It Is All In The Details

Posted on by

As Customers keep raising the bar with what makes them happy, it becomes more and more important to pay attention to the details in your Dealership.  I am surprised by how much Customers continue to demand from Dealerships in a world where the number of businesses that “Wow” their Customers continues to decline.  Here’s a story about a small detail that we may not think about, but a Service Advisor did.

While Lloyd Schiller was conducting Service Advisor training in Iowa, Robby, a Service Advisor, commented on how much the Customers liked the new menus and the multi-point inspection forms.  However, now it’s a problem because all the extra paper work, combined with the invoice,  was filling the glove box.  Robby’s thought was “wouldn’t it be nice if the Customers had a folder to hold all of the Service paperwork, just like they get when they buy a vehicle?”  Well two months later, they had imprinted folders and “the Customers LOVE them!”  The good news is these inexpensive folders are a continual promotional reminder of the services you provide.

Another way to keep your Dealership’s name in front of the Customer is to do what Inskeep Ford in Greenfield, Indiana, does: a simple, but useful, air freshener with the Dealership’s logo and website imprinted on it.  It can be hung in the new and used vehicles once they’ve been prepped.  You can use it when delivering a new vehicle or it can be given to a Customer whose vehicle is in for service or is in the Body Shop.  Let the Customers know they don’t have to wait for a service appointment for a new air freshener; the Customers can visit your Dealership anytime and get a new one when the scent evaporates.

Small details can make a big impact on your Customer’s perception of your Dealership.  What can you do that keeps your name in front of your Customer – and keeps them coming back?

Benefits of a Mentoring Program in Your Dealership

Posted on by

Seventy-one percent of Fortune 500 companies offer mentor programs to their employees. If you don’t have a mentor program in your dealership, what’s stopping you from implementing a Mentor/Mentee program in your department and dealership?

A mentoring program is not just directing a new employee to ask seasoned employees questions, it is a relationship between a less-experienced employee and his or her mentor who is seen as a role model—someone to learn from and to look for advice when needed.

Benefits for the Dealership: Mentoring reduces employee turnover, improves workforce productivity, extends the careers of older employees, and grooms future leaders. A mentoring program encourages your experienced staff to spread their knowledge and best practices to new employees.

Benefits for the Mentee: The new employee will feel less isolated—less like the new kid. A formal mentor/mentee agreement gives the new employee “permission” to ask questions instead of muddling through a problem for fear of looking ignorant. Fewer mistakes will be made and the learning curve is shortened. This is a win-win for the dealership and the employee.

Benefits for the Mentor: Peter Drucker (developer of the management by objectives concept) said: “No one learns as much about a subject as one who is forced to teach it.” As a mentor you have a new appreciation of your skills, and you learn from your mentee. You become even more of an asset to your Dealership as you fine-tune your leadership skills.
Does it take a special person to be a mentor? Anyone who can answer yes to the following questions could be a good mentor:
• Do you enjoy working with people?
• Do you respect your colleagues?
• Do you recognize when others need help?
• Are you patient and tolerant when teaching someone?
• Do you enjoy your work and want to share that excitement with others?
• Do you have sufficient self-confidence to help someone move ahead without feeling threatened?
• Do you see mentoring as an opportunity for personal growth?
• Do you find helping others personally rewarding?

If you had a mentor that helped you, contact your mentor to say thank you; express your gratitude on social media or make a financial contribution to a local mentoring program in your mentor’s honor. Best yet, pass on what you received by becoming a mentor to a person in your dealership.

Make Your Express Service Center More Profitable

Posted on by

Maintenance Work is eclipsing Repair Work for Customer Pay visits, but it dims in contribution to Gross Profits.  Express/Quick Service Teams can increase Tech Efficiency, leaving us more time to sell recommended work and to increase our profits – if we take advantage of this extra time. Consider the following profit opportunities:

Upselling in Express Service

Multi-Point Inspection (MPI)

Provide your Customers with laminated blank MPI forms.  When you write-up your Customers, show them what visual inspections are being done on their vehicles while the vehicles are on the lifts.  On the back of the MPI form, show the benefits of maintaining their vehicles or have a copy of your maintenance menu.  Educate the Customers on the benefits of changing engine coolant, brake fluid and air filters, etc. to help sell the recommended maintenance that wasn’t sold during the vehicle write-up.  Reinforce that maintenance is less costly than repairs or expensive breakdowns. (When your laminated copies get grungy, please replace them.)

