This month’s article was written with the help of Coach Steve Privette.
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Many successful shops across North America have been noticing a reduction in car count this year —even those with huge marketing calendars. While there are many opinions on what is causing this trend, from weather to a decrease in sales of cars during the Great Recession, the reality is that we have to do something about it or experience a reduction in our income. Actually, many of our clients are experiencing the most profitable year of their career because they are focusing harder on their processes on each car. I’d like you to listen to Coach Steve Privette explain how you can become more profitable by examining your processes on every repair order.
In the 30 plus years that I have been in the industry, I was told to focus on sales, sales, sales and the profits will come. While sales volume is certainly important, I realized one day that sales alone does not pay bills at all — gross profit does! I have coached shops entering our ATI program doing $10,000 in weekly sales and making money, but also shops doing $60,000 in weekly sales and losing money. Which would you rather have: a $10,000 sales day at 20 percent gross profit ($2,000) or a $5,000 sales day at a 60 percent gross profit ($3,000)? I know, the best answer is a $10,000 sales day at a 60 percent gross profit ($6,000)! You can see why I say both sales volume and gross profit are equally important.
How do I manage both sales and gross profit? I measure the things that affect and provide it. You know the old saying: “We can’t manage it if we don’t measure it.” During the time I was a fixed operations director for an auto mall, I decided to start auditing my daily repair orders to make sure my service writers were doing all that they could to produce both sales volume and gross profit.
Auditing repair orders
I set up a simple process. I asked my service writers to leave that day’s invoiced repair orders on my desk at the end of each day for review. Every morning I would arrive at work about a half hour before opening to review the prior day’s business. I used a checklist derived from key performance indicators on each invoiced repair order from the previous day. I would highlight anything I found that either was not done or was done improperly. I would check all the important margins to make sure they were where our goals were with each, again highlighting any that were below our goals. I would then return the highlighted invoices back to my service writers to review and justify why any particular item on the list was not to goal and/or standard. This was of course my way of holding them accountable to continue to improve and generate the gross profit dollars we require to run a healthy business.