Recently Don Tipton presented a workshop on how to create a viable Business Plan for Service.
The Executive Summary is too long and detailed of offer here, so here is a segment on how to target improvements in Service Profits.
The NOW Environment for Dealership Service?
Quality of the vehicle is much improved – little real difference between brands anymore
Less recommended factory maintenance and longer maintenance cycles
Longer warranty coverage
Factory covered maintenance – "we need a plan-for when it’s over". There is a huge drop off between the last or next to last free service and the first pay service. If we can’t please them when it’s free, why should they pay when it’s not?
Low Dealership loyalty with Used buyers – "need a plan-to get them back".
Is this a huge opportunity or red-headed stepchild?
Customers may have a negative impression of the service experience from the past. – how do we overcome this?
Dealer may have a high percentage of repeat New Vehicle buyers – While this depresses shop traffic, it is a good problem because we are doing a great job.
Quality of the vehicle is much improved – little real difference between brands anymore
Longer cycles, longer warranties and less recommended maintenance means that two or more customers are now required to equal the value that one used to provide– "we need a plan"
Consider this:
The average age of vehicles on the road today is…. 11.5 Years!!!!!
Which means the average year model is… 2007/2008
So how do we tap into that opportunity? It starts by knowing what your customers value.
The NOW retail environment:
Customer expectations are higher than ever
Customers have many choices for any product or service
Time is the new Currency. Does your heart leap with joy when there are lines at the grocery checkout, or do you instead grumble about the lack of cashiers?
So how do we turn pain into profit and target success?
It can be summed up in 5 steps.
The 5 "P’s" of Targeting Success:
1 Profit – objectives and percentages
2 Particulars – elements of the plan
3 Process – the activities that define specific parts of the plan
4 People – getting the right people for the job, staffing, payroll, etc.
5 Performance – measuring performance against goals and enforcing accountability
PROFIT OBJECTIVES
Establishing profit objectives is no easy matter. To help visualize the process, let’s put some typical numbers into a case study on how to build a plan to improve service profits.
Situation:
The Dealer "requests" a target of a $50K monthly net profit. "Requests" like this often come just after he or she has returned from a 20-Group Meeting.
STEP 1: Assess the current situation.
The historical net profit position has hovered around the current yield of $32,600 +/- per month
Total monthly expenses are $125,000
Labor gross profit margin is 65.0%
Overall Effective Labor Rate is $78.23
They enjoy a high volume of Express Service business
Value per customer repair order is 1.5 hours
They average 1240 customer pay repair orders month
They average 3100 total flat rate hours sold per month
Multi-Point Inspections are inconsistent and inadequate with many high mileage vehicles rated "Green ... no problems found"
This is reflected in the lack of up-sell opportunities
STEP 2: Determine requirements to achieve net profit objective
Start with the objective determining total gross profit needed to pay for your expenses and net profit objective: $125,000 expense + $50,000 net profit = total profit objective of $175,000
Determine what labor sales are needed to meet the total profit objective: $175,000 divided by 65.0% labor margin = $269,231 labor sales required
Determine how many labor hours are needed to produce your sales objective: $269,231 divided by $78.23 OELR = 3441.5 flat rate hours of production required
Determine how much additional production is required to meet your total production goal: 3441.5 new production objective less current average of 3100.0 = 341.5 additional production required.
Now that we know how many hours are needed to meet the dealer’s target, how do we get there? It starts with a plan. What will you do to achieve this goal? As mentioned before, the entire Business Plan requires all the following elements:
The 5 "P’s" of Targeting Success
Profit – objectives and percentages
Particulars – elements of the plan
Process – the activities that define specific parts of the plan
People – getting the right people for the job, staffing, payroll, etc.
Performance – measuring performance against goals and enforcing accountability
You can obtain the complete, (16-page), Service Business Improvement Plan at:
In addition to the Print Executive Summary Report, you will also obtain access to the video and audio recordings of the workshop… plus Don’s presentation slides.
This is available at a huge discount, but only for a limited time to assist your 2020 planning and goal setting.