We did organizational growth. We did all that stuff. I stopped doing that because I fell in love with small and mid-sized businesses, right?

Michael Smith: Us on the street working hard. The million dollar projects are very interesting, but at some point you've done them already and it's like, you know where the real action is. It's out in the real world, in communities where small businesses are operating. And I spent time in the private equity world with a holding company going all over the world, buying stuff, trying to improve stuff, learning how that works.

Michael Smith: And I bought a bunch of small businesses and sold them in different things just to get all this grounding so that now we can sit here and say, Hey, you know what? Here's my point. The models for all this stuff exist, and it's not theoretical. It's actual, it's practical. We know what a high performance culture is.

Michael Smith: You can build one proactively yourself. You just have to know what it is. We know how to help you build value in your business. You just have to know how to do it. Then you gotta go home and do it. You have to do it alone. No, there's podcasts like this, the Institute, I've got groups. We're here to help you do it along the way, but there's nothing we're talking about that is untried, unproven, unknown.

Michael Smith: The only people who don't know it are the people who need it the most. Absolutely. And that's the encouragement I have. Please don't be intimidated by this step into the middle of it and say, okay, I admit I don't know what you're doing. T show me what you're doing. Yeah. Intrigued me. Draw me into it. Show me something interesting that I think might belong.

Michael Smith: For me. Right. And then when they get into it I kid you not, they're like, this isn't as hard as I thought it would be. It's like I told you on the podcast, the hardest language is the one you already speak. It's easier exactly after as you get this thing going, and then it becomes iterative, right?

Michael Smith: Then you get momentum going. You can get better people. The better people perform better. There's more cash in the bank. Now you have more that you can invest. Don't take the money out. Invest it internally. What do you put it into? The stuff that builds high performance culture, the stuff that builds value.

Michael Smith: Now you get better people on the door, you're drawing better customers and it's like it takes on its own life. And it's a hurricane that goes from category one to two to three only. It's a happy hurricane, right? It's a money hurricane and a production and success hurricane all of a sudden, and I'll come back to what you said, 'cause I don't wanna let it go by.

Michael Smith: You wanna be the person who knows the least. About all the individual drop inside your company if you do this right? And what I mean by that is there's always a better talent in every seat working for you than you.

Lucas Underwood: Yeah. That's if you're the smartest person in the room, we got problems, baby. That's the things are not looking

Michael Smith: good.

Michael Smith: That's the thing. And your job at that point is to make sure that all those super smart, super talented, highly productive. Awesome people have what they need to work together and get this thing, keep their thing going, and they'll come up with better ideas than you can have. And you've gotta get out of the way and facilitate it and let 'em go and let 'em go.

Michael Smith: And this thing will take off. And when people do this, after they go through these processes we're talking about, and it starts to take off, they're like, Michael, I'm having the best months I've ever had from a revenue standpoint, Michael, my nets are off the chart. Michael, that toxic guy in the corner that nobody could get along with is making volunteer ideas in a meeting.

Michael Smith: What the hell is happening here? Right. And it's like. It's because it takes on, the people are wired. To be happy and to have health and to be satisfied and to work that together.

Lucas Underwood: I've asked that in my reels over and over again. Yeah. I make these videos and I post them a couple days a week. Right.

Lucas Underwood: And it's, listen, you're upset with your employees. Don't you think that they want to make you happy? Don't you think that they showed up and wanted to do a good job today? Yep. Like, and you keep saying something. You keep saying the word. Culture. Right. And I'm gonna tell you, for the longest time I thought it was just hoppy cock, right?

Lucas Underwood: Like, I just thought it was noise and I, you know, oh, that's just, that's a spin, a buzzword, whatever you wanna call it. But the reality that I've learned is. You have a culture and it can be a good one or it can be a bad one, but you have one, right? You do. It's just like, and if you're not protecting it and molding it

Michael Smith: and developing it, yep, you will have a bad one.

Michael Smith: It's just like the exit strategy question. You may not think you have one, but you have one. Yeah, the culture question's the same thing. Cul, and I'll do this real quick so people can kind of get the perspective. You start a company, pretend, right? Let's say you started from scratch. A lot of you bought a business, but start, you've got a culture fish tank full of clear water because it's what you think it should be.

Michael Smith: Then you hire your first employee. They have a whole bunch of little droppers of blue dye, right? Yep. They show up every day with their culture perspective and put a drop in your tank and a drop in your tank. Now, the second person comes, they have a red dropper, and then there's a yellow dropper and a green one.

Michael Smith: Over time. Colors mixed to brown, right? Eventually they go to black. The point of that is your culture without attending to it. Just by letting people be who they are in many times, semi or fully dysfunctional ways, and not fixing that, not bringing it back to the ideal Clearwater, you know, goal that you have.

