There’s no doubt we’re in a slowdown. How long it will last and how deep it will go is anybody’s guess. Those factors are out of your control. But, on the bright side, you can and do control the profitability of your dealership.
Many, if not most, dealerships are leaking profit opportunities like a sieve. That’s because the focus is on front-end sales. This makes sense because most dealer principals and GMs come from the sales side.
That means there are untapped profit opportunities on the back side of your dealership — in the service department. Over the past five weeks, I’ve isolated specific areas of opportunity where you can increase profits.
I’ve given examples based on a real-world experience using a base of 500 customer pay repair orders a month. With these parameters, you can add hundreds of thousands of dollars to your bottom line.
Here are links to those blogs and summary of the added profits you can earn from each improvement:
Parts & Labor Margins
Dealers average 38% and 68% respectively. NADA recommends 45% and 75%. By making this adjustment on 500 repair orders a month, you can add $130,500 to your bottom line.
The Inspection Connection
Inspect every customer vehicle for safety and reliability like you do for used car reconditioning. This could add .5 HPRO per RO. Bottom line results: On 500 customer pay repair orders per month, this could add more than $280,000 to your bottom line annually.
The Magic of Menus
Show recommended maintenance menus to 100% of your customers, 100% of the time. This provides customers with choices, a selection. When you empower customers, they choose more — up to 30% more. Bottom line results: On 500 customer pay repair orders per month, menus could add nearly $170,000 to your bottom line annually.
Increase Your Hours Per Customer Pay RO
Upsell in the express lane — don’t settle for one-item ROs. The average express lane RO in a dealership is $29; in the aftermarket, it is $85. If you can make up that difference by following aftermarket practices, you can add more than $330,000 annually to your bottom line based on 500 customer pay ROs per month.
Pay Attention to Retention
If your service business is flat, you’re losing customers at the same rate you’re selling new vehicles. New vehicle sales should be a source of adding customers. The solution: promote service to maintain a 6-to-1 ratio in customer pay RO count to total vehicle sales. This could result in increasing service customers by 10%, adding about $114,000 in gross profits annually.
Single Source Strategic Roadmap
So, you now have a series of blogs you can use and review anytime anywhere online. But I’ve also combined all these ideas into a single document, a white paper. Because it is a single document, instead of a five-part series, the ideas are organized into three parts.
- Parts & Labor Profit Margins
- Service Drive
- Inspection
- Menu Presentations
- Upsell the Express Lane
- Customer Retention — Maintain a 6-to-1 Ratio in Customer Pay RO Count to Total Vehicle Sales
The white paper is a downloadable PDF you can share with your team. You can use it in team meetings, setting benchmarks and measuring your progress. To download it, Click Here.
Customer Relationships are the Key
Your customers want their vehicles to be safe and reliable. That is the mission of your service department. Paying attention to the backbone of your dealership starts with how your people treat your customers during each and every visit to your dealership. It is imperative that your dealership maintains a presence in the eyes and minds of your customers.
- Do you give your customers reasons to come back?
- Is your dealership different than the competition?
- Do you have a user-friendly appointment system on the phone or online?
- Are you competitive with the marketplace?
- Do you keep your name in front of your customers regularly?
- Do you strive to exceed their expectations?
Only by giving your existing customers the attention they deserve and want will your service sales and RO counts provide the added profits you will need to accelerate through a slowdown.
Don Reed – DealerPro Training
