|If you would like to “recession proof” your dealership this year, you can do so by raising your service absorption or fixed coverage as some like to call it. In simple terms we are talking about getting your service and parts departments to generate enough gross profit to pay for 100 percent of your dealership’s total fixed overhead expenses, which means that your sales department is left with covering the variable selling expenses. Sound like Fantasyland? Please read on.|
To begin with, most dealers tend to be front end oriented since that is usually where they came from, as opposed to “back end” oriented, which is a place that they are unfamiliar with and possibly do not understand. That being said, let’s take a front end approach to making your Dealership recession proof through maximizing your profits in the back end.
Now ask yourself this question: “Do I employ service writers or service advisors in my service department?” What is the difference, you ask? Well, a writer simply writes the customer’s concerns on a repair order and dispatches it to a technician. An advisor writes the customer’s concern on a repair order, walks around their car with them, advises them of any obvious service needs, makes recommendations for a maintenance program and advises the customer that a factory trained technician will perform a 27-point inspection of their vehicle at no charge. Simply put, a writer is essentially a clerk. An advisor is a salesperson.
In your sales departments and F&I departments you are probably measuring the performance of your salespeople and managers on a daily, weekly and monthly basis, right? Do you do the same for your technicians, advisors (writers) and managers? Most dealerships have sales goals for new and used vehicles and F&I products. Do you have sales goals for customer pay repair orders, maintenance menus, and preventative maintenance? If your sales department has goals for gross profit per retail until and F&I gross profit per retail until, then why not have goals for hours per customer pay repair order, dollar sales per repair order and gross profit as a percentage of sales for labor and parts sales.
If you believe in performance based pay plans for your salespeople and sales managers, then why not do the same for your advisors (writers), service and parts managers and all technicians? If you have minimum performance standards for your salespeople, you should also have performance standards for your advisors (writers). Answer this question: “What would you do with a salesperson averaging five vehicle sales per month?” There are only two options: train and show him or her how to sell 10+ vehicles per month or conduct an exit interview! Now answer another question: “What would you do with a service writer that only writes 1.5 hours per customer pay RO?” Your options remain the same. Train and show him or her how to sell 2.5 hours per customer pay RO or let them join the five-car salesperson in the exit interview! If you hold your salespeople accountable for their sales performance, then why not do the same for your service advisors? By the way, you will most likely experience a higher CSI rating for your advisors once they learn how to advise.
Inspect what you expect by using daily performance evaluations of your service advisors’ sales productivity. Set realistic goals for them, coach them daily and get them professionally trained on how to be a salesperson (advisor). Now you are on your way to making your dealership “recession proof.”
Vol 2, Issue 3
Emerging service issues darken J.D. Power’s otherwise upbeat 2016-MY vehicle reliability report, which finds an industrywide improvement of 4% and mass-market vehicles outperforming highlines for the first time.