R this and R that

R this and R that. Which one is the right R for our Dealership? If we concentrate on ROI, what do we lose in ROR? Is it possible to have too much focus on ROR?

Wait. I didn’t explain what I am talking about very well. Ok. ROI is referring to Return On Investment. This “Investment” can be anything. Time, Money, Parts, Labor…anything. And when we “Invest” we have a perceived “Return” we would like to get back.

ROR is Return On Relationship. And this too requires an “Investment.” Of ourselves. That’s why ROR is a little more important (IMHO) than ROI. Because we put “ourselves” in the building of the Relationship, when we don’t get a “Return”, we feel bad about the decision.

If we put a part on a car or give a discount, and the Customer goes sideways or doesn’t come back, we feel the loss of revenue. And when it doesn’t work out, we might mutter under our breath, but we can move past it because we don’t have a piece of us on the chopping block. We can “write it off” as a “bad investment.”

When we start building Relationships we put some of ourselves into this Relationship, and the last thing we want is our Customer to go someplace else to have Service work performed on their vehicle. Our “Return On Relationship” suffers and we have a difficult time “writing it off” because it is about us.

Yes, we need ROI. Profit is important. Revenue is important. We work for MONEY! But, the Relationships we build with our Customers is even more important. Without ROR, every Dealership will fail.

So, what do we do different in Service to build a Relationship that is different from every other department in the Dealership? Not much.
In Sales, do we not strive to build a Relationship or a connection with the Customer as they come on to the lot, call us on the phone or send us an email?

In Sales, do we not have a Sales process to guide the Customer from the initial Meet and Greet through the Sales transaction to delivery and then

Layers of a typical sales funnel. (Photo credit: Wikipedia)

follow-up?

In Sales, do we not advertise for additional business using every media available to us?

In Sales, do we not have a process that every Sales Customer is taken on a tour of the Dealership and introduced to every department so they can make the transition from “Here is a New Sales Customer” to “Here is OUR New Customer?”

In Sales, do we not have one meeting a week at a minimum to generate excitement, introduce upcoming Sales events, reinforce best practices, go over aging inventory, describe specials and define Goals for the coming week/weekend?

So, if we do all of these things in the Sales department, and it is part of the Standard Operating Procedure to build a Relationship with the Customer, why would we do something different in Service?

We wouldn’t. In building Relationships with our Customers, we need to be consistent and Send the same message to our Customers from the initial contact to the initial Service appointment.

In Service, we need to start the ROR process from the moment we first meet the Customer. The strongest message we can send begins with a proper Greeting, a friendly outgoing attitude and a complete and thorough walk around every time they come in for Service.

In Service, we must have a Sales process to efficiently guide the Customer and ADVISE them as to the proper way to MAINTAIN their vehicle so they get maximum life and value from their purchase.

In Service, we must have an advertising budget to keep in contact with our Customers in a manner they have come to expect and taking into account how they want to be contacted. We must be as media savvy as any other Dealership department.

In Service, our ROR process must include a “How to” of the Service department. Everything from “How to make an appointment” to “How will the Advisor advise me on needed services and repairs?”

In Service, we must conduct weekly meetings with our personnel to generate excitement, describe specials, discuss service issues, reinforce best practices and define Goals for the week.

If our Standard Operating Procedure was the same for every Department in our Dealership, would we not have an EXCEPTIONAL Return on Relationship which would give us an EXCELLENT Return On Investment?

Training Your Service Customers: Pays Big Dividends

If you are like most dealers, you are reading this article and scratching your head, wondering, “What the heck is this guy talking about training your service customers?” To begin with, I want you to come to grips with the concept that training can solve most any problem. Training can give you a higher return on your capital investment. Training can generate more bang for your working-capital buck. Training can reduce employee turnover. Training can improve closing ratios and increase owner retention. Training will generate more net profit. Think about it.


You just hired a new payroll clerk who has five years of payroll experience using ADP. However, your payroll system is on Reynolds and Reynolds. What do you do? You train the clerk to use your computer system, and, within a few days, your payroll process is back to normal. You just lost your top F&I producer and you have this successful salesperson who has always wanted to move into F&I, so you do the right thing and offer him the position. You know that in order for him to be successful in producing F&I income, he must have some training on how to become a top F&I producer. So, you send him to a professional F&I training class. Now, how about that service advisor you just hired from the competition down the street (big mistake), who is supposed to improve your falling CSI, stop your declining repair order count and increase sales? Obviously, achieving those worthy goals will require a lot of communication and sales skills. Clearly, you will also seek out a professional to train this new advisor, right? (I hope you said yes).

Now you’re starting to get the picture regarding training. This trained advisor can now go to work each day and focus on achieving the goals that you have given him/her, improve your falling CSI, stop your declining repair order count and increase sales. All three of these can be accomplished by this advisor simply training your customers. It all starts with the first oil change.

When I was a service advisor, way back in the 70s the manufacturers actually helped me train my customers. That’s right; every customer was given a maintenance booklet that resembled a checkbook, with coupons about the size of a check. The customer was required to complete all of the required maintenance items listed on each coupon. As an advisor, I would remove the coupon upon completion of the service, attach it to the hard copy of the RO and validate the coupon stub with my dealership stamp and date. Upon delivering the vehicle back to my customer, I would review what was required on the next coupon, explain when the next service would be due and tell the customer that these services were required by the manufacturer in order to maintain their manufacturer’s warranty. It worked like a charm.

My customers would walk up to me with their keys and maintenance booklet in hand and state something like, “Hi Don, I’m here for my 15,000-mile service.” When they came back to pick up their vehicle, I reviewed the 18,000-mile service. In those days, the required service intervals were every 3,000 miles for the life of the vehicle. I had very happy customers (CSI) because their vehicles were properly maintained. My repair order count continued to climb each month and, of course, so did our sales. So, why can’t we use this same process in today’s service departments? The answer is, we can. The question is, why aren’t we using this same process in service departments? Do you realize this kind of training is exactly what the aftermarket quick lube centers are doing with your customers?

Starting today, ask each of your advisors what maintenance is required by your respective manufacturer. I’m betting they don’t know. If that is the case, then require them to read the warranty book and they will find the words “required maintenance” inside. So, wouldn’t it be a novel idea to advise each and every customer, on each and every visit to your service department, of the maintenance requirements for their respective vehicle? If you did so and they agreed, do you think they would be driving a more reliable vehicle? The people who build the vehicles think so. If they have a more reliable vehicle, will your CSI improve? Yes. If your CSI improves, will your customers keep coming back? Most likely. If you advise them on what is required next and when it is due, will even more of them come back? Probably. If more customers return for more required maintenance, would it be a good idea to offer them recommendations for additional maintenance based on your local driving conditions and their individual driving habits? Absolutely.

Now, what are the benefits of following this simple process from the 70s? Your CSI improves, your repair order numbers increase and your sales go up, along with a nice steady supply of repeat customers for your sales department. With someone always saying, “Sell more cars,” isn’t it about time you get serious about service and start training your service customers?

---Don Reed

The one word every Advisor needs to hear...

There is one word every Service Advisor needs to hear.


This word is the key to their future...whether they become a top-notch superstar a middle of the road average Joe or a washout...they need this word.

It defines greatness as well as highlights deficiencies.

The word is...No.

Since our Company (DealerPro) trains in Dealerships all over the country, we are exposed to every level of Service Advisor imaginable.

From the greenpea who is day one in a new job to the old dog who knows every customer who has come in for the past 5 years!

