How to Accelerate Profits Through a Slowdown - AutoSuccessOnline

How to Accelerate Profits Through a Slowdown

If your parts and service departments are already profitable, then of course you realize this $201,600 drops straight down to net operating profit.

Profit Accelerator #4: Increase Your Hours Per Customer Pay RO

To succeed, you need to consistently enforce discipline and accountability for performance. When we look at performance with regard to customer pay hours per RO, there aren’t many people being held accountable to a high standard, since the industry average still hovers around 1.2-1.5 hours per CPRO.

To Get Different Results

You need to start doing different things or doing things differently if you expect to accelerate your profits. To begin with, you need to recognize that you must compete on the same playing field as your aftermarket competitors and in doing so, you must beat them at the game of gaining and retaining customers.

Quick Lube Isn’t That Difficult

Let’s look at a simple quick lube experience. In an effort to stay tuned (pardon the pun) with the marketplace, I take one of my family’s vehicles to an aftermarket quick lube-type facility for an oil change and my other vehicle to my new car dealer where I leased the vehicle.

Every single time I visit the quick-lube facility (no appointment necessary) the following happens:

  • I am offered additional services and products.
  • I am shown my air filter.
  • They check and tell me my tire pressure.
  • Wash my windows.
  • Vacuum my interior.
  • They inspect all of my fluid levels (and show them to me if they are dirty).
  • They inspect my wiper blades, belts and hoses.
  • They inspect the undercarriage for any visible signs of fluid leaks.
  • And they list all of these items on my repair ticket with “No Charge” printed next to every item they inspected.
  • They offer me a savings of $5 on a tire rotation if I get it done while they are changing the oil in my car.
  • And they review the repair ticket with me line by line, with at least five items showing “No Charge.”
  • Finally, they review with me what will need to be serviced on my next visit and I am out the door in a reasonable amount of time.

If I only bought the oil change, my total bill would have been $28.95 plus tax; however, in reviewing my records I notice that my average expenditure on each visit is about $85.

Do You Make Oil Changes Difficult?

Now, compare this visit to my new car dealer who happens to be the largest volume dealer in Columbus, OH, for this particular make of vehicle:

  • I must call and make an appointment first.
  • When I arrive and meet the service writer (no advisors here), I am offered no additional services or products.
  • I am asked to wait in the customer lounge and the cashier will call me when my vehicle is ready. About 45 minutes to an hour later, the cashier calls out “Mr. Reed, your vehicle is ready. Your LOF is complete and your total is $28.95 plus tax.”
  • My windows are not cleaned.
  • My interior is not vacuumed.
  • I am shown nothing that was replaced, removed, completed.
  • I am given no results of any kind of any inspection of my vehicle.
  • I am offered no “savings” today.
  • There is nothing on my repair order that shows “No Charge.”
  • I am not advised of my other fluid levels and/or condition.
  • I have no idea if my tires were looked at, forget about properly inflated.
  • The cashier doesn’t know my future service requirements, nor does he/she schedule appointments, so I leave with no future plan to return.

And this nice, young cashier hands me my keys and receipt…my ONE ITEM REPAIR ORDER…called a “LOF” (I pronounce it “loaf” since loafing seems to be the acceptable culture in this service drive!) and I’m frustrated and out the door, wondering how this service department stays in business.

The Difference Service Sales Makes

So let’s compare the financial aspects of each of these scenarios. I spend about $85 at the aftermarket and about $29 at the new car dealer. The difference between these two repair orders amounts to $56. Now look at your ROs and add $56 to each customer pay repair order and you decide whether or not that amount of money is significant to you.

If you write around 500 customer pay repair orders per month, you’re missing out on about $28,000 in sales per month or about $336,000 per year, according to this aftermarket experiment. Your combined gross profit in parts and labor as a percent of sales is going to average somewhere around 60% (probably higher), resulting in additional gross profits totaling $201,600.

If your parts and service departments are already profitable, then of course you realize this $201,600 drops straight down to net operating profit. If you’ve got a dedicated express lane, this number is very achievable, and your advisors need to be professionally trained salespeople to make it happen.

I reviewed this scenario with a dealer at the NADA convention who was writing about 1,000 customer pay repair orders per month and I asked him if this made sense to him. His response was: “Sounds like a new boat to me!”

So back to building our business plan to achieve 100% service absorption: what else can you do to increase your customer pay hours per RO to 2.2-2.5?

Don Reed

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