Michael Smith: You'll end up with a messy tank. And so what you're saying, you got a tank, it just may not be a very good one. Right. Can you look through it and see the other side? Sure. Nope. Well, here's the good news, right? How do you fix brown water? You start pouring in. Fresh water and you keep pouring it in and you keep pouring it in and it dilutes and you can, pretty soon, you can't tell there was ever any color in here.

Michael Smith: And that's the process. And again, it's about like that you don't just go, Hey Lucas, are you ready? 1, 2, 3, flip. And the culture is there. It's like everything's rosy and beautiful and clear water. It takes time because you have to identify what you're building. By the way, we know what the components are.

Michael Smith: You have to figure out where you're bleeding, what color is your water, so we know what to fix first. Then you gotta put the processes in place to do it. Then you begin operating. It's a lot like social media. All you owners out there that are listening, that do social media, they're like, look, you can't do social media and get immediate impact.

Michael Smith: It's like a aircraft carrier. You shove the. The throttle forward and those big screws start, it goes slow faster. The good news is you can take your hand off the throttle and it keeps going until it brings itself down. Culture's exactly the same way. So you do the right things and it still looks like brown water and it feels harder, but all of a sudden it's like, do not give up.

Michael Smith: Do not give up, keep going. And one event at a time clears itself, one event at a time, and pretty soon everybody can see through the water and they're going, I like this. Better than it was before. It's like, keep going. Don't stop. And all of a sudden, now think now just think this, and again, I'll turn it back to you.

Michael Smith: Now you've got a clear water tank and here comes an outside person you're recruiting who comes in with a little black vial of drops, right? In recruiting process, you see that your people know what they're looking for. Now, do you hire them? And let them come in and start dropping it in your clear. No you don't.

Michael Smith: You go, okay, let me see your vial. They go, what are you talking about? Pull out your drops. And they put 'em down. Clear water. Ha. Let's talk. I've got clients brother that have multi shops, like 20 and 30 shops. Yeah. And they are main job at the CEO level. The general manager, COO level operator level is to make sure the culture.

Michael Smith: The context, purpose, and character fit is in place with new people. That's the first interview is with the CEO. If they don't pass the context and culture screens, they don't even get interviewed about whether they can fix a car or sell repairs. They don't even get talked to.

Lucas Underwood: Yeah. 'cause those are the minor things, right?

Lucas Underwood: We always look at 'em like they're the big things, but they're the minor things.

Michael Smith: That's exactly right. And it's like, are there people who can fix cars? All kinds of them. Do we want all of 'em working for us? Not if you have a clear fish tank, we don't. We want the people who understand the value of that clarity and the power in it.

Michael Smith: And when they do. Then, now here's the thing, can you bring kids up through the process from Apprentice and you know, GS and all that on? Absolutely. And what you want is to have a system so strong with the people who are leading and at the top of the game that when you bring the kids in, you interview them for the potential to bring clear water, and then you move them into a system that doesn't put up with red, green, or blue dots.

Michael Smith: You just don't put up with it. Exactly. And the point is you either purge it out or they go. And you hire somebody who brings the Clearwater potential or the drops in, and then you've got a culture that is high performance and then you win. Yeah. Brother, the key

Lucas Underwood: about the high performance culture, right?

Lucas Underwood: Yeah. Like the key behind it is something that I just experienced recently, right? Like I fell in love with this concept when we went to leadership intensive and what, you know, we've got leadership intensive coming up at my shop. Yes, we do. And what I want everybody to hear is me say.

Lucas Underwood: When I talk about leadership intensive, this isn't like Michael formed all of these concepts. I mean, this is the science of leadership and the big ones that I, that stand out to me, right? I've had these really neat experiences over the past year. Yep. And you don't really know how strong you are until you have to go through something really tough.

Lucas Underwood: Sure. And so I've been through some tough things over the past year and one of them was taking over a business that was devoid of culture. Right. It was a toxic culture. Yep. And stepping into that business, the thing that I could see the red warning sign on the wall that was flashing.

Lucas Underwood: Meltdown. Meltdown. Right. Like, what was it? Well, it was that we had told people. That we were gonna do something. And we didn't do it. And you didn't do it. Right. Right. Leadership is trust earned through repeated behavior. Absolutely. Right? Absolutely. And going on a journey. So it can't be about me.

Lucas Underwood: You know, the Tim Kite video that I love so much, he talks about big ego and strong ego, and he said, strong ego is not bad. Big ego is about you. Strong ego is about them. That's called servant leadership. That's right. We have a responsibility to our people. Right. And see the automotive space has this concept about culture.

Lucas Underwood: That it's, well, the culture is either them winning or me winning. No, absolutely not. The culture is do what's right for human beings. Yes. And when you do what's right for human beings, they'll do what's right for you. Lemme

Michael Smith: this. Exactly. No. Let me broaden this. It's an abundance versus a scarcity model, right?

