top of page

How to Target Service Department Profit Improvement In 2020

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


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.


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.

97 views0 comments


bottom of page