Friday, October 21, 2011

The Eight Essentials: Revisited

 These Eight Essential fundamentals are the key to a top performing service department. How do you measure up? or maybe you haven't measured them in a while because your to busy! or you just don't know what they are? You will have the opportunity to understand, measure, and take action on any opportunities you may have. Eight Essentials! Here's the Worksheet:

  1. Work Days Per Month. This is the actual days the service department is open for business. I can tell you from personal experience that this is in most cases not thought out completely. I have never understood why a Dealership would open it's service department a Half Day on Saturdays? This is without a doubt a CSI and Customer Retention killer! and to make matters worse most of them only perform maintenance. Example: Your customer shows up on Saturday and his check engine light is on. The service advisor says we Can't do that on Saturdays we only do Maintenance! The question you need to ask is who put any thought into the Days of Operation based on being in your customers shoes? If your not open all day for regular business with a Full Crew, Don't Open The Doors!
  2. Calendar Utilization. This is probably the most abused and over looked item on the list. The calculation is the Clock Hours worked divided by the Hours the Technicians are required to be there. I can tell you most dealerships are running between 70-80%. Let's do the math. Example: You have 10 Technicians that should work 40 hours per week. That's 400 hours. Now for argument sake let's times that by 10% and we have lost 40 hours. Now let's go one step further and times that by an overall effective rate of $75.00 and you have $3000.00 per week or $12,000.00 a month potential loss in labor sales not to mention parts sales. Do you know the impact 10% has on your service department? Do The Math!   
  3. Hours of Operation. This is self explanatory however I can't seem to understand the thinking that goes into or maybe the Lack of Thinking for opening 4 hours on a Saturday with a limited crew!!! I have seen this time and time again and the same results. The other one is opening at night for a few hours with limited crew and the only possible outcome is a pissed off customer. Let's do some more math and take the 4 hours on Saturday and times it by 10 Technicians. That's 40 hours and let's times that by $75.00 overall effective rate. Again we have an Opportunity to make $3000.00 in Labor Sales and of course the Parts Sales that go with that! What's your Opportunity?
  4. Technicians Available Daily.  Again this is not Rocket Science however if we go pull the days missed for what ever reason it will blow your mind how much time off your Technicians really took. The other thing we have to take into consideration is each Technician is worth on average 10,000.00 dollars in Gross Profit Each Month in Labor only. Let's divide that by the average working days each month of 21.3 and we get $469.00 per day in Gross Profit. How many days do your Technicians take off per month? How much Gross Profit are we leaving on the table? How many Technicians do you need to Retire the Departmental Expenses? Grab your Financial Statement and find the Expenses and divide it by $10,0000.00 and that's the number of Technicians you need everyday in a months time frame.
  5. Technician Productivity. I have found over the years that many people have different definitions on how Technician Productivity is measured. I measure it this way. Let's say a Technician based on his Job Description is required to be at a dealership 8 hours a day and that same Technician Flags 10 hours in that 8 hour (actual clock time) period his production percentage would be calculated like this: 10 hrs divided by 8 hrs = 125% The key here is that the Required Hours to be at the Dealership is a fixed number. If the Technician leaves early it doesn't change his Production Percentage. Example: The same Technician is required to be at the dealership 8 hrs however he leaves early and Actual Clock Time is 5 hrs and Flags 7 hrs. I would take the 7 hrs Flagged and divide it by the Required 8 hrs which = 87.5% for that day. Remember just because a Technician leaves early doesn't mean he is pulling his weight for that Stall. Each Stall needs to produce 8-10 hrs a day to be profitable in most cases. So here's the question: How are you measuring your Production Percentage? If a Technician leaves early do you take his Flag time and divide it by his Actual Clock Time? That by my definition is Efficiency Percentage which tells me the Technician is capable of performing or not. It doesn't tell me he is able to hit my projections for that Stall each day. I call it Stall Efficiency. 
  6. Overall Effective Rate. This is a combined labor rate you are receiving for each of your Labor types. Most DMS will have a report you can pull to find that number. Take a hard look at this number and ask yourself are you achieving the desired labor dollars for each labor type? I would break it down and and look at them individually. The most abused one is the Internal Rate you charge the sales department. It should be the same as your Customer Pay Rate. The Warranty Rate should be reviewed every 6-12 months and follow your manufacturer's guidelines to achieve a Rate increase. The Customer Pay Door Rate should be reviewed the same time  as your Warranty Rate every 6-12 months. I call all the dealers in the area and ask them what the door rate is and adjust it accordingly  to stay competitive in the market area. I would mark your calendar or you will forget!
  7. Overall Gross Profit Percentage. This is what you get to keep as a percentage of your Labor Sale. It should be between 70-75% Only two things effective this number your Cost of Sale and what you sell your Customer, Warranty, and Internal Labor for. The Cost of Sale is what you pay your Technicians for each Labor Hour produced. The cost of sale is usually the more difficult number to adjust and fix however there are a number of ways to do it. The number one thing that comes to mind is what the Technician is Flagging on the R.O. for each operation. Your DMS should be able to pull an OP-Code history detail which shows you what your Effective Rate average is for each. The Labor Sale is usually the one that's being abused by our Service Advisor, or Sales Department based on not Inspecting What We Expect  everyday. What's your Percentage? What are you going to do to change it?
  8. Monthly Expenses. This is anything to do with the operation of your service department however nothing to do with the Cost of Sale which is what you pay to the Technicians for each Labor Hour Produced. You should be aware of each of your expenses and correct any out of line items, however always Fix your Customer Pay Sales Per R.O. and C.P. R.O. Count before attacking your expenses. The old saying is still true you can't save yourself into a profit! You should send out a letter every year asking for new bids on all your supplies, rugs, parts washers, brake clean, uniforms and so on. No more than one year contracts and make sure no price increases during that one year period. I would sit down and ask my controller to show you every check they write and compare it to your agreements quarterly if possible.

As always we can help you stop the "Profit Leaks" and exceed your expectations through Training, Coaching, or Consulting your fixed operations. ACG is a "Results Based" company and we don't get paid until you do!

Guy Salkeld is the President and Head Performance Coach of Automotive Consultants Group Inc. The only Results Based High Return Training, Coaching, and Consulting company in the world! To learn more go to  Have a question? E-Mail Guy directly at or Call me direct at: 305-331-3373