Michael Smith: Yes. It's a philosophic model about what the world looks like, and the reality of it is, and I'm gonna just tell you straight up, and people can say, what the hell are they talking about? If this is, we live in an abundant universe. If you do the right thing, you can generate win wins. All the way around and make all the money you'll ever need, have all the influence you'd ever want.

Michael Smith: And in fact, the people who can take this as far as they can, you have a handful of people who play the mean game all the way to the top, and eventually they fall. If you do this right and you live in a world of abundance and you lift people up and you do the right thing by customers and you don't shortcut the corners and you don't lie to your parts companies, all the stuff that we know how to cut corners and do, by the way, our industries.

Michael Smith: Pretty known for that out there in the world. Yeah. And so it causes our customers to walk in the front door kind of like this. They're not sure on go, they can trust us. Right. The whole idea that if we live in abundance instead of scarcity, there are don't have to be losers. Everybody can win. All of a sudden you start winning more.

Michael Smith: And people come to you and the people who believe that come and they bring more with them and they give you more for free because it goes along with the joy they're having, being a, and I'm not blowing smoke at you, Lucas. The high performance companies are loyal at the employee level like you've never seen before.

Michael Smith: Team members do not, you know, they look up and they go, you know, with all the foibles around here, 'cause nothing's. Perfect. I can't imagine a place that I could go that I have the kinds of relationships, the kind of a culture, the kind of opportunity that I have here. And you know what that draws from a customer standpoint.

Michael Smith: The loyal brand ambassadors in your market that also look for that from their provider of services, who can they trust? How come they know they can trust you? 'cause you all trust each other. Yeah, because you do the right and they can see it. And they can see it. They feel it sense when they walk in the front door.

Michael Smith: There's abundance everywhere. So I'm not that. It's a huge baseline concept and a scarcity centric industry, which I hate to say it, that's what it's historically,

Lucas Underwood: right? Absolutely. You're a hundred percent right. And you know, I developed a really unique culture here in the shop. Much of it by accident.

Lucas Underwood: It was that I just. Acted as I believed. Right. And I tried to do what was right for other people. I had this really neat experience, and I know you know a little bit about this, but I had this neat experience where somebody else had come into the culture and was working in the shop and they were in kind of a leadership position.

Lucas Underwood: And the team eventually came to me and said, Hey bud, like this isn't working right. This is antithetical to who we are. Yep. And I remember a time when that wouldn't have happened. Everybody in the shop would've shifted. Right. But instead, what do we do? We take a whiteboard and we go down that whiteboard and we write down like each person's name, and we say, all right, who are three people that inspired you?

Lucas Underwood: Who are three people that drove you and that you look up to? Tell me who those three people are. Okay, now gimme three things about those people that stood out to you. And guess what we did? We compiled all the way down this list, and we came back and said, this is our culture because this is what we believe.

Lucas Underwood: These are the things that are important to us, and we're all fairly in alignment. With the things that were important to us. Yep. This is why it stands out to us. Yep. And so we came back to that, right? We came back to that sheet of paper and they came to me and they said, Hey, I know you're trying to make this work.

Lucas Underwood: Something's not working. Something just doesn't feel right. Let's sit down and talk about this. So as a team, we sat down and we said, this doesn't align here and this doesn't align here. And this doesn't mean that person's bad. Doesn't mean that's a, a unworthy human being or something like that.

Lucas Underwood: It's that the culture saw that it wasn't the fit for this shop. It wasn't the fit for this business. Yep. Now, previously that would've been on my back. I would've been sitting there going, oh man, is this what I should do? Should I do this? Should I not do this? Maybe I'm missing it, maybe I'm that. But when the team as a whole comes to you and says, Hey, this isn't working, and let me show you why.

Lucas Underwood: That is a different world right there.

Michael Smith: See, look, let's talk value for a minute and I wanna build on what you said about collaboration. I wanna pull that out of the stories that you just told are rich in collaboration, right?

Lucas Underwood: Yeah.

Michael Smith: One of the things that'll cause an owner, an investor owner, to pay the more to you for your shop then they would pay for another, is if they can find.

Michael Smith: Collaboration. The reason being, look, here's the deal, right? How many times in our industry have we said, are you working on your business or in it? Like, I mean, if I hear that one more time, I'll fall asleep, right? But the point of it is like, what does that mean? And a lot of people are like, well, I, how do, I mean, I guess I work on it 'cause I show up and work in it every day.

Michael Smith: I don't know. What are you talking about? Here's a way of looking at it. If you work. You're up to your eyeballs in operations and decision making, there's not much collaboration because you are the answer person and there's a dopamine hit that goes with that, like playing video games. It's like, Woohoo, isn't this fun?

Michael Smith: I get to be the answer person. Yeah, that's great. Except guess what? I can't sell it to anybody else. I can't have a life goes. Well, the thing is, the new owner's gotta replace you with another answer person, and that's expensive. And so the value's not there and you don't get as much for your company. So we just pause there for a second, right?

