“Most dealers tend to be front-end oriented since that is usually where they came from, as opposed to back-end oriented, which is a place that they are unfamiliar with and possibly do not understand. That being said, let’s take a front-end approach to making your dealership recession proof through maximizing your profits in the back end.” — Don Reed, CEO, DealerPRO Training
Recession-Proof Your Dealership
If you would like to recession proof your dealership in this coming year, you can do so by increasing your service absorption or “fixed coverage” as some like to call it.
Fact: Many dealers have increased their service absorption to 100 percent or more.
In simple terms, you can get your service and parts departments to generate enough gross profit to pay for all (100 percent) of your dealership’s total fixed overhead expenses, which means that your sales department is left with covering the variable selling expenses.
Sound like “Fantasyland”? Please read on.
Service Writers Can’t Do It — Advisors Can
Ask yourself this question: “Do I employ service writers or service advisors in my service department?”
What is the difference, you ask? Well, a writer simply writes the customer’s concerns on a repair order and then dispatches it to a technician.
An advisor writes the customer’s concern on a repair order, walks around their car with them, advises them of any obvious service needs, makes recommendations for a maintenance program and advises the customer that a factory-trained technician will perform a 27-point courtesy inspection of their vehicle at no charge. Simply put, a writer is essentially a clerk. An advisor is a salesperson.
In your sales departments and F&I departments you are probably measuring the performance of your salespeople and managers on a daily, weekly and monthly basis, right? Do you do the same for your technicians, advisors (writers) and managers?
Most dealerships have sales goals for new and used vehicles and F&I products.
Do you have sales goals for customer pay repair orders, maintenance menus and preventative maintenance?
If your sales department has goals for gross profit per retail unit and F&I gross profit per retail unit, then why not have goals for:
- Hours per customer pay repair order;
- Dollar sales per repair order; and
- Gross profit as a % of sales for labor and parts sales.
Pay for Performance
If you believe in performance-based pay plans for your salespeople and sales managers then why not do the same for your advisors (writers), service and parts managers and all technicians?
If you have minimum performance standards for your salespeople, you should also have performance standards for your advisors (writers).
Answer this question: “What would you do with a salesperson who averages five vehicle sales per month?” There are only two options. Train and show him or her how to sell 10+ vehicles per month or conduct an exit interview!
Now answer another question: “What would you do with a service writer who only writes 1.5 hours per customer pay RO?” Your options remain the same. Train and show him or her how to sell 2.5 hours per customer pay RO or let them join the five-car salesperson in the exit interview!
Front and Back Accountability
If you hold your salespeople accountable for their sales performance, then why not do the same for your service advisors? By the way, you will most likely experience a higher CSI rating for your advisors once they learn how to advise.
Inspect what you expect by using Daily Performance Evaluations of your service advisors’ sales productivity. Set realistic goals for them, coach them daily and get them professionally trained on how to be a salesperson (advisor). Now you are on your way to making your dealership “recession proof.”