Nothing has the ability to drive more net profit to the bottom line of a dealership than a well-run service department. The service department impacts every aspect of a dealership so its improvement is critical to your success.
We need to get the repair fixed right, communicate well with the customer, and get it back in their hands. Regardless of what you sell or what type of shop you might have, dealers share several fundamental metrics. Measure how you are performing using a 1-5 scale, with 1 being terrible and 5 being no room for improvement.
1. Customer Experience
The shop is critical because if you perform well, people will come back and buy more. If the customer has a bad experience, you may not sell to them again. Define the customer experience you want to achieve; measure how you are meeting that goal; and then hold accountable those employees who influence that experience.
A first step toward a positive customer experience is to provide the estimated repair completion time. Follow up with a phone call within 24 hours, regardless of whether work has been done or not. Keep them in the loop and be clear regarding the completion time.
Another aspect to the customer experience is the service fee. Create parameters for what the work will cost and, again, keep the customer informed. When the work is completed, deliver a product back to them that is not only fixed, but cleaner than when it was brought in. Finally, follow up with the customer to ensure the equipment is still running smoothly.
2. Quality of Work
It’s critical that you have time built into your jobs to ensure repairs have been done correctly. Your quality assurance process should also define what you will do if the customer says the equipment is still not working properly.
The best approach is to apologize and offer to send a technician to take a look. It is also helpful to get a fresh set of eyes on the equipment if it comes back. If you have write downs, you need to have an account set up where those are charged off. This account should be reconciled once a month or at least once a quarter.
When I go into a shop, I always ask, “Would your mom be proud of this?” Rural lifestylers are often willing to spend money on their equipment and they want to walk into a clean and organized shop.
Every piece of equipment — tractors, loaders, lawnmowers, etc. — should be washed before it enters the shop. When the equipment leaves the shop, that area and the tools should also be cleaned.
Be sure to have all your technicians up to date on manufacturer training. Well trained, professional technicians can help ensure a good experience.
4. Recovery Rate
Your measurement of success in a service department is your recovery rate. Recovery rate is a calculation of billed hours vs. paid hours. If your technician is billing 8 hours and you paid him for 8 hours of work, your recovery rate is 100%.
At a minimum, your shop’s recovery rate should be running at 85%. If it is below this rate, evaluate your processes or create new ones.
5. Closing Work Orders
Completed work orders need to be closed promptly to add to the cashflow of the dealership. In fact, you need to close work orders daily. If you are not doing this, it’s like selling a part and saying, “Don’t worry about it. I’ll catch you next time.”
Also, make sure your warranty work orders are filed as soon as they are completed so you can recover those dollars.
6. Pricing Jobs
The biggest issue for most shops is under pricing their work. If a shop does time-and-material work and they are less than 85% on their recovery rate, they are losing money on every job.
We recommend pricing a job based on how long it would take for a B-level technician to complete the work. If that estimate is 12 hours but the work is completed in 10, you earn 2 extra hours. Plus, the customer is pleased because you completed the work faster than expected.
6 Steps to Increase Service Department Profits
Don’t underestimate what good processes, flat rating and efficiency incentives can mean for service department revenues.