Increasing the Profit
“How do I increase profits in my service department?” This is a question that we often hear, so today we are going to look at three ways to increase profits in your service department!
When is the last time you looked at your uniform bill with any kind of detail? I’ve looked at many uniform invoices over the years paying particular attention to how many non-uniform expenses were on them. The worst case I’ve found so far exceeded $70,000 annually! This particular dealership was renting floor mats, mop handles, air fresheners, and the list went on extensively.
All of these items can be bought reasonably at any wholesale club or big box retail store, however the uniform provider talks his way into the dealer by trying something out at no charge for a short period of time. The free trial time runs out and they become a large profit center for your uniform provider. I suggest everyone take a good look at their uniform invoices and challenge thinking of renting these items that are not uniforms.
Medicine cabinet vendors are very convenient to the dealerships personnel, however they charge massive pricing for common supplies that could be purchased at any wholesale club or big box retailer. Look at your medicine cabinet vendor and challenge your thinking to compare their pricing at Walmart. You’ll find unnecessary items that are not needed and extremely high pricing on everything. We work too hard to bring gross profits into the dealership to lose them so aggressively by buying throat lozenges and aspirin.
Gain better control of shop supplies by tracking individual technicians on what they are using. The parts Department should have subcategories using technicians name and invoices closing them out on a weekly basis. Copies of these invoices should be provided to service management for review. If the manager has any questions they could compare usage of each technician on products to see who is using more of an item.
The fact is most dealerships don’t track who is using what and can’t answer why shop supplies are so high. If the technicians understand how critical shop supplies are to maintaining a profitable operation in the service Department, this expense with declined dramatically.
We must review our Uniform, Medicine cabinet vendors and Shop Supplies invoices, in my experience they are so often overlooked by management. By comparing these three invoices to the price we pay at any big box retail store, we can greatly increase the profits in your service department!
Rob Gehring, President
Fixed Performance Inc.
Everybody wants to maximize their results on repair orders just ask them. The tone of the conversation will change however, when you ask them how they will maximize their results on repair orders. I find it fascinating how implementing small changes can have a huge financial impact the dealership.
Take for example if the dealership would improve the average technician hour sold per repair order .2 and increase the effective rate four dollars an hour parts and labor sales over a year in a medium-size store would be well over $500,000. In this article we are going to look at several small changes that will help you maximize results.
My belief has always been people will take the path of least resistance in life. In the management role the goal is to make the path of least resistance compliance. I have found that advisors across the country discount labor and parts pricing on repair orders when they find that their over the estimate provided to the customer. They also discount members of their family, friends, church members and the list goes on. This action is the path of least resistance as it is easier to discount than to the phone the customer and ask them for an additional amount the estimate is over.
The reason, this is generally the path of least resistance is because most managers don’t monitor discounts in a consistent manner. So the advisor is never challenged on the reason they discounted the customer. These discounts can be seen in most DMS exception reports however the formats are not the easiest to read or understand. The most innovative way I’ve seen to control advisor discounts is a product called ROAMS by keeps Corporation. These easy to read reports provide a percentage of advisor compliance on every repair order they have written on customer pay. It then gives a detailed breakdown of noncompliant repair orders that are highlighted and just a click away from reviewing. It then becomes easy to discuss noncompliant discounting with the advisor to get the reason for their actions.
As you can see the path of least resistance for the advisor would no longer be discounting customer labor or parts sales on the repair order. The goal here should be that every advisor and the dealership is over 90% compliant on a consistent basis.
Charge More for High Skill Level Repairs
Today’s dealerships have many competitors able to provide quick easy maintenance services such as oil changes or tire rotations. Due to the complexity of new automobile systems the competition drops off dramatically when reviewing such things as electrical, diesel engine, or transmission concerns. The independent repair sites have little or no factory training and no special tools designed to complete the repair properly. The dealership has invested hundreds of thousands of dollars in brand specific technician training and special tools to repair the vehicle correctly the first time.
Who is the competition in complicated repairs? To maximize service results we must be unafraid to charge the customer higher prices to offset these investments. Your dealership will never make large amounts of profit from oil changes and tire rotations. I have witnessed many times service managers that believe they can’t charge over a certain amount for repairs. The reality that a $10 an hour increase in the repair rate on a two hour water pump replacement would increase the cost to the customer $20 and would not be considered significant. Would anyone tow the vehicle out for that?
