How to Manage the 8 Controllables of Dealership Service Profits! With Don Reed from DealerPro Training Moderated by Mike Bowers, Executive Editor at DealersEdge Thursday, June 13, 2013 1 2:30pm ET DealerPro Training is the Largest Performance Based Fixed Operations Training Organization in North America. Don Reed is the founder and prime mover of DealerPro Training. With 26 years of success in all aspects of a dealership - from parts manager to dealer principal, Don knows what it takes to succeed. It takes a well trained team. And Don has built a team of the best and brightest - 22 Fixed Operations Specialists averaging 23 Years of Experience. This group of experts has trained in more than 700 Dealerships in the U.S. & Canada. Achieve 100% Service Absorption The 4 Essentials to 100% Service Absorption Service Advisor Sales Training Service Management Training Technician Sales Training Training the Customer Telephone Training On-line Maintenance Menu Interactive On-line Training Parts PRO Training Sales Training Telephone Training Control Obsolescence Increase Stock Order Performance Body Shop PRO Reduce Cycle Times Increase Productivity Sales per Transaction Insurance Company Relationships
Managing the Essential Eight Controllables To Maximize Profitability Presented by: Don Reed, DealerPro Training Solutions The Essential Eight Expense Controls Working Days Gross Profit Margins Effective Labor Rate Maximize Profitability Calendar Utilization Hours Available Technician Productivity Number of Technicians
Essential # 1 Working Days=25 What are the Options? Open Saturday and/or Sunday Open Holidays How to Implement? 4 Day Work Week @ 10 Hours per Day Production Groups (3 Rotating Shifts) Lateral Support Simple Support Production Teams Three Week Rotation
Essential #2 Calendar Utilization=90% Typically the Least Managed Essential Calendar Utilization is a measure of the days actually worked as a percentage of the available work days. Calendar Utilization is Affected by: Vacation Sick Leave (Deer Season & Harvest Time) Replacement Time (Turnover) Training Calendar Utilization Calculation Formula: What Opportunities do You see for Improvement in Your Store?
Essential #3 Hours Available Opportunities for Improvement 6 Days @ 10 Hours each With Three Groups 5 Days @ 9 Hours Each Second Shift Production Teams (Multiple Technicians per Bay)
Available Hours of Operation Which ones Improve Owner Retention? Essential #4 Technicians Available What type of Technicians do you Need? Lower Skilled Technicians (Maintenance) PDI Technicians Where do you find them? Aftermarket Service Facilities Other Auto Dealers Ex-Military Techs
Essential #5 Technician Productivity=120% Formula: # of Technician hours Billed on the Repair Order divided by # of Technician Hours Worked How to Increase Productivity to 120%? Install Performance Based Pay Plans Measure Productivity Daily Train Advisors how to Advise
Essential #5 Technician Productivity Parts Processes What is the Primary Mission of a Parts Department? -Support the Technicians- Pre-pick parts Deliver parts to Techs Improve Work Mix Retail vs. Warranty Inspection Process for Maximum Reliability Maintenance Menus (Low Skill & High Return) 500-50% - 40% - 0.2 = $10,000 Gross Profit
Essential #6 Effective Labor Rate Definition: The Actual Labor Rate paid by the Sales department, the Manufacturer & the Retail Customer for Services Performed Formula: Total Labor Sales divided by Total Hours Billed on the Repair Orders = Effective Labor Rate Question: Why is the Effective Labor Rate typically less than the Posted Retail Rate? Answer: Discounting & Maintenance Pricing
Essential #7 Gross Profit Margins = 75% & 40% Gross Profit = The Sale Amount of a Product or Service Minus the Cost of Sale Gross Profit Margin = The Gross Profit divided by the Sale Amount Sale Amount Cost of Sale Gross Profit Margin $112-Labor $28-Tech $84 75% $90-Parts $54-Supplier $36 40% Essential #8 Control Expenses Shop Policy Adjustment (2% of Labor Gross) Lot Damage Comebacks Tools & Shop Supplies Charge Out Supplies @ 7% of Labor (State Laws?) Store & Dispense Supplies in the Parts Department (Log) Personnel (1 Support Person for every 2 Productive)
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Essential Eight Changes Working Days (No Change) Calendar Utilization + 5% Hours Available per Day (No Change) Number of Technicians + 1 Technician Productivity + 25% Effective Labor Rate + $4.92 Margins Labor + 1.5% - Parts + 5% Expenses + 20% of Additional Gross Let s Compare to Sales Department Performance Essential Eight NET Profit Potential $51,103 per Month $526,376 per year If I m Wrong by 50% you Still Get $263,188 NET Profit That Equates to Selling an Additional 351 Units at $1,500 per Retail Unit
Essential Eight Strategy for Implementation Evaluate your Essential Eight Opportunities Build your Plan for Implementation Sell your Employees on the Benefits of your Plan Measure their Performance Daily Compensate to Motivate Get Ready for Change Hold Your People Accountable!