It has become critical today in shop measurement to break down your revenue and examine the type of revenue coming through your door.
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Most shop owners basically just measure parts and labor, then look at their bank account balance and what they owe. That must change because it boils down to what business you are really in — it is the shop’s professional responsibility to ensure that their client’s vehicle is safe and reliable based on how the client uses the vehicle and their expectations with the vehicle.
To achieve that responsibility, the shop business model must move to a “service on need” model, which means the shop is managing the service intervals for the client based on how the vehicle is being used (highway, city or off-road driving) and the mileage being driven on that specific vehicle. The days of using a preventative maintenance service as a canned seasonal package are over. Everything must now be tailored directly to the individual client. That is our value offering as an independent aftermarket shop to the client and when you look at it, it is very powerful.
“We will take our professional responsibility very seriously Mr./Ms. Client and manage your vehicle to the service intervals recommended by the manufacturer on your vehicle based on how you use that vehicle and your expectation with the vehicle. We will not let you down.”
So this now brings to the table what “type” of work is coming into the shop. First, the revenue categories that should be measured daily, weekly and monthly include: fluids, tires, aftermarket parts, dealer domestic parts, dealer foreign parts, maintenance labor, diagnostic labor and re-flash labor as the minimum revenue categories. Once this is done and you can see the history of these categories, now you move to a critical examination of the “type” of services that are coming in.
The objective in the shop should be 30 percent of the revenue is “preventative maintenance revenue,” meaning the client is in the shop because their service interval recommended by the manufacturer is now due and you are looking after it. The rest of the revenue should be breakdown and repair and client/customer demand revenue. Examine each RO and see why the vehicle was in the shop.
This is an intriguing measurement because it tells whether the shop is actually “managing” the vehicle on behalf of the client or only performing services requested by the client.
To achieve this level of service, the back office has to be in order because it demands proper and complete follow up and proper scheduling of the vehicle based on the mileage the client is driving. A calendar must be established with forward dates booked, as you know the vehicle mileage being driven and when the next manufacturer service level is due. Proper follow up with the client (based on how they want to be contacted – e-mail, text or phone call) two weeks out and one week out to confirm their next appointment must be made. Take nothing for granted. Your shop must follow up with each client.
In reality, I have found that the 30 percent figure is not being achieved — most shops I have seen are in the 5 percent to 12 percent range. This is unacceptable to management. A client hires a shop to look after their vehicle, ensure it is safe and reliable, but also to get the financial return out of it that they are looking for.
Is your shop doing it right or are you discovering there is work to be done to maximize your client relationship of trust and shop profitability?