The 4 Essentials to Increasing Service Profits
Written by: Don Reed, DealerPRO Training
If you’re making money in all departments, congratulations. However, don’t set your cruise-control, yet. The industry continues to evolve, so you must seek ways to evolve with it. After all, if you’re like most dealers, you’re not living up to your true profit potential anyway.
Let’s look at the four essentials to increasing net profits in your service department.
When dealers start losing money, expenses are usually addressed first because they are the easiest to control. Many times, dealers say, “I’m going to cut expenses everywhere and save my way into a profit.” Is it possible to save enough through expense cuts to offset the lost revenue from new and used unit sales? Probably not. There’s a limit to how many expenses you can cut. Cut too many and you can go out of business. If that’s not your plan, let’s look at some ways to generate more revenue streams – starting with your service department.
Improve Fixed Ops Profit Margins
Profit margins can be affected immediately. First, set a goal for your margins – no less than 75% on labor sales and 35% on parts sales. To do this, you must either lower the cost of sale (wages to technicians and cost of parts) or increase your selling price.
To get your profit margin in line, you could pay your technicians an hourly rate based on the number of hours billed out on the repair orders instead of a fixed hourly rate. You’ll also need your retail labor rate at least 4x the cost of your techs. To optimize the margin on parts, adjust the selling price by utilizing a pricing matrix which adjusts the markup of each part based on cost and demand.
Increase Sales per Repair Order
First, it’s important to note the difference between a service “writer” and a service “advisor.” Think of a service writer as a secretary taking notes on what the customer wants done. Does the customer know what needs to be done to ensure the trailer is safe? Probably not. A service advisor does and he or she communicates it to the customer.
Here are three ways that your service advisor can increase your sales per repair order without adding a dime to your budget.
- Walk Around Inspections – Your Service Advisor should perform a walk-around inspection of the unit with the customer, looking for visible signs of needed repairs or services and making recommendations for completion during the visit.
- Printed Maintenance Schedule – Service Advisors need a printed maintenance schedule for each type of unit you service based on time and/or usage. This “maintenance menu” should be presented to every customer one very visit, so they can maintain their units in ‘like new’ condition to maintain the manufacturer’s warranty.
- Printed Inspection Report – Every technician should complete a printed inspection on every customer’s unit on every visit.
Get More Customers in the Door
Start generating more repair orders by bringing in more service customers to your dealership. That starts with scheduling. By positively addressing the questions below, your dealership will have a better understanding of how to get more customers through the door.
- How long do your customers have to wait to schedule a service? Every day they wait lowers your ability to grow.
- Are your technicians producing at least 40 collectable hours per week?
- Are your technicians paid on performance?
- Are your service advisors paid on total labor and parts sales?
- Do you have the capacity to add more technicians?
- Have you implemented extended hours to become more convenient for your customers?
ABOUT DEALERPRO TRAINING
DealerPRO RV Training is the nation's largest and most experienced performance-based, Service and Parts Training company, designed exclusively for RV, Trailer, Fifth Wheel and Powersports dealers. Its proven, in-dealership performance driven training programs have produced additional gross profits for RV and Trailer Dealers that beat their previous year’s performance by up to 40% or more. Providing management and leadership skills training, as well as training on efficient processes and proactive customer communication to your entire service and parts staff, results in great customer retention/loyalty and overall increased profitability. To learn more, please visit www.rvdealerprotraining.com.