If you’re making money in all departments, congratulations.
However, don’t set your cruise-control, yet. The industry
continues to evolve, so you must seek ways to evolve with it.
After all, if you’re like most dealers, you’re not living up to your
true profit potential anyway. Improve Fixed Ops Profit Margins
Let’s look at the four essentials to increasing net profits in your
service department. To get your profit margin in line, you could pay your technicians
an hourly rate based on the number of hours billed out on the
repair orders instead of a fixed hourly rate. You’ll also need your
retail labor rate at least 4x the cost of your techs. To optimize
the margin on parts, adjust the selling price by utilizing a pricing
matrix which adjusts the markup of each part based on cost and
demand.
Control Expenses
When dealers start losing money, expenses are usually addressed
first because they are the easiest to control. Many times, dealers
say, “I’m going to cut expenses everywhere and save my way into
a profit.” Is it possible to save enough through expense cuts to
offset the lost revenue from new and used unit sales? Probably
not. There’s a limit to how many expenses you can cut. Cut too
many and you can go out of business. If that’s not your plan, let’s
look at some ways to generate more revenue streams – starting
with your service department.
80
Profit margins can be affected immediately. First, set a goal for
your margins – no less than 75% on labor sales and 35% on parts
sales. To do this, you must either lower the cost of sale (wages
to technicians and cost of parts) or increase your selling price.
Increase Sales per Repair Order
First, it’s important to note the difference between a service
“writer” and a service “advisor.” Think of a service writer as a
secretary taking notes on what the customer wants done. Does
the customer know what needs to be done to ensure the trailer
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