In the Seattle area there is a Service Advisor named Chad who became a believer in the word No!

Chad did not come from an automotive background, unless you count driving a car, and had no more special skills than anybody else. He does not come to work wearing a cape and he does not have x-ray vision.

When we first started training in Chad's store and introduced Professional Selling Skills to the Advisors, Chad was skeptical just like everybody else.

After being trained on the 12 Step Process and ASR Presentation Skills he went to work in the service drive. At first, did some of the Write-up processes some of the time and followed the ASR Presentation process sometimes... and just like everybody else, he got what you might expect...some results.

But Chad was a little different.

He understood the value in presenting all of the recommended repairs and maintenance to the customers but didn't always follow through. Like many other Advisors, he didn't want to seem "pushy" or "sell them something they didn't need."

And he didn't like the word No.

What changed for Chad is referred to as a paradigm shift. His view of "what it means to be a Service Advisor" became radically different when he realized that the customers were having repairs done someplace else even though he had made the recommendations.

And other customers were coming in with the maintenance on their vehicle up to date because it was completed by other shops...his competition! He realized he was getting all of the "leftovers"...and the "warranty work."

He asked himself "Why are customers leaving my shop without having the work their vehicle needs completed right here at my Dealership?"

And then it hit him...it was because he NEVER ASKED!

He realized he was afraid to ask!

He made up his mind that his customers were going to be serviced at his Dealership! He started believing that the recommendations he was making were helpful to the customer in maintaining their vehicle and actually saved them money!

And he became a fan of the word No.

He started presenting recommended services...and repair recommendations ...and in the beginning he heard a No a lot. In fact, if you ask him, he will tell you that he almost gave up!

But he had decided that in order to be successful as an Advisor he needed to learn how to sell. And so, he heard even more No's.

And in his mind he decided that every No was a good thing because that led the next YES!

And because he stuck with it...more and more No's came his way... and still Chad kept going... and going... until finally one day...he started getting YES.

And soon the amount of YES'es doubled the N0's.

Can you guess what happened to Chad's HPRO?

Yep...it doubled as well... in fact...he became the number one Service Advisor in his store. Can you guess what happened to his income?

Yep...it nearly doubled as well.

Chad is still happily employed at that same Dealership...can you guess how his CSI is? Yep...it's better too!

All of us like to deal with a Trained Professional...someone who can guide us and help us make the right decision based on our needs and wants. Know what else is true?

We will gladly pay for it...and in some cases pay even more. It's because we all like to be taken care of.

Want to be succesful as a Service Advisor?

Be like Chad.

Get more No's!

Use the "3T System" to make more money in Fixed Ops.

Making more Money in Fixed Operations is everyone's goal.


Think not?

Just go tell your Dealer Principal that this month you've decided that making money is not important... and see what happens to you, Mr. /Ms. Jobless.

Making money is much easier when you use a system to do it and it is much better than just wishing for more Money. Use the "3T System" to drive more dollars to the bank.

The first T stands for "Tell Everybody" what you want to accomplish this month. It is also called "Create a Compelling Vision" and the more Compelling it is, the more people are drawn to it.

Additionally, it must be specific, memorable and most importantly, reinforced at every opportunity!

It cannot be the same old tired "We need to do better or else!" stuff. They have already heard it before.

If it is, people will just ignore it. Start the month off with a kickoff meeting detailing exactly what it is you must accomplish, what role each person has and how you will be holding people accountable.

Remember, the more specific you are, the better your results!

The second T stands for "Teach me Something New." Everybody wants to be part of the newest, latest and greatest.

New is fun...New is exciting...New is way better than "old and stale." Let me give you an example.

When was the last time a you offered to make a sandwich for a guest in your home, and they said to you "Please make mine using old stale bread, month old lunchmeat and could you put some expired mayonnaise on it"?

Not gonna happen. It's the same way in the Service Department.

People want to feel like they are part of a new challenge and accomplishing new things. Don't make them a stale old sandwich and expect them to eat it.

Teach them something new about their job, the Customer, the Dealership...anything!

And the last T stands for "Train to Win!"

Bobby Jones said it best when he said "If you fail to get the proper instruction you'll only get better at making yourself worse." Train to Win means the best Training by the Best Method yields the Best Results!

Train your personnel using the Best Methods available (like DealerPro VT) and you will consistently improve and reach new Goals!

When Performance is Measured—It Improves

If you are a baseball fan like I am, you have most likely watched a game or two on TV or have gone to the ballpark to root for your favorite team (St. Louis Cardinals for me). In doing so, you have undoubtedly noticed the constant display of Player Statistics at the bottom of your TV screen or boldly displayed on the huge electronic scoreboard. For each batter who comes to the plate we see their Batting Average, RBI’s (Runs batted in), # of Home Runs, OBP (On base percentage), and for pitchers we see their ERA (Earned run average), number of games won versus lost, number of starts, how many innings pitched, etc. We even see the speed of every single pitch he makes displayed on the screen. Why? Maybe it’s because we as fans want to see and evaluate the performance of each player. Maybe it’s because the team’s coaches want to see and evaluate their individual player’s performance as well as that of the team. Maybe it’s because the opposing team’s coaches and players want to see and evaluate the other players’ performance. Or, just maybe it’s all of the above. When performance is measured it improves.


Top Performers are identified as such through constant, on-going performance evaluations. If you can’t evaluate their performance then how can you identify their status as a Top Performer? All of the players inducted into the Baseball Hall of Fame do not have the same stats. They are all different yet they all excelled in the sport of baseball and became the best players in the game. As a Dealer, General Manager or department manager you can learn a lot from this analogy because unless you have the stats on every individual on your team you cannot possibly evaluate their performance. You can’t identify their strengths or their weaknesses. You can’t measure improvement or failure accurately or fairly. You don’t know who needs training and what they need trained on. Now let’s take this concept of “you can’t manage what you don’t measure” and look at it from the perspective of “Front End” versus “Back End.”

The vast majority of Dealers have processes in place to measure the performance of their sales team every single day so they can evaluate their performance. Here are some typical examples:

Finance & Insurance Department:

• Gross Profit Per Retail Unit-New & Used

• Finance Penetration as a percent of total vehicle deliveries

• Extended Service Contract Penetration as a percent of total vehicle deliveries

• GAP Penetration as a percent of total vehicle deliveries

• Lease Penetration as a percent of total vehicles financed

• Number of contracts pending loan approval

• Total F&I Gross Profit produced Month to Date

This is typically measured for each Finance Producer as well as the entire F&I department and is done so DAILY so that you can effectively identify the Top Performers from the Underachievers and act accordingly.

New & Used Sales Departments:

• Gross Per Retail Unit-New & Used

• Number of units sold Month to Date

• Number of “UPS” Month to Date

• Number of Demos Month to Date

• Number of Written Proposals Month to Date

• Closing Ratio of UPS to Closed deals

• Number of Appointments for the day

• Number of T.O’s

• Conduct a lot walk to view inventory additions/deletions

• Number of Phone UPS Month to Date

• Wholesale Profit/Loss Month to Date

• Internet Sales Leads Month to Date

• Number of Internet Sales closed Month to Date

• Results from advertising campaigns

• Used Vehicle Reconditioning Cost PUVR

Most of these measurements are calculated for each Salesperson and each Manager for the same reasons as listed above for the Finance Producers and they are done DAILY. Most sales departments start their day with a brief Sales Meeting to review many of the items listed above. These are the typical 23 “Front End” processes that separate the average Dealer from the Top Performing Dealer. How would you rate your Sales Department?

