An Open Letter to Dealers and General Managers
To dealers and general managers: how do you feel about fixed operations? Do you see fixed ops as a necessary evil that is located in the back of the dealership to support warranty complaints and keep the OEM off your back? In your opinion, is the service department a financial drain on the overall dealership operation? Do you view the parts department as a place that ties up several hundred thousand dollars of your liquid assets?
The real answer to these questions is reflected in the time you dedicate each week focusing on your parts and service departments. It’s so easy to give lip service to the importance of fixed ops; but the real litmus test is spelled T-I-M-E. I’m talking about time spent with technicians, advisors, parts personnel, support personnel, and management. Time spent listening, mentoring, coaching, training, motivating, and encouraging your fixed ops team.
Now, don’t panic; I’m not talking about spending half of your day in the service department. Rather, I’m suggesting you spend two or three hours a week uniquely dedicated to building and expanding this vital segment of your business. After all, you retain 70% gross on every dollar that is generated in service compared to 5% gross for every new car sold. Additionally, service customers see you twice a year while new car buyers see you twice per decade!
Is it possible to quantify the value of dealers and general managers being “all in” with respect to fixed ops? Yes it is.
A Tale of Two Dealerships
I have been blessed to be able to do business with many dealerships across North America. I track the service departments according to the money they generate and take to the bank as a result of our business relationship.
Let me quickly compare and contrast two domestic dealerships that I have been tracking for the past ten years. These are identical stores with the same numbers of advisors and techs, the same type of clientele in a similar socio-economic environment.
The first dealership has a dealer and general manager that are totally absorbed in new and used car sales. Whenever they are asked to join a service meeting or an advisor training session they say, “Hey, that’s why we have a service manager—work with him.” In the past ten years, this dealership has made $500,000 revenue from maintenance service sales ($50,000 annually).
The other dealership has a dealer that never misses a service meeting with the techs. He always has a positive word of encouragement and a challenge to help the guys reach the next milestone. The dealer is there when I come in to train his advisors. Just to clarify, he may not sit through every minute of every meeting, but he always starts the meeting and lets everyone know that the maintenance service sales program is HIS program. This dealer has generated $4.6 million in maintenance revenue in the past 10 years ($460,000 annually! Wow!).
So how important is it for the dealer and general manager to be all in? It’s $500,000 vs. $4.6 million. So you tell me if it’s worth it. Oh my goodness, yes!
“If the services advisors know the dealer and general manager are monitoring them, they will perform better and they will sell more!”
Indulge me for one more quick comparison: Dealer #1 is a metro import dealership; the general manager can’t be bothered with what goes on in the “back end”. The revenue that this Dealer brought in from maintenance sales in the past six years is $355,000 ($59,000 annually).
Dealer #2 is also in a similar metro area with the same number of advisors and techs. It is an import store with the same vehicle make as Dealer #1. The brass at this dealership, including the COO, has made it very clear to all fixed ops personnel that maintenance service sales are a huge priority and a vital part of the dealership’s bottom line. They’ve made $2.2 million in the past six years from maintenance sales ($371,000 annually).
To recap, that’s $355,000 generated when the dealer is aloof and detached from fixed operations vs. $2.2 million when the dealer is “all in”. I think you can see my point.
Action Point: Accountability
As a dealer or general manager, I know you are very busy and your time is valuable. In addition to attending service meetings and making fixed ops a priority, I have one other suggestion: hold your service personnel accountable to sell service.
I have created a very simple Excel spreadsheet that prints out as a concise, one-page report. It is yours for the asking by emailing me at email@example.com.
The spreadsheet allows you to track how many maintenance sales were made compared to the number of customer-pay ROs generated. With baseball season upon us, think of customer-pay ROs as ‘at bats’ and maintenance sales as ‘hits’. Therefore, maintenance sales penetration is their ‘batting average’.
My suggestion is for you to require each service advisor to fill out the spreadsheet each week and email it to you every Friday by 5:00 p.m. This is a powerful accountability tool that gives you the info you need to pat folks on the back or encourage them to do better next week.
If the services advisors know the dealer and general manager are monitoring them, they will perform better and they will sell more! Happy sales to you!