Michael Smith: How do you break that cycle? You start asking people, gee, instead of answering their question, these are simple things, right? What do you think we should do? Oh, no boss, I came to you. 'cause I don't know the answer. It's like, yeah, I know that and I have ideas, but I wanna start with, what did you do already?

Michael Smith: What are you thinking? What might be an answer? It's like, well, and then here's my point. The first time it's. Awkward as can be. Second time, they kind of know you're gonna do it third time. They're starting to think about the answers before they get there. 'cause they know, you ask them, there is no fourth time.

Michael Smith: Yeah. Because the fourth time they're like, he's gonna make me answer this anyway. Why don't I just go do it by myself? Try or ask Bob in the shade in the bay next to me what he thinks I should do. And then we, and here's the point that's working on your business, not in it. Right. You get everybody doing their jobs as well as they can.

Michael Smith: They become learning beings. They're thinking for themselves. You are not the answer person. You are not the problem solver. You, of course, you have to solve some of the bigger problems, but the reality is you're empowering your people. Again. Win-win. They become stronger professionals. Their confidence level goes up, their self-esteem goes up.

Michael Smith: Then you give them your others' esteem. The team starts to support each other. There's collaborative conversation continuously. One of the marks, there's many marks of a high performance culture. One of them is collaboration affiliation. It's the fact that people work positively and well together for their own and for others in the group success.

Michael Smith: Yeah. So think about your culture as you're listening to this. Do you have a lot of affiliation and collaboration, or not too much at this point? If the answer is, eh, some, or gee, not as much as I'd like. You can build that proactively. You can put that into place intentionally. There's things that you can do.

Michael Smith: Yeah. Right. A humanistic, encouraging culture. How much trash talk do you guys have in your shops? Right? Oh, well that's the culture of the industry. It's like, I don't want to hear that from you. Do you realize every time I sarcastically. Say something negative to you, it goes into your brain. And unless you say to yourself in that moment, I don't accept that it goes into your self-esteem tapes and gets added to the negative list.

Lucas Underwood: Oh, that's so true. That's so true. It's so fun to, and well,

Michael Smith: that's just how we are. We're sarcastic. We tease each other. It's like, you're the dumbest guy I've ever seen. Oh no, you're dumber than me. You know what? Stop that stuff because that's not encouraging. Positive top cultures are encouraging and these are the things we can learn, right?

Michael Smith: And get better at Lucas. Go ahead, brother.

Lucas Underwood: Well, you know it, it's funny because I've been sitting down with part of the team that's coming to leadership intensive at the shop and folks listen, you guys be asking questions, right? Drop some questions in here. I've got some I'm gonna answer here in a minute.

Lucas Underwood: You know, here's one of the things I'll tell you about that is I've been reading through that book. And I had an incident the other day where I was talking to somebody, I was saying something and they got really upset and they got really frustrated really quickly and I thought, okay, how about just stopping right now and seek first to understand before we go any further with this, let the situation calm down a little bit.

Lucas Underwood: Let's understand. And it connected to me a little bit because it's something that I've been through. I remember when I was little. If I grabbed a bag that was too small for the sandwich and I put the sandwich in the Ziploc bag, I'd get fussed at for putting it in the too small of a Ziploc bag.

Lucas Underwood: If I got a bigger Ziploc bag I'd get fussed at for putting it in too big of a Ziploc bag, you're wasting a bag. Right, right. Like what I was I couldn't win. And I said to him, I said, Hey, listen, I don't understand why you got so upset. They said, listen, from the time I was very little, I couldn't do anything.

Lucas Underwood: Right. Right. And I constantly, like when somebody says something, I didn't do something right. It's visceral. It comes out before I even realize I've said it. Yeah. Before I've done it. And if we do that to our children. We also do that to our team. Now I pick on my team too, but I also like, we have a very haha laughing, joking team.

Lucas Underwood: Yeah.

Michael Smith: Yeah. But let me say this too though. I know I got, it's in here because every time you say something like that, I know you, you're thinking I probably shouldn't be doing this, but I'm gonna, right. And then next Michael told probably not to

Lucas Underwood: do that.

Michael Smith: I'm gonna do it anyway. Just don't tell him.

Michael Smith: You're on the road, you're almost at the end where you won't do

Lucas Underwood: it

Michael Smith: anymore anyway.

Lucas Underwood: Right. So there you go. That's it. That's it. Well, I'm gonna jump in. I want to answer a couple questions now. These are more automotive questions, so if you want to put your opinion, your 2 cents in here, be my guess. But I'm gonna jump in and answer.

Lucas Underwood: I don't

Michael Smith: answer car repair questions, that's for darn sure. So,

Lucas Underwood: And so the first one is when doing digital vehicle evaluations, do we estimate everything that we find and in my shop, yes, we do. There's some variables to that. There are a lot of cases where shops will not do that. They may only do red, they may only do red and yellow.