Okay, now let’s cross over the demarcation line to the “Back End” of your dealership and take a look at the Service & Parts Departments and identify the typical processes for evaluating their performance DAILY. I emphasize DAILY not monthly.

Parts Department:

• Wholesale Parts Sales

• Counter Retail Sales

• Repair Order Sales

• Gross Profit Margin

• Lost Sales

• Fill Rate

My experience has been that far too many Dealers, GM’s and Parts Managers measure all of the above for the department but too often fail to do the same for each parts employee. For example do you run a DAILY Exception Report for each employee to identify the “Unauthorized Discounts?” Do you review a Performance Report DAILY by employee to identify their performance on parts margin—Wholesale, Retail Repair orders and Retail counter? Do you compare your performance to the benchmarks in our industry? Do you measure dollar sales per employee? Do you measure transactions per employee? Remember, if you only measure the performance of the department, you can’t effectively identify the Top Performers from the Underachievers. You can’t identify their individual strengths and weaknesses.

Service Department:

• Technician’s Flat Rate Hours Produced

• Technician’s Clock Hours Worked

• Hours per Repair Order by Advisor

• Number of Repair Orders Month to Date—Retail-Warranty-Internal by Advisor

• Number of Appointments Scheduled

• # of Carryovers

• Shop Productivity

Again, based on my experience and that of my 20 Trainers working in dealerships all across the country, we can’t find very many Dealers, GM’s, Service Directors/Managers and Parts Managers who measure anything else. Those who do measure more invariably will produce more. Measure things like their Advisors’ Unauthorized Parts & Labor Discounts, Policy Adjustment, Parts Margin, Labor Margin, # of Up-sells, Closing Ratio of Up-sells, Un-sold Hours per day, # of Menu Presentations, Closing Ratio on Menus, # of Inspection presentations, etc.

For Technicians let’s measure how many completed Inspections per day, # of additional repairs sold from inspections, # of comebacks, HPRO and the number of RO’s.

To sum it up, I see most dealers measuring about 23 stats per day in their Sales Departments and only about 13 stats per day in Service & Parts. If you follow my recommendations listed above that number jumps to about 30 stats per day and the good news is it costs you absolutely nothing! Now take a pen and check off all of the stats you measure DAILY in your Sales Department and then check off all of the ones you measure DAILY in your Service & Parts Departments. How did you score—Top Performer or Underachiever? It’s all in the stats!

Don Reed—CEO DealerPro Training Solutions

A recent Fixed Operations Study and what it reveals about Service Sales, Profitability and more...

Recent studies show that Service Advisors that hand out menus during the write up process experience an increase in Customer Maintenance Sales. The study also shows that this corresponds to an increase in the Service Advisors pay.

These recent studies also show that Technicians that completed a Multipoint Inspection on every vehicle flagged more hours than Technicians who did not. An interesting side note to the study, Technicians who completed the most Multipoint Inspections made the most money.

Furthermore, the study revealed that Professionally Trained Advisors had higher CSI Scores than Advisors who received little or no Training at all. In fact, during the study, Customers preferred talking to a monkey rather than an Un-Trained Un-Professional Service Advisor by a margin of 5-1. (Note; no monkeys were harmed in the study and were paid in peanuts for their participation, same as the Un-Trained Advisors)

Customers also preferred to have their vehicles repaired in one visit rather than having to return to the Dealership for repairs later due to an Un-Trained Un-Professional Advisor not being able to reach them during the day to complete the repair process. The Advisors who asked for a Pre-Authorized Repair Amount out serviced and outperformed the monkeys…er…Un-Advisors by a margin of 100%.

Additionally, Dealerships with Trained Professional Advisors had higher Gross Profit amounts than other Dealers who have monkeys... er…Un-Advisors. This was not too surprising to the Professional Advisors and Service Personnel but came as a shock to the monkeys…er…Un-Advisors who blamed the results on “demanding customers and high management expectations.”

One other aspect the study revealed was that Dealers who increased their Gross Profit had a Net Profit Increase as well. And interestingly enough, those same Dealers had an increase in Service Absorption. And the most telling aspect of the study revealed that Dealers that had an Increase in Gross Profit, Net Profit and Service Absorption stayed in business longer than those who did not.

One final note on this recent study…all of the Dealers that had monkeys…er…Un-Advisors working in the Service Department have closed.

The Worth Of A Technician: Comparing Positions In The Dealership

Have you ever taken the time to sit down and actually calculate the real value of an average technician? The value I’m referring to is in regards to gross profit production and customer loyalty, which I hope are on your radar screen every day. If they are not, they need to be starting today. Let’s look at gross profit production first.
An average technician at 100 percent productivity (40 hours produced versus 40 hours worked) will contribute about $15,000 in parts and labor gross profit per month based on our industry’s benchmarks. If we annualized that monthly contribution, it amounts to about $180,000. This is about the same as selling 120 new vehicles per year at an average gross PRU of $1,450 (National Average last year), which is pretty close to what your average salesperson produced last year. If an average technician produces about the same gross profit as an average salesperson, one would naturally assume that each of these people deserve to share equally in the attention received from the general manager and/or dealer, right? Let’s look at some examples of how much these two actually have in common.

Let’s start with performance. If you maintain a performance board for salespeople where you post their sales daily for all in the sales department to see, then I would hope you also maintain a performance board for technicians to measure and post their flat rate productivity daily. Additionally, if you set daily, weekly and monthly goals for all salespeople then surely you are doing the same for technicians, since it is a fundamental part of measuring daily the success of all productive employees both in sales and service.

How about support? In the sales department you need to have a solid, customer-oriented finance department to provide the financing support for putting the cars over the curb. A weak finance department will most assuredly have a negative effect on the performance of your salespeople. Similarly, in the service department, you need to have a solid, customer-oriented parts department to provide the replacement parts for getting your customers back on the road. A weak parts department will most assuredly have a negative effect on the performance of your technicians.

Why is it that the parts department in most dealerships will send a driver in a truck across town to deliver a part to a competitor (wholesale), but they won’t walk 50 feet to deliver a part to their own technicians (retail)? Since the technicians are the primary customer of the parts department, it would seem obvious that providing technicians the highest level of service possible ought to be a top priority. This level of service will have a direct effect on your CSI Report for “Fixed First Visit.”
To often this Fixed First Visit score is misinterpreted to reflect shop comebacks by the technicians. The fact of the matter is that Fixed First Visit has a lot more to do with the lack of parts needed to complete the repair properly; therefore, you must special order parts and ask the customer to return for a second visit to complete the repair. Hence, when the customer comes to “Fixed First Visit” on their survey, the answer is going to be, “No.” Are you evaluating the performance of your support department for your technicians?

Now, back to the salesperson who’s selling 10 cars a month and producing about $15,000 in gross profit. I bet you have processes in place to measure their individual sales opportunities such as the number of ups, demos, write ups, and TOs. You’re probably thinking “how can any of these processes possible apply to technicians?” To begin, measure the number of repair orders dispatched (UPS) to each technician. Every repair order, with the exception of new vehicle internals, should have an inspection sheet completed by the technician to ensure every customer is driving a safe and reliable vehicle. This is equivalent to the Demo. Of course, any needed repairs and/or services found should be itemized on an estimate sheet (Write Up) and presented to the service advisor for review with the customer.

Any customer who declines a technician’s recommendation for these needed repairs and/or services should be turned over (TO) to the service drive sales manager or service manager for a second review with the customer so they understand we are just trying to make sure they are driving a safe and reliable vehicle.

If you implement these processes and measure them daily, like you do in sales, you will immediately realize an increase in service retail sales because your technicians’ productivity will go up. It’s not uncommon for a good technician to reach 120 percent productivity or more. At this level of productivity your technician is now worth about $18,000 per month. CSI and customer retention are on the rise and service absorption just took a big leap forward, which sounds to me like the dealer just got a pay raise!

By measuring the efforts of your technicians daily, several things will happen with your entire service team starting on day one. First, you send a strong message that you care about service. Second, you are looking at their performance daily and comparing that to their goals.

Third, they will be held accountable for their individual performance on a daily basis. Fourth, productivity will increase significantly and so will your net profits. Finally, your service customers will like doing business with you and are likely to become return customers. So, don’t you think it’s about time you crossed over that line separating sales from service and give your service team the attention they deserve?

Don Reed
CEO, Fixed Ops Solutions
DealerPro Training Solutions

Missed Profit Opportunities

In the pursuit of additional profit opportunities in your service department, you must focus on maintenance of your customers’ vehicles. This is a missed opportunity for many dealers who do not perform complete, thorough inspections of their customers’ vehicles and do not make recommendations for preventative maintenance based on time, mileage, local conditions, etc. The value of these missed profit opportunities might surprise you.

To begin with, let me ask you this question: What percentage of your customers take delivery of their new or used vehicle and then, once they get home, remove that maintenance manual so they can review and study their required and recommended maintenance services? I don’t know the exact answer but I’m pretty confident the answer is, not very many. I’m talking about the transmission services, coolant flushes, air filters, pollen filters (which very few customers know they need), alignments, tire rotations, and the list goes on, and on. Everyone knows when to change the engine oil, but how many do you really think know when to perform all of those other maintenance services?

Next question: Are all of your customers mechanically inclined and can they perform all maintenance services on their vehicles themselves? Most customers rely upon someone with knowledge of their vehicle to provide recommendations for the proper maintenance and service on their vehicle.

It’s kind of like going to the dentist; the dentist performs an inspection of your teeth on each and every visit and makes recommendations to you based on the time since your last visit and the condition of your teeth. You know that you have to brush after every meal and floss, but there are other things your teeth need that you may not be aware of.

You rely upon a professional to help you maintain healthy teeth. An automobile customer is no different. They rely upon a professional, your technician or your service advisor, to properly advise them on how to maintain a reliable and safe vehicle which, in the long run, provides a much more enjoyable driving experience. There’s nothing worse than going on a trip with the family and having a problem occur with your vehicle, right?

Okay, so let’s look at the profit potential regarding this process of inspecting every vehicle and making recommendations to your customers for additional maintenance. In working with dealers all over the country, I have found that a complete and thorough inspection will produce, on average, an additional 0.7 hour of labor per retail work order. Let’s use the following assumptions when calculating the profit opportunity in our model dealership/service facility:

•Retail labor rate of $85 per hour
•Retail labor profit margin of 75% (Techs are paid $21.25 per hour)
•Parts-to-labor sales ratio of 0.8-to-1 ($0.80 in parts sales = $1.00 in labor sales)
•Retail parts profit margin of 45%
•Average 500 retail work orders per month

By performing complete and thorough inspections of all 500 vehicles we find, on average, 0.7 additional hours to sell at $85 per hour equals $59.50 in labor sales. At a profit margin of 75 percent, this produces additional gross profit of $44.63. At a 0.8-to-1 ratio our parts sales would be $68 per hour with a profit margin of 45 percent, which produces additional gross profit of $30.60 per repair order. Add the two together, and our total additional gross profit equals $75.23 per work order. Multiply that by our 500 work orders and the result is an additional gross profit of $37,615 per month. That comes to $451,380 for the year, based on 500 work orders each month.

Now ask yourself this question: “How many additional vehicles would I need to sell throughout the year to produce another $451,380 in gross profit?” If your average gross profit per unit is $1,500, this equates to approximately 301 additional vehicles. Does that get your attention? The point is, you need to start looking at your service and parts departments as true profit centers that can not only stand on their own, but also actually generate enough profit to cover all of your dealership’s fixed expenses. That’s service absorption! This means you have less dependency on new and used vehicle sales to make a net profit, which becomes a huge benefit during a soft market, high interest rates, expensive fuel, bad weather and a whole lot of other ills.

In far too many dealerships, the service and parts departments are simply there to provide support for the sale and delivery of new and used vehicles. Their secondary role is to take care of all the warranty repairs, and last of all, if time permits, they will write a retail work order for cash business. I’ve actually been in a service department that told customers that if they didn’t buy their vehicle from the dealership, they were low priority.

If this philosophy makes sense to you, then welcome to the dark ages! As you can imagine, this dealer was losing money in his service and parts department in numbers that would take your breath away. Would you want to be a service advisor or service manager in that store? It’s worth noting that the turnover in those two positions was quite high.

Why would you want to operate any department in your dealership at a loss to support another department? I believe it makes a lot more sense to operate every department as a standalone enterprise that works with the other departments to maximize overall performance and profits. It’s called return on investment.

Don Reed
CEO, Fixed Ops Solutions
DealerPro Training Solutions

Business Development Centers Can Maximize Service Appointments

I recently reviewed some research findings from a Detroit 3 manufacturer that revealed a very disturbing statistic: “The average dealer has a drop rate of about 35% on incoming service calls.” This simply means the customer hangs up the phone without speaking to anyone. This is disturbing, particularly in light of the declining warranty and retail repair order counts we are experiencing in our industry today. As a dealer or general manager, would you allow 35 percent of your incoming sales calls to be dropped? What would happen to your service appointments if you could find a way to capture all of these lost calls?
Additionally, research shows that for every five incoming calls that are answered, one results in an appointment, one is calling on the status of their vehicle and three are calling for a price quote or availability. What would happen to your service appointments if you could convert just one of the three incoming calls for price and availability to an appointment?

How does this happen in so many dealerships across the country? It’s because most dealers send incoming service calls to their service advisors. Some dealers even have a direct phone line to the service advisors. Most of these calls are coming in during the morning hours, midday and late afternoon, which is exactly the same time the advisors are their busiest working with customers and technicians. These processes are not conducive to increasing appointments, increasing sales, improving CSI or building owner retention.

Here are a few situations to consider evaluating in your dealership:

•Your advisor is making a maintenance menu presentation to a customer and the phone rings. What do they do?
•Your advisor is on the phone with a customer and the phone rings. What do they do?
•Your advisor is reviewing a repair order with a technician or customer and the phone rings. What do they do?
•Do your advisors ever answer the phone, “Service, hold”?
•Does your receptionist ever complain about your advisors not answering their phone?
The correct answer to the first three is: never stop working with the customer in front of you to answer the phone. The answer to the last two is probably yes, which is exactly why 35 percent of the service calls are dropped. What can you do to change this?

One very effective way to correct this is to send all incoming service calls to a business development center (BDC). Properly trained BDC personnel can provide a multitude of services that will increase owner retention and CSI while enabling your advisors to become more productive, thereby increasing sales and shop productivity. Here are some examples:

•Answer all incoming calls eliminating the 35 percent dropped calls and increase appointments set.
•Convert one of the three customers who call for price and availability to an appointment.
•Call all lost service customers to invite them back for service
•Make CSI follow-up calls
•Contact all no-shows to reschedule their missed appointment
•Call customers for appointments to install special order parts
•Contact all customers with an appointment reminder
•Advise customers on recall campaigns
Now your advisors have the time available to focus on providing your customers the highest level of service they expect and deserve. Advisors tell me that the phone consumes more of their time than any other function they perform. With a BDC, you can greatly reduce the number of time-consuming incoming service calls going to your advisors, giving them the available time they need.

How much time do your advisors spend answering incoming service calls? Well, again the research shows that the average dealer will schedule one appointment for every five incoming service calls. Let’s assume your service department schedules 500 appointments per month (retail and warranty), or 24 per day. That equates to about 2,500 service phone calls per month or about 120 per day.

If you had two service advisors taking these calls, then each would handle approximately 60 service calls per day to schedule 12 appointments each. Assuming each call lasts for three minutes, each service advisor would spend three hours on the phone. With a 9-hour workday, that means your advisors are spending 33 percent of their day answering the phone. This does not include outgoing calls advising their customers on needed repairs or services, reviewing the repair order with their customer, getting authorization for extended service contract repairs or advising on completion times, all of which could easily add another three hours. Is a business development center starting to make sense?

If you don’t think you are quite ready for a BDC, then you might want to consider hiring appointment coordinators. Appointment coordinators will receive all incoming service calls and schedule service appointments. They can perform the exact same functions as the BDC would for the service department, except they only work for the service department. The benefits to the advisors and customers are still the same, and your sales and CSI will increase. Your increase in sales and CSI will far outweigh the costs of this position.

If you are of the opinion that you don’t need a BDC or appointment coordinators, then here is a simple exercise for you to complete as soon as you finish reading this magazine. Phone shop each of your advisors. Ask a friend, a relative or maybe someone in your office staff to do the phone shopping. Make a note of how many times the phone rings, whether the caller was put on hold at any time during the conversation, whether the advisor offered an appointment for a specific time for today or tomorrow, and if the advisor give his or her name and asked for the callers. Did the advisor exceed your expectations?

Don Reed
CEO, Fixed Ops Solutions
DealerPro Training Solutions

Does 100 Percent Service Absorption Interest You?

I hope you answered “Yes” to the question above. So, let’s begin with defining what “service absorption” means.

It is calculated by taking your total gross profit from the sale of parts and labor, which is sales minus the cost of parts and labor sales and dividing that total by your dealership’s fixed expenses. Do not include any variable sales expenses such as sales commissions or floor plan interest.

To put it simply, if one can achieve 100 percent service absorption, then all of the dealership’s fixed expenses are paid for by the service and parts departments, which means that the sales department is producing net profit on the very first unit it sells. For example, if your sales gross profit is $4,000, your sales commission is $1,000, and your floor plan interest is $500, then you have $1,500 in variable expenses to deduct from gross profit, which leaves you with a net profit of $2,500.

Based on our financial evaluations of RV dealerships across the country, we find that most dealerships are well below 45 percent. That means it is difficult for the average dealer to believe that 100 percent service absorption is indeed attainable since he or she never did it nor do they know of any other dealer who achieved such a feat.

Well let me assure you that it can be done if you are willing to change.

The most significant change needed is to change your attitude toward your service department. First, you must believe your service department will become a profit center. Currently, many dealers perceive this department as a support department for the sales department and to prep units for delivery, then handle warranty headaches after the sale.

Once the warranty period expires, there does not seem to be much effort to keep the customer coming back for retail repairs. After all, during the “season,” the shop is booked for two weeks or longer on any given day, so why worry about retail repair work? This attitude needs to change because retail customers will spend thousands of dollars on parts and labor, which have the highest profit margins of any product you sell. Additionally, we know the RV owners who have their RV serviced at the dealer who sold it to them are much more likely to buy their next unit from that dealer.

We find that the dealers who have low service absorption also suffer from low shop productivity. Shop productivity is defined as the number of hours sold on retail, warranty, and internal repair orders, divided by the number of clock hours the technicians actually work. For example, 100 hours sold on all repair orders divided by 200 technician hours actually worked, equals 50 percent shop productivity.
Our experience shows that most dealers fall into the range of 50-55 percent shop productivity. Are you starting to get a picture of the opportunity for improvement? How can you be booked out two weeks in appointments when your technicians are only 50 percent productive? What happened to the other 50 percent of their working hours?

Technicians, for the most part, are hard working employees. They brave the cold, the heat, the rain, and the snow to perform whatever service or repair is printed on the face of the repair order, and most of the time they complete the service or repair to the satisfaction of the customer. However, do they complete the service or repair in as short a time as possible? More importantly, do they have the incentive to complete service or repairs as quickly as possible? It’s called “performance based compensation.” At most RV dealerships, the answer is “No,” since technicians are simply paid by the number of clock hours worked with no regard for the number of hours sold. If you are a technician, what difference does it make to you if you spend four hours completing a two hour job? Conversely, if you were paid two hours to complete a two hour job, would you try your best to finish in two hours so you could get another repair order to get paid on? If you completed that same two hour job in 90 minutes and still got paid for two hours, would that be a good thing or a bad thing? If you are a good technician, a good employee, and you have a good attitude, you just gave yourself a pay raise. You also, just gave the dealer a pay raise.

Now, let’s assume that you install this “performance based pay plan” in your shop and your technicians’ productivity jumps to 75 percent from the current 50 percent. You just realized a 50 percent increase in labor gross profit. If your dealership is currently profitable, this 50 percent increase in labor gross profit then becomes 100 percent net profit. Take a look at your total labor gross profit for last year and increase it by 50 percent, and then ask yourself if it would be worth changing your attitude to put that much money in your bank account. What would it cost you to do that? Nothing!

by: Don Reed

The 7 Measurables and the Financial Statement

There are 7 Measurable and Improvable Key Performance Indicators that every Fixed Operations Director/Service Manager needs to be aware of.

They are RO Count, HPRO, Labor Gross Margin, Parts Gross Margin, EFL (Effective Labor Rate), Total Gross Profit and Total Net Profit.

When you have a constant update on these measurables and a mandate to improve their numbers you can have a really impressive Financial Statement at the end of the month.

Think about what a 10% increase in RO Count would mean to your Advisors, or a .3 increase in HPRO. What would that translate to in real dollars and cents at the end of the month?

If you are the average store in America and you are at the average labor rate you can expect to have a $5400.00 increase in Gross Sales per Advisor for every 10% increase in RO count. Is that a number to get your attention?

How about a .3 increase in HPRO? That equates to an additional $10,800.00 in Gross Sales per Advisor. Can you see why that would be an important measurable?

How about the Gross Profit Margins? If you decrease unauthorized discounts by just 10% in your store you can expect to have a $1600.00 per Advisor recapture of Lost Profit. (or more)

Effective Labor Rate is not only a matter of proper Labor Rate billing it also a direct reflection of unauthorized discounts as well.

And finally, if you are working your numbers, and want an increase in RO Count, HPRO, EFL, Labor and Parts Gross to translate into higher overall Gross Profit, all you have to do is start measuring daily and start holding personnel accountable for performance.

In theory, it sounds easy, doesn’t it?

In practice, it is one of the most difficult things to do on earth if there is not a clear plan of action backed up by a firm resolve to see it through.

And if you are interested in Net Profit, then you have to know your expenses inside and out. Some easy questions to ask are “What are we spending in Policy Adjustment compared to Marketing?”

So the real question Mr. or Ms. Dealer, are you happy with your Financial Statement and if not, what are you going to do about it?

3 Important Steps to Increase Service Sales

Ooooohhh, you got a shiny new car. I got to admit….you look good in it! It’s all you…the color… the styling….all your friends and neighbors are just gonna scream when you pull it into the driveway…they’ll say things like “Nice ride” or “Man, that is saaaaawwweeeetttt!”

And for the next few months you are constantly looking for excuses to take that baby for a spin! Need a double A for the tv remote??? “I’ll be right back” is the only thing you shout as you rush out the door to a store clear across town just so you can “cruise it baby!” Know what I’m talking about?

You probably are not even thinking about this next question.
“What percentage of your customers take delivery of their new or used vehicle and then, once they get home, remove that maintenance manual so they can review their required and recommended maintenance schedule?”
asks Don Reed of DealerPro Training Solutions.
The answer, not many. The reason is, they are just like you and me. The last thing on our minds is “When will I need to take it in for my first service?”
All this means is that the purchaser, who has become your new potential Service Customer, will need to know what maintenance is required in order to keep their vehicle in top running condition.
If you are in Service there should be a word that just popped into your head. Can you say “Opportunity?
In order to capitalize on your potential ”opportunity” you will need to do at least 3 things.
1st, provide a friendly, inviting environment to have service completed. Some things you will need to have are Friendly People (not fake friendly), clean waiting rooms and restrooms (a real must!), adequately comfortable chairs to sit down (not the plastic high school lunchroom chairs), access to refreshments (does not have to be gourmet) and probably the number one item in the customer’s mind, a promise to meet the customers time expectations.

2nd, have personnel that are not only knowledgeable about the maintenance required, but can explain it in a manner that a customer can understand with a friendly, caring attitude. No condescending, no derogatory or demeaning statements, no expectation of compensation. Just a sincere and caring attitude in favor of the customer.
Lastly, a thorough inspection of the customer vehicle when in for service. Every time. When completed, the customer should receive a copy and complete explanation of what was found and the overall condition of the vehicle. Every time. By doing this the customer and you will begin to build a relationship. One that will lead to continued customer loyalty to the brand and the Dealership and future business for you.

Are there many more things you need to do? Yep. These are just 3 of the most important. There are a lot more steps to take in increasing your service market. If you can accomplish these 1st 3, you’ll be on your way to having increased service business, returning loyal customers and increasing profit.
Now, go get your car and take it for a ride…somewhere there is a double A about to go bad and you are going to need a new one!

Menus Can Make a Difference

Most dealers today understand the value of an F&I department, and history shows that this department can be a significant profit center when the right processes are implemented, enabling managers to sell additional products and services to every customer who takes delivery of a new or used vehicle. One of those processes is menu selling.

These menus are designed to offer the customer choices for protecting their vehicle, credit, payment, etc. Most menus will give the customer the opportunity to choose from three or four different options such as Platinum, Gold, Silver or Bronze coverage. We know that if the customer chooses any one of these options, it results in an automatic upsell, which of course means more gross profit in the car deal.

Additionally, the finance producer is usually required to present these menus to 100 percent of your customers with no exceptions! This process breeds consistency and ensures that every customer is treated the same, meaning that each and every customer receives a feature/benefit presentation on all of the products contained in the menu. Starting today, why don’t you install this same process in your service department?

Menus can be just as effective in your service department. Here are five steps to properly implement maintenance menus:

1. Create your own menu

2. Train service advisors how to make a feature/benefit presentation

3. Require this process to be followed with every customer on every visit

4. Measure menu sales for each service advisor

5. Hold managers and advisors accountable for performance

Designing a maintenance menu can be very time consuming if you do it right, but I can assure you the time will be well spent. You can choose to design a paper menu or you might prefer an electronic one. Technology is a wonderful thing when it’s used properly. I prefer the electronic menus, which require nothing more than Internet service.

Electronic menus cost less, allow for more pricing flexibility, are easy to use, offer 100-percent accountability tracking for advisors, are customer-friendly and are available 24/7 for your customers. Research shows that online menus partnered with an online appointment process will generate about 20 percent more in sales per repair order than those written by your advisors. Do the math in your store and you’ll probably see an opportunity to add at least $50 per repair order. The fact is, online customers will go to your online menu and “sell themselves” because 100 percent of the customers are presented the menu when they log in.

All maintenance menus should start with the manufacturer’s requirements and recommendations based on months in service and/or mileage. From there, you must add services for local driving conditions as well as the customer’s own driving habits. For example, the driving conditions in Mesa, Ariz., are not the same as those in Bangor, Maine, and a truck owner towing boats does not have the same driving habits as one hauling a horse trailer in the mountains.

Training your advisors on how to make a feature/benefit presentation starts with taking a plain sheet of paper and drawing a line down the middle of the page. On the left, you should list all of the features outlined in your menu. On the right, list the corresponding benefits of each feature, which are the reasons a customer will say yes to a menu presentation. Remember, your advisors must understand that customers only buy benefits; they don’t buy features. An example would be a tire rotation. Nobody wants to buy a tire rotation (a feature), but they do want to have longer-lasting tires to save money (a benefit). Electronic menus also have full-color video feature/benefit presentations that enable the customer to actually see the benefits as well as hear about them.

Now, you must require every advisor to follow this process every day with each customer they greet, both warranty and customer-pay. This is not an option for your finance producers, and it should not be an option for your service advisors. You will never get 50 percent service contract penetration in F&I by offering contracts to only those customers who might buy them, right? It’s no different in service.

You can’t manage what you don’t measure, so it’s imperative that you keep a record of each advisor’s sales performance. I’m talking about sales per RO, hours per RO, profit margins on parts and labor, effective labor rate, closing ratio on menu sales, and closing ratio on inspection upsells. You’re most likely measuring every measurable statistic in your sales and F&I departments every day, so start doing the same for your service and parts departments. Then, you will have complete accountability for their individual performance.

These five steps outlined in this article will boost your bottom line starting with day one. Your customers will become trained on how to pay attention to preventative maintenance, which will give them a much more pleasurable ownership experience and save them money over time. If you doubt me, just go visit any aftermarket service facility and observe their processes since they now own 84 percent of the parts and service business in America.

Don Reed, CEO DealerPro Training Solutions

How Many Dealerships Would Still Be In Business If They Had 100% Service Absorption?

ALL OF THEM!

Join the 200K Club!

 

DealerPro Training Solutions
THE $200K CLUB

Join the $200K Club … and gain an extra $200,000
Service Gross Profit—Guaranteed!


MORE IS BETTER!

Q: How many thousands of dealers would still be in business if they achieved 100% service absorption?

A: All of them.

Think about it. Are you leaving service dollars on the table?


The Service Gold Mine

Good times or bad, when you keep customers coming back to your dealership for service, you can cover 100% (or more) of your dealership’s overhead. When your service department absorbs all your overhead, that’s 100% service absorption. Some dealerships can even exceed this ideal.


Join the $200K Club

And gain an extra $200,000 Service Gross Profit—Guaranteed!

Serious situations call for serious solutions—DealerPro Training Solutions. So if you are serious about success and having your Service Department pay all your Dealership’s overhead, contact me today at rheywood@dealerprotraining.com



WHY THE DEALERPRO $200K CLUB?

Because a $200,000 increase in Service Department Gross Profit is a very attainable goal. In fact, it is a goal that practically every DealerPro dealership achieves, usually within about a year.

We started the Club to recognize that achievement … and to make it clear to every dealer that there are rich rewards to be had for joining the DealerPro $200K Club.


Training and Gaining

When you join the DealerPro $200K Club, it is an active membership. Every member of your Service team becomes fully engaged in making more money for you.

Fact: Each trained Service Advisor can add the equivalent of 22 more new car sales to your bottom line every month.

Today is number 56. There are 309 days left in this year.

It’s the end of February. Are you happy with the results you achieved this month? Is your year on track to be better than last year? Are you concerned or content? Lets review 3 possible answers and see which one fits you.

For you the month of February in the Service Department was Great! You hit the Goals you set for HPRO, EFL and Profit Margins! Your CSI has never been better! Overall, you could not have done any more. Congrats! And, March looks like it is going to take off as well! Your overall strategy is to keep that ball rollin’ baby!

Ok, maybe your February was not as good. Maybe you got close to your Goals, HPRO was near the bar you set, and EFL was just a few dollars under what you felt you needed to get to and maybe your Margins were just under standards. Basically, you are not overly concerned, you felt you got everything you could and March is just around the corner and hey, you couldn’t possibly have two so so months in a row, right? It’s got to get better, doesn’t it?

Perhaps you are the Dealer with the worst month ever. Your HPRO is barely above the minimum you need to keep the doors open, your EFL and Profit Margins are just north of “this really sucks”, and your CSI is about as good as the last Customer who said “I wouldn’t come back here if this was the last place on earth.”

3 completely different results requiring 3 completely different Action Plans.

If you are Dealer number 1, your biggest challenge is finding a new set of Goals that are just out of reach for your Team to go after. Maybe you want to focus in HPRO and set a .2 increase as a new benchmark. Or, you want to increase CSI and are doing it by installing a new process to complete a write-up in the service drive. Whatever it is, you will need to make it harder to reach. “Maintaining Success is more difficult than achieving Success.”

If you are Dealer number 3, it’s all upside for you! Hey, you know you already need a change, Right! Personnel, attitude, training, processes…everything! It’s got to be changed because you cannot hit Profitability Goals and achieve the level of Success with what you have in place right now! Congratulations, this is an exciting and fantastic time to be in your Dealership!

But, if you are number 2, you are in a lot of trouble my friend. Why? Because I left one little “C” word out in the very beginning.

Complacency.

It’s the evil that all Leaders fear more than anything. When you become complacent, you start to die!

If your Management and Leadership strategy sounds like this “Oh, it was just a slow month, and the weather was terrible, and we had some people sick, and the Customers…oh man…the Customers were just mean, nobody wanted to buy anything. They just wanted oil changes. Yep, next month will be better. Don’t worry, because we are not changing anything! All we need to do is just hang on until things get better” then I want you to immediately take out a sheet of paper and write down 3 NEW GOALS for March.

Whatever your HPRO was for February, add .5 to it, whatever your EFL was for February, add $5.00 to it, whatever your Profit Margins for February add 5%.

YOU NEED A JOLT! AN ELECTRIC SHOCK STRAIGHT TO THE HEART OF YOUR DEALERSHIP!

As soon as you have them written down, make a copy for everyone in the Fixed Operations Department, hold a meeting, TODAY!, pass them out and tell them “Failure is not an option!”

Because if you don’t, at the end of March, you will be saying ““Oh, it was just a slow month, and the weather was terrible, and we had some people sick, and the Customers…oh man…the Customers were just mean, nobody wanted to buy anything. They just wanted oil changes. Yep, next month will be better. Don’t worry, because we are not changing anything! All we need to do is just hang on until things get better” and you will be on the road to an entire year of wasted opportunity!

By the way, just to let you know, we are experts here at DealerPro in delivering the shock to jump-start your Dealerships Fixed Operations.

Posted by Leonard Buchholz February 25, 2011

DealerPro Guarantees $200K in Added Service Gross Profits!

COLUMBUS, OH—Don Reed, CEO of DealerPro Training Solutions and an NADA Top 10 speaker since 2008, has announced an increased Service Gross Profit Guarantee for automobile dealers nationwide.

This applies for dealers who implement DealerPro’s In-Dealership Performance Driven Training program. This 13-month program installs new policies and processes guaranteed to increase customer pay hours per RO and CSI.

The results from this No-Risk program are so dramatic that DealerPro says a typical dealer will increase Service Gross Profits at least $200,000 within the program’s 13 months. Dozens of dealers have hit this mark and become proud members of the DealerPro $200K Club.

More important, dozens more dealers have exceeded the $200K mark, earning more than $300,000 … and $400,000 in additional Service Gross Profits. One dealer is currently on track to make more than $900,000 additional Service Gross Profits in his first 13 months on the program.

Because dealers are enjoying such tremendous success under the DealerPro Performance Driven Training program, Mr. Reed is providing a Performance Guarantee … and a Money-Back Guarantee as well. “We do the job, or we don’t get paid,” says Mr. Reed.

DealerPro trains Service Advisors to sell, and provides them with the tools for success. The result: 40% or better Increases in customer pay sales … Increased RO count, Increased sales per RO, more incoming calls converted into appointments … and more.

Mr. Reed has more than 20 years experience as a dealer and more than 10 years as a trainer. As a Twenty Group Advisor and consultant, he has helped hundreds of dealerships dramatically improve Service Gross Profits.

“The real growth in Service Gross Profits comes from monthly monitoring and refresher training built into the DealerPro process,” says Mr. Reed. “That’s how we can guarantee success.”

For more information visit www.dealerprotraining.com, call toll-free at 1-888-553-0100 or email Don Reed: dreed@dealerprotraining.com.

The Hundred Mile An Hour Goat

Two friends are out hunting, and as they are walking along they come upon a huge hole in the ground. As they approach it they are amazed by the size of it.

The first hunter says “Wow, that’s some hole; I can’t even see the bottom. I wonder how deep it is.” The second hunter says” I don’t know, let’s throw something down and listen and see how long it takes to hit bottom.”
The first hunter looks around and spies an old automobile transmission lying in the grass. He tells the other hunter “Hey, there’s this old automobile transmission here. Give me a hand and we’ll throw it in and see”.

So they pick it up, carry it over and count “One, two, three!” and
throw it into the hole.

They are standing there listening and looking over the edge when they hear a rustling in the brush behind them. As they turn around they see a goat come crashing through the brush, run up to the hole and with no hesitation jump in head first!

They are totally shocked and suprised to say the least! While standing at the edge of the hole looking at each other and then looking into the hole trying to figure out what just happened, an old farmer walks up.

“Say there”, says the farmer, “you fellers didn’t happen to see my goat
around here anywhere, did you?”

The first hunter says ” Funny you should ask, but we were just standing here a minute ago and a goat came running out of the bushes doin’ about a hunert miles an hour and jumped headfirst into this hole here!”

The old farmer said “Why that’s impossible…… I had him chained to a
transmission!”

The moral of the story…don’t chain your 2011 Fixed Operations Gross Profit to anything that can be tossed into a deep hole. If your 2010 ended up like a goat chained to a transmission, now is the time to make a plan for 2011.

This is the time to measure what you accomplished or did not accomplish in 2010, what you want to improve in 2011 and plan how you are going to do it.

Goal setting is critical for achieving Success.

Here are 10 0f the most important areas to measure in Fixed Operations and their standards to help you set defined Goals for 2011.

■Labor Gross Profit Margins (75% is the correct number)
■Parts Gross Profit Margins (45% is the correct number)
■Parts to Labor Ratio (80% is the correct number)
■Multi-point Inspection Completion Rate (100% is the correct number)
■Additional Service Requests (30-40% of CP ROs is the correct number)
■ASR Closing Ratio (30-50% is the correct number)
■RO Count to Sold Units (6-1 Ratio is the correct number)
■Effective Labor Rate (90% of Door Rate is the correct number)
■Gross Profit Increase Year over Year (10% or more is the correct number)
■RO Count Increase (Yearly 10% or more is the correct number)
These are the bare minimum numbers for planning next years Goals. By planning now you are keeping yourself from “chaining your goat” to something that can be tossed at the first sign of trouble or adversity, which we all know happens when things are not going smoothly.

Goal Setting with everyone involved will prevent the possibility of 2011 being tossed into a deep hole before it even gets started.

“The Cheapest Oil Change In Town”

In every market and at every dealer there is the perception in Fixed Operations that cheap oil changes will add profit.



While it is true that cheap oil changes will bring Customers to your door, it is up to you to do something with them when they arrive.

Here are 3 Ways you can maximize the cheap oil change.

■Be “Over The Top” with your Customer Service. Be clean and neat, be accomodating, be prompt, be courteous and be Thankful. Think of the Customer as someone who is test driving your Dealership to see if they like the ride. Give them the best ride possible.
■Do a Complete and Thorough Inspection of the vehicle. Instead of a “27 Point” how about a “Driveability Check” or a “Winter Safety Check” or a “Brake, Light and Fluid Check” in addition to your usual 27 Point Inspection. The object is to give the Customer something that they were not expecting when they came in for “just an oil change.”
■Give them a Reason to Complete Service Work with You. Hey, you advertise, you plan for, you spend money and you lose money on the oil change and then…you don’t give your Customer a compelling reason to have service work completed at your Dealership? What are you thinking?
Making money in Fixed Operations is difficult when you don’t plan for the Oil Change Customer who might or might not be your Customer. It is impossible if you do not maximize the Cheap Oil Change Customers visit.

Passionate About Success in Service? Are You Using “Old Thinking” In New Times?

I was reading a post on another site when I read something I found quite profound. It was a comment by another gentleman.

He said ”If you are not passionate about what you do, if you do not believe in it with every fiber of your being, it will be reflected in your achievements.”

In my role as a Trainer, this is the single biggest reason I see people fail in this business as Service Advisors and Service Managers.

1st, they don’t want to be there. This is “just a job.” For many it is just the “means to pay the bills.” The amount of effort they put into the day is just enough to get them through it. Yet, when questioned, many people say “I need my job.”

Really? Lots of people need a job.

The truly successful Service Advisors see themselves not only as Advisors, they see themselves as Caretakers of the Customer. Not as Order Takers and Phone Answerers.

2nd, they don’t believe that what they do has real meaning. The Truth is, in our roles as Service Managers and Service Advisors, it can be a thankless and grinding task.

You are not going to rescue a child from a burning building or invent a cure for a life threatening disease.

However, if you are looking for something that involves working with people, thinking, commuication skils, sales, action management, technical knowhow, Customer Service knowledge and the ability to remain calm during stressful situations then you are going to love this position. It has all of that and more.

I like to think of the Service Advisor as more of a Traffic Controller than anything else. Just as important as the Air Traffic Controller is to the Tower, the Advisor is to the Dealership.

The average Advisor has more to do with the overall profitability of the Dealership than any other single person employed by the Dealership.

It is an important role and if you don’t have that mentality, then you should find another profession. And, once in awhile. there will be someone who recognizes your efforts and Thanks you. Sometime they bring donuts, sometimes they just look you in the eye, and say “Thanks for taking care of me.”

Lastly, Resistance To Change. Why is it in our business everyone thinks that once you are trained, nothing else need be done?

What single business on the planet remains static, frozen in process and procedure? What single busines on the planet has a constant supply of the Customers who are exactly the same as they were the year before? With all of the same buying habits, demographics and metrics? Not one that is still in business. Because every single business that thinks that way goes out of business.

Look around you. In the past 5 years, Dealerships have Decreased! and Aftermarket Competition has Increased!

Why are you using old thinking in new times?

Change is inevitable. Become a Change Agent. Read everyday about your Profession. Find and attend Training relevant to your areas of opportunity. Ask your Customer what is important to them. Become proactive and not reactive.

Coaching For Professionals

Several years ago, our local golf course completed an extensive re-model and re-design. At the dedication, Ray Floyd was the celebrity guest of honor. At the time, Ray had been enjoying renewed success in his golfing career. The local newspaper covered the event which included an interview. The answer to one of the questions intrigued me, and formed the basis for this article. The question was, “Ray, what do you contribute your recent successes to?” Ray responded, “I hired a new swing coach and started seeing a golf psychologist. You see, I needed to make certain I was maximizing every aspect of my game, both mental and physical! I needed all I could get from my swing and had to make sure my head was in the right place. These two changes helped me to improve my game and start scoring again.”

From Ray’s comments we can conclude that regardless of experience, abilities or past successes, EVERYONE can benefit from coaching, even your business. Coaching can improve current performance and help move dealerships to their Next Level. A third party, a coach, will see things others do not see, or things that are seen but overlooked, or worse yet, tolerated. A coach can help efficiently maximize an organizations effort.

Many of the dealerships we visit lack structure and processes. Structure is like the golf swing, you need to START correctly in order to finish up where you want. Processes relate to the mental aspect. If a dealership has procedures that are followed as designed, the thought process becomes easier, EVERYONE does the same thing, EVERY TIME. The only time one needs to improvise is when the situation is not clearly defined by a process. When that happens, get help immediately.

Let’s look at each of these elements individually. Proper structure needs to include economic balance in every aspect of your business. Are you selling the right products, are you stocking the right merchandise? Are your grosses in line with others in your area, region or the nation? Are you spending more than you should to generate the sales and grosses you are currently generating? Do you have guidelines for your new and used inventories? Are you paying your people TOO much, or TOO little? Are your pay plans fair to your employees as well as the dealership? Are your goals in writing? Did your management staff have the opportunity to give their input when establishing those goals? How often are the goals reviewed? The more frequent your review of your goals, the more you tend to move toward those goals.

Processes reflect the mental aspects of your business. Everyone needs to be doing the same thing, every time. When a customer walks on your lot, they need to be greeted in a professional and courteous manner, every time. After the customer has been greeted, they need to be escorted to a place where the salesperson can conduct a thorough, fact finding interview, every time. When a customer walks up to your service or parts department, they need to be handled the same way, every time. When a salesperson sits your customer down to negotiate the deal on their new purchase, they need to follow the same process, every time. Simplify the mental parts with processes and improve the score. No one can be exempt, everyone needs to follow the processes, every time.

Processes require ongoing training and discipline. Speaking of training, who does your training, your managers, your top producers? If they are not training, who is? Here is a scary thought, if your sales managers or your top producers are not doing the training that means your BOTTOM producers must be handling it. When you hire new people, what are they learning and who are they learning it from?

A Coach can help an organization with these and other opportunities. When was the last time your dealership had a check up? Is your business on solid ground? How are your processes? Are regular, ongoing training sessions being held? Are ALL employees required to attend? Is your dealership selling what sells, and stocking what is selling. Are your managers involved at all levels, including forecasting? Are your forecast and goals written? Are the forecasts achievable? How frequently are your forecasts reviewed? Do you have a coach, and if not, why?

Dugan Anderson operates Profit Solutions, a Division of RVMax. Dugan is a former dealer and for the past 8 years has been working with RVMax and dealerships across the country, dealing with all aspects of Financial Analysis, Expense control, marketing, training and consulting.