Have a decision-tree in place for when Customers buy recommended work and it will take longer than an hour.  Should we put the Customer in a loaner car or do we shuttle them to the mall/home/back work?  Will the work be done by a Main Shop Tech or by the Express Techs?  Do you have a Tech upsell bonus for work assigned to another Tech?  To sell and install more tires, consider a dedicated tire-change Tech.  Make the transition seamless to the Customer when a vehicle moves from the Express Shop to the Main Shop.

Have a maintenance menu which includes any additional time necessary to complete the work.  This makes it easy for the Customer to say, “Yes!”  When the Customer is expecting to get in and out in under an hour, the last thing he is thinking about is adding more time to the visit.  “We can take care of the cabin air filter today and you’ll still be out in under an hour.”  Your Express Service Team makes it easy to add services to the Repair Order without adding time.

Have a flyer available to promote your specials and your other departments.  If you would like an example, email us at brooke@profits4dealers.com.  This could also be printed in black and white and used on the back of Parts Counter Tickets or Repair Order Invoices – another opportunity to reach more Customers!

Add a Labor Operation Code for safety items found, but not taken care of at this visit.  The Labor Op Code, in some fashion should say (you can always check with your attorney): “Customer was advised of severe concerns regarding the vehicle’s safety.  I have declined the recommended work and will not hold the dealership liable should not completing this work lead to a system failure or an accident.”

X_________________________ (Customer’s Signature)

When Business is Slow

One of the killers to profit in the Express Service Center is paying Techs a clock hourly wage and not having any Customers for an hour or two.  If you can define specific days of the week and/or hours of the day where your business is slow, consider Happy Hour Specials, After School Specials or Coffee Break Specials to attract Customers to fill those hours.

If the slow times vary, how about a sign to put in front of the dealership?  (Oil Change – No Waiting.  Free Tire Rotation)  Cost of sign: less than $100.  When you get busy, bring in the sign.

Still no Customers?  Don’t waste the down time, use the time to refresh your
Techs and Advisors on inspection skills and selling skills.  Make a list of things that can be done when there is a gap in work.  Such as oil changes on company owned vehicles – loaner vehicles, demos and parts trucks.  Oil changes for retail trade-ins, leave the inspection and repairs for the higher paid Techs.  An Employee Perk! How about your Employees’ cars?  You are already paying the hourly Techs; the Employees pay for the oil and filter(s).

To further discuss how to make your Express Service Center (from performance-based pay plans to Advisors’ scripts to best practices) a real profit center, call us at 877.316.7418.

 

 

.

What Should The Internal Labor Rate Be For a Dealership?

Posted on by

The debate of what the Sales Department should pay for repairs and maintenance on vehicles they want to retail continues year after year.  We encourage Dealerships to charge most of the used vehicle internal work at a Retail Labor Rate, understanding that the cost of the work will be passed on to the vehicle Customer and the Dealership ultimately will make more profit, since the Sales Department typically sells from cost on Used Vehicles.

However, there are still Dealerships whose Internal Labor Rate is 50% – 60% of the Retail Labor Rate and deeply discount the parts.  To those Dealerships, I pose the following:

What if:  You’re the Used Vehicle Manager and every week you bring in a beautiful trade at a great price and you expect to make $2,000 on it, plus finance income.  Now you’re told to sell it to an employee for $500 over cost.  (Even if the employee has plans to retail the vehicle.)  If this happens every week, the $104,000 Gross Profit you would have made for the year is now $26,000. How happy will you be?

Although the numbers may be larger in this example (and maybe not), the effect is the same when the Sales Department “asks” the other departments to discount their efforts.

