Five Ways to Make More Money
As with any business there are two ways to generate more net profit—either increase your sales without increasing your expenses, or reduce your expenses without sacrificing your sales. When you want more net profit, the first place most people start is with the expenses. You examine the details and say, “We don’t need that,” and poof it’s gone. However, what about the biggest expense—the expense you can’t see—waste. You’ll be amazed at how much WASTE you can find when you pay attention to your processes. In most Service Departments, the average gross profit for labor and parts per technician billed hour runs between $95 and $115. Turn five hours per day of your technicians’ wasted time into productive time and you generate an additional $120,000 gross profit a year. A salesperson’s time can run between $85 to well over $150 an hour, depending on his or her abilities. It doesn’t always take a Time and Motion Expert to see what can be improved. Read below and think about some of the common areas of waste (besides being seduced to surf the Internet) at your dealership:
- WAITING: Employees have to wait for Customers’ authorizations, equipment repairs, parts to arrive, the finance manager to be available, etc. Waiting probably accounts for the biggest waste of time. If your service advisors initially wrote better descriptions of the issues customers had with their vehicles, would your technicians save time in fixing the problem? (Just ask the service customer, “How can we duplicate your concern?” to help the technicians.) Would a better Parts Inventory (notice I said better, not necessarily bigger) help the technicians repair the vehicle without waiting for a part? If you hired a part-time finance manager to work weekends to take care of the customers, could you expedite the finance process?
- CORRECTIONS: When you fix a vehicle twice, re-order a needed part or re-contract a finance customer, you are wasting time. John Wooden got it right, “If you don’t have the time to do it right, when will you have time to do it over?” Have the “right” technicians work on the vehicles they are trained to fix instead of using the customers’ vehicles for on-the-job training. If you don’t have properly trained salespeople, you spend money on advertising and then your Customers receive average treatment from their salesperson. Not only does this waste time, it wastes money and gives your dealership a bad reputation.
- MOTIONS: When people, paperwork or equipment moves more that necessary, this is waste and probably the easiest to fix. Start with streamlining your processes, then update or add new equipment. Bar-coding parts and vehicles will save you time and money. Technicians waste time when they have to look for a Customer’s vehicle; number the parking places and write the number on the key tag, scratch it out and add the new number when the vehicle is moved. Stop your Salespeople from roaming the lot in hopes of finding a vehicle to sell to their Customers—arrange the vehicles in model order, start with the highest price down to the lowest price.
- OVER-PROCESSING: Are there process steps that don’t enhance the customers’ experience, or are there steps added to fix a poor design? Think of a title clerk hand-addressing envelopes for vehicle registrations that easily could be mailed in a window envelop.
- UNDER-UTILIZATION: The under-utilization of your staff is a waste. When your technicians generate $100 an hour in parts and labor gross profit, does it make sense to waste any of his or her time? Pre-pull parts or run parts to the technicians to make better use of your technicians’ time. When you have an A-skilled technician doing oil changes you are certainly under-utilizing the technician’s talents. Should the salespeople gather insurance information instead of the finance manager?
When you eliminate or reduce waste you improve the overall efficiency of your dealership—the result is more time to generate more income. Involve your Employees to see how wasted time can be eliminated in each department. I am happy to provide dealerships with a monthly analysis that is guaranteed to save your managers time. The Profit Blueprints® System points out underperforming areas with the use of color and provides managers with dealership-proven Action Plans to help them quickly resolve an area of concern. For more information, call us at 877.316.7418.
Sharing ideas and business-proven solutions is just one of the benefits of using the Profit Blueprints® System. Each month we talk with Dealers and their Managers to discuss their opportunities and provide them with Dealership-proven solutions. The solutions are designed so your Managers create personalized action plans for under-performing areas in their Departments. For information on how we can help you and your Managers reach your goals with our No Risk Guarantee, call 877.316.7418 or email us at .