Lucas Underwood: They may not do things that are coming up in the future, that kind of thing. For me personally, I do this for a very specific reason. It is a lot of workload on the shop, but my reason for doing this is liability, because if they decline that. That's one thing. If I said, Hey, you need to do this, but I never told 'em how much it was and proposed a potential solution to their problem, then it's not documented anywhere that, that I said, no, I don't wanna do that.

Lucas Underwood: I don't wanna fix that right now. So if there were to be a potential legality issue, a liability, something like a litigation because they got in an accident and their insurance, like they don't really care that you told them about it. Insurance wants to know beyond a shadow of a doubt, you gave them a potential solution.

Lucas Underwood: And you weren't responsible at that point, right? They said no. So that's the reason that I do it in my shop. Quality control process is the other question also from er auto Diesel Tire.

Michael Smith: Lucas, can I interrupt you for one second? Yeah, sure. Go ahead. I wanna add a trust psychology component to what you just said before you do the next one.

Michael Smith: Of course, think about being a customer and you walk into, get some service done and they're. A person across the desk from you says, listen, you came in to do one, what we would call in a DVI red thing, and we have three more red things to show you. And what does that say to them? If they trust you, you're sort of rocking that trust and squeeze a little bit.

Michael Smith: If they don't trust you, they feel like what? They're being upsold. Yeah, so then if you do the reds and the yellows, right? It's like, well, this is stuff that we have to do later. They feel like they're being set up for the next time. When I talk at the leadership intensive about customer component near the end of the program and we talk about it, we talk about building a stewardship relationship with your customer over time, and the stewardship relationship includes the things that are going well.

Michael Smith: The things that are not going well and what do we need to do in the future to be more successful together? Right? We joke around in psychology, it's the poop sandwich. What's going well is the happy bread. There's a little poop in the middle. What's not going well? And then the happy bread on the end is what can we do in the future to make us more successful in the past?

Michael Smith: Yes. When you do all three red, yellow, green and you say to them, look, the green's the good stuff. This is, you know, cars fall apart over time. That's what a car does. You got some great stuff going here. These things we looked at, they're in good shape. That's a good feeling, right?

Lucas Underwood: Yes.

Michael Smith: Then you get into the red and the yellow stuff.

Michael Smith: It's like, here's the red, now here's what the red issues are. You've moved into the, what's the scary little bit of a, you know, uncomfortable part. In the middle of the conversation, the end of the conversation comes back to the list of the reds and yellows and the greens. And saying, look, here's what I, we recommend we do.

Michael Smith: Let's do the red stuff. Now let's keep an eye on the yellow stuff so when you come in next time. Exactly. Nothing's gonna sneak by all of us and make you unsafe or have something catastrophic happen and the green stuff, we're gonna keep watching that and it starts to turn yellow. We're gonna do our best to keep as much green as we can.

Michael Smith: That's the FU in positive conversation. So you're doing that when you present all three? Yes. With the full psychology of. Positive and positive out the ugly, costly stuff they don't wanna deal with is in the middle, but it's sandwiched relationally. And the last thing is because they've got the list of all three layers, they can see that you're being full disclosure with them.

Michael Smith: Yes. And they have more trust doing something moves from yellow to red, that you're tracking it and it finally has moved. It's not just this red surprise or the price that goes with it. That's a. Hit on their credit card. They didn't want to have based on where they're going on the weekend or some such thing.

Michael Smith: So, but I just wanted to add this psychology to it. All three of those. I love it. Very powerful system.

Lucas Underwood: I absolutely love it. And that's what I believe as a automotive service industry that we need to be doing. We need to be advocates, right? We need to be there as service to them and be an advocate.

Lucas Underwood: We, we call them service advisors. What does that mean? You're giving advice, you're advising. Right. And I think that's something that we often miss. And again, I, that's my thing with just doing reds. That's my thing with just doing what they came in for. I'm not providing them a full picture. I'm not being their advocate.

Lucas Underwood: Now if you make that about a sales process, right, that they'll pick up that you made that about a sales process. And I catch flag. People are like, oh, of course you do that for sales. No I really don't. I. I am just a little bit of a softed soft-hearted guy, and I don't like it when people fuss at me.

Lucas Underwood: So I like to be able to say, I understand you're really frustrated, but I did tell you about it right here. You know what I mean? Like, I like that. It makes me feel better. I like people to like me. I can't help myself. There's also a question about the quality control process. And in our shop, what we do is we're a little bit extensive about quality control, but we build a model.

Lucas Underwood: This designed around a very unique client experience, right? We are extreme hospitality, unrealistic, or unreasonable hospitality is what we offer in my shop. And so they get cookies when they pick up and they get, you know, the warranty card and all the information, and we pick 'em up and we deliver 'em the whole nine yards, vacuum and clean the car.