Every year billions of dollars of needed maintenance and repairs never even get recommended to customer. Some of the most destructive reasons I have seen causing this must be shared. Let’s say a technician looks a vehicle over very well and notifies the advisor of several issues with the car. If the advisor quickly responds with “That’s Mary she never buys anything just button it up and go to the next car.” I am not a mind reader however; I know what that technician is thinking. “I just spent 15 minutes of wasted time I won’t get paid for caring about our customer and the needs of a car and she won’t even know about it. See if I do that again”.
The technicians then develop a disease in their minds that says the advisor won’t sell it so they don’t recommended anything. It’s critical that you understand nobody wins in this situation including the customer. The customer has every right to understand what their vehicle needs are when they visit your dealership. Whether they buy it or not isn’t the largest concern. It’s the customers expectation you will inform them what their vehicle needs are, however, it’s your obligation as the service provider. Be sure that every multipoint inspection is presented in the first 15 minutes of the visit with recommended services listed on it.
We know 80% of all approvals are in the first quarter of the visit so be sure your dealership is disciplined to make your presentations in that timeframe. Track every declined service properly so they can be reviewed with the customer in detail on future visits.
Do It Now
Many shops do a good job looking the vehicle over and informing the customer of needed maintenance or repairs. They believe however they are too busy to get those recommended items completed and accommodate the schedule of the day so they attempt to reschedule when it’s more convenient for the dealership. This loses a lot of efficiencies inside the shop and allows the customer an opportunity to price shop other places to perform the recommended services. This practice will also create resentment if the vehicle does come back in and it’s assigned to a technician that didn’t recommend the work. Best practice will always be to place the focus on what is best for the customer without consideration of your issues. It is an inconvenience for the customer to return to the dealership at a future date and many just won’t do it. So you do it now.
You will find developing max results on repair orders is a journey not a destination. Be determined and always look for ways of improvement with an open mind. Place the focus on a future without limits and never make excuses why it can’t be done in your market or dealership. Those at the top understand constant effort to be the best is required to reach it. A friend of mine Shawn Dill has said it well. “We need convection stronger than our desire to please”.
Rob Gehring, President
Fixed Performance Inc.
Why Do We Do This?
Zig Ziglar had been a strong positive influence in my life. One of the many statements that influenced me was "You can have everything in life you want, if you will just help enough other people get what they want" This is one of the cornerstones that I have built my personal life on. If you make it your mission to lift other people up, it will create a quality of life that we all desire to achieve. Let's look at some things people want in our dealership environment and what it would mean to us to help them get it.
Our customers rely on us to take their cars in and take care of any concerns they've listed. When they picked the vehicle up, it's obvious they don't want any mistakes in that transaction. They want their car clean and repaired correctly the first time. Could you imagine if they had a concern about the right outer door handle and the repair order listed a correction was done on the wrong handle, the response would not be positive. We have to help other people get what they want and provide them a no flaws visit.
One of the most common complaints I hear from customers, is that it took too long with their oil change or other repair while they waited. We want dealerships to value their time as much as you value yours. It should never take an hour and a half to perform an oil change on a customer's car. We have to help other people get what they want and provide them a timely visit.
Most importantly, your customers want to know that you care. You can make a mistake, or take extra time and be forgiven, if the customer understands how much you care and believes it. We have to help other people and let them know without question how much we care.
Getting What You Want
I hope, like me you'll take the advice from Zig Ziglar and understand that you can have everything in life you want, if you will just help enough other people get what they want.
Rob Gehring, President
Fixed Performance Inc.
Rob is President and Founder of Fixed Performance Inc. which he began over 15 years ago. His passion for customer care and helping others has assisted hundreds of dealerships with their fixed operations performance. His common sense coaching and training lifts people up as individuals and team members. With over 30 years of dealership management experience, he understands and respects the daily challenges of fixed operations. Placing a strong value in people and best practice processes always provide growth. His articles have been published regularly in national publications and weekly newsletters are read by thousands.