The Service Department, the Body Shop and the Parts Department could be selling their work at a higher rate to retail Customers than at a discounted internal rate.  For Service and Body, there is no replenishing the time sold – once it’s sold at a discounted rate, there’s no chance of selling it at a higher rate.  The time the Parts Counter People spend tracking down the parts the Parts Department doesn’t stock could be spent providing excellent service to the Departments and Customers who pay a higher mark-up percentage.

As any Service Manager or Body Shop Manager can tell you, finding Technicians is a challenge; just like finding beautiful used vehicles at bargain prices.  The effort to find, hire, train and coach Technicians is valuable, just like the time spent by Sales Managers finding, appraising, preparing a vehicle, then ultimately working a deal to get the best price.

If the Labor Rate for Service work was only worth 60% of the Retail Labor rate, you can be sure that the Factory would pay claims at that Labor Rate.  If a parts Markup of 20% made sense, then the Factory would pay no more.  I’ve run the analysis many times, for numerous Dealerships, and a 25% Markup on parts will allow the Parts Department to break-even.  There is little pride or sense in breaking even.

There will be times when the Service, Parts and the Body Shop will need to help the Sales Department with a discount, we call them “Mulligans,” but it shouldn’t be an everyday occurrence.  Maintenance work should be done at the same price as Customer Pay – not more than the Customer Pay work.  If there is a “special” or coupon price, then that is what the Sales Department should pay.  If you retail pre-owned vehicles over 7 years old, a discounted labor rate and reduced parts markup is worthy of discussion.  But in return the Sales Department should make the effort to introduce the Sales Customers to the Service Department, instead of worrying that the Customer might actually return to the Dealership.

The Sales Department should be part of the Team and not send work outside the Dealership because “they can get it done so much cheaper.”  This is a disservice to all involved, including the Customer if something on the vehicle fails because work was done by the cheapest guy in the block.

The Service Department should be part of the Team and earn the right to charge the retail labor rate, by providing excellent service and not putting the used vehicles at the end of the line.  If it takes a week to get a car through reconditioning, then I can’t fault the Sales Department for demanding a discount.

There are a lot of challenges and debates when running a Dealership and its departments; let’s not make the Internal markup be one of them.

 

 

Service, Body Shop and Parts Departments Cash Flow

Posted on by

Every business faces unexpected events which can strain its bank balance; the trick is to be prepared for them.  You finally got (and paid for) all of those recall parts, now you have to find the time to install them and wait for the factory to pay you.  A tornado or a hailstorm overwhelmed your Body Shop; you worked overtime to get the vehicles repaired, while you wait on insurance checks.  You were offered a fantastic buy on tires, but you can’t sell them all in one week.  These are just a few of the potential times when all of a sudden, “Where did all our cash go?”  The financial statement’s balance sheet shows the two main areas to look for that money – Receivables and Inventories.

When it comes to the financial statement, most managers see their role to make the profit and control the expenses. Cash flow is low on the list of priorities, after all, isn’t that accounting’s responsibility? Actually, cash flow should be everyone’s responsibility. For subscribers to the Profit Blueprints© system we analyze key accounts to save you time in monitoring your asset accounts. Not only do we track the monthly balance; we put it into perspective by comparing the balances to the appropriate sales accounts and show you how much cash, if any, is tied up in frozen assets.

To keep frozen assets in check, be familiar with the schedules and the accounts to understand where cash could potentially be hiding.

SERVICE DEPARTMENT

OPEN REPAIR ORDER REPORT.  This report could easily hide thousands of dollars of potential cash or potential write-offs.  Keep this report clean by closing Repair Orders promptly.  If not paid in full, close the Repair Order to a receivables account when the vehicle leaves the lot.  This will make it a “thorn in your side” when it starts to age and is   better than the labor and parts sitting on a report that few people review.  Open Repair Orders should have a vehicle on your lot; verify this at the end of every month.

SCHEDULES

Receivables

  • Confirm that you will be paid, before you extend credit. This includes Extended Service Contract companies.
  • Warranty Claims Schedule. Clearly defined processes and continuous training of staff will help collect and keep the warranty money.  The last page of your Profit Blueprints report tracks your Warranty Receivables in relation to your warranty sales.  If you are above the day’s supply target, the excess will show in green.

