Don’t Let Selling More Maintenance Cost You!

brian hammerman newsletterThere is no arguing that maintenance sales are a great way to grow your service business and retain your customers. But does it come at a cost? Let’s see how ROSE (Repair Order Survey & Evaluation) can help increase your maintenance sales and gross profit. In my last article, we reviewed how increasing maintenance sales can lower your ELR (Effective Labor Rate) and lower your gross profit percentages and we focused on the REPAIR side of CP ELR. Now let’s look and see how managing the Maintenance ELR can increase your profitability.

First review this example dealer’s ELRs.

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This Dealership’s CP door rate is $105.00. So I ask the same question I did in the first article. Is $77.50 a good CP ELR? To answer that we must look at their Maintenance and Repair ELRs independently.

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The first thing I am looking at is the % of Hours. A dealership doing a good job selling maintenance will have over 60% maintenance. So 49.5% is not very bad. Then I turn my attention to the Maintenance ELR because it is weighted almost exactly half of the total CP ELR. $43.91 is low. However, it may not be all that uncommon if you don’t have a tool like ROSE to review this sort of information. I did notice as well that the Repair ELR is $110.45. With a door rate of $105.00, that is a job well done. Even with the grid utilization of 77.97%. Average Maintenance ELR is in the $65.00 – $75.00 range. I have seen dealerships as high as $85.00.

So how can we raise this dealership’s Maintenance ELR? The first thing to do is look at the “MAINTENANCE OPERATIONS” report in ROSE. A sample of their top used ops is listed below.

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The most frequently used Op-Code is 1P. This is their oil change op-code. It has an ELR of $18.34 and the average labor is $14.00. This would be the first op-code to review. Any op-code under $65.00 should be reviewed. We used the same report and looked at the parts side of the op-code.

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Parts GP% on the oil change is 33.64% and average sale is $33.62. Now I’m not looking to rob Peter to pay Paul here. But when maintenance operations are built, there is a compromise among 3 parties–the Service Department, the Techs with the time paid, and the Parts Department. We all have agreed that we discount labor for maintenance and sometimes Techs have to give a little on the time to be competitive and get the business. So does the Parts Department. In this example dealership’s case, the Parts Department was holding all the gross and the Service Department was on the short end of the stick. Good job, Parts Manager??? Maybe, but should all 3 parties share equally in the discounting in a fair and equitable manner? I think so. Review all the ops so all parties are satisfied. Then we can look to sell MORE.

The other thing to keep in mind is, what is the price the customer is paying??? Ultimately, this is where the increase in sales will begin. Conduct a market survey for your most common services. Don’t just shop other dealers–shop the independents. After all, our customers do. Once you know what the market is for that service, look to parts. We recommend a family price for all the maintenance parts. This will save time for the Tech and SA quoting jobs. Then you know what is left for labor sale. Now look at the Tech’s time and adjust as needed. We recommend getting the Techs involved in this process. After all, the Techs already seem like they are having their times cut every time they turn around. There is nothing to hide from them. Techs should know that the Parts and Service Departments are taking a cut, as well, so you are all in the boat together. Perhaps there are some ops that we can pay the techs more. The goal is not to make less time, but to have the service priced right so you can sell MORE! Therefore, making more money. We all like that. ROSE can be used to look at individual techs’ “MAINTENANCE OPERATIONS.” I have found that Techs scream a lot about a service, even though they may only do 2-3 a month. So how bad is it for them??? If the price was right and they sold just one more, would they make more money? YES!

Other ways to sell more maintenance is with menu presentations and good inspection processes. Watch for another newsletter article!

Written by Brian Hammerman

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