Jack McGee owns Jack's Transmissions in Colorado Springs. When this episode was recorded in 2016, the shop rebuilt and upgraded transmissions for DSM, Evo, 3000GT and Nissan GT-R owners, built engines, and ran full car builds, with 15 to 20 GT-Rs in the building at a time. It had 13 employees in a 5,000 square foot building and brought in a few million dollars a year.
It hadn't always looked like that. Jack said that for about ten years he worked 15-plus hours a day, seven days a week, and barely made money. His first year, the company brought in $30,000.
This episode is about how he turned that around. He tracked every hour his techs worked, found the products that were losing money, wrote process sheets for every build, and handed off work he had believed only he could do.
From VCR repair to a garage transmission business
Jack's first love was electronics. He grew up in Europe, where his father was stationed in the military, and was taking apart VCRs by age eight. The family moved to Colorado Springs when he was about 15. Nobody wanted a teenager fixing their electronics, so he made deals with local video stores. They advertised repairs and collected broken units, and twice a week he picked them up. He charged the stores $40 plus parts, and they charged the customer whatever they liked.
When VCR prices dropped and repair shops started closing, he quit while the business was still good. He tried an engineering degree but stopped halfway, which he called a major regret. He worked a year testing tape drives at a large manufacturer and three and a half years doing component-level circuit board repair, where a $10 fix could replace a $180 board.
Then he bought a 1991 Mitsubishi Galant VR-4 with 60,000 miles and rebuilt its transmission. Friends started dropping off their DSM transmissions at his garage, and word spread on enthusiast forums. He rented a 1,000 square foot unit, then the one next to it, and kept adding units until he bought his current building. He grew it without debt.
Tracking direct and indirect time
The change Jack was most excited about sounded dull, and he said so. One of his 13 employees did nothing but crunch numbers, full time, in his own office. The shop used My Shop Assist, adapted to its own system, to log every task every employee did. Work on a customer's car or transmission counted as direct. Phone calls, email, cleaning and moving cars counted as indirect.
Jack wanted his main techs at 80 percent direct or more. When they measured, many were at 50 to 60 percent. The leaks were small. His DSM tech would be missing a 32 mm socket, walk over to ask a second tech, and the two of them would go find it on a third tech's bench. Three people stopped working every time that transmission went together, which could add up to almost an hour of lost labor.
The host compared it to a job he once had, where a weekly hour-long meeting tied up a room full of engineers who billed by the hour, much of it spent on small talk.
Fix the system, then the employee
Each week Jack reviewed every person's labor ratio. When someone missed 80 percent, he called them into his office to get information, without any blame. He compared it to how crash investigators treat a plane crash, as a series of events with no single cause. A tech at 70 percent usually had a reason, such as hunting for a tool or putting one unit away to start another because a part was out of stock.
Once a month the managers spent about an hour going through pages of data. They worked out that the shop's overall direct labor ratio had to reach 35 percent just to break even, covering pay and overhead. At 37 percent, the shop was very profitable. Two points sounds small, but with that much money coming in and going out, it meant paying cash for new equipment.
Jack said the system made employees accountable for their time and called that data priceless. The numbers also went into QuickBooks for charts and reporting.
Finding the jobs that lose money
The data turned up a surprise. For years the shop built a stage one five-speed Evo transmission for about $900. Once they counted the real hours and parts, every one had lost $200 to $300. They dropped it.
If you think that you're working really hard, you got a lot going on, but you're not making any money and you wonder why, you got to look at the numbers.
Car builds got the same review. About 80 percent of sales were transmission and engine work, and the cars were about 20 percent. An average build, with engine, transmission, exhaust, bolt-ons and turbos, ran about $30,000. The big builds rarely made money. The smaller full bolt-on builds with smaller turbos were profitable. Even break-even work had a place, since it kept money moving and paid the rent. Long term, Jack wanted engineering, manufacturing and parts sales to carry the business, because a part doesn't come with the liability of a whole car.
The small building helped. When the shop ran out of room, Jack dropped the least profitable product and kept the best ones.
Getting over yourself
For years Jack believed nobody else could build a DSM transmission or detail synchros the way he did. He had no trust in his staff, and he said he lost good people because of it. By 2016 he admitted that half his employees could build DSM and Evo transmissions far better than he could. One tech did nothing but DSM units all day and had come up with faster methods, like small platforms that held the gears while he pressed the clusters together.
His view was that most skilled techs don't want to run a business anyway. His own brother, once his partner, sold out and was happier as a tech. Another tech had closed his own shop because he wanted a regular job.
To make handoffs work, the shop wrote a book of process sheets with detailed pictures for every transmission. Anyone could cover for a sick coworker. When quality slipped on the complex GT-R units, such as a connector left unplugged or a locating clip left in, the rule became like aircraft maintenance. Techs had to work from the process sheet, step by step, until quality came back up. Engines were the gap. Jack still built every short block himself and needed to train someone to take it over.
An expensive engineering lesson
The worst moment came the year before the interview. The shop found a cheap way to add clutch plates to the GT-R transmission by thinning one end plate. It worked for months in Jack's car and on customer cars. They released it, and after a few months every unit failed at once. The thinner plate bowed under piston thrust load until the assembly came apart.
Jack said it cost about $130,000 and cut into year-end bonuses. He paid shops and individual owners for removal, installation and shipping, and refunded some customers in full. He lost vendors and good customers anyway. Afterward he became far more cautious about releasing changes, and hired a mechanical engineer from the nearby university to check his ideas.
Working smarter, and fewer days
The shop moved to four 10-hour days. Jack still worked 12 to 15 hours on those days, but he got a three-day weekend with his wife and young daughter. He had seen older shop owners burned out, sick and selling everything. The man who sold him his building held on to it past 90.
I used to work really hard, like all the time, and worked every day, just insane hours, and the business really wasn't very successful at all.
Now that he had cut his hours down, he said, the business was hugely successful. If you are still working that hard after a few years and nothing is changing, he believed you are doing something wrong.
Key takeaways
- Track direct and indirect time for every employee, and review it every week.
- When a tech misses the target, look for what in the system slowed them down.
- Cost out every product with real hours and parts. Some popular jobs lose money.
- Write process sheets with pictures so anyone can cover a job and quality stays consistent.
- Train specialists. Someone who does one job all day will get better at it than the owner.
- Test changes for longer than seems necessary before you sell them.
Measuring your own shop with My Shop Assist
Jack's turnaround ran on data his techs logged in My Shop Assist. MSA tracks time on every job and task, so you can see how much of each person's day goes to billable work and what each product really costs to build. Checklists and forms let you turn process sheets into steps techs follow on the job. Parts and purchase orders keep build costs accurate, and jobs export to QuickBooks for the reporting Jack relied on. Learn how MSA fits engine and transmission builders.
To see where your hours go, start a free 30-day trial.