Sublet Schedule – Service and Body Shop

There is nothing worse then when you have to write off a balance on the sublet schedule because when the work was done – you thought you were going to be paid for it…then something slipped through the cracks and now you have to write off a balance.  Compare the Sublet Schedule to the Open Repair Order report every few weeks to make sure the two are in sync.  Shore up your sublet processes when you see a problem.

BODY SHOP

OPEN REPAIR ORDER REPORT   To free up cash and avoid potential write-offs, close Repair Orders when the vehicle is delivered to the Customer, don’t wait until the end of the month.  Open Repair Orders should have a vehicle on your lot; verify this at the end of the month by touching every one.

RECEIVABLES  The Body Shop should have a receivables schedule separate from the other departments.  The only balances on this schedule should be for Insurance companies you have a Direct Repair Agreement with; all other repairs need to be paid-in-full before the vehicle leaves the Body Shop.  Deposit Customers’ checks in accordance with your dealership’s policy.  Do all of this and you will have a picture perfect schedule.

PAINT AND MATERIALS  Because most paint suppliers deliver requested materials within hours of a request, there is little reason to stock more than a month’s supply.  If your financial statement’s balance sheet doesn’t breakout Paint and Material (P & M), we don’t analyze it on your report unless the inventory balance is supplied by your Controller.  Calculate your P & M supply of inventory by comparing your General Ledger Balance to your P & M Cost of Sales for the Month.  (Sales – Gross Profit = Cost of Sale)  Ideally, the inventory value will be around the average Cost of Sale.  Reconcile the General Ledger balance to the physical Paint and Material balance every month.  Do not let your paint vendor count this inventory!  And don’t let them place an order for you.

PARTS DEPARTMENT

INVENTORY

The Parts Department is special because even though the parts inventory can range from hundreds of thousands of dollars to several millions of dollars, there is no Accounting schedule to confirm that the General Ledger balance is accurate.

  • We recommend a monthly reconciliation of the General Ledger to the Parts Management Report to watch for growing gaps, but this does not assure that all the parts are on the shelves. Perpetual inventories, done 3 – 4 times a year, plus a physical inventory done by an outside company should confirm all parts are present and accounted for, 99% of the time.
  • Watch the days of supply as calculated on your Profit Blueprints© Report. 30 days is too skinny, while over 60 days may raise a red flag.  Parts managers will confirm when they got off the 30-day supply and stocked more parts – their sales went up!  Work towards the optimal range of around 45 – 55 days of supply.
  • Keep your eye on your stocking status and aging analysis from your Parts’ DMS Management Report. You could show the ideal days of supply, only to find out 30% of the inventory is over 12 months old.  Stocking Status (Normal or Active) is another indicator of the quality of your inventory with a target of 70%+ for most franchises.
  • Do everything you can to minimize Special Order Parts. If the part(s) could be here tomorrow – hold the vehicle.  If it is a Customer Pay Part, the part(s) needs to be pre-paid.  If it is a warranty part(s), the Customer has to confirm an appointment before the part is ordered.  If we saw those Special Order Parts sitting on shelves as hundred dollar bills, we’d do what we could to get them to the bank.

RECEIVABLES

The Parts Department should have a receivables schedule separate from the other departments.  The only balances on this schedule should be for approved Wholesale Customers.  Approved mean you also have on file a complete credit application and, if appropriate, a sales tax exemption number.  Only extend credit to companies who have good references, continuously pay on time and have a low percentage of returns.  Being weary of a Customer suddenly buying more than usual, this may indicate they have been cut off from other vendors—or it could mean you are doing a great job!  The Parts Department should be vigilant for Customers who drag their feet on paying.  By the third week of the month, most wholesale accounts should reflect only current purchases.

Each department manager has the responsibility to keep the cash flowing.  Review your responsibilities for your department’s cash flow.  With good processes and continuous monitoring, the bank account will be flush and you can focus on selling more and controlling expenses.