Lucas Underwood: Our quality control process is 10 miles by a quality control technician. They drive it. They go out, they check the fluids, they make sure everything looks good. They visually inspect the work the technician did, and then they take it on a 10 mile test drive. They bring it back. If the weather's nice, they wash it.

Lucas Underwood: The weather's not nice. They just go right into the bay. They vacuum. The front passenger compartment out. They put the cookies in, they wipe everything down. They recheck the wheel toque the whole nine yards. Now a smaller shop, that's gonna be very difficult because that's such a large piece of your gross revenue going to a porter that's doing that type of work.

Lucas Underwood: And so in some cases it might be that you have a technician who does some type of quality control process and it's never the same person rechecking that job, right? Somebody else needs to drive it. When we first started this process, I was quality control. So they would do the work, I would take the car and drive it.

Lucas Underwood: They hated that. They thought that was absolutely terrible. They just thought that I was a bit of a perfectionist. I don't know what to say to that. Like of course I want the cars. Perfect. Right? They were built perfect when they came out. Why can't they be, don't look at me like that Michael. Let's see here.

Lucas Underwood: I wanna answer these last little questions 'cause we're running low on time here. We keep getting calls for alignments from people that either do the work themselves or had another garage do the work, but we don't have an alignment machine. We've taken a couple and they've been a lot of work, very little money.

Lucas Underwood: We're thinking about not taking them at all. Thoughts on this or a different way to handle these situations. If you don't have an aligner and you don't have someone locally that you can sublet with that, that sets it up. I probably just would not take those jobs on. If I am not the one providing that service and all they want in alignment, I'm gonna recommend the shop down the street.

Lucas Underwood: If I'm doing work on the car, I will sublet that alignment out. I'll handle all of it in-house so I can ensure it's right. I can ensure the steering wheel straight and that we got all the bolts tightened back and that they're marked and we know that it's driving like it's supposed to. So we don't have an issue.

Lucas Underwood: I can check the alignment sheet just to make sure the numbers are actually right on it. And so that would be in-house. If it is anything else, I am absolutely sending it out. If another shop's doing the work. Probably not. I'm probably gonna say, Hey, I'm really sorry. We're just really busy right now.

Lucas Underwood: 'cause it turns into a mess. It turns into a mess every single time. Probably better off, 'cause I mean, you're not really gonna see any gross profit per hour if. From that. So it's a, it's kind of a loss leader. And then the last one, before Michael and I jump back into the conversation here how do you feel about loss leader specials, oil changes, alignments, tires?

Lucas Underwood: We can't charge enough to make good gp but we do use them to generate more sales repairs. I know that is a method that's been used for this, the industry for years and years. I don't believe in operating that way. I do run specials from time to time, but they're the same price that they would normally be in my shop.

Lucas Underwood: They're not loss leaders. And really my reasoning behind that is, is because I want to serve the client who wants to buy what I sell. And if it takes those discounts to bring them in the door, I have found, for me personally, they're not really a good fit for us, but we also curated a very unique experience for our guest, and that is just kind of part of that discovery conversation.

Lucas Underwood: Part of that barrier of entry into the shop is that we don't want the wrong people into the shop. That's not saying people who are looking for a cheap oil change or bad people or anything like that. It just doesn't fit my model. Now, I will say this says that we can't charge enough to make a good gp.

Lucas Underwood: I'm gonna tell you something, and Michael you tell me from your perspective what you think about this. I think as long as our industry is focused on competing on price alone, it's in trouble. Because I know folks that work in the corporate office at a massive national tire chain, and I know what they pay for the same tire that I buy.

Lucas Underwood: I asked them to look up a Continental the other day. The number is unbelievable. They can be making 60% if I'm selling that tire at 10%. And so if we're trying to compete on price alone, and that's what's gonna drive people into our shops. Long term, I don't believe that's sustainable because they can lower their price and still make 30% gross profit.

Lucas Underwood: I'm still over. I can't lower my price anymore. Somebody will always beat me on price. Michael, how do we handle that?

Michael Smith: No. I'll throw the, I'll add to this in, well, in business school we, in microeconomics, we studied this very question, and the question is, do you compete on value or do you compete on price?

Michael Smith: And you know when the professor stands up and says, the teacher says, what do y'all think? You know, half the classes we have to compete on price. 'cause price too high. People aren't gonna come. The professor leans forward and says, you realize only one. A company in a given market can be the winner. Yep. In the low price game.

Michael Smith: And the low price winner also has the lowest margins in town too. And everybody sits back in their chair and goes, oh yeah. The best way to do this is to have a value proposition that draws a customer that will pay more because of the value proposition and get away from competing on price. Now, if you carry that into this loss leader question, then you know, when we do the high performance.

Michael Smith: Customer stuff at the end of the leadership intensive, and we do it in our high performance group, we talk about LTV, the lifetime value of a loyal brand ambassador customer. And so what Lucas was talking about was, Hey, look, let's be differentiated in building a customer base that's. Days and grows in trust and brings us more, and we charge them the right price, but we give them the best value for that price that they can find anywhere.

Michael Smith: And guess what? Now you're not working on lost leader stuff to get new bodies walking in the door. And you know why? Because loyal brand ambassadors, that's what they do. They're your ambassador. They bring people like them who are value oriented and refer them into your shop, and you'll become less dependent on churning new clients into your system than you will holding on to the top performing clients that you have.

Michael Smith: So this question will fade over time. And the real message, I wanna join you in Lucas. Don't play the low price game. That's a losers game. Absolutely first

Lucas Underwood: game. A hundred percent. And you know, one, one of the first epiphanies I had in, in this aspect, I'll never forget it was a really eye-opening experience where a STA second year I've ever been, I encouraged a lot of people to come and I had a vehicle full of people and I said, Hey guys, tell you what, I'll buy dinner.

Lucas Underwood: So look, somebody just picked somewhere to eat. Nobody would pick. So I just turned my phone over, said restaurants and said Somebody tap the screen. They tapped the screen. Now, at the time I was old country boy, right? I'd never been anywhere. Nice. And they picked Ruth Chris. And so I roll up in this place.

Lucas Underwood: One guy's arguing about having to take his hat off. Here I am with these big greasy technicians. We're going into this super nice restaurant and we're sitting down and we're eating. And the guys waiting on our table and he said, oh, you guys are car guys. Oh, I love this and I love this. And he starts talking about Corvettes.

Lucas Underwood: And they said, how do you know, how do you know about that car? That a Z oh six, that's a really nice car and pro charged and blah, blah, blah, blah, blah, blah, blah. And he said, oh yeah, that's mine out there in the parking lot. And the guys all turned around and looked at him and said, do what? You're a waiter.

Lucas Underwood: He said, yeah. He said, I cleared $140,000 waiting tables in this place. I said, there's enough people willing to spend that on food. That a 20% tip gave you $140,000 last year. He said, this place is packed seven days a week. He said, you make as much money as you want. If you wanna work every single night, you can work every single night.

Lucas Underwood: You make as much money as you want. And I said but like they, they'll come in here and spend this all the time. He said, yeah, we've got regulars that come in here every Friday night. He said, just because you see money as this, you know, you don't have any of it. And so you think, oh my gosh, that's really expensive.

Lucas Underwood: He said, these other people, they don't see it like that. They just look at it and say, yeah, it's a meal, it's dinner. It's not that big of a deal. And that woke me up to the fact that my perspective in a lot of ways was holding me back because I had in my head what value was. I'd never seen it through anybody else's eyes.

Michael Smith: Yep. I'm gonna throw this out there. It tied to our conversation, we talk about value propositions. You have to have a better value proposition. When I started in this industry, I was in front of 70 owners in a room and I didn't know the industry yet. And I said, okay, that, let's talk about unique. Value propositions.

Michael Smith: They said, who's got a unique one and somebody put their hand up. I have a 36,036 month warranty. Okay. I wrote it on a whiteboard. Anybody got a better one? I got a 48. Right? We went through this whole thing. How many people in the room have one of those and they put on some form of a warranty, like everybody in the room put their hand up.

Michael Smith: I took my pen and I drew a line through it. Said, what's another one? We went all the way down the list with this, right? And what I wanna say to the listeners is this, you're not losers if you play the industry traditional game. I said, it's a loser's game. It doesn't mean you're a loser, it means it's a losing game.

Michael Smith: Right? What is your unique value proposition? Amen. I don't know. And it's like I'm two miles away from the next guy and all the people in my neighborhood come to me and I have a warranty from my parts company. And you know, and it's like, okay, so if we standardize everything, we're all doing exactly the same way.

Michael Smith: Yep. So what's unique about you? And then people's faces kind of go blank, right? Right. That's a hard question. That answer. That answer is the answer that allows you to play the value proposition game instead of the. The pricing game. Right? A hundred percent. And I will throw out a couple of ideas. If you have a company that stands for something, stay with me.

Michael Smith: Guys more noble than the rest of the industry. Yes. That's unique in our industry. If you have a high performance culture where people on your teams knock themselves out to make sure your customers are thrilled when they walk out the front door in relative terms, that's a unique. Value proposition. Yes.

Michael Smith: The human stuff is unique when you dial it in and get it right, because our industry hasn't done that incredibly well on average.

Lucas Underwood: Absolutely. So if

Michael Smith: you think uniqueness in terms of my SOPs are tighter than yours, you're on pretty rocky ground at that point. What's a good enough SOP one that works, right?

Michael Smith: So is there any uniqueness in there? You see where I'm going with this, right? Stay away from pricing as a competitive edge and stop and say. Legitimate question. Yeah. What do, or what could we do better than the people that we would consider our local competitors and soak in that for a while. The initial question is, gee, I don't know.

Michael Smith: It's like, good. Then go home and think about it. Let this wake you up at two in the morning. Have a beer on a Friday night thinking about it. Get up and have coffee at five in the morning, whatever your cycle. Thinking is put that back on the table again and go, what can I do? Or what do we do? What can we become that's unique in this marketplace?

Michael Smith: And that's what you take to the market. And that reduces the pricing pressure discussion, right? It's just like now people come to you for that and that's

Lucas Underwood: when owning a business gets fun again.

Michael Smith: Yes, it does. That's when

Lucas Underwood: owning a business gets funnier. Absolutely. Right? 'cause now we have something that we can target.

Lucas Underwood: Right. Because as an owner, when we get, as an owner, when we get to a certain point, it's like, we don't have a target. We don't have a goal. We don't have a, what is it, Jordan Peterson says, human beings are focusing creatures. We don't have a focus. Right. And so that gives us the focus. We had one more question.

Lucas Underwood: I know we're out of time. Michael's gonna kill me both Michaels might kill me. How do we prepare for the future turndown that's being predicted? I'll be honest with you, I think the automotive service industry fares very well in turndowns. Like we might see. But if you really look at the numbers, right?

Lucas Underwood: Yes, credit card debt is really high and delinquencies are high and card debt delinquencies are high. But the reality is the market's actually still pretty strong there. There's some softness in a few areas, but it's unbelievably strong. And those who know the market right now are saying, holy cow, how is this possible?

Lucas Underwood: It's still going up. So I mean, it was up this morning before we got on here. So I think that there are gonna be weaknesses in the market, in areas, and I do believe that the consumer is highly pressured right now. But I think that if you focus on the fact that more consumers are going to be utilizing your services as opposed to replacing automobiles, and you're creating a very solid experience and offering them the tools and resources they need to make this work, I don't think you're gonna slow down.

Lucas Underwood: You might slow down some, but that's in marketing, right? Make sure you're working your marketing, make sure you're calling your clients and checking on them. But there again, Michael. The reality is we gotta make sure the business is profitable. Absolutely. 'cause there's gonna be rainy days no matter.

Lucas Underwood: And the goal is not to say, oh, I can't afford to slow down. The goal is to say, I've got six months of opex in an account. If it slows down, let's just hope it doesn't last more than six months.

Michael Smith: No, that's right. And let me tell you one of the things about this industry. I grew up in the big firms, right?

Michael Smith: 50 60 industry verticals I was a part of. This was the 51st or whatever. This one is known for this. It's not recession proof, which some people will say, but it is recession resistant, meaning that when things go down deep, we go down, but we don't go that deep. So what can you do to be prepared? Make sure you understand, and I'll just give you some ideas, right?

Michael Smith: Make sure that you know what your your variable expenses are. The fixed ones are fixed based on the work that's gonna go down when the work goes down. But the variable expenses, what are you spending that you could maybe bank in the short run until it pops back up again? One, two, go after your customers that you have relationships with and talk to them about stewarding the downturn, say to them.

Michael Smith: What can we do to get through this together? How can we help you? I know shops that do as well in recessions as they do in the high times because they reach out to their customers and say, let's manage the recession together. How can we keep you on the road? What do you need for us to do? And people will bring their credit cards and get work done that they were putting off because they have time to do it now.

Michael Smith: And I'm not blowing smoke at you. This is, it's an amazing conversation we have with people. Go back to the, we're helping you to get as much value out of your vehicle as we can. Let's monitor this in these value tough times and make sure we're beside you. And business can actually go up rather than go down.

Michael Smith: So it, it's an interesting industry that we have. Right? Plus, not to mention the fact that when times are tough, people buy fewer new cars and they tend to hold on to the used ones longer, which is also in our favor. Amen, sir. Our favor. So.

Lucas Underwood: Amen, sir. Well, Michael, thank you for being here. Thanks to all of our wonderful listeners and commenters for being here with us.

Lucas Underwood: They're gonna drop QR codes down at the bottom, and I would like, and I'm sure Michael would like to personally invite you guys, we're gonna hold a couple seats open to those who attend some of our digital stuff to the leadership intensive here at my shop. We're gonna do a lot of. Fun stuff. We might do axe throwing, we might do gym mining.

Lucas Underwood: We might eat ice cream, who knows? But it's gonna be a lot of fun. There is a mechanical bull. Michael's promised he's going to ride it in the cowboy mode.

Michael Smith: On slow. On slow, not cowboy mode. I'm not doing it.

Lucas Underwood: So we want invite you guys and just want to say thank you so much for being here. Thank you for being part of what the institute does and Michael Smith, thank you for being here as well, sir.

Michael Smith: It's my pleasure. My pleasure. 

Lucas Underwood: Yes sir. Be well. All. Have a good day y'all.