Unveiling the Secret to Service Profitability

POSTED ON March 15, 2018

In today's competitive automotive market, there are many reasons why dealerships are seeing decreasing hours per repair order and less routine maintenance. If yours is one of these dealerships, I challenge you to ask the question, "Why?"

"Is our staff improperly trained?"
"Are we failing to hold people accountable?"
"Do we have enough people in appropriate places, such as technicians and service advisors?"

While these may all be factors, I can assure you that the "Why?" is NOT for lack of vehicles of more than four (4) years old with 60,000+ miles. Increasing your service profitability begins by shedding the excuses and focusing on actionable change.

Step 1: Identify Issues

The first step in finding more profits is to figure out where we are gaining and losing it. One of the best methods is to develop a 100-customer survey. Recently, four of my 20 Groups (three Toyota groups and one VW group) performed a 100-customer survey regarding customer-pay repair orders, and every group was shocked at the results. In my Toyota groups, each dealership varied between 52-55% of the 100 customer-pay repair orders being on vehicles from 2013 or older, with 43-50% of those vehicles having 60,000+ miles. After studying these results, does it look like hours per repair order or effective labor rates have dropped? Absolutely not!

What does a vehicle that is four (4) years old with 60,000+ miles need?

  • Tires
  • Brakes
  • Alignment
  • Belts
  • Air filter
  • Cabin air filter
  • Wiper blades
  • Battery
  • Fuel filter
  • Bearings/seals
  • Maintenance packages

Do these services equal 1 hour or less per repair order? No! So why are we accepting the results we are producing? I encourage you to do a simple, 100-customer analysis of your customer-pay repair orders and discover your own results. I'll be shocked if they differ from my 20 Groups' outcome.

Step 2: Implement Changes

After conducting your survey, you may wonder what to do with the results. Based on the feedback from my 20 Groups, here are some changes that are easy to implement in any dealership, without adding expense to your bottom line:

  1. Daily repair order analysis: If your department is struggling with profitability, your service manager may tell you that they "don't have time" to review the previous day's ups. Don't accept this excuse from your service manager; instead, find time to make this tactic happen.
  2. Weekly and Monthly 1 on 1s: Schedule these meetings with service advisors to go over expectations and objectives. Coaching and counseling on customer objections is key to the success of these meetings.
  3. Teach mechanics how to do a proper inspection: A good variation of this exercise is to have two or three mechanics inspect the same vehicle and share the results. Trust me, the results WILL vary and this exercise will prove to be a very teachable moment.
  4. Monitor MPI's: Your multi-point inspection process is critical to presenting your team with more sales opportunities, and, when done properly, can also lead to a better customer experience.
  5. Productivity boards: Score boarding the success of your team not only establishes a culture of accountability in your department, but can also be a constant reminder of the goals the department strives to achieve and the small victories it takes to get there.

Step 3: Optimize Your Service Department

The reality for most dealerships is that they don't have enough people to handle the customers coming through the door. You need to staff your department appropriately and provide the tools necessary to drive profit.

Most successful dealers agree that the F&I department should see no more than 60 customers per month, as this allows them to maintain a higher per-car average. Why does this average not apply to service advisors? The optimal work rate for service advisors is 12-15 customers per day while effectively supporting 2-3 technicians. I frequently hear that "We don't have room to add another service advisor." However, what I never hear is a dealer tell me that he/she has no room for another salesperson. Again, why shouldn't this apply to your service advisors? Do you need a computer or a desk to write a repair order? No! Then why do you treat sales and service so differently? Do you hold your salespeople accountable for the ups they handle? If so, why not your service advisors?

I guarantee that if you pick two or more of the above suggestions or processes, and faithfully adhere to them, your hours per repair order and service profitability will rise without increasing any expenses!

Learn more from Lycia and the other NCM moderators and consultants by joining a 20 Group or scheduling in-dealership consulting. Our experts are veterans to the automotive industry and are willing to share their knowledge and experience with you. Take